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How Big Is Simple?

A Snarketing post by Ron Shevlin

A Snarketing post by Ron Shevlin, Director of Research at Cornerstone Advisors

To be honest, when I saw the title of the Forbes’ article “Simple Competes On Customer Experience, Not Interest Rates,” my first reaction was ‘I don’t really care how they compete, I want to know how well they’re competing.”

In other words, I just wanted to know — after nearly seven years of existence, and two years since being acquired by BBVA — how many customers does Simple really have?

simple_card

After all, the hype around the company was pretty strong for a while there, touting how it, and other fintech startups, were going to disrupt and displace traditional banks.

As I began to read the article, I harbored no delusions that I would find any references to how many customers, or how big, Simple actually is. But then I saw this:

“[Simple CEO Josh] Reich won’t go into specifics on Simple’s growth, but he did say that if it were a traditional bank it would have needed 850 branches and 6,000 branch employees to support the number of customers it has now.”

Josh went on to say, “We are investing in head count for growth, but we have 200 to 250 people.”

simple_office

Cornerstone Advisors has been benchmarking bank operations and performance for nearly 15 years. So let’s use their data to help translate Josh’s statement (or claim) into customers and assets.

Employees Per Branch

First off, Josh’s ratio of 6,000 branch employees to 850 branches is perfectly in line with what’s really going on in the industry. Cornerstone’s data says the median number of branch employees per branch is around six (and declining). So Josh’s estimate of requiring seven employees per branch to support Simple’s customer base is in line with reality.

Checking Accounts Per Branch

According to Cornerstone’s benchmarks, there’s a wide range in the number of checking accounts per branch across traditional banks and credit unions, in part because many community banks are more commercial- than consumer-focused. But the average across both types of financial institution is around 3,500 checking accounts per branch.

So, if Simple believes it needs 850 branches to support its customer base, it would not be out of line to estimate that it has 2.975 million customers. Unless, of course, the average number of accounts held per customer is significantly greater than one.

Back when Simple was acquired, there were references to the company having about 33k customers. Thirty-three thousand to three million. Pretty impressive growth, eh?

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Deposits Per Branch

Cornerstone’s Performance Report finds that traditional banks and credit unions, average about $115 million deposits per branch. Which means that an 850-branch bank — which Simple claims to be on par with — would have about $98 billion in assets. BBVA Compass, which is part of the global BBVA bank enterprise that acquired Simple, has about $65 billion in deposits (and only about 700 branches, for that matter), which would make Simple roughly 50% larger (in terms of deposits) than its sister traditional bank.

Assets Per Branch

At traditional banks and credit unions, average assets per branch is roughly $137 million, which would make an 850-branch Simple a $117 billion institution. Or the 21st largest bank in the United States.

Assets Per Employee

Traditional banks average about $5 million per FTE. If Simple really has $68 billion in assets, each of its 250 employees would be supporting nearly $275 million in assets. How does Simple do it?!@*#!@??!!

Growing the Business

Yeah, how does Simple do it? Well, according to Reich:

“Our hypothesis is that there is a different way to grow the banking business. The traditional way is through the price mechanism. What we do to grow is invest in the user experience, primarily delivered by the Web. If it works great for 1,000 people it doesn’t cost us 10X to deliver the experience to 10,000. We’ve made a big investment in the first order costs of developing technology and in our model.”

Enrique Gonzalez, Simple’s relationship manager on the BBVA side of the house, added this:”The talent and technology would be difficult to replicate. A high percentage of the people are engineers or have strong technology backgrounds, and they all work together.”

Honestly, I don’t really know what either of those comments really means. Engineers + working together = growth? Cumbaya, my lord, cumbaya.

And is Josh saying that marketing isn’t necessary for growth? Josh says that “if it works great for 1,000 people it doesn’t cost us 10X to deliver the experience to 10,000.” How is that any different from what’s going on at Bank of America (and other large, traditional banks). As reported in Bank Innovation:

“60% of the bank’s sales are all digital now,” Brian T. Moynihan, Chairman and CEO of Bank of America, told investors. Moynihan also disclosed that about 6% of the bank’s digital sales are via mobile device, and growing at 300%,” he said.”

The Bottom Line

I’m finding it pretty darn hard to believe that Simple has grown from 33,000 customers in February 2014 to a number that would warrant 850 branches and 6,000 branch employees.

Ron ShevlinRon Shevlin is Director of Research at Cornerstone Advisors. Get a copy of his best-selling book, Smarter Bank: Why Money Management is More Important Than Money Movement. And don't forget to follow him on Twitter at @rshevlin.

All content © 2017 by The Financial Brand and may not be reproduced by any means without permission.

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Comments

  1. Ron, the only data I can add to your questions about Simple’s size are, according to the Google Play app store, the Simple banking app has between 100,000 – 500,000 downloads.

    Also, what bank has their deposits? Are they still at Bancorp or have they moved to BBVA Compass? Their website still says: Banking Services provided by The Bancorp Bank, Member FDIC. The Simple Visa Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted.

    I too would like to know how well they are doing. Since they are not required to file any public bank regulatory reports, we will never know.

  2. <300,000 and more than 1/2 have no deposits. Im intimately familiar with the actual metrics.

  3. They look like a pretty cool bank, but I am VERY doubtful that they have anywhere near the business volume they imply they do. And I’ve browsed through their site and am not entirely sure what makes them so unbelievably, orgasmically, 21st-Century-ily different. Because they’ve invested in the “Customer Experience”? What bank hasn’t? And HOW is their customer experience so different? Is it like all the credit unions you’ve talked about in the past that have touted “our people” as their strongest asset?

    I’m not trying to knock Simple. I’ve looked at them before and they seem pretty cool. But I’m doubtful of their claim that they are as large as they are based simply on their mobile app and customer service when EVERY bank has a mobile app and dedicated phone support staff.

    Great article, Ron!

    Sincerely,
    ARB–Angry Retail Banker

  4. Could not agree more with these comments and Ron’s article. I have an account @ Simple. Used it once or twice. Definitely not a category killer. In fact, BofA has all but replicated key features of the Simple product. I’m not a millennial, I do not want my spending to be social, I do not want to check-in and share where I’m spending money. I do not want my bank to be my friend. I think one will find this a common thread as millennials accumulate more, take on the responsibilities of adults, and grow up. This makes Simple a novelty (much like trading POGS and Pokemon cards) , not a sustaining business.

    Where I think most analyses miss the mark is the ability of Simple, Moven, et al to collect transactional/behavioral data and resell it to retailers to tailor product offers. The collection of this data is really the heart of these businesses; not financial services.

    Or maybe I’m just too old to get it.

  5. J Mitchell says:

    Ironically I am a banker who has an account with Simple. And I … as Anonymous states above … have no deposits in my account.

    I opened the Simple account to see how well it worked and to experience their customer service. I will say that I enjoyed the refreshingly honest and direct email conversations I had with their employees.

    The Simple Experience was fun for a while until they changed the software (or something) that drove their mobile deposits. When that happened, I could NEVER get my mobile deposited checks to be accepted.

    I had numerous online conversations with Simple employees who agreed with me that the ratio of the box to the check was more square than rectangular which made zooming out necessary. That is what caused my issue; in order to get the check to fit in the box, the image was so small they wouldn’t accept the picture. And I was using the latest iPhone.

    Of course all the Simple employees said that this was ‘being researched’ but without deposits, the account was worthless to me. Over two years ago, I removed the remaining money, which I thought would close the account (nothing on their site tells you how to do that.) Just last week, I received a new debit card!!

    For them to be ‘on the cutting edge’, they have made the same missteps and mistakes of every other bank.

  6. Ron Shevlin says:

    J Mitchell: Thanks for sharing that. The title of the Forbes article claimed that Simple “competes on customer experience, not interest rates.” It sounds like the reality is that they really aren’t competing on experience, but on price.

  7. Angry Retail Banker:

    Thanks for the kind words! Greatly appreciated.

    Ron

  8. Same here. Bank employee researching Simple. Tried it and didn’t find it any more “experiential” than multiple other banks. So I have an open account with ZERO balance. I also have to question the data on average deposits and assets per branch? Seems awfully high and they must be counting all the home office deposits that drive that average up. Median would have been a much better metric. I think that would have cut those figures in half.

  9. I love the sense of skepticism. Everyone wants people to think they’re doing amazing and better with less than their competitors. But as is true for the rest of us, when we know the facts, and the context, the story is no doubt closer to the average than the legendary. But I really would like to believe legendary is a possibility…. I just don’t think it’s “simple.”

  10. JimBob:

    Thanks for commenting. I chose to show average deposits and assets per branch because the median, 25th percentile, and 75th percentile data is included in Cornerstone Advisors’ Performance Reports which are available for sale.

    I’m restricted as to how much data I can share publicly.

    Ron

  11. Jumping in to the comment about “millennials” using Simple. This doesn’t reflect the article on how large Simple is (though I’d be curious to know that as well), but as a Simple user who absolutely LOVES this bank…to the point that I’m searching for articles on it.

    I didn’t switch to it to share my purchases, or to check in to places…I don’t believe you can actually do that. I switch because of their money managing tools. I have a load of student debt, and combined with rent and other bills I need to always be managing my money. The safe to spend feature and setting aside money for goals has been a major help in getting me on the right track financially. I’m finally saving my money and slowly getting my loans down.

    It definitely isn’t for anyone. No joint accounts, and checks are a pain…but I’m okay with trading all of that so I can get my finances on track.

    I’d be curious though to see where they go in the next 5 years..

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