Banking as a platform: coming soon with BankSimple

New website, recruitments, preview of Ipad app: BankSimple is on a roll recently; but for me the most important piece of news was the announcement of the BankSimple API.

We’ll be launching an API for use by third-party developers in conjunction with the release of our initial user-facing web and mobile products. We intend the API to support everything that users can do with BankSimple, including retrieving transaction information, transferring funds, and more.

And perhaps even more important, from Joshua Reich on the BankSimple API Google group:

We’ve spent the last year thinking about these issues, but we’d love to hear
your input. Our business model isn’t pageview driven. We want our customers
to own their own data and use it in ways we could never imagine. We want to
support a rich ecosystem of 3rd party applications that make banking better,
while respecting the privacy of our customers.

Now, if you look at your current banking experience, what can you do with your financial data? At best, you can access it from another service (say Mint) which will reformat it to make it more useful for you. THAT’S IT… (if you know of other uses cases, please put them in comment)

On the contrary, the BankSimple API will allow banking to move toward a platform business model, with several stacks of services, as described by Sean Park in this post

The new industrial stack.

I am not a developer and I have most probably a limited understanding of the discussions around the BankSimple API but however I quickly came up with a couple of potential apps/services:

– Kids account application, making a user friendly kid money management application (a la Bobber) with a parental side (warning, kill switch, account allocation, spending limits etc…)

– Live widget dashboard with real time information for the account balance paranoid 😉

– Browser plugin providing balance reminders/advice when doing online transactions. A natural extension of the price comparison plugin, it will provide you with detailed information of your balance and perhaps an overview of the transaction impact on your budget (by type, buying movie tickets would be deduced from the entertainment allocation)

– Family account structure: a single account with annoted transactions to define who is “responsible” for the transaction. For the couples who want a single account but also would like to flag exceptional one sided spending.

– Ability to transfer account management to third party applications. Think automated money managers, with a set of activities per applications allowed by BankSimple, which cannot be overridden (no withdrawal, outside transfers for example)

For BankSimple, a rich ecosystem would make it attractive for new clients and probably help compensate the strong position of their competitors. Since their revenue will depend (even if partially) on the number of their clients/accounts(?), it will drive growth. For application developers/entrepreneurs, it’s a new ecosystem, with no existing equivalent and a huge potential to build value added services (revenue sharing model?).

What do you think could be built around the BankSimple API?

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  • I think BankSimple is currently describing quite a new way in thinking of your bank account as a node and not a vault. From the business model standpoint, this is quite disruptive. Instead of trying to keep money in your bank account to sell you many connected products (loans, savings, insurance,..), you'll create value by your ability to let money flow freely and securely at your will. There's certainly a new business model to define for doing that sustainably. I have no worries what so ever of the zillion of new services you can invent on top of this.

  • Brian

    It makes me think of the API a broker like IB is providing for statements enabling your own reporting systems to update themselves. Or using their trading API's to do trading and realtime account management. BankSimple is an innovative idea of doing the same for the banking industry, as Frederic said there is a ton of applications that you can think of to build on a banking API from insurance to lots of other things. For example doing your own analysis based on your financial history to see if you can apply for a new mortgage from a host of providers based on their latest terms, all automatically.

  • I feel there is a major hurdle which still needs to be overcome in the financial world. The way we exchange money today is burdened by a kludgy system of slow transfers and inter-banking processes. I really think your innovation in this market is needed and will make my experience with your financial institution a lot less painful, but until the majority of our institutions can agree to a more efficient and customer-centric model of business exchanging money will continue to be a chore.

  • yranchere

    It could be both a vault and a node with for example BankSimple being a virtual vault for all account data including the one added by other services (for security reasons mainly). Revenue sharing could then be a way for the services to pay BankSimple as it maintains these datas. There are hints of this on the BankSimple API group (if I understand correctly).

  • yranchere

    A constant monitoring to identify when mortgage terms are the best? Would be great.
    Or even more: providing more information to get better terms? Kabbage-like (http://kabbage.com) service which would use account information instead of vendor reputation.

  • yranchere

    Thank you for your comment.
    – First: to clarify I am not part of the BankSimple team, I just write on them because I believe their approach is really innovative for the banking industry.
    – Second: I agree with you, historically the payment structure is complex and may appear somewhat outdated, but initiatives such as SEPA in Europe are slowly changing this.

  • As long as there are organizations with their “hands in the pot”, the system will naturally gravitate to whatever model yields the most lucrative results. Instead, we should be trying to change our motivations and correct the behavior which traps us into these inefficient processes. I'm not familiar with the work being done by SEPA, but as a US citizen, I find little progress being made in favor of the casual consumer/merchant.

    I've written some of thoughts on this here… (http://nobulb.com/2010/07/the-end-of-distribution)

  • The distinction I made between vault and node was actually more economical than technical. When you operate a vault, you tend to maximize the amount of money stored within your vault and your business model is based on a fee on this amount. When you operate a node, you tend to maximize the flow going through your node and the fee is on transactions. My point is that banks are more on the vault business model side and payments services on the node one. Inventing a “bank” that would make your money move freely and flexibly, while still operating as a concentration point for your financial life is indeed something very new.

  • Thanks Yann for drawing the parallel between BankSimple and a new ‘platform’ business as I described in my eComm presentation. (Apologies that parkparadigm.com was taken down for maintenance very soon after you posted this but is now back up so your link should now work again.)

    Indeed one of the key reasons we invested in BankSimple is that Josh and Shamir intrinsically “get” how technology can be used to drive and implement fundamentally new and better adapted business models in financial services. They have some pretty significant challenges ahead of them and I sometimes worry about the current hype (as I know the founders do) but I remain confident that they have an excellent chance to build a truly innovative and possibly disruptive new player in retail financial services.

  • Thanks Yann for drawing the parallel between BankSimple and a new ‘platform’ business as I described in my eComm presentation. (Apologies that parkparadigm.com was taken down for maintenance very soon after you posted this but is now back up so your link should now work again.)

    Indeed one of the key reasons we invested in BankSimple is that Josh and Shamir intrinsically “get” how technology can be used to drive and implement fundamentally new and better adapted business models in financial services. They have some pretty significant challenges ahead of them and I sometimes worry about the current hype (as I know the founders do) but I remain confident that they have an excellent chance to build a truly innovative and possibly disruptive new player in retail financial services.

  • Thanks Yann for drawing the parallel between BankSimple and a new ‘platform’ business as I described in my eComm presentation. (Apologies that parkparadigm.com was taken down for maintenance very soon after you posted this but is now back up so your link should now work again.)

    Indeed one of the key reasons we invested in BankSimple is that Josh and Shamir intrinsically “get” how technology can be used to drive and implement fundamentally new and better adapted business models in financial services. They have some pretty significant challenges ahead of them and I sometimes worry about the current hype (as I know the founders do) but I remain confident that they have an excellent chance to build a truly innovative and possibly disruptive new player in retail financial services.

  • Anonymous

    Regarding the current hype I understand your and their concerns (the same could be said for Square). It is difficult to navigate between generating a positive image and being flooded by requests at a level that you are not ready for with an early stage product (which is pretty much what happened to Square, with too many requests for Square readers, a lot probably not from people with a real need – like me -). I think that the buzz is good but alpha customers should really be early adopters with an understanding of the limitation and risk of using a new product.

    I am pretty sure the BankSimple team has more than enough knowledge to deal with scaling and product improvements and, from our discussion and what they are slowly revealing on the interweb, a deep understanding of retail banking. I will keep writing about them, I know I am in no way comparable with say Techcrunch for hyping powers (parkparadigm going down after this post has to be a pure coincidence 😉 )

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  • mcx tips

    This is very nice post sir.I just love it.

  • mcx tips

    Wonderful post dude.i really appreciate sir. 

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