"LET'S START a retail bank." That was the email subject line that greeted Jerry Neumann, a venture capitalist, one morning in 2009. The sender: his former employee Josh Reich, a Wall Street denizen so fed up with his personal-banking experience -- the hidden fees, the confusing jargon, the poor customer service -- that he vowed to build a better one.
Alas, regulatory roadblocks prevent most people from bootstrapping a bank. So Reich and partner Shamir Karkal created BankSimple instead.
The New York tech startup, which in May launched a closed-beta version of its web app, aims to streamline the U.S. banking experience by decoupling it from actual banks. Services such as Mint and LearnVest have toyed with this notion for years, launching sleek personal-finance tools that source stats from existing accounts. BankSimple plans to one-up them all by offering checking accounts, debit cards, and more. The twist: Rather than handling cash, it partners with "back-end" banks, so employees can prioritize user satisfaction. "Our core brand value is 'Don't suck,' " Reich says.
At first glance, BankSimple's sparse, elegant platform looks more like a Tumblr than, say, a Chase.com. That's because creative director Bill DeRouchey designed for mobile from the get-go, which, he says, "forced us to make the flow as simple as possible." The site also nods to Twitter and Google, offering a scrollable stream of recent transactions and a search feature that understands commands like "show me every transaction greater than $50." To give users a real-time snapshot of their financial health, a "safe to spend" balance figures in pending bills and savings goals.
BankSimple's operations are even bolder than its design. Because it's tethered to multiple banks (via special software), the startup can shift users' money between them to secure the best interest rates. The FDIC-backed firms, in turn, get additional customers without paying for marketing, meaning "there's enough revenue for both of us to be happy," says Pete Chiccino of Bancorp, which is slated to join CBW Bank as a BankSimple partner. Reich also promises his company won't charge the kinds of extraneous fees that netted U.S. banks some $36.5 billion last year. In fact, BankSimple touts 30,000 fee-free ATMs in its network and plans to extend credit to prevent users' overdrafts. To offset those costs, it relies on retailer fees from its debit card, and soon, interest from loans -- much the way banks operated before deregulation in the late '90s.
To be sure, BankSimple has plenty of obstacles to overcome. Among them: servicing 12,000 beta testers by year's end; opening its platform to developers; launching to the general public in 2012; and luring customers away from brand-name banks with physical branches. "I'm not saying it can't be done," says Brad Strothkamp, a VP at the research firm Forrester. "But the answer is not as simple as, 'We've got better technology.' "
"People are going to raise an eyebrow," counters CTO (and Twitter vet) Alex Payne. "Then, hopefully, they'll realize we're building something better than a bank."
A version of this article appears in the July/August 2011 issue of Fast Company.