BankSimple, a new type of technology-focused, online-only banking startup cofounded by an early Twitter employee, has just completed a round of venture funding, SAI has learned.
First Round Capital’s Josh Kopelman, IA Ventures’ Roger Ehrenberg, and Village Ventures’ Matt Harris led the round, which will close shortly. Angels including Ron Conway joined in.
The startup was founded by CEO Josh Reich, CFO Shamir Karkal, and CTO Alex Payne, one of Twitter‘s first employees, and the man who predicted that new features on Twitter’s home page would eliminate the need for desktop clients.
BankSimple says its goal is to “automate the hard parts of banking and make it easy for our customers to understand and manage their money.” Since there are high regulatory barriers to entry in banking, BankSimple isn’t a bank itself, but rather works on an affiliate model, depositing its customers’ money in other, FDIC-insured banks. It issues a single ATM/Debit/Credit card, and offers some neat high tech features like the ability to cash checks using your smartphone.
BankSimple has two main selling points: simplicity, and, especially, transparency. The company is born from outrage at the revenue model of existing commercial banks: sticking their customers with hidden fees and penalties. BankSimple insists it won’t do any of that. And, because it won’t have any physical branches to support, it can afford to be telling the truth about that.
Of course, the startup has a huge hurdle to clear in earning consumers’ trust. Even if we don’t like our banks, they are huge names, and we can hand them our life savings secure in the knowledge that they won’t steal or lose it outright. But if it can get past that, this could be a huge opportunity. Many consumers, especially younger, more technologically-inclined ones, don’t have much use for physical banks, and we’d rather not pay for them.