Smarty Pig offers high-yield online savings accounts coupled with social networking features. It is not a bank, but partners with one bank per country to keep the deposits and set the rate for those accounts.
In the United States, its partner is West Bancorp Inc., a West Des Moines company that also has a stake in Smarty Pig.
Though Smarty Pig, of Des Moines, is not actively looking for a new partner, it knows it will eventually outgrow West Bank and has developed a new payments system with that day in mind.
This payments system "allows us to plug-and-play very quickly into different banking partners," Mike Ferrari, a Smarty Pig co-founder, said in an interview.
Already this approach to technology helped Smarty Pig launch in Australia last year, where it partnered with New Zealand Banking Group Ltd.
"We saw some of that [benefit] when we launched into Australia in a very, very short amount of time," Ferrari said. "That certainly could never have been done had we been ingrained in lots of different legacy systems of banks and third-party providers."
Most recently, this strategy came into play as part of Smarty Pig's desire to reduce the time it takes to fund its accounts through the automated clearing house network. Using a system from PayPal Inc., a unit of eBay Inc., it took three days. But after developing in-house a new payments system to link Smarty Pig directly to its bank partner, it takes two days.
This was done by linking directly to West Bank, cutting out the middleman, as Ferrari said in a blog post Monday that announced the change to customers. West Bank handles its ACH payments through Fiserv Inc.
Ferrari said the reaction to the speed improvement has been strong, but varied since he posted news of the improvement over Twitter Inc.'s microblogging service.
"Half the people are saying this is the greatest thing in the world," he said, but "I'm just reading one that says … 'will real time happen in our lifetime???' "
Even though Smarty Pig accounts are meant for long-term savings — the average savings goal is set at four years — customers are sensitive to the time it takes to move money, Ferrari said. They know they could be earning more interest if the money moved even a day faster.
Doug Gulling, West Bank's chief financial officer, said that with the recent changes, Smarty Pig is now moving money as fast as it possibly can over the ACH network. "I think we've got it squeezed down as far as we can get it," he said.
Aside from the speed benefit, the new system for handling ACH transfers is also less expensive.
Smarty Pig's move to a larger bank partner is inevitable, he said, but there is no specific time frame or deposit threshold that would trigger such a move.
"We're a $1.5 billion bank in terms of assets and $1.2 billion in terms of deposits," Gulling said. "At some point in time, Smarty Pig will outgrow West Bank, and that's been known from the beginning."
When Smarty Pig finds a new bank partner, it will move its deposits there, but West Bank would likely retain its investment, Gulling said.
