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2/ When @simple announced it was shutting down this month, the news was met with dismay from both its customer base and the greater fintech community.
The arc of Simple, one of the first neobanks to enter the mainstream zeitgeist, was a harbinger for the rise of fintech.
The arc of Simple, one of the first neobanks to enter the mainstream zeitgeist, was a harbinger for the rise of fintech.
3/ When it was founded in 2009, Simple was a revelation. Here was a company that brought technology to banking, offering smart budgeting and safe-to-spend balance monitoring.
4/ Though few were familiar with “fintech,” even the general public could appreciate that Simple was doing something new.
(ps love the pic of Josh + Shamir in this nyt piece) https://www.nytimes.com/2013/01/09/technology/a-financial-service-for-people-fed-up-with-banks.html
(ps love the pic of Josh + Shamir in this nyt piece) https://www.nytimes.com/2013/01/09/technology/a-financial-service-for-people-fed-up-with-banks.html
5/ But what was even more important was what was happening behind the scenes.
Though Simple offered banking services, it was not a bank.
Instead, Simple partnered with Bancorp as a licensed regulated entity.
Though Simple offered banking services, it was not a bank.
Instead, Simple partnered with Bancorp as a licensed regulated entity.
6/ In this way, Simple precipitated the era of partner banks. When Simple launched, there were only a handful of what would today be called neobanks.
Today, there are dozens of neobanks in existence — and more willing banking partners than ever. https://a16z.com/2020/06/11/the-partner-bank-boom/
Today, there are dozens of neobanks in existence — and more willing banking partners than ever. https://a16z.com/2020/06/11/the-partner-bank-boom/
7/ Equipped with a bit of naiveté — “Surely this can’t be that hard?” — and loads of perseverance, Simple founders Josh Reich ( @i2pi), Shamir Karkal ( @shamir_k), and Alex Payne willed the entire stack for this new approach into existence. but they faced a variety of hurdles:
8/ Hurdle #1
banks’ risk aversion. No bank wanted to risk its license by partnering with unproven fintech.
banks’ risk aversion. No bank wanted to risk its license by partnering with unproven fintech.
9/ Hurdle #2
even if a bank was willing working out the details of a new type of relationship / contract was HARD.
What about revenue share, and who owned what parts of what processes (Does the fintech handle the KYC or does the bank?) etc
even if a bank was willing working out the details of a new type of relationship / contract was HARD.
What about revenue share, and who owned what parts of what processes (Does the fintech handle the KYC or does the bank?) etc
10/ Hurdle #3
banking technology was (and to an extent remains) a contradiction in terms.
Even if a bank signed an agreement, the tech integration still loomed large. In the aughts, many banks didn’t know what an API was, let alone how to let a third party use it.
banking technology was (and to an extent remains) a contradiction in terms.
Even if a bank signed an agreement, the tech integration still loomed large. In the aughts, many banks didn’t know what an API was, let alone how to let a third party use it.
11/ Fintech stands on the shoulders of early pioneers like the Simple's founders.
It’s still a complex endeavor to create a successful neobank today, but it is an order of magnitude easier than it was at the beginning of the decade.
It’s still a complex endeavor to create a successful neobank today, but it is an order of magnitude easier than it was at the beginning of the decade.
12/ As one trailblazing neobank shutters, we are grateful for all the entrepreneurs past, present, and future with the conviction to build something new. 
bonus: founders here's a story about how to take care of you employees during an exit.
from @shamir_k, one of Simple's founders on when they sold to BBVA. https://twitter.com/shamir_k/status/1347597131725459457
from @shamir_k, one of Simple's founders on when they sold to BBVA. https://twitter.com/shamir_k/status/1347597131725459457
bonus x2: if you liked this story you can find more like it by subscribing to our newsletter here:
https://info.a16z.com/newsletters-fintech
https://info.a16z.com/newsletters-fintech
