16 September 2014

Change Control

Jorge Yui - BankArchitects

22 | posts 96,375 | views 4 | comments

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.
A post relating to this item from Finextra:

BBVA buys Simple for $117m

20 February 2014  |  6290 views  |  1
US digital banking start-up Simple has sold out to Spain's Banco Bilbao Vizcaya Argentaria (BBVA) for $117 million in cash.

Simple Bank - a Financial prosumer tale !

28 February 2014  |  6071 views  |  1

Prosumer is a portmanteau originally formed by contracting producer with the word consumer. In a commercial environment, it describes a market segment between professional and consumer. (Wikipedia)

Portland, the main city of Oregon, has little to do with the techie Silicon Valley or the greedy and sophisticated city which is home to Wall Street. For the ignorant tourist, Portland’s most striking attraction could be considered a free realm for sex parlors, and other dubious leisure activities. In fact, it’s the only US state where is specifically considered and stated by law that full nudity and lap dances in strip clubs are protected speech. It’s also the city where 15,000 people drive their bikes around naked, fortunately only once a year, celebrating the World Naked Bike Ride.

That’s perhaps the reason nobody could expect that a start-up like Simple Bank would be born in such a city. The mythical side of the story goes like this: In 2009 its founder, Josh Reich, an Australian immigrant, angry about bank over overdraft fees and delayed money transfers wrote an email to Shamir Karkal and one more friend and invited them to create a bank.

They set up a website where potential clients would be able to leave their email address and went on a campaign asking hundreds of disgruntled bank customers what they wanted. Most of them were unhappy with their overdraft fees and the cumbersome ways banks use to display account information.

In doing the research of the industry they wanted to venture into, Josh, a medical school dropout, with a tendency to take apart any electronic gadget falling in his hands, and his partner Shamir, a programmer, soon discovered the sheer complexity and highly politicized world of the Banking business.

They also explored the highly monopolized market of Banking Software, where a small group of core banking vendors hold the U.S. market hostage. In fact, FIS, Fiserv, Jack Henry, and D+H are the companies ruling this world; together they own about 96 percent of market share of a trade worth about US$2.9 billion a year, according to an Industry Analyst. The same analyst firm expects that revenue to grow 3.7 percent per year, reaching more than US$3.3 billion in 2017. Of course there are other players, small, niches and some based in other countries but each holds just a small sliver of that remaining 4 percent, most of them serving foreign banks operating in the USA.

Josh and Shamir confronted the problem by working out an extremely user friendly application, focusing on providing an intimate and personal user experience to its future customers; for example users could upload and attach pictures to account entries, creating a kind of memory album of past expenses. They also focused on creating real value for users by helping them to better manage their cash flow, creating the concept of the “safe to spend” balance. It took them three more years before they were ready to actually start sending debit cards out to members of the public.

The dream was becoming reality: Simple Bank has grown to 100,000 users in couple of years, driven by a lean organization, a no branches approach and in particular the obsession of its management to provide the best possible user experience to its customers. The beautifully designed Apps for the iOS and Android also helped. In order to cope with the heavy Banking regulations, Simple partnered with Bancorp. So in reality rather than a Bank, Simple is a sophisticated Front Application connected to a backend. The deal with BBVA will allow Simple to fulfill its destiny to become a real Bank. After all, they didn’t want to be just a pretty App sitting on top of someone else’s bank.

Banco Bilbao Vizcaya Argentaria (BBVA)

BBVA is probably the most dynamic and internationally minded Bank in Spain. It’s active in over 32 countries worldwide and in recent years has built a strong position in the so called “Sun Belt” of the USA through a series of acquisitions in Texas and later in California. In Miami it also holds a strong position acting as a hub for the growing wealthy population of Latin America.

Without a doubt, BBVA is one of the biggest groups in LatAm with a vast retail operations network in over 12 countries including the biggest markets like Mexico and Brazil. Also with a solid foot in Asia, through an alliance with one of the largest banks in China, BBVA has great ambitions in the international arena, occupying currently the 33rd place among the largest banks of the world.

Will Simple Bank play a strategic role? Probably Simple Bank alone won’t suffice. But BBVA has heavily sponsored startups and startup events in Spain and in other countries, creating a techie community which is developing the next generation of Banking software. In this sense the acquisition of Simple Bank for EUR 100 Mio is one more step forward in this direction. As Felix Salomon, from Reuters, wrote “BBVA is good for Simple.”

Simple may also be good for BBVA and surely for its 50 Mio customers around the world. I just wonder about the impact on the Banking Software industry.. maybe somewhere in the outerspace a huge meterorite has changed direction...  

 

TagsWholesale bankingInnovation

Comments: (1)

Hitesh Thakkar - Sun microsystems - Mumbai | 03 March, 2014, 15:09

Hello Jorge, thanks for connecting dots from Europe (BBVA) and Simple (USA) and BBVA's expansion journey in "sun-belt" but sure to bring to notice famous term by Alvin Toffler "Pro-Sumer" ( trillions of dollars gets created).

Simple is best example of what Prosumer can get in return as incentive from conducting 'Mobile Only' Bank account.

Comment on this story (membership required)
Log in to receive notifications when someone posts a comment

Latest posts from Jorge

Target 2 - Securities - Shaping the EU finance space

23 June 2014  |  3220 views  |  0  |  Recommends 0 TagsPost-trade & opsInnovationGroupInnovation in Financial Services

Will Facebook become a Bank?

14 April 2014  |  2576 views  |  0  |  Recommends 0 TagsMobile & onlinePaymentsGroupInnovation in Financial Services

Banking Software: Digital strategy and reality checks

31 March 2014  |  2990 views  |  0  |  Recommends 0 TagsMobile & onlineInnovationGroupInnovation in Financial Services

A 600 billion financial StartUp

24 March 2014  |  5508 views  |  2  |  Recommends 0 TagsPaymentsInnovationGroupInnovation in Financial Services

Will Mobile do the trick for the Banking Industry?

12 March 2014  |  6617 views  |  1  |  Recommends 0 TagsMobile & onlineInnovationGroupInnovation in Financial Services
name

Jorge Yui

job title

Banking Strategy

company name

BankArchitects

member since

2010

location

Geneva

Summary profile See full profile »
Jorge Yui is a digital banking expert, linguist, entrepreneur, and global banking systems special...

Jorge's expertise

Who is commenting on Jorge's posts

Cristian Vlad
Paul Love
Taron Mohan
Hitesh Thakkar