I think there's a huge need for an actual new bank that is built on technology. It's one of those obvious big need problem.
One of the big problems founders usually run into when doing this, though, is dealing with the mass of regulatory requirements involved. How are you thinking about this? Which of the many different services offered by a bank will you target first? Is it going to be that payments piece you are describing?
One of the hardest parts of the regulatory requirements is the Capital on hand and getting a federal charter.
Because we've targeted a handful of very small institutions with those charters in place and the banks are in good standing it actually allows us to skirt some of the pain points of trying to charter one ourselves but also allows us to hit the ground running on the technology front.
We think the bill pay/secured payments could be the one to target first because we think there is value in just being a great traditional savings and loan bank. However, the main thing we're thinking through now is if this is a big enough segment to gain real traction with consumers or if we need more of a WOW product for mass adoption.
I was thinking about this recently - there is a need for a meta banking service - basically a p2p banking service much like Venmo -- but also allowing for vendors.
The actual funds can still be housed in a traditional bank - but you can still have an account or CC number which you would give a vendor.
Whenever the vendor attempts to charge your CC number the amount goes on escrow hold only in the meta-space until you the user will auth it to actually come out of your account.
It sits between the real bank and the vendor and you and gives one more control over their money.
Thats exactly the idea that got us to this point Sam.
To be honest we had no intent of sharing this much publicly before there was more to play with out there but we couldn't pass up getting some advice from Aaron and Michael as we've been going through this process and trying to figure out more pain points for the end users.
Cn I contact you and give you all my personal pain points, I have actually been thinking about this for months -- but only internally. I'd like to vent and give you some context as to why.
Ill gladly sign an NDA - you actually dont need to tell me too much - but I'd like to just brain dump on you in the hopes that my issues will be addressed by someone.
I want to opt out of the traditional banking system 100%.
I want to have integrated books. why can't a bank just sell me the invoice, payroll etc. services so I don't have to import them. Rules for employee spending. employee X's debit card can only buy from these stores fort this amount. Employee Y has limit of $500 per day. and I should be able to go to my smart phone to change the rules.
The way we've figured out so far is really learning from a failed past experience. We built a product in the past which was a kind of Yodlee or Plaid competitor (http://spout.co) and learned alot of what consumers cared about along the way while never hitting an actual nerve with clients who were willing to pay us money.
I think we started like most people would here, by partnering with existing banks. So we have a signed pilot with one major bank and are working on a partnership with another one. But knowing how slow they move we started looking at other avenues that could make a more immediate impact.
The pilots are around lost or stolen cards and being able to have your autopayments as proxy cards so when the number of the card on your Target or Home Depot account gets stolen the number of the card in your wallet doesn't have to change and vice versa.
What we're working on now is a way for people to identify bills in their email that we can then process and remind them when they're due and how much money they may have left in their accounts when paying them. This allows us a couple of opportunities.
1. To get consumer eyeballs on something and to see if people would like to pay bills via a simple Venmo-like product.
2. Building a base of potential users for an actual bank launch.
In that vein some of the underlying tech behind an actual bank itself becomes the most interesting part of the problem once a transaction is approved.
But until we get behind the kimono we really don't think theres a way to know how much we'll have to build or improve with the underlying tech and systems but we suspect what is built can be leveraged in several ways.
What we do expect is a complete questioning and re-thinking of how every single thing is done from how customers deposit money to how we issue new accounts and how underwriting is done on loans of all types.
That seems like a pretty good way to start getting relationships with customers. How is it going? What have you learned from seeing how they use your product?
Well since we started with the pilots I’ll go there first. They progressed very quickly at first. One meeting turned into three which turned into 5 more and then we actually got wireframes and mockups made. And then everything seems to go into super slow-mo.
When that happened with one bank we used the first relationship to leverage into a second one with another large bank, after going through a near identical process we realized that big banks all move much slower than we can (even the ones that claim they can move very quickly).
At that point we started pursuing relationships with smaller banks and those seem to be significantly faster albeit still very slow in comparison to a startup.
The most recent revelation with the bill pay stuff has literally been over the course of the last 7-10 days because we threw out what we thought was a hairbrain idea to buy a small bank to an investor we knew well.
He got excited and offered to fund the entire deal if we could find one that we thought could work well.
That kind of kicked ideas into hyperdrive about what we could build to attract users now instead of waiting, and the tool to identify bills within emails was thought up and began progress on just so us and some of our friends can try it.
It’s not a launched product yet, but its close to something we could stick in the chrome store as an extension and see the feedback we get.
One of the big problems founders usually run into when doing this, though, is dealing with the mass of regulatory requirements involved. How are you thinking about this? Which of the many different services offered by a bank will you target first? Is it going to be that payments piece you are describing?