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Simple CEO: we're stuck with plastic cards thanks to America's fragmented banking market

Simple CEO: we're stuck with plastic cards thanks to America's fragmented banking market

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joshua reich simple
joshua reich simple

Josh Reich is CEO and founder of Simple, a banking startup that combines the design sensibilities of Square with the common sense of Mint. He has led the company to over half a billion dollars in transactions and 25,000 customers, with over 200,000 more still on the wait list to gain access. Simple also built the first mobile banking app we actually enjoy using. Reich took a few minutes to talk to The Verge about why most banks throw away 97 percent of your spending data, the best calculator ever made, and why we won’t be ditching plastic credit cards anytime soon. You can find him on Twitter at @i2pi.

What are you doing right now?

I’m on a plane from SF to PDX.

How do you structure your days?

With great aplomb.

I like to focus on one of five things: Strategy, Hiring, Investors, Product, and Culture. I put them in that order because it spells Ship-C. It’s easy to remember that way. If I find myself working on something that doesn’t directly move one of those things forward, I know to refocus on something that does.

What are your favorite blogs to check out?

I’ve basically switched to using Prismatic and given up on managing my own RSS feeds.

How do you stay organized? Any specific apps, methods, or mantras?

Evernote & TeuxDeux

Why have banks been so slow to adopt new technologies like smartphones and cloud computing?

It’s a long and complicated answer. Banking technology evolved in a completely parallel universe to the world of modern computing. For example, where ASCII became the standard for encoding text in binary everywhere, banks still primarily use EBCDIC. While this may seem like a technical annoyance (and it is), it speaks to a deeper culture issue inside banks when it comes to technology. They just don’t get it.

"Banking technology evolved in a completely parallel universe to the world of modern computing."

To understand the importance of engineering culture on technology decisions, everyone must read Steve Steinberg’s ‘96 Wired piece on Netheads v. Bellheads. We’re seeing the same thing again at Simple. We’re the netheads, and the banks represent the old guard.

What’s different about starting a finance startup than, say, a photo-sharing app startup?

The legal bills. Lawyers love us.

Banking is a highly complicated, regulated, and antiquated industry. At the same time, the minimal viable product for banking has a much higher bar. We can certainly move quickly in many areas, but when it comes to dealing with money, we’re very cautious. I’m proud to say that we’re processing nearly half a billion dollars on an annual basis and haven’t lost a penny, but that means it takes time to deliver new features. Now that we’ve got the basic product in market, we’re iterating really quickly and approaching the product velocity of your typical tech startup.

You told me once that banks throw out tons of data about how and where you’re spending money. What can you guys really DO with all that extra information?

Ninety-seven percent of transactions we see have ZIP codes. This isn’t important for accounting purposes, so banks ignore them. We don’t have the same costs of storing data that mainframe based banks do (oh, and they’re all on mainframes). So instead of saving the cost of storing a few extra bits, we take the opposite approach. We go out and go to open databases of locations, stores, etc. and augment our data with even more data.

"We’re the netheads, and the banks represent the old guard."

We do this because we want to improve our customer’s understanding of their finances. If you see enough transactions on your statement that look like gibberish, you start to ignore them. Ignoring your finances is a pretty bad life choice. Instead, if you see a transaction history that is rich and invites engagement, customers are more likely to develop a situational awareness to their money. This is really important and drives a great deal of the positive behavioral changes that we see our customers doing.

How did you design the Simple logo?

The Simple icon is a very basic guilloche pattern, meant to resemble a torus or ring. A guilloche is a complex pattern created from simple, repeatable steps that can be represented using elementary equations. This complex beauty formed algorithmically using simple components is why we choose to use it to represent our company, Simple. Of course, I had to prove my geek cred and went and wrote a program so I could generate our logo on my oscilloscope.

What underrated app, company, or service is simply "doing it right"? What other startups inspire you?

I’ll have to think about that one. I have a pretty spartan set of apps on my phone. If I’m going by what app I use the most, it would be Letterpress.

When are we going to be able to get rid of plastic cards? Why has it taken so long?

America is a terribly fragmented market. There are millions of merchants and thousands of banks. Outside of America, we’ve seen the adoption of a slew of new payments technologies that may make it to America, but I don’t expect to see any radical changes to payments in the next two years.

Take Europe, for example. Europe has adopted the Single European Payments Area (SEPA) and a regulation known as the Payments Directive. The Directive means that small companies can build services that serve SEPA without being a chartered bank. In America, if you want to build a payments company, you have two routes: being (or working very closely) with a bank, or getting money transmission licenses in each state. Both options are expensive and time-consuming, and that limits the level of innovation we see domestically.

"If someone tried to start this in America, they'd have to deal with multiple telcos hamstrung by competitive constraints."

One I really like is M-Pesa. It is the poster-child for mobile payments. Prior to M-Pesa, the predominant way of sending money in Kenya was to use bus drivers to send money back from the cities to rural regions. This was slow and error prone. M-Pesa arose when Safaricom (the cell phone provider in the region) started letting people cash out their prepaid phone credits. Coupled with the ability to send credits to any other phone, this meant that there was a cheap, reliable and fast way of sending money to anyone. 40 percent of the country now uses it to send money.

If someone tried to start this in America, they’d have to deal with multiple telcos who are hamstrung by competitive constraints and poor technology and a regulatory framework that would slap them down pretty damn fast.

What are you currently saving for?

I’ve got a few boring goals, like my taxes and homeowners insurance. I just completed a goal to go on vacation in Australia. That was fantastic. It was nice to know that I had saved up for it and spend on all the things I wanted to do without impacting my Safe-to-Spend balance, instead of putting it on a credit card and trying to work out how to pay for it after the fact.

I also had a goal to buy a Nikon D800e, but it was clear that I’m not earning enough yet to buy one, so I paused it. Once I pay off my other more boring goals, I’ll resume that one.

Who is your favorite person to follow online?


What’s your all-time favorite electronic device?

Way too easy. Hewlett Packard HP-42S. The best calculator ever made.

What’s the best movie you’ve seen this year?

I don’t make it to the cinema much, but I enjoyed watching The War Room on Netflix earlier this year.

What do you think will define the next wave in technology?

Software designed for people, not software engineers.

Do aliens exist? Have they visited the earth?

Have you seen a platypus?

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