Fed up with banks?

Portland startup company aims to simplify banking

Jenna Wortham / New York Times News Service /

Like many people, Josh Reich got fed up with his bank after it charged him overdraft fees and he endured painful customer service calls to fight them. But unlike most people, Reich, a software engineer from Australia, decided to come up with a better way to bank.

Reich and a co-founder, Shamir Karkal, created Simple, an online banking startup company based in Portland, which offers its customers free checking accounts and data-rich analyses of their transactions and spending habits.

Few entrepreneurs dare to set their sights on industries as large and entrenched as banking and expect to flourish. But Reich, 34, a professed data nerd who has built computers and tinkered with the innards of sophisticated cameras, holds a master’s degree in business and has a robust background in financial data analysis. He is confident that Simple’s minimalist approach — it promises not to charge any fees for any services — will draw fans and customers.

“Banks make money by keeping customers confused,” Reich said. “There’s no incentives to make the experience better.”

Of course, inviting people to trust a startup with their money is a lot to ask. The company, which began signing up customers late last year in a deliberately slow fashion, now has 20,000 and has processed transactions worth more than $200 million.

It also has the backing of prominent venture capital firms including Shasta Ventures, SV Angel and IA Ventures and has raised more than $13 million. Simple has few, if any, direct competitors, although some services like Smarty- Pig and Mint offer analyses of bank accounts and financial transactions.

Simple is actually not a bank. It has deals with CBW Bank and Bancorp, federally insured banks, to hold its customers’ money.

And it has built slick apps for the Web and mobile devices to give customers an overview of their accounts and transactions. But it encourages customers to treat it as a bank, closing their more traditional accounts and only using Simple.

The company’s biggest challenge, banking analysts say, will be to persuade people to give it a try.

“It is extremely difficult to get consumers to change and leave their banks,” said Jacob Jegher, an analyst at Celent, a research and consulting firm. “Plus, although they are not a bank, they still operate like a financial institution, and they will face challenges that big banks have decades of experience with.”

At this stage, those who want a Simple account have to request an invitation on its site, though these are handed out fairly liberally to those who meet the minimal qualifications of Simple and its bank partners.

Customers receive a plain white card that can be used like a debit card. The company offers most traditional banking features, like direct deposit and money transfers. But there is plenty it does not offer, like joint or business checking accounts, or paper checkbooks, which may be a deal killer for some.

The startup does not have physical bank branches or automated teller machines, nor does it plan to build any. As a result, Simple customers cannot make cash deposits and must rely on the Internet and phone for service.

Simple tries to make up for what it does not have with modern software design and data analysis.

Each Simple transaction is tagged with detailed information that allows customers to search their accounts with plain English commands like “Show me how much I spent on meals over $30 last month,” or “Show me how much money I spent on gifts in December.”

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