Paybefore Award-winning Simple, the Portland, Ore.-based branchless bank founded in 2009, this week said it’s eliminating all consumer fees and will rely exclusively on earning interest and interchange for its revenues. The move builds on a growing trend of financial services providers cutting the cost of basic banking services for consumers looking for alternatives to traditional full-service bank relationships, but analysts suggest it could be a challenging business model for Simple.
Simple, which BBVA acquired last year, has relied on an electronic model to deliver services from the outset, with no minimum balance or monthly fees. The company never offered overdraft services and the only fees it charged were “passed through” from third-party services, Simple said. Now Simple has removed those, including all fees for cash withdrawals, Treasurer’s checks, international ATM withdrawals and expedited card-replacement fees. “Simple earns money from interest and interchange, or rather, when our customers use their accounts,” Josh Reich, Simple’s CEO, explained in a blog post.
Analysts say Simple is going after consumers that are willing to forego all fees in exchange for bare-bones services. “Some consumers may be drawn to the no-fee strategy, but find the account isn’t right for them,” says Ron Shevlin, director of research at Cornerstone Advisors, noting that many consumers still prefer the option of conveniences like overdraft service, branch access and ancillary services. Leaning heavily on interchange for its revenue could be “a tough row to hoe,” Shevlin adds, pointing out the downward pressure on interchange worldwide. “Even if Simple is successful at attracting a meaningful number of customers, these consumers’ spending patterns aren’t likely to generate a lot in interchange.”
Simple is a longtime partner of the CFPB’s Project Catalyst program to drive financial services innovation, and is part of a growing movement of financial services alternatives for unbanked, underbanked and younger consumers, analysts note. Green Dot Corp.’s GoBank, a 2014 and 2015 Paybefore Awards winner, launched in 2013 with a mobile-centric banking product emphasizing minimal fees. American Express Co. went after “unhappily banked” consumers when it launched the Bluebird checking alternative in 2012, and the company continues to enrich features of Serve, its product targeting unbanked consumers, that now includes three different service/fee options, including one Serve card with 1 percent cash back on all purchases.
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