BBVA Buys Simple in Path to Digital Transformation
The two top execs at consumer-finance startup Simple took to a public forum -- a social media chat among tech investors including the famed Marc Andreessen -- to discuss the pros and cons of buying a bank.
The bank innovation flag has been raised.
BBVA agreed on Thursday to buy disruptor Simple for $117 million in a bid to improve the Spanish bank's digital properties. Simple, which was founded in Brooklyn as BankSimple in 2009, provides PC-based and mobile banking in cooperation with The Bancorp Bank. Its goal from the beginning was to work with many banks, providing a streamlined digital front-end for online banking. In the absence of other bank partners, Simple focused much of its business on its Bancorp Bank relationship.
"We are excited. We are very serious about the digital transformation and helping our customers and we believe Simple can help us on our path," says Jay Reinemann, executive director of BBVA Ventures. "The bank has been on a path to digital transformation for many years."
Simple, which began providing a basic online and mobile banking interface to customers in July 2012, will become a subsidiary of BBVA and will gain distribution and potentially more dedicated resources from its new bank owner. Eventually, BBVA aims to introduce the Portland company's customers to additional financial services, something Reinemann says current Simple customers have been asking for.
Simple's digital value proposition and its younger customers were two big draws for BBVA, says Reinemann. The average age of Simple's users, of which there are about 100,000 in the U.S., is between 25 and 35. "It's younger than our current demographic in the U.S.," he says.
For the near-term, the bank wants Simple to focus on its existing business in the U.S. Over time, Simple's features are expected to bleed into BBVA's digital apps.
New Simple customers will continue to be enrolled by The Bancorp, Simple's current U.S. bank partner. In time, new Simple customers will be linked to BBVA. (The Spanish bank is no stranger to being the behind-the-scenes bank. SmartyPig customers get savings accounts with BBVA when they sign up for the goal-oriented savings account service.)
Simple has been a poster child for digital banking design in recent years and has sought to position itself as somewhat anti-bank at tradeshows and in the media. (It's a marketing strategy Mint, now owned by Intuit, also took in its early days.) One risk for BBVA is that some Simple customers will be turned off by the fact that it's now owned by a conventional bank.
"We are thrilled to be working with a partner who shares our vision," says Adam Erlebacher, COO at Simple.
Simple has been in talks with BBVA for several years, he says. "[BBVA] has a commitment to innovation that we have not seen elsewhere."
Erlebacher says Simple, which already employs 92 people, is hiring aggressively.
He says the startup is getting most of its customers from Bank of America, Chase and Citi.
Reinemann cites Simple's Safe-to-Spend tool as one example of a unique feature. The tool is designed to do away with mental math like calculating whether a user can buy, say, a TV, given upcoming rent payments and other financial data.
Reinemann says BBVA "will treat them [Simple's operations] differently than a traditional bank." Simple's employees will remain in Portland, Ore and the company will maintain it U.S. focus.. What will change is Simple's board.
"We are in the planning processes to give the right support and put in the place the right board," he says.
Industry insiders view the deal as a smart match for both companies.
"I think it's a really interesting deal," says Jacob Jegher, senior analyst at Celent. "Simple is a disrupter in the industry and BBVA is a highly innovative bank. It sounds like a good match. Simple can't be replicated overnight."
The outcome, of course, depends on how BBVA and Simple work together. Jegher believes consumers will care less about the bank behind the interface and more about the experience and receiving stellar service.
"Any step like this pushes the industry forward," says Jegher. "It's part of building a culture of innovation in the bank."
Stessa Cohen, a research director at Gartner, says BBVA's acquisition of Simple and partnership with SmartyPig is another sign of its customer focus.
"It's not oriented around transactions but around what the consumer wants and needs," Cohen says. "It's a whole new customer experience that really puts customers at the center of their own money."
For BBVA rivals, the question is how to respond.
"Should banks all go and copy? I dunno. Every bank has a different strategy," Cohen says. "There's no one recipe."