I don't understand how BankSimple is going to work. Is it going to actually store people's physical money somewhere, or is it just a layer on top of existing banks?
they're acting as their own simple bank. you give them money, they give you a debit card and a slick UI to track your money.
when you give them money, they give it to another bank, who they have probably negotiated some sort of deal with. banksimple gets a decent kickback on deposits or debit card transactions in exchange for dealing with everything from fees to customer service.
or at least, thats what it sounds like based on what i've read
From reading their posts it sounds like they are doing a abstraction layer on top of existing banks so they can avoid the paperwork of becoming a actual bank.
That makes me wonder how well their no fee scheme will work in practice.
I think he worries that since the banks "under" banksimple are already taking a good cut of the "interest gap" between the rate you can lend it out at and the rate you pay customers, there won't be enough left for you to cover your costs.
My guess is that "they will make it up with volume".
Controlling large sums of money that can be moved around behind the scenes to the capture the best rates may provide the consumer a better deal than they can get with their more modest sums. BankSimple passes some of that back to their customer, and keeps the rest. My assumption is they will try to squeeze the margins down from the banks doing the heavy lifting, just as Walmart does with suppliers.
Precisely.
Also concerned that the underlying banks could be jerks and change terms etc to make their model not work or cause problems.
I'm not against trying it, just concerned about how well it will play out.
I haven't been looking forward to switching banks before. So far every time I have switched banks it has been to get a local branch to deposit checks. I'm really hoping BankSimple is the last bank I'll ever need but I'll need to see how it works in practice.
Ah, O.K. Fair question. Unfortunately, I couldn't provide you with a satisfactory answer until we announce our partners. I expect we'll be doing so sooner than later.
He thinks that it's a layer on top of a bank account from some other bank, so the fees would technically still be in effect. How do cash deposits work for BankSimple?
Good question, but the last time I did a cash deposit was when I sold a car. And the time before that was when I sold another car. That's two times in about seven years for me.
Probably the same way they work for ING Direct. You have a different bank account elsewhere (Chase, WellsFargo, BoA, Credit Union) and you transfer the money from that account into your ING Direct account.
Besides that, with Direct Deposit I can't remember the last time I deposited a check.
Pretty sure most banks don't do too much physical money storing. I've used cash once in the past couple months; someone gave me a 20 to pay me back for something. I got rid of it ASAP.
But yeah, they're using other banks for their existing infrastructure like ATMs and treasury dealings. I'm curious about their revenue margins with that setup, but I've got to believe that there's a place for profit there.
If I remember from my economics classes correctly, a bank has to have around 10% of its assets liquid. Meaning if you have $100,000 dollars in the bank, they need to have $10,000 in cash on hand. Of course, the 10% is all assets, not just yours, so 100 customers have a total of 1 million dollars, the bank needs $100,000 on hand for withdrawals.
That is just a broad overview that I remember from college. The numbers probably are wrong (10% is a nice round number) and I don't know how that works with a bank with 1000's of branches across the country. Of course I could be completely wrong, since I didn't really care about economics at the time.
Banking is a highly regulated industry and so products usually stop at national borders. Even banks that operate in multiple countries (RBS/Citizens, Santander/Sovereign, HSBC, etc.) basically operate as separate companies in each country.
It's expensive and time consuming to comply with so much regulation. If BankSimple does well, I'm sure they'd be happy to expand internationally, but at this point it's questionable whether the public will gravitate to BankSimple. If they tried to launch in multiple countries from day 1, they'd be spreading resources very thin dealing with all the different laws. This way, they can launch, be successful, and expand.
In some ways it's like physical businesses. You wouldn't expect a new fast-food chain to launch with 50,000 stores worldwide, would you? Unlike the web which is decently universal, they need to wait a little to catch on and grow.
