When we think of banks, we think of the brick-and-mortar financial institutions we turn to to keep our money safe. Even though in recent years we’ve seen reputable banks crumble and interest rates tumble, most of us would never think to abandon a bank — especially one whose history dates back hundreds of years — for an unvetted alternative.  Banksimple, a startup still in stealth mode, is that alternative. It’s not offering online banking, but “banking online.” The company is approaching the banking space in a whole new way and hoping to capitalize on the erosion of consumer trust in banks, as well as growing frustration about hidden and miscellaneous fees that are rampant in the industry.  The Banksimple formula is one that puts customers first and focuses on automatic, “worry-free” money management with a digital twist and penchant for social integration.  Alex Payne of TwitterTwitter API fame left the company he helped to grow to join Banksimple. We spoke to Payne about the startup’s bleeding edge approach to banking that we predict will be both controversial and groundbreaking. For now, Banksimple will remain closed to the public, but use this post as a primer for things to come.  Banksimple is not a bank. Banksimple doesn’t hold its own bank charter; instead it works with FDIC insured banks that serve as the financial backbone for the platform. Customers, however, will have an entirely Banksimple-branded experience from the time they login and make their first deposit to each and every cash withdrawal they make at ATMs.  According to Payne, this approach allows the company to offer the best of both worlds and provide “a customer-friendly startup experience, while money sits with institutions that are solid.”  With Banksimple, customers will have one account and one debit card — whether it be a VISA or MasterCard has yet to be decided. The signup process will be relatively painless and require the user to make an initial transfer of money to setup their Banksimple account. From there on, Banksimple seeks to provide an automated banking experience with a flair for the unconventional, but the comfort of traditional serves like automatic deposits and bill payments.  There will be also be mobile apps for iPhoneiPhone and Andriod that support electronic deposits.  Part of Banksimple’s secret sauce is its predictive money management model. While users only need to concern themselves with a single account, there are actually checking, savings and credit accounts tied to that one login. Those will function behind-the-scenes with Banksimple automatically managing funds and transferring money between the accounts as needed.  This approach attempts to take the thinking out of banking for customers. Customers deposit funds, Banksimple does the rest to ensure that the most money is yielding the most interest at any given time. The predictive model knows how much money to keep for padding and can calculate how much money is safe to spend.  The idea of connecting your bank account to Twitter and FacebookFacebook is likely just as scary as sharing your credit card purchases with the world, but Payne believes that Banksimple can use social integrations to simplify money transfers between social network friends.  To that purpose, Banksimple will support Facebook Connect and Twitter @Anywhere at launch. That’s just barely scratching the surface. Payne’s specialty is in API technology and he’s bringing that expertise to Banksimple with the intention of releasing a Banksimple API that will be both secure and powerful.  Third-party application developers will have the opportunity to tap into the bank accounts of Banksimple users, but only when permission is explicitly granted by the user. On that front, Payne has an aggressive attitude around security, pointing to his own background in information security.  In some ways, Payne’s vision around simple, friend-to-friend money transfers overlaps with the mobile payment purpose of services such as Venmo and Square, though with the API there’s also the opportunity for harmony in lieu of competition. Of course, as Twitter buddies, we’d certainly expect a partnership, and not a battle, between Payne and Jack Dorsey, the Founder of Square.  “You can’t trust banks to do the right thing,” Payne says. Payne speaks of banks as bad guys that knowingly deceive customers with hidden fees, overdraft charges and ATM fees. He believes he’s not alone in his contempt for these practices and points to similar responses found in the company’s pre-launch research efforts.  Banksimple promises fee-free banking, a mantra that extends to 50,000 plus ATMs in a initiative that the company has orchestrated to support fee-free withdrawals come launch time. It also means that Banksimple won’t charge overdraft fees.  Instead, the startup will take a percentage of interchange fees and net interest margins to monetize their service on day one. Both are standard sources of revenue for banks, the former of which is simply a percentage of the fee that businesses pay to credit card companies to process transactions. In the future, Banksimple also hopes to offer for-charge services around products designed to make customers’ financial lives easier.  Stellar customer service isn’t typically considered a revolutionary feature. Still, Zappos has gone a long way to prove that legendary customer service is worth the extra expense. Payne believes that Banksimple can apply a customer service focus, à la Zappos, to change the way people think about engaging with their bank.  “Customer service is key,” says Payne. “The technology is not rocket science, and other banks could do what we’re doing, but they don’t. We’ve built a pretty solid and clean user experience, but if the person on the phone can’t help you, that ruins everything.”  That’s why Banksimple is investing in a resource-heavy call center that will include trained professionals who will be available to all customers for any of their queries, free of charge. It’s an expensive undertaking, but a necessary one for the startup to stand out. Payne reiterates, “We want to keep people really happy.”  - Growing Your Business: 5 Tips From the Founder of Blip.tv - Growing Your Business: 5 Tips From the Founder of Foursquare - 10 Tips for Corporate Blogging - 5 Lessons to Learn from Web Startups - 11 Essential Online Resources for Consultants  [img credits: Daniel Y. Go, Leonard John Matthews, lowlevelrebel, and image courtesy of iStockphotoiStockphoto, Henrik5000]
We spoke to the co-founder of Banksimple to talk about why traditional banks are lacking, and how his new startup plans to shake up the personal finance space.