On Banks

Bank.

a financial institution that accepts deposits and channels the money into lending activities

I’m excited to see that somebody with the developer chops of Alex Payne has hooked up with a startup that promises a more simple bank.

It’s amusing to me that for all the annoyances I’ve had with banks over the years, I’ve never really imagined that anything could be too different about the way they were run. The biggest change in recent memory is the move to non brick and mortar establishments, like ING, that allow for smaller operational costs. This, of course, allows for better customer benefits and bigger profits.

So, at the risk of sounding naive, since I got to thinking about what a bank should be tonight, and since BankSimple is asking for feedback, here’s what I think a bank should provide.

A bank should live on:

  • Customers who deposit money are the only reason banks are in business.
  • Lending should provide (1) funding for operations and (2) passive income for customers.
  • At the risk of everything else, the bank should hold the faith of those customers that trust the bank with their money.

That’s pretty much it.

If a bank wants to make a ton of money, they should explore other high risk avenues and leave the trusting customers to their solid banks.

If a bank wants to make enough money while making their customers happy, there are always low risk lending opportunities out there that allow you to both cover your costs and give at least a small amount back to your faithful customers.

And then.

In the 21st century, a bank should also live on electronic access that is:

  • Secure.
  • Always available.
  • User friendly.
  • Transparent.

So many banks are trapped in the 20th century with what can be done on the web, and that’s scary. Every time I do something on my non-ING bank’s website, I see the “https”, but I still have a hard time believing it. It’d be nice for once to be blown away by the design of a bank’s website, to have no troubles with the way data was collected, and to go away believing that my information was secure.

Once the first three are covered, it would ultimately be nice to see what data my bank had about me, how they used that data, and what methods they used to keep everything contained to my eyes only.

That adds up to a lot of words about how simple a bank should be, but the concepts are easy – take my money, be nice about it, hold it tight, and be sure to toss a little back my way every once and a while.