When Josh Reich arrived in Pittsburgh from Australia in the summer of 2004 to start grad school, his first order of business was finding an apartment and setting up utilities. But he quickly discovered one major problem: he didn’t know how to write a check.
Stumped by the phrase “Pay to the order of” and unable to Google it, Reich was forced to sheepishly knock on his neighbour’s door to ask how to fill out the check so he could set up electricity service.
That experience, he says, began “an adversarial relationship” with American banking.
Reich was stunned by how difficult it was to transfer money, the number of fees that quickly began to add up and the fact that he constantly had to keep an eye on his accounts. After graduating from Carnegie Mellon University with an MBA in finance, economics, and accounting, Reich went on to work for a hedge fund. But his problems continued.
“Any nanosecond of the day, I could tell what was going on with billions of dollars of other people’s money, yet when I came home and tried to figure out what was going on with my household finances, it was really hard,” Reich told Business Insider. “I knew it wasn’t because I didn’t know what I was doing.”
Reich and a fellow CMU graduate, Shamir Karkal, decided to start their own banking platform. They both quit their jobs and began building Simple out of Reich’s basement in Brooklyn at a time when there was little to no trust in the banking system: it was 2009, at the peak of the financial crisis.
In the midst of Occupy Wall Street, Reich and Karkal devised a plan for how to fix some of the problems people were protesting about. Then they began to shop around their idea to the venture capital community.
“I remember speaking with a certain VC who will remain nameless,” Reich said. “He told me, ‘Well, I’ve got a Wells Fargo account and if I need a check, I just call up the bank and they come bring it to my office.’ And I said, ‘No sir. You have a Wells Fargo account with like eight digits in it. You’re a very wealthy gentleman. They will do that for you — they don’t do that for average people.'”
‘We’re well able to punch above our weight class’
Now, Simple is approaching its seventh birthday and was acquired in February 2014 by financial services corporation BBVA. Simple is about to build a new, 50,000-square-foot office building in its home city of Portland, Oregon, next door to Simple’s existing headquarters.
According to Reich, the company is just trying to avoid having to hold meetings in the bathroom or broom closets.
“Over the last six months, we’ve grown 43%,” he said. “If we were a traditional bank, we would have needed 945 branches to support the growth that we’ve had. We have 320 people and we’re well able to punch above our weight class.”
The company focuses on a combination of encouraging saving while tracking spending, all on a minimalist mobile platform. There are no physical bank branches — instead, Simple uses fee-free ATMs inside places like CVS, 7-11, and Walgreens. The company makes money splitting interest margins with its partner bank and splitting the service fee on debit card purchases. Reich says there are no overdraft fees, late fees or any other more traditional banking fees.
So will Simple actually replace traditional banking? Will users switch their money over to a mobile platform with no brick-and-mortar branches? Can a 7-year-old startup compete with the likes of Wells Fargo and Chase Bank?
Reich is confident: “If you build a process people like, people will use it.”