Would You Trust a Website With Your Paycheck?

Simple.com does much of what a bank does, without bricks, mortar, or fees

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Steven Cherry: Hi, this is Steven Cherry for IEEE Spectrum’s “Techwise Conversations.”

The Internet is taking over everything, but not all at the same pace. The music industry was very quickly transformed, publishing, mail, retail, telephony. But when it comes to money, change comes much more slowly.

I can remember using Citibank’s online payment system sometime in the 1980s, using a 300-baud modem the bank gave out to customers who signed up for it. The Stanford Federal Credit Union was apparently the first bank to put all its services online, back in 1994. The First Internet Bank—that’s its name, I’m not sure if it was the first—was chartered in 1997. And PayPal was founded in 1998.

There are now a lot of ways to do online banking—and the traditional banks have in many cases caught up—but new services keep coming along anyway. One of them is Simple. Yes, that’s its name—it even has the domain simple.com, and it already has 20 000 customers.

My guest today is the director of engineering at Simple—does your bank have a director of engineering?—Brian Merritt, where he manages a 20-plus person engineering team. He previously worked at Topsy Labs, which is a search engine for social networks. He joins us by phone from the company’s headquarters in Portland [Oregon].

Brian, welcome to the podcast.

Brian Merritt: Thanks, Steven. It’s great to be with you.

Steven Cherry: So what are some of the nouveau services that Simple provides that banks ordinarily don’t?

Brian Merritt: You can search. You can categorize. You have tools similar to those that Mint offered and that give you greater insight into your finances. In addition, we provide a mobile application that allows you to do most of the same things that you could do on the Web.

Steven Cherry: So is it fair to say that instead of a simple bank statement at Simple I would be looking at something more like a spreadsheet that could be manipulated and sliced and diced and categorized and labeled and stuff?

Brian Merritt: I think that’s one way to think of it. We do provide traditional statements. You can download them and print them out. We also provide many different ways to explore your transactions dynamically via our Web and mobile apps. But we also provide a way to export your data, actually multiple ways, including to a spreadsheet form. But we also allow you to export your data as a JSON format, which is a format used in programming to build applications around data. So if you’re a programmer, you can build whatever tools you can imagine. If you’re someone who’s more comfortable using Excel, you can export data in that format. If you’d rather just explore the data via our Web or mobile application, you can do that. The bottom line is that we try to give every possible opportunity to our customers to have the greatest possible insight into their data and to use their data the way they want to, because it’s theirs.

Steven Cherry: You also have almost none of the traditional banking fees—fees for checking, fees for overdraft, and so on. Don’t you want to make money?

Brian Merritt: So while we don’t have many fees, we do have revenue streams, and we can talk about that. But our relationship to fees is that we sometimes do have to charge them because there are certain things that cost us money. For example, an international wire transfer costs us US $25. We pass that cost on transparently to our customer, but we’ll never make a profit off of fees.

Steven Cherry: Yeah, so I gather there are two main ways in which Simple does make money. So when customers use their debit cards, there are fees that are paid by the merchant and Simple gets a cut of those. And then I guess like any other bank or savings and loan, the deposited money is invested in loans that generate income. So are those sources enough to keep you profitable? Are you profitable?

Brian Merritt: We are not profitable at this point as a startup. We are focused on building our business and investing our business rather than focused on trying to drive to profit. So we certainly believe that our model will be profitable that will allow us to create a sustainable business. However, we don’t look for sources of revenue that other banks do. So like I said, we will never profit off of fees. So we have given up that revenue stream that makes up sometimes 50 percent or more of the revenue that other banks make. We do make money off of interchange, which you mentioned is the percentage of each card-swipe transaction that gets spread around between the card network and the issuing bank and the acquiring bank. And we do make money along with our partner bank, Bancorp bank, on the interest earned on loans from customer deposits, which is the most traditional revenue stream of banks going back decades.

Steven Cherry: Deposits with Simple are insured like a bank’s because they are insured with a bank, Bancorp. And maybe we can just get out of the way the other thing that I think makes people nervous in this context. How secure is online banking in general, not just yours?

Brian Merritt: So we believe that online banking is as secure or more secure than banking in the real world. Something to think about is that when you give a check to somebody, they have your account number and routing number. They can use that in various ways to commit fraud. When you give your debit card to somebody, they have the number right in front of them. They can write it down and use it to commit fraud. These things happen all the time. So we think that banking online is safe, and the fact of the matter is that billions of dollars are being moved through banking websites, merchant websites, you name it, all over the Internet.

Steven Cherry: So you’re the director of engineering, and I guess in some ways the heart of Simple is its website and apps and other software, and I gather that software development at Simple is a little bit more like it is at, say, Facebook or some other startup than what a traditional bank would do.

Brian Merritt: That’s correct. We are not a bank; we are better than a bank. One of the ways that we’re better than a bank is we take a startup approach to developing our technology and our customer experience rather than having to focus on the many different concerns that traditional banks have and trying to support the legacy technology that all banks have. So we iterate very quickly. We use the most modern best practices that are used by other startup companies like Facebook and Google, and so on, which are exemplars in the industry. And we think that enables us to provide a better experience for our customers by adding more features more often, by fixing problems more quickly, and to be honest, just by doing it better.

Steven Cherry: Last year, we had a podcast about some economic research that took financial data generated by smartphone users of a service called Pageonce. Do you do any data mining of transactions, and could that be a way of providing added services to customers?

Brian Merritt: We are huge believers in data. In fact, our CEO is a big data guy, so at every point of our company, everything we do, we’re always collecting as much data as possible, and we use that data in many, many different ways.

So as you said, there’s a lot of data associated with customer transactions. One of the things that’s interesting is that all banks get an enormous amount of data over the card network. Visa sends many fields of data each time you do a transaction. But most people are familiar with what their transactions look like on traditional banks’ websites, where there’s lots of numbers and names of the merchants, and it’s sort of confusing sometimes.

And what else is interesting about that is there’s tons of data that’s just not displayed. So we do our best to use all of the data to do everything that we can to display as much as we can about transactions to our customer, obviously not some of the technical data that’s not meaningful, but that’s one way that we’re using data generated by the card network that is accessible to all banks, to all card issuers, to provide a better experience. But then there’s the data that we’re generating internally; we collect data for mobile-application usage, Web-application usage, all of the contacts our customer has with our customer relations team, you name it, everywhere.

And we’re constantly using that data to see how we can provide a better experience, to see how our customers are using our tools to understand who our customers are, and that’s one of those differentiations I mentioned in terms of being more of a startup in our approach to technology than a bank. Banks certainly have plenty of data, but they don’t normally have the tools and the team that can use that data to the best advantage.

Steven Cherry: There are a lot of ways to pay bills right now. There are specific bill-paying services: PayTrust, PayMyBills, I mentioned Pageonce. Google and Microsoft both want to enter this market. Is there room for Simple among all these others?

Brian Merritt: We absolutely think there is room for Simple. One thing to keep in mind is that the banking marketplace is extremely large. One way to think about it is that pretty much every person 18 or over in this country has some type of banking relationship. That’s a really big market. Every customer is different, and every customer has different needs. We think that the payment space has not solidified around any particular set of solutions for modern payments, movable payments, and so on, and we think that’s a huge opportunity for us because we have plenty of ideas, plenty of plans, and things already in the works to provide more-unique payment experiences, better ways of paying people, merchants, and so on.

Steven Cherry: There’s also Mint, which was created by Intuit, the company that makes Quicken, and you actually mentioned it before. How are Simple and Mint different?

Brian Merritt: Mint was one of the first companies that enabled you to gain better insight into your finances. In their case, they used an approach where they were not a bank or a bank replacement, but they enabled you to collect all your information from a variety of financial institutions and see it all in one place, explore it, and so on.

And we think there’s a lot of value in the approach to the extent that it allows banking customers to understand their finances better in some cases, but we are very different from Mint in that we are a bank replacement. Mint makes its revenue by working with vendors that want to sell products to customers, so that incentive to use your data to essentially show you ads is really different from what we’re doing. We do have revenue streams that we talked about before, but we’re not trying to show you ads. We’re not trying to sell you products.

Steven Cherry: Yeah, there’s obviously some big plusses once you limit yourself to a single account that you can look at in this way with additional insight. I guess there’s also a downside too, Brian. If I sign up with a new way to buy movie tickets online, the worst that happens is I’m out 20 bucks and I don’t see the movie. You’re asking people to send you their paycheck or their entire savings. How do you develop that kind of trust as a startup?

Brian Merritt: We can go back to reiterate that the money is stored in an FDIC-insured interest-bearing account at our partner bank, the Bancorp bank. What that means is that your money is just as safe with Simple as it is with any other FDIC-insured bank in the country. We think that we can provide not only a safe experience to keep your money secure but also a better experience because we don’t have to focus on the many, many things that traditional banks have to do in order to meet regulations, regulatory requirements, compliance requirements, and so forth. Certainly those are very important things. FDIC insurance was the only thing that provided safety and security to many banking customers during the recent financial crisis. We all learned that no matter how large a bank is, it’s not necessarily secure or solvent. The biggest banks had to be supported by the federal government in order to stay in business. The bottom line is, when customers are confused about their finances, they are not able to make the best decisions. We think that traditional banks are incentivized to keep their customers confused, so we provide all the tools that we can to keep customers as close to their money, as close to their spending habits, saving habits, as they can be, and to have the best understanding of how they can make the best decisions.

Steven Cherry: Well, Brian, if there’s anything that needed reinventing, it’s the traditional and expensive checking account. So good luck to you and to Simple, and thanks for joining us today.

Brian Merritt: Well, thank you very much, Steven. I really enjoyed being here, and take care.

Steven Cherry: We’ve been speaking with software engineer Brian Merritt about Simple, a website that does a lot of what a traditional bank does, and helps you manage your money as well.

For IEEE Spectrum’s “Techwise Conversations,” I’m Steven Cherry.

This interview was recorded 31 January 2013.
Segment producer: Barbara Finkelstein; audio engineer: Francesco Ferorelli

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