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Neumann lends his support, both emotional and financial. "I'm an early-stage investor. The things I look for are high-risk, high-return things-people that are gonna change the world. Most of the pitches I get are people who are trying to fix small problems. People like Josh and Shamir can fix bigger problems; and, you know, banking is a huge problem."

As the months go on, Reich and Karkal research and refine their idea. They discover that starting a bank, charter and all, is a cumbersome process that could take three to four years and would plunge them into a world of regulation and compliance. They decide that their main goal is to improve customer experience, because, as Reich says, "Banks in America fundamentally make money by keeping customers confused. ... A confused customer is a profitable customer. We've joked that one of the greatest innovations in banking is ever-decreasing font size." They realize the best way to improve customer experience is as a technology company, and it's what they both do best. They're now developing the technology Reich believes is so lacking in current U.S. banks. This technology will be transparent to the average customer but will make their banking easy, hassle-free. Even the product's name will be easy-BankSimple.

BankSimple will be exclusively online. Customers will have one easy-to-access account and one card. They'll have free ATM access to the nation's largest network and free online bill payment. They'll have no overdraft fees, in fact, no hidden fees at all. They'll be able to deposit checks in such innovative ways as using pictures taken with their smartphones. They'll have real-time, useful data and the tools to clearly and easily manage their money.

In the consumer's eyes, BankSimple will function as a bank, but in reality it's purely the front-end experience. Reich and Karkal will work behind the scenes with chartered banks that hold FDIC-insured deposits and make loans. Their company's system will move funds as needed between checking, savings, and credit accounts to make life easy yet yield the most for the customer. The company will make its profits not from myriad fees, but by sharing lending and credit card profits with their partner banks.

In keeping with their simplicity approach, Reich and Karkal also have quite a promotional line: "We make banking not suck." Their fledgling company, called Simple Finance Technology Corporation, has moved out of Reich's basement and into nearby Brooklyn offices. Both can now walk to work, as Karkal has since moved a few blocks away.

Reich and Karkal have taken on another young partner, Alex Payne, the developer of the Twitter platform. They've expanded to nine employees, scattered in New York, Portland, and San Francisco, and have successfully raised nearly $3 million in their first round of financing. Their next step-testing BankSimple with a small group of friends and family, then starting the process of bringing on customers later this year. The waiting list already numbers more than 20,000.

The banking industry has noticed. The company was recently named one of Bank Technology News' Top 20 Innovators, alongside the likes of Citigroup and MasterCard. Amazing when considering that just a year earlier Neumann was smiling as Reich brashly decided they should "start a bank and go up against the biggest frickin' organizations in the world!"

In an era of bank failure and consolidation, BankSimple seems to have seized an opportunity. As one impatient customer wrote: "What a bizarre concept-people on a waiting list for a bank."

Melissa Silmore (TPR'85) is a Pittsburgh-based freelance writer and a regular contributor to this magazine.

Related Links:
BankSimple.net Offers Solutions
Hot Market: Consumer-Friendly Financial Services
Restoring Trust to Banking
Ron Conway's Crystal Ball: 12 Startups on the Cusp

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