Finextra held court for a much viewed Twitterview yesterday with soon-to-be launched US retail bank,
Once launched, banksimple plan to offer individual deposits to US customers as well as small amounts of credit. There will be no branches ("Branches are an anachronism") and no hidden or complex 'fees' because "Banks can make plenty of money from net interest
margin & interchange, aka Old Fashioned Banking, especially without branch costs."
This Twittereview had a lot of audience participation and interest. For the sake of 'simplicity' the following transcript, for those of you Twitter-adverse who didn't follow the #finxlive hashtag yesterday, is of the Q&A between banksimple and Finextra only.
A transcript of the Q&A between the audience and banksimple can be found here.
(some of the questions were rather good).
Some of the Tweets have been combined or modified (very slightly) to ease reading (trust me I'm a journalist).
Finextra Welcome all to the Finextra Twitterview with banksimple. Let's start with our first question
Finextra You say that 'looking after my money' is what the banks 'used to be for' When/why did this change?
banksimple It changed when banks began earning more money from fees than core banking. Banking is low cost, tech enabled & highly scalable.
Finextra When did this happen?
banksimple Mid to late 90's with the introduction of 'free checking', with hidden fees to make up for lost revenue
Finextra Did dismantling Glass-Steagall kill community banks in the US?
banksimple Deregulation reduced the number and market share of community banks. Yet with over 8,000 banks, they are far from dead. But deregulation began in the 70's, so Glass-Steagall was just another nail in the coffin.
Finextra Banks make money off our 'mistakes'. Are consumers deliberately being set up to fail?
banksimple Banks make money by keeping their customers confused. Confused about available balances, clearing time, rates & fee triggers. As of Jan '08, the GAO found that 33% of banks don't provide up to date terms & conditions in branches. 66% fail
to do so online.
Finextra Your new bank, will this be all online, will there be branches?
banksimple Online only. Branches are an anachronism. I can trade shares, buy books, watch movies & do interviews online, why not banking?
Finextra Your focus is on individual deposits - no SME products?
banksimple Initially, our pilot is for individuals only & we want to make sure we get that right before expanding our offering to SMEs.
Finextra A bit more about offerings. You will be offering credit, have you made a deal with Visa or Master Card or anyone else?
banksimple Initially, we only plan to offer a small line of credit for overdraft protection. Without overdraft protection fees, of course. We are agnostic to Visa or MC. Neither of them actually underwrite the credit, they just provide a network.
Finextra You're dispensing with 'fees' Not to be cheeky, but do you plan on making a profit - I'm assuming BS is not a charity?
banksimple Banks can make plenty of money from net interest margin & interchange, aka Old Fashioned Banking, especially without branch costs.
Finextra You say no more overdraft fees or late payment fees. How does that work? What if a client is overdrawn?
banksimple Overdrafts are handled through our line of credit, which does charge interest - but there is no fixed cash fee.
Finextra You plan on issuing a 'simple card' filled with bank products - any plans for mobile banking?
banksimple Absolutely. Mobile banking is huge outside of the US. The experience in North America is terrible right now.
Finextra Yes, you're focusing on the US market, but do these issues arise in Europe or Asia as well?
banksimple Europe & Asia suffer from some issues that we plan to tackle, but to a lesser extent. Priority #1 right now is USA.
Finextra I know your IT engine is a 'secret' right now. But can you offer and teasers? ETA?
banksimple Our technology is great. We don't use COBOL. No mainframes. No batch processing. Dragging banking out of the 70s.
Finextra Any ‘cool' IT involved - CEP, clouds, RIA etc...?
banksimple Yes. Not so much on the cloud front, banking data is pretty simple. But heavy use of Python + R + Postgres. Open Source.
Finextra You are passionate about 'fees and complexity' Did this come from a 'personal' experience? Name and shame?
banksimple http://blog.i2pi.com/?p=196 - happened to me after we started working on this. Funny timing.
banksimple And as computer geeks, we are innately passionate about removing complexity. So banking is a big pain point for us.
Finextra I had a left over question about cheques? Their days are numbered, but how long do they have in the US?
banksimple Prior to Check21, paper checks were handled by 45 processing centers. Now there is just 1. 99% are electronic.... We give checks another 10 years of existence, at least. This is unfortunate.
Finextra Why unfortunate I mean? Aren't cheques outdated?
banksimple It's generational. They are highly inefficient. We can tweet in near real time, yet ACH clears over days...Oh sorry. We think that it's unfortunate that it will take 10+ years to get rid of checks.
Finextra Thank you for a great Twitterview banksimple! Quite a few peeps interested in you. Good Luck and keep us updated!