My pals at BankSimple soft launched their debit cards internally for their staff this week, which is big news because it signifies the acceleration of the big shift in the BANK 2.0 landscape. Interestingly, though, this launch wasn't easy, as the team at BankSimple articulated on their blog post of today.

The last many months have taught us greater patience. It is difficult to change an industry. But we’re leaning into it and can’t wait to show you what we’re building. Thank you for your patience.
Bank Simple Blog Post - May 20th, 2011

The BankSimple launch is significant for a number of reasons. First of all, when was the last time you heard of a new bank having 50,000 customers signed up or registered before the bank launched?? Secondly, the fact that BankSimple doesn't have a banking license of their own, is no hindrance in offering better banking service today. Lastly, if you are going to change an industry, be prepared for some resistance.

Viral Banking - who'd have thunk?

Banks are notoriously hopeless when it comes to social media. However, Apple, Google, Mint, BankSimple, Square and others who are increasingly stepping on the toes of traditional banking players, are extremely adept at garnering customer support for their initiatives through viral marketing, social media and digital advocacy.

It is incredible that in an age where LinkedIn is worth $9Bn (40 times revenue), there are still some major bank players like RBS and HSBC that don't have a Twitter account. I know the transition from a controlled media and brand messaging environment to a conversation sometimes dominated by customers, is a difficult leap, but it doesn't mean you can't live in this new social world.

I know there will be cynics out there that would say that RBS and HSBC probably hasn't actually lost any revenue from not being on Twitter - personally I wouldn't be sure about that. One thing I am sure of though, is that I can guarantee that they haven't signed up 50,000 new customers as a result of digital presence on social media like BankSimple has.

This is the new way of acquisition. Be a part of the conversation, garner customer advocacy, simplify the engagement and enable relationships digitally. If you aren't living in the viral, social, conversation space - be prepared to be marginalized as a service provider in the retail banking landscape.

The separation of the bank and the customer

I've previously talked a great deal about the customer experience gap and how banks are moving further and further apart from their customers due to lack of behavioral sensitivity and poor user experience, but this is more. BankSimple is working with a raft of back-end providers that hold a banking license and can offer an FDIC guarantee on the deposit, but that doesn't mean that the holder of the deposit or the issuer of the credit product, actually owns the customer.

For years we've seen this in other industries where manufacturing of products and services is separate from the distribution network. The distribution network of the retail banking sector is under enormous pressure today. The BankSimple approach is the first of a massive shift away from traditional distribution channels where owning a branch network no longer means squat. Physical distribution network didn't save Borders from collapse, nor did it save Blockbuster, Encyclopedia Brittanica, MGM or countless music stores.

In this shift away from physical to digital distribution, it is almost always new players that start to dominate. In the case of books - Amazon. In the case of music and video - Apple.

In banking, it is too distributed and widespread, along with too heavily regulated, for one single global player to dominate the new banking interface. But one thing is for certain. We are about to see a whole new layer of retail banking interface or customer experience that doesn't need a banking license. If you think banking is "special", then just keep thinking that while you slump into irrelevance.

The new bank is the customer experience bank.

Resistance is futile

The chaps at BankSimple have found out that trying to change the paradigm of retail banking takes cojones. It also takes patience.

There are a whole raft of embedded bankers who don't want to see the world change. I liken this to the MPAA's response to the whole bittorrent landscape, or the RIAA's response to Napster. When the shift started to happen the traditional industry first denied it would ever happen, when it did start to happen they fought it with everything they had, and in the end they were screwed anyway.

The same thing will happen with banking. No matter how secure you think your relationship with the customer is today as a bank, the fact is if you can't enable me to bank in a better way, then you are irrelevant. Someone else can put a new layer of customer experience over the top of your banking license and do it better, faster, cheaper and sexier than the traditional players.

At the end of the day physical cash, cheques, plastic cards, and branches are all elements of the banking system that are ripe for digitization. The longer you keep fooling yourself that this transition is going to take years, and the banking sector has plenty of time to adapt - the easier it will be for BankSimple and others to eat your lunch.