Starting a Bank

I often get asked something along the line of, “If you weren’t leading Automattic, what would you work on?” There’s not a single answer to this question; the answer changes day to day. But I think if you asked me today, I’d say I would like to start a bank.

There are very few people who really love their bank. We’ve all dealt with overage fees that stack up, brain-dead fine print, and a general malaise. There’s also a unique opportunity in that mainstream contempt for financial institutions has never been higher, while at the same time there is an incredible amount of government backing that essentially makes it a no-risk environment. People are hungry just for anything different, something contrarian. A David to the Goliath banking industry.

The name of my bank would be something supremely boring, like SafeBank. The idea behind it is that bad behaviour in the banking world has been largely inevitable because their compensation structures incented people to do overly risky things. SafeBank would maintain a reserve level 2-3x higher than Fed requirements and any other bank. SafeBank would have no bonuses. Critics would say this would make it impossible to attract top-shelf talent. Every time the bank gets attacked we’d turn it into an advertising opportunity to emphasize why we’re different. “We can’t attract top-shelf talent? We take your money and put it in a vault. We don’t need the million-dollar bonus geniuses on Wall Street to do that. SafeBank. Bank, safe.”

In fact, the first few years of SafeBank would be largely focused on acquisition through every trick in the book. At the very beginning pull a Gmail/ and make it invite-only, which will create a buzz and also allow you to give amazing white-glove service to the initial customers, who will in turn tell their friends and make a ton more buzz. (You can also target certain profitable segments and ultra-safe depositors at first, like Gmail users in San Francisco (using Firefox with an ad-blocker) who make six figures a year.) There would be only one style of checks and debit cards and they’d need a distinctive design so if you saw one you’d say, “What’s that?” which would then start the whole conversation again about how SafeBank is different.

For the first two years you could also do things like not allow accounts larger than the FDIC-insured limit. No one has ever heard of a bank turning away money! But you’d say that although everything SafeBank does is risk-free, it’s still a startup and if people have more than the insured limit (250k for single, 500k for couples) in an account, they should put the extra somewhere else. Again, this will impact a very low percentage of customers, but everyone will think it’s remarkable. This can be phased out after a few years; in fact, it would be a PR opportunity. “We’ve been in business now long enough that we feel comfortable with larger accounts.” Boom, free coverage.

I’m a tech guy so of course a lot of focus would be on the website. Imagine an old-time vintage design aesthetic combined with a Google-like simplicity and attention to speed. All logins would be two-factor, with the default being it’d SMS you a one-time code to log in when you gave your email address. A big part of the website would be the blog, of course. It would have a strong Ben Franklin-like common sense voice, and in addition to giving a few cool saving or home tips each week, it would cover at least one financial industry story a day.

  • “Bank of America spent $40,000,000 dollars on airplanes last year. We spent $40,000 to develop an iPhone application so you can check your balance from anywhere.”Β  (Hmm, the iPhone app should cost like $2.99.)
  • “Here’s how to block advertising when you browse the web with Firefox; it makes the web faster and less annoying.”
  • “Goldman Sachs just paid out 16 billion dollars in bonuses to their employees. If we had an extra 16 billion dollars lying around, we’d put it in the bank for a rainy day. (If Goldman had never paid out bonuses they never would have needed government intervention.)”
  • “So-and-so Bank’s website requires you to use Internet Explorer. We beg that you don’t, because there are way cooler and faster browsers. Here are 3 open source browsers you can switch to today.”
  • “68 Million Reasons Your Bank Sucks. That’s the amount BoA collected last quarter in needless ATM fees.”

(That’s all made up.) The headlines would almost write themselves, and every time a financial institution is in the news it’d be an opportunity to contrast why SafeBank is different and what the underlying philosophy is behind why it’s different.

All of the marketing would be on the web and viral, because it’d be an online-only bank like ING Direct. No storefronts where people have to wait in line or risk a bad interaction with a teller, or that get robbed and need insurance; basically a lot of the historical risk of running a bank could be eliminated. When you sign up it would have a “tell your friends about SafeBank” address book feature that would connect you to them if they signed up for an account, give you both money (Bank of America has something like this), and also make it easy to send them money, PayPal-style, if they have an account.

How would the bank make money? I think it wouldn’t touch anything risky on the financial side — it would be a data company. The first 3 years the focus would be entirely on customer acquisition, marketing, PR, and building a world-class tech team building a rock solid infrastructure. SafeBank would make way, way less money than banks currently do, but it would be more than enough to build an amazing product in a sustainable way, like Craigslist did with newspaper classifieds. After a certain milestone, say 100 billion in deposits, I would buy or clone Mint. SafeBank would have more (and more accurate) data about its customers than almost any other company in the world other than credit card companies, so the online interface would have Mint-like lead generation offers based on that information. For example, you spend $140 a month on electricity, but if you switch to this new solar provider you’d save $200 a year. Think of it like Gmail contextual advertising but based on where you spend your money rather than the words in an email. There also might be aggregate data opportunities for economic research or targeting, but I’m not sure if I like the privacy implications there.

SafeBank couldn’t raise VC or anything like that because having any sort of exit expectations would completely kill the safety story, but I think it could be bootstrapped and after a few years would be hugely profitable. Its existence would also put huge pressure on existing banks because depositors would be leaving in droves, putting pressure on their reserve requirements. Existing banks couldn’t compete in a traditional way because they have such a sordid history of customer apathy and bad PR. SafeBank wouldn’t be trying to capture their profits, it would largely be destroying them and making much smaller amounts of money in non-traditional bank ways. It would be somewhat like a credit union, but for the masses.

Anyway, this is just how my mind wandered this morning while brushing my teeth. Tomorrow I’ll think the last industry I’d every want to be in is banking. πŸ˜‰

Would you trust your money to SafeBank?

242 thoughts on “Starting a Bank

  1. Sign me up!

    When I was living in the USA it seemed like every state had it’s own banking laws, but I imagine a lot of the challenges is just how complex these banks’ systems are. Rules are often a lot simpler when you keep it simple.

    I also had the painful experience of the Indian support not knowing that there were no Chase branches in San Francisco (or even California I think). So USA based support please!

    Once SafeBank has conquered it’s own market, it will be exciting for it to be the 1st bank that makes it easy to move money between the US and Canada.

    1. Matt, your posts are interesting, but could you please consider incresing the font-size and removing the diagonal strips from the background. That alone would make the posts waaay easier to read. I just got to the thrid paragraph, had to quit, got a headache. Thanks.

      1. The redesign is very cool, but I agree with Luis the font background combo just don’t work.

        Otherwise, the bank idea is great.

    2. Oh Matt!
      Nice post, — I felt half warm half sad when I read it. You are a very creative guy and have great ideas. Marc Andreesen also said recently he’d be interested in a bank….. lots of very smart entrepreneurs and visionaries are. Problem is, you cant. You cant, I cant, basically the only ones who can are those who already own banks.
      Same goes for insurance…. try starting an insurance company (not an agency, an actual insurer).
      In your post you mentioned several things that are currently a regulatory problem — even having a company blog is a problem — for investment firms all material that communicates with the public has to be approved by a compliance team- banks are similar. You cant deny deposits and have all kinds of regulations about how many loans you must give, money you must take, etc etc. You cant even buy (let alone start) a bank without having all kinds of approvals – which they will not give you because you don’t have a minimum of three years in banking etc etc.

      Sadly we have very little competition because of this. But it will take a visionary to break through — the internet will certainly help — but the only thing that will really help new competition is to have less regulation. Most people think ‘deregulation’ is an ugly word and the cause of the current mess, the opposite is true- get rid of the current regulations so a Matt or Marc could enter the space.

      1. Then people would have to choose again between very safe – but extremely low return, and very unsafe, but high return.

        The whole cause of the banking crisis was the safe investments not being used at all, all money going to the very unsafe, which caused a cascade failure. One unsafe investment fell through, causing another to fall through (because the first firm went bankrupt).

        In other words, Matt’s bank would have made 0 difference.

        The problem was not safe investments being unavailable, the FED offers investments that are as safe as America itself. People didn’t buy them.

      2. Of course, you won’t get anywhere with this argument, since that means that ordinary people were responsible for the collapse. Greed of Joe, Dick and Harry. Greed of mr. Joe Average, of you and me.

        And politicians simply don’t blame ordinary Americans. They most certainly don’t blame them for a sin, however aged the concept might (or might not) be.

        That just buys a politician a one way ticket to obscurity. Rather, you pull an Obama : “we’re going to kill those evil rich jewish banking directors one by one !”. And everyone’s happy.

        That’s what demagogues do, after all. One would like to think the disaster that was WWII would immunize people against that sort of thing. One would like to.


      3. @Tomc

        High risk investments were chosen over low risk investments for two reasons:

        1) US monetary policy and various regulations provided excess capital. The FED may offer safe investments but they incentivize mal-investment and help to create bubbles.

        2) There was an (obviously correct) expectation that the “too big to fail” institutions would get bailed out in a crisis, creating a moral hazard.

        I don’t know any average people that chose to invest in high risk areas. I know many that took out mortgages they couldn’t afford because the banks offered it to them. The banks offered it to them because of easy credit from the FED and the implicit guarantee of institutions like Freddie and Fannie.

        In truly free market, one with much less regulation and no distortion by a central bank, there would be more interest in lower risk investments. When the high risk investments failed, nobody would be there to bail them out.

    3. hi,

      Not wanting to rain on your long teeth brushing brain storming here are a few of the flaws or misunderstandings that i see from briefly reading you idea while eating my toast –

      – You say that there is currently a no risk environment in banking. Not only is this a paradoxical statement in terms of banking but unfortunately your bank would not qualify for the TARP scheme, as indeed the 89 other small banks that have gone bankrupt in the US have found out.

      – ‘β€œWe can’t attract top-shelf talent? We take your money and put it in a vault.’ Although you later go on to contradict this false advertising claim by discussing how you’d make money, it’s not really much of a bank, or indeed a business at all, if you just take the money you’re given and stick it in a vault. Remember you have to pay each of your customers interest and the fractional banking system only really works if you take their money and make more interest with it than you are paying out. Which means you are taking on the risk of holding their money (see that risk word again).

      – As another poster has said you can’t just start banks and the thought of anybody being able to is a pretty terrifying one. But, but, i hear you cry, look how the banks created the current crisis. If so, i suggest you read up on the Greenspan Put, Fed Policy to not prick bubbles, The model portfolio theory, the efficient market theory, Chapter 11 bankruptcy law, the yen carry trade, the mark to model/market accountancy changes amongst other things before blaming banks for the crisis. The banks did ignore and ultimately underestimate the risk too long, but they had little choice given the lax regulatory and governmental economic environment that developed through the late 1980s onwards through the policies of the BoJ and the Federal Reserve.

      – “How would the bank make money?” – You’d lend it to other people at a higher rate than you’re paying out. That’s what banks do and this creates risk.

      – “I think it wouldn’t touch anything risky on the financial side β€” it would be a data company.”
      If that’s the case, it’s not a bank, it’s a unit trust and you wouldnt be able to register as a bank and enojy any of the protection schemes and/or FDIC guarantees.

      – “The first 3 years the focus would be entirely on customer acquisition, marketing, PR, and building a world-class tech team building a rock solid infrastructure. ”

      Ok let’s assume you take in one million pounds from investors and give them interest of 3% a year. In three years you’d have paid out approximately Β£100k in interest and also i assume you’d be paying your great PR and advertising teams some nice salaries. But you wont have actually made any revenue. Now this might sound fine in the insular world of web 2.0 as many companies build up a user base before making any money (and in most cases never making any money). However, banks don’t work like that. In late 2008, when a few money market funds lost money on the lehman brothers bankruptcy and announced that they wouldnt be able to pay back all of their investors money (and i’m talking about saying they could only pay 98 cents for every dollar invested, which might not sound like much), panic ensued and the industry lost 7% of its assets in 48 hours and these investors redemptions caused various funds to go under. So saying you want three years of losing money and eating into your deposits as you build up a user base might not go down too well with your depositors.

      – “after a few years would be hugely profitable”
      How exactly would it be profitable? Yet again, you’d need to be making more money than your paying back and this would require you to invest the money and financial expertise.

      Ok nitpicking over. Having said all that, i do applaud some of your ideas to make banks and their bonus structures more transparant. The problem is, the banking world is painfully complex and by definition the idea of a bank is the assumption of risk. And as we’ve found out in the last few years, this is something that anybody can get horribly wrong.

      1. The point about interest rates is misleading. Most retail banks make their money from charges, e.g. for overdrafts etc, not from lending money from current accounts. Personally, I would be very happy to use a bank (or whatever you might call it) which charged a modest fee for managing my money rather than using it to finance bets, which is what investment banks do. If Safebank used my financial data like Google, they would be able to predict cashflow, make bill payments on time and generally do what a good business manager would do, only for a few dollars/euros/pounds per month. Let’s do it!

    4. Try a Frost Momentum account, it’s free and the Flash interface is good. You can tag your purchases like Mint, you create the categories. Also it’s a paperless account and you don’t need to visit a branch if you don’t want to–the idea is to save money, like you’re saying. Also Frost has a long history–not that you don’t Matt πŸ˜‰

      They are about to announce some SMS services. I hope Frost continues to innovate, because I think you are right, banks now need to focus on technology.

      PS: I switched to Frost because WAMU went under.

  2. I don’t believe that you can have an invitation only bank and still receive the Federal Insurance; I think that you have to be an equal opportunity bank to have FDIC backing.
    That being said, I *really* like these ideas, so sign me up! I think that I would want an opt out option on the advertising. I would also like a BlackBerry app developed as quickly as the iPhone app πŸ˜‰
    You would also have to address the time that it would take to generate and send the SMS passwords. Oh! Don’t forget to have banners available for people to place on their websites!

    1. It would be open to everybody, just in the beginning it would be limited to something like 1,000 new accounts a day, so you’d sign up on a list to get notified when there was a space available and reserved for you.

      1. That sounds like a great workaround, Matt! can I have account number 000000021? I would never forget my account number then!!! πŸ™‚

      2. Actually, it’s perfectly acceptable to be an invitation-only bank. That’s all private banks are. πŸ™‚ Discrimination laws only come into affect when you deal with lending (mortgages, loans, etc.)

        ps. I’d like account # 007 please. πŸ˜€

      1. I think this thread is starting to hit on possibly the biggest downside about this business: dealing with government! Something most entrepreneurs avoid since it’s so limiting and takes all the fun out of it.

        But seriously, brilliant idea Matt! ING Direct is trying to do some of this but not all. Very innovative.

  3. Paradigm changing ideas always sound crazy at first, something you certainly know better than I. Why not? Look at what WordPress did to the way we all experience and think about the web and communication in general. Why not banking. I’d move my money from ING to SafeBank! If Arrington can build the CrunchPad, why can’t you start a bank? Yeah ok, that’s stretching it a little…

    1. I think the beauty of the web is that anyone can do this.

      Even if there are “Indian” support staff in @reply to Lloyd Budd above.

  4. That all ran through your mind just while you were brushing your teeth?

    I’m just thinking how glad I am to “have” all of my teeth when I’m brushing. Now wonder you’re so successful.

    1. LOL! I just had to comment on your comment. I was really laughing out loud. I also think about how clean I am getting my teeth while I brush. I get most of my ideas instead when I shower. And even while I shower and think at the same time, I sometimes forget to add conditioner to my hair!

  5. Yes, I too would likre to open an account with MattBank… er, BankPress … er, SafeBank.

    Heck – I would would be interested in working for a company like this. I do 99.9999% of my banking online even though the web interface blows. I know we can do better.

  6. Different isn’t always crazy. These are good ideas.

    The only problem is that your “no-risk”, government-backed industry will never make an honest dime. There can’t be profit without risk.

    1. The risk is in non-banking stuff, namely the data and lead-gen business side of things. Those can be very honest dimes.

    2. I like the concept, but I don’t know if you can really separate any risk (banking or non-banking) from the company and from the customers.

    3. I have to agree with Matt on this one. Just because he’ll be investing his capital differently from most banks, doesn’t mean he has to incur huge risks.

      Sign me up when you get it started Matt.

    4. The missing story of the past year was all the small local banks that performed just fine during the ‘banking crisis’. These banks and credit unions were conservative with their money and consequently had very few problems while still making money.

  7. I use USAA (.com) and I really love it… They’re not far from your invitation system, in that they only offer membership to military personnel and their families (then certain family members of existing members, this is how I got it, I married a member).

    Their service is the most excellent service I’ve ever gotten anywhere. For real, nothing compares. Their website is pretty darn good. I do everything online, even deposit checks with my scanner. I can use my ATM card at any ATM and they’ll refund any fees from the other bank (they don’t have many of their own ATMs).

    Anyway, you should steal some ideas from them πŸ™‚

    1. This is exactly the reply I was going to make! Have been a customer for over ten years and they’ve always been nothing but FANTASTIC.

    2. USAA has a really nice iPhone application too. You can check balances, they have an accident collection form (if you use their Auto Insurance), and with the latest version you can deposit checks by taking photos of them with your phone.

    3. I use USAA for Car Insurance, Renter’s Insurance, and Credit, and I agree with these sentiments. I had no idea about the check depositing, and I’ll have to look into those services, because I definitely love and trust the company.

      Your ideas sound great, Matt. I hope we see more innovation in banking.

    4. Agree with the rest on USAA. No ATM fees. Deposit a check with a free application on my iPhone from anywhere and have the funds available instantly. Customer service that wows every chance it gets. They just can’t be beat…

  8. Matt:
    Many of the pluses and high-sides you mention are already in place — at credit unions. See, for instance, USAA’s recently-released iPhone app.

    Credit unions are where it’s at, to paraphrase a rapping hipster.

    1. I just had a “conversation” with my credit union this morning about an overdraft fee.

      The response(s) from the credit union were :

      – Our fees are still lesser than what other banks charge.
      – We have to make money too…

      Well at least for me, making money off of someone’s mistake seems somewhat dishonest/unethical.

      See story below,

      I am on board Matt … Let me know if you need any help. Also, when do I get an invite?

      1. You can’t be serious about this. You think charging a penalty for an overdraft is dishonest/unethical?

      2. No.. this fee is NOT dishonest or unethical, but it’s all so easy to make a mistake…

        Banks have even rigged the system against you sometimes. If you go into many banks and deposit $500 (you’ve got an existing balance of $10) and then write a $200 check… that check could overdraft, simply because the bank hasn’t made it “available” yet.

        Seriously.. you just deposited your money, but the bank won’t let you spend it!!!!

        Some banks are cooler (US Bank for instance) and will let you make a deposit one minute before the end of the day to bring your account positive. As long as your account is positive at the end of the day, they will waive the fees.

        Other banks will run checks and stuff going out of your account first, and THEN do the deposits going in… That means you could have deposited the money to cover the checks, but since they took the money OUT before putting your deposit IN, you got overdrafts.

        Another way they screw you is by charging that fee instantaneously. I’ve had cases where an (incorrect) overdraft charge caused other checks to bounce. When you finally convince the bank that that charge was invalid, and they finally credit you back the overdraft fee… try cleaning up THAT mess.

        Delaying that overdraft charge from coming out of your account, even by a week, would save consumers billions of dollars. What other business in the world gets away with charging a fee first, and seeking to prove it’s legitimate later? You don’t pay for a haircut until after you’ve received the product… even your credit card company sends you a bill before charging you fees for not paying it… why shouldn’t it be the same with banks?

        Overdraft penalties are not unethical… it’s the way they are handled which is not.

      3. Agree with Mike, what if everyone over drafted their accounts? You made the mistake of over spending and now you pay the consequences and move on the wiser.

  9. While definitely not your idea of SafeBank, there is a fairly remarkable bank that I became aware of as part of participating in the LaunchBox accellerator program.

    Square 1 Bank – – is very much a “startup” bank. All of my interactions there were with actual people that could get things done. They were actually able to offer good advice on things, they “turn away money” from anyone who isn’t a VC backed concern, etc.

    Just thought you might think they were interesting.

    1. Yeah but their web stuff is horrendous — we’ve used them as well as Silicon Valley Bank which is the other go-to for startups. They’re “valley” in name only, it doesn’t feel like there’s any real innovation especially on the technology side coming out of either.

      1. Comparatively, they are still miles ahead of other offerings. I had a local Virginia Bank all but accuse me of fraudulent activities for wanting to open a business account for an online business: “What do you mean you don’t have an office?”

        Square 1 covered the costs to FedEx all the documents to us and was overall just about as cool as a bank could be.

        On the technology side they also offered us a scanner for opening an account (no toasters) so that we could scan checks for deposit electronically, which I thought was pretty cool.

  10. The business you’re already in, communication, is more important than money.

    Having said that, yeah, I’d join your bank but what I really want you to work on next is a teleportation device.

    1. I’m with Donnacha on that. While you’re at it, one of those lovely replicators (the Star Trek one, not the Stargate SG1 one), and about 4 more hours in the day. Thanks Matt!

  11. I must say, your teeth must be in a great shape as you must be brushing them extensively!!!

    And the Bank, I’d sign up right away! In fact, what’s stopping you? If you willing to finance such a bank, I am sure there will be people to run it per your vision. Sign me up as a CIO there !

  12. I would one up your SafeBank, I would have SafeCU, and it would be a Credit Union with membership based on being an internet user.

    I would seek out insurance backing from all countries, so all citizens of the world could indeed bank with SafeCU.

    I would not charge for my iPhone app, even though it cost me $40,000 to develop. Why? Because you should never have to spend money to access your money.

    I would have a network like to facilitate having ATMS worldwide. Oh, part of my iPhone/Android app would be an free ATM locator.

    I would also follow in the footsteps of USAA and allow Checks to be deposited through technology, like snapping a picture of the check.

    In fact Matt I am going to put the challenge out. If you fund the startup of such a bank/CU I would join Automattic in coding this bank to reality.

    1. I think that ATMS and Checks are somewhat old school. One area of risk (for customers) is the use of debit cards. I believe credit cards are safer.

      I would like a bank that issued cards that had fraud guarantees like credit cards.

      Generally, I would like to use a bank with more innovative ways to access and use money digitally and safely.

      1. I think you are completely wrong about safety in credit cards. Frauding a credit card is much easier than a debit card. To fraud a credit card all you need is the credit card. A signature is not enough to validate/invalidate a purchase in my mind.

        With a debit card you have to have a password (PIN), which in most cases is a number that is random (or should be).

        I also don’t like the waiting period with most credit card purchases where with debit card you know instantly if you have the money for a purchase.

        I think banks like SafeBank would discourage the use of credit cards as spending money you don’t own is not a safe practice.

      1. Your own ATMs? Or all the other bank ATMs? Because the other banks will charge fees to your customers, which will really inhibit your growth. No one wants to be charged just to get their money.

      2. Ignore that comment.

        I have no idea what I’m talking about (some reason I thought I’ve heard that online banks do that).

        USAA seems to be the only one that reimburses all ATMS.

      3. There are others that do it as well. Schwab’s Investor checking account offers a rebate on any ATM fees you pay. I believe USAA reimburses up to a certain number per month (though it’s generous – I never came anywhere close to it).

      4. Or, you could just print out credits? A new system of monetary exchange?

        Like PayPal, except for sending money via email you give a “fortune cookie” to the other person and to get their money they simply sign up.


  13. Well, the little money I have isn’t worth a bank, but I’d use it if I have money to save! Do it. Please.

  14. Matt – the bank you want (or a lot of it) already exists. It is called a Credit Union and you have one of the very best very near you on Second Street – patelco.

    They’ve had online banking since 1996. They do things like cover all transactions against a stolen debit card even though they don’t have to by law. And you may not realise it but credit unions are in fact now open to everyone.

  15. Sign me up! Banks here in Tokyo, in many ways are even worse and less convenient.

    How come there’s a World Bank for the fat cats, but no reliable one for us indies, is what I wanna know;-)

    let me know if I can hellp!

  16. I think you are a secret genius.

    Also, I heart ING.

    I second the person who suggested that you work on a teleporting device. That is my secret dream!

    Lastly, the only thing I don’t like about your plan is the SMS part. I only had my cell phone for two months but I received about 20 fake banking-related SMS’s trying to get me to call fake numbers or use fake sites. I think there are too many SMS scams for you to use that for the PINS (unless I have misunderstood SMS and it stands for something else now).

    1. Teleportation is awesome! Have you ever seen that Simpsons episode where homer uses the matter transporter machine so that he can use the bathroom from his living room? Brilliant!! haha!

  17. I would be so upset if SB functioned only in US. I am Aussie and we want to be initially included. payPal took years to make us equal. Please send me your invite, for the start I will invite only proper people, after proper consideration to whom I send it. Good on you Matt.

  18. Just wanted to throw my vote in for UTAHCON’s suggestion of a Credit Union rather than a bank, the differences are subtle but in general creating a Credit Union is probably easier and offers more benefits.

  19. also, open a branch in Japan at the same time. Asia is one of the keys to the new global economy. and the geeks and regular people here are probably even more apathetic about the possibility of good banking than North Americans – easy to surprise and delight them with the story you’re telling.

  20. I love my credit union, NFCU is really good. I would like to see a more technologically advanced credit union, using the Verisign little 6 digit number system that works with the iPhone VIP app would be awesome.

  21. Make it with a simple account structure. One simple account giving interest if you are above a certain level, charging interest if you’re in the red. On a daily basis.

    Interests and limits would be determined by your warranties (house, etc.) and credit rating.

    Have only a debit card, or a credit card that gives you 30 days without interest (as if you would pay the whole balance from your credit card each month).

  22. Oh! And yes, make it international from day one. One world, one currency. Easy access anywhere in the world.

  23. The only thing that would keep me from signing up is the name. “SafeBank.” Anything with the word “Safe” in it that deals with my money sounds too good to be true.

    How about ‘MullenBank?’

    1. There are a group of us working on new standards and Open Source Software for banking:

      We are starting a fresh and not planning on changing anything to make it fit for existing banks as they are too complex and old fashioned to fix.

      There are already 2 demo implementations and it looks like there will be a few real world implementations within the next half year.

  24. Awesome, inspirational post. Just want to point out one thing:

    No one has ever heard of a bank turning away money!

    ING Direct has actually based quite a bit of publicity around the fact that they do this. They say don’t want the large accounts, don’t want customers who expect to be treated better than most other customers, etc.

    1. I think ING Direct has executed on a good chunk of this strategy, but are limited in going all the way because they’re owned by a real bank.

    2. When I signed up with Wamu, they explicitly told me that they didn’t treat big accounts different from small accounts. The account manager said it was the reason he jumped over from Wells Fargo.

      Too bad they got bought by Chase. Now I’m looking for a SafeBank to deal with.

  25. While your hubris is attractive, I think you need a little deeper understanding of banking.

    Banks no more make money off taking deposits than Google does by conducting my searches. Just as Google’s business model is to put eyes in front of ads, a bank makes money by aggregating savers and matching them with borrowers.

    While retail banking is frustrating from the perspective of the consumer, it’s even more so from the perspective of the bank, because retail depositors are an expensive (though stable) source of loanable funds. Many banks would just as soon not have to deal with them and stick solely with commercial clients and the interbank market for funds.

    The other problem with your model is the idea that keeping a capitalization 2-3 times higher than your competition would somehow put you at a competitive advantage. While your bond holders and depositors might appreciate that, any equity investor will be signing up for returns of 1/2 or 1/3 what she might get investing in your competition, though we expect that to be mitigated by cost savings through efficiencies and marketing.

    I think there is tremendous room for improving the current situation for retail depositors, but I’m not sure that yours would work. You can’t lose sight of the big picture — the borrowers are the banks customers, and we depositors are suppliers.

    1. I don’t think SafeBank would be attractive at all to equity investors, for exactly the reasons you mention. One of the big tests would be if it could be bootstrapped cheaply enough to avoid having to raise money in public markets.

    2. I think there is a lot of space for simple retail banking even with 100% reserves. Profits are not going to be anywhere near as high as traditionally.

      They can be structured as co-ops and be funded by membership fees and a variety of other ways.

      I believe in this idea of limited purpose banking, where each bank only does one thing.

      Store or Web front operations could provide the “financial supermarket” front for people who like that, others might pick and choose what they want.

      A group of us are working on Open Source software to make this possible on the Agile Banking google list.

      1. Great thoughts and dream like ideas. I want to be in your board room during the first exam.

        It all sounds very child like.

    3. Excellent points Jim. I do think there are other banking models that will work. I seriously wonder if this “do no evil” approach to banking can make money. If Google charged even a penny for a search, their share of the market would be no where near what it is.

      You see a bank like Wamu. They played nice and they were swallowed whole.

  26. Hi Matt,
    I really like how you want to grow the bank as in get the clients, but ,maybe I’m wrong, I think I see a flaw in your argument at the end of the article. Why do you need a bank if you just want to make money the way Mint does today? Looking at it only from a business perspective it seems to me it’s way to complicated and it takes a lot of time until you’ll be able to make money.
    The only way it makes sense is only if you want to do this as some sort of social corporate responsability kind of thing which makes you a incurable dreamer πŸ™‚ And I say this as a genuine compliment. Sorry for my possible english mistakes. It’s not my native tongue.

  27. Self-empowerment!

    You rock, Matt — you can do anything because you appeal to the intelligence of people first and you call to action afterwards, when people are listening.

    I personally have an idea for co-operative micro-credit banks to be established in every single family or small group in Canada (which could be done in any country, actually) where anybody could borrow at the prime rate and then, loan the money at any interest rate “the co-op members” wish because, whatever money is made, it’s REDISTRIBUTED back to everyone!

    Isn’t that cool?

    Paying interest on loans which will be PAID BACK TO YOU ; )

    There needs to be public pressure for this idea to become a reality.

    People absolutely need to take back control in their own hands — big banks have ruined us and now, it’s time to bring fresh new ideas to how the money flows.

    1. Being involved in Diku-Dilenga,org (an NGO offering microfinance in DRCongo), I thought that Matt’s wonderful proposition could leverage many microfinance organization methods:
      – reward people giving you money;
      – lent only money people can reimburse in short terms (6 months);
      – target just sustainable entrepreneurs with loans;
      – go after each cent not reimburse.
      Then this bank will be able to reach the 99%+ of returned loans!

  28. Matt, I have a very similar idea about starting a bank.

    One that offers simple banking solutions. Instead of offering many many different credit and deposit products, my dream bank offers three solutions, investing (deposits), spending and borrowing accounts. And all these accounts are connected.

    The primary banking channel would be the website, making then ATMs and over-the-counter services secondary channel.

    And that data part is exactly what I want the bank to do.

  29. another thing – you mentioned that VC would threaten safety? I feel that VC threatens any interest that is not aligned with financial profitability.

    You seem to be containing VC well in Automattic. Though I get the general direction – can you elaborate why you feel there is a VC threat here and what is unique about this context?

    1. Automattic is a risk-taking, profit-making venture with high growth. SafeBank would only be 1 of those 3, so not a great fit for the venture capital model. (Some forms of private equity might be interesting.)

  30. I think your idea is received so well because of recent events but in a few years people will have forgotten about the banking crisis and will get greedy again.

    That is when they will all take out their money from SafeBank and move it to a high-interest account in Iceland πŸ™‚

    1. I think ATM fees would be a necessary evil, but I think the trend is toward cashless so that would be less of an issue over time.

  31. Great post! Very insightful and you hit the subject right on the nail. There’s actually some banks in Denmark, at least, that have tried this aproach more-or-less. for instance. I remember I read about them as an ‘innovator’ within the bank sector a couple of years ago. They are doing ok, but strugling with the trust issues of its customer base. Just like any company that deals with large transactions but which is only based online with no brick-and-mortar stores.

    When you start to think about ‘webbyfying’ a bank then think of all the sectors one could invigorate by restructuring the bussiness around a web startup bussiness model. Produce (“you order, we deliver”), the car industry (already happening with the Tesla and others), phone industry (skype and the numerous little frontend companies which cater specific needs), publishing and media distribution (amazon, iTunes, netflix), electricity (buy you power local with niche offerings) etc….

    It’s already happening and will continue to expand to other indutries. I think there’s a lot of benefits in the long run – both business wise and for the consumers with this approach. My guess is that whoever commands how these ‘old’ industries transition to this new model will command the 21. century – just like Ford, Sulzberger, Rockefeller did a 100 years ago.

  32. Seems like a lot of people are asking for an invite. Rather than an invite, I’d be begging for an opportunity to be part of building such a bank.

    There is so much room for seeing banking in a fresh light and now is probably the best time to do just that.

    I’d love to be part of such a project πŸ™‚

  33. A bank that just holds money? That there is the reason this will never work.

    When I leave money in the bank they pay me interest. Why? Well because inflation depreciates the value of my money while its lying in their account. So interest is the bank’s way of offsetting that cost. To make money to pay that interest they have to invest their depositors’ funds. Keep in mind that a good savings account will give you an interest rate of a couple of percent so they need to invest the money in a way that gives that return plus the rate of inflation (since the money they invest is worth more than the money they get back after their investment returns an income).

    Now given that you started with the intention of setting up a bank that doesn’t damage its customers’ interests, how can you justify a cost for leaving your money in an account there? That’s not very sensible.

    1. Most checking accounts holders earn pretty minimal interest — ING Direct Electric Orange currently has %0.25 APY for accounts under $50,000. (I wonder what percent of their accounts are under 50k?) I think if your goal is protecting your capital against inflation you should probably allocate your money in bonds and money market accounts. The “working capital” in your checking should probably not be the bulk of your assets and move the needle much when earning 25-100 points.

      1. So? Checking accounts are not meant for holding funds for a long period of time. They’re for quick access to funds. Savings accounts on the other hand are and have a higher rate of interest as a result.

        As you say the working capital in your checking account is not the bulk of your assets. So what are you proposing? A bank that solely does checking accounts? In that case by your own admission most of peoples’ funds would be in the “unsafe” banks.

        Of course it depends on the rate of inflation, but in a solid economy that should not be too high.

  34. You have a very interesting concept Matt – we need more innovation in our financial markets.

    I have experience in opening a new financial institution – a few years ago I was the principal organizer of a new bank that my company opened. As I’m sure you would guess, there is a staggering array of regulatory hoops to jump through in the approval process.

    The 100% capital reserve concept is interesting, but would create challenges for the startup process. If you truly wanted to hew to this tenet throughout the life of the bank, you would be required to raise startup capital equal to 100% of the expected deposits at Year 3 of the life of the bank. Currently, federal regulations require new banks to maintain what they call a Tier I capital ratio equal to the expected asset size at Year 3. This of course is well below 100% (typically 5-10%), but still a challenge in fund-raising.

    I know there is no shortage of “bastard banker” stories, but I can say that the vast majority of new bank founders don’t go into business to take advantage of customers. Certainly it seems like the mega-banks aren’t in the customer service business, but you might check out any one of the 8,000 community banks that operate in the US today. Many of them are small business people too, and share your values in customer service. You can find one via the Independent Community Bankers of America web site at

    1. I don’t know if 100% reserve would work, but you could make a very good story with 20-30%. Thanks for pointing out that there are lots of smaller banks out there already — like credit unions it sounds like they might offer a fantastic alternative today to the merge-banks.

    1. I think iPhone app would be an overkill – stick with developing websites that are adapted to iPhone browser. The only benefit of having an app is the marketing via app store, which does not seem to useful in this case. At the same time, there are multiples benefits of a website:
      -you can update it anytime you want (I am sick of app approval process);
      -it costs way less;
      -it’s way more streamlined from a user standpoint.

      Paul Graham wrote a good article outlining all this in more detail recently

  35. Funny how nerds always feel they know better than everybody else, about everything, in industries they know nothing about, have no qualifications in or have any experience in on the business side. Yet when someone who doesn’t have a CS degree writes some code or html, they complain about how much of an art computing is, how hard it is, and that it requires decades of experience to get right, etc…

    1. I would say this fearless naivete, while 99% of the time wrong, and mixing of ideas from different industries is at the heart of many innovations we enjoy.

      I spent more time writing down my thoughts here than I actually did thinking about them — obviously anyone embarking on this endeavor would need to dig much deeper on every aspect, but I think it’s interesting that there’s obviously *some* market demand and people with experience in the industry (and starting banks) have dropped in on this comment thread. That’s what’s fun about brainstorms, anything is possible. πŸ™‚

  36. Is selling the sort of data you’re talking about possible under banking privacy laws? I thought the way that banks got around those restrictions was reporting everything to central (bank-owned) credit bureaus that, in turn, sold the data.

    Setting that aside, it sounds like you think banks today take too much risk with our money. But then you’re passing up relatively safe sources of income (lets call those honest, old-fashioned loans) and instead betting on a totally different business model. Instead of spreading your customers’ risk across a wide range of investments, you’re essentially making them bondholders in a single startup venture that’s betting on selling data about them to the highest bidder.

    With that in mind, I don’t think an analytics/advertising-based model is where I want to bet my own life savings. Do you think you can make 5%+ selling data about depositors today, to provide even a nominal, positive rate of interest for them? If market interest rates go up to 5%, do you think you can make 10%+ selling data about customers?

    Let’s say you have a customer with $100,000 on file. You’d need a few thousand dollars in data revenue for that one customer to support paying them any interest at all. If inflation hits 5% again, or higher, how do you create enough revenue to keep their savings “safe” from inflation?

    You’re 100% right that we need new kinds of banks that are focused on depositors. But I don’t think data-mining is the way to design a bank that has the right incentives.

    1. The bank could still lend some out, traditional bank stuff, though a much lower percentage of assets than most banks. The other ideas are just complementary ways a bank could make money in non-customer-hostile ways.

    1. Nice find! I particularly like being able to update my transactions from Twitter, would prefer a more secure solution, but not bad either.

    2. What a brilliant UI!! I love the way that you can set spending goals, and see where you are in that goal. What a great way to show children how to budget and track money! – thank you, Matt.

  37. Where is the bank making its money? I get your plan to take in depositors, but traditional banks make money on the spread between the interest given to its customers and the interest charged on loans (amongst fees, and other stuff).

    Where is the First National Bank of Ma.TT going to make its money? Are you going to loan? What kind of loans?

    1. As I said, the bank would make loans, and also explore opportunities with the vast amount of data it has not necessarily selling it to outsiders but using the insight into your life to recommend ways you could save money, Mint-style.

      1. Wow, for just a toothbrushing thought this is really amazingly detailed and with a lot of great service and marketing details.

        I was stunned, however, to hear about the revenue model. At least me personally, I would not like my bank to tinker with my transaction records (just as little as I want Google to analyse and tinker with my personal communication).

        Wouldn’t that result in me giving money AND data to the bank in return for… hm. A fast webinterface and a beautiful credit card? This appears to be imbalanced.
        While most banks don’t offer the latter, I hope they at least are not making additional money with my data.

        (Of course, the idea of doing the recommending yourself and making money by some sort of clickthrough to new services makes me feel more comfortable. But it still requires a considerable amount of trust in your privacy fineprint…)

  38. I hope your bank has plenty of ATMs but no branches; You can spend the money you save on branches to pay for my external ATM fees (see Also, skip expensive types of marketing and use that money to bribe other banks to cooperate in speeding up your transactions- they need to be same day but the goal should be instantaneous transactions. Finally, you should have 24/7 telephone/chat support- splurge here for the best; People are starving for good customer service (see

  39. I think your geek bank has some potential. Fun read, thanks for sharing your teeth brushing thoughts πŸ™‚

  40. Matt: The essay is fantastic, as everybody before me praised already. One really basic concept threw in the middle of it bugs me though: “A big part of the website would be the blog, of course.” It seems that every website of every field could be adapted to a blog somehow (even a bank!). I thought it amazing, but I didn’t get there really. You meant with that phrase that your bank website would have sequential posts with pieces of information and a community commenting it or a bank blog would go further than that?

  41. I would love to think that this model would work. And maybe it would… It’s just that I’ve worked in the financial sector long enough to have formed a very jaded view of what is possible under our current oligarchical banking system. My first (and perhaps knee-jerk) reaction is that if it became too popular, SafeBank would be swallowed up by one of the decreasing number of banking behemoths.

    On the other hand, given what you’ve already accomplished at such a tender age I’m disinclined to declare that you couldn’t pull it off.

    1. agreed! I like the art at the top but the color & background of the article make my eyes hurt from the strain. I can disable images in my browser, but then what’s the point of the graphic design?

  42. I am passing this to my friends who are in financial industry. This is an amazing idea. Probably no one would accept it since they all profit driven…

  43. Matt, you’re a smart guy, but frankly stick with what you know. This sounds like an awful idea.

    1. If I stuck to what I knew I never would have started blogging software. πŸ™‚ It’s just a blog post, on my personal blog, no need to take it so seriously.

  44. I too would be interested in helping to make this a reality if that option is ever available. My primary background is IT Security and Compliance. Currently for healthcare but I have done a bit of banking work in the past.

  45. How do you deal with competitors that show up and run on the same platform and model you do? This plan works great if you’re the only one, or one of very few doing it, but competition in your space could throw you heavily off of your game.

    1. Most good ideas have a ton of people doing them, I consider competition a validation and something that drives innovation, not a reason to not do a business.

  46. Hi Matt, I’m a first time reader. I’ve read a bunch of crazy comments from people here and on HackerNews.

    I think your post is great. It is not the idea, or your brainstorming here that is awesome. It is the fact that you have taken this concept so old and said, lets start again. What is the main goal, and how can I serve the needs. You were brave enough to question something that we take for granted.

    Your ideas are just loud thinking of things that need to be solved. I can’t see why anyone would read it as a business plan.

    I will read this as, hey here is a guy that says that banks suck and he is thinking of what could be done. Any banks listening?

    I wrote in my notepad to reimagine the banking system from the clients’ perspective, and I hope I will write my take on this soon at

    Cheers, and thanks for the shared insight!

    – Dejan

  47. From what you describe of SafeBank, you should look into modern Islamic Banking as a model.

    It is not about bonuses but about the profit making model. Conventional banking practices are concerned with “elimination of
    risk” where as Islamic banks “bear the risk” when involved in any
    transaction. That is the only way to make banks in to SafeBanks.

    As a banker I’d rather have a money-making blog to run. brush your teeth again to be sure.

  48. Most excellent idea. I will head up the Safebank Mortgage department. We will only lend to people with 780 credit, 50% down payment and five years of income verification. And we’ll do it at 3.25% And still make money

  49. Thanks for the inspiration. Harvard Business Review ran an article last year profiling industries that only make a killing when the customer is having it stuck to them. Biggies were cell phone companies (think overage fees), video rentals (think late fees), airlines (same seat cost more as flights fill) and banks (think fees, fees, fees). I loved banking at WaMu because they seemed less predatory than any other bank I had experienced.. right up until they went out of business. Thanks again!

  50. Wow, sounds like a great bank already! I would completely sign up – let us all know when you’re ready to go! πŸ™‚

  51. Where do I sign? I’m ready. A couple of years ago I accidentally transposed a number in my check book (wrote 2 instead of a 5). I don’t remember the amounts but I do remember the result. (amounts for illustration only)
    Balance $100
    Check #1 $105 car payment
    Check #2 $5 Blockbuster
    Debit $15 Gas
    Debit $5 lunch
    Debit $3 Morning Coffee

    This resulted in a $150s in overdraft fees. While I can actually understand why I would have received one overdraft fee. I think receiving 5 $30 OD fee is stupid considering 4 of the transactions didn;t even ad up to $30.

    So Matt sign me up. I’ll be the first in line for a customer application.

  52. Great Idea, when you lunched it, please do lunch a China branch in my City.

    And, I can find some healthy projects for your bank.

    No risk, all gov based.

  53. It would be the last thing I’d do with my money πŸ™‚
    I’ve seen pretty similar business plans and we decided to help one of them happen. It just didn’t work. the customer segment willing to buy in was one that just couldn’t let the bank survive, despite of a professional banking team and a very, very good IT.

    You’re dreaming the way adolescents do when letting their imagination fly with Superman πŸ™‚

    But it’s refreshing and very nice to see such naivity exposed to us, your freinds

  54. Matty McMatt. Your article has been linked from Y-Combinator’s Hacker News. And they have valid criticisms, I would like to see you debunk.

    Thanks Mate.

  55. Hi Matt,

    Great post and an issue that cuts to the core of human interactions.

    Think of some of the big religious divisions in the world and their issues, stereotypes and traditions around lending money – think Christians, Jews, Muslims and that’s just the well known ones…

    Always near the bottom line is the issue of trust and design. It is obvious that Banks are all about trust. All banks in try for prime locations and building with completely over-the-top architectural styles often routed in some mythical past. They cry out for the public to trust them and if not trust, to be just overwhelmed by the gravitas and unquestionable authority of the ‘great financial institutions’ that they would like to be seen as.

    They often seem completely enmeshed in the world of secret societies and shady morality and legality (lately we see that they actually are).

    Like insurance schemes, if you pare back to the basic functions, they are all trading on people’s fear of being robbed and of just not having enough… (health/food/stuff).

    While it is naive to think that we can do away with banks and/or money overnight we could usefully explore these issues and look to applying some of the workable systems and ethos from recently emerged new media like transparency, crowd sourced building/debugging, micro-publishing, near zero cost replication and distributed, fault tolerant processing.

    Who’s to say that we could not set up a system of micro-trading that did without centralised, top heavy hierarchies. Instead it might rely on self policing and regulation.

    In Africa people have set up micro credit transfer systems based just on ad-hoc mobile phone owner network that enables people to send credit, that can be turned into real currency, simply.

    Maybe the emerging nations are teaching us a thing or two about our technology and about our greed once again!

    Good luck with your new career Matt. I’ll open an account with you.

    All the best Dave

  56. Matt, I think someone has a similar idea. Or, at least, according to their advertising, they seem to think in a similar way to what you’ve described in the way of service, though, perhaps not the “membership” model. It’s Ally Bank at, er,

    Incidentally, if anyone has checked them out, especially if they have an account there, I’d love to know more about it!

  57. The marketing & technology aspects of this idea are great; too bad you don’t have time to help more banks adopt them.

    Unfortunately, as mentioned in other comments, the economics of this banking model don’t add up. It is possible, that by adopting strict loan underwriting standards and offering low/no interest accounts, you might make this an attractive option to college students and young adults with few assets…not much profit there though.

    The course I took last semester ( covered the various factors which incentivize banks to undertake risky lending practices. These are very complex problems; dealing with regulatory, competitive and economic forecasting issues. There are no easy answers.

    That said, I wish my bank would buy Mint…

  58. Matt,

    look to what Grameen Bank did. They started with micropayments and are now a force to be reckoned with in Bangladesh! πŸ™‚

  59. Interesting post. I was thinking about this same concept today. What about also giving the money made on loans back to the depositors of the bank. So a user can sign up, deposit x amount of money and choose to get returns from a loan portfolio that a bank makes. Rather than the bank getting all the profits, the profits from loans goes straight back to the depositors. Of course, they may not make money, but they also can get a decent return if the loans the bank makes perform well. Can this work or I’m I being a idiot? Thoughts?

  60. sign me up for real.

    those of you working on the iphone app, I’m tired of putting money in separate envelops under the mattress. How about portfolio-style earmarked savings, where each deposit is diverted into multiple folders per user-defined percentages; savings for dog emergencies, savings for triathlon supplies, etc., all within one account. And the ability to drag and drop funds from one folder to the next. Easily keep track of multiple lines of project-specific savings. The total money in the account matches the total money displayed in the app, but the graphical representation of how that money is divided up and sorted and earmarked makes all the difference in the world.

  61. How about a credit union instead of a bank?

    It would be even sweeter to take customers from all the commercial banks and not make any profit from them.

    But yes, BANKING is the most pathetic industry. Innovation is zip, costs are very hight (youd think costs would be low what with “competitoion” – tells you something).

    All it would take would be one modern bank not run by arseholes to tip the whole industry on its head.

  62. Great Idea – IΒ΄m in and will handle the german PR & marketing based on succes of course πŸ˜‰

    The thing that strikes me most besides security is the ads youΒ΄ll show in their banking statements – I think itΒ΄s one of the most obvious things any bank could do, but – of course – they never come up with ideas like that by themselves…
    I ha the idea of a “best price” reverse calculator, where you type in what you pay, eg. for your phone, insurance, electricity, and the site would suggest, where you can pay less. That thing in your bankingstatement would be just so much more convenient – go, please!

  63. As an ex-banker and now financial start up, and loyal WP blogger, this is an inspriatonal post for me.

    I am gong to do some math on the concept of extra capital. As someone earlier suggested this reduces relative profits to other banks, but there are other aspects here like no branches or trad marketing that compensate.

  64. Matt, could you please tell me is this to target or open the bank also in countries outside of USA ? Australia etc.? Good on you, ta! Rado

  65. They should make The Sims for entrepreneurs to see how certain start-ups would work out….

  66. I just tweeted about this! I HATE my bank. I was there 20 years. Finally moved. To USAA which alot of people have been talking about. They rule and are the closest thing to a safe bank. You have seen them actually doing a bit of advertising about their “safeness” in this downturn and are picking up gobs of customers!

    Sign me up.

  67. This would make no money.

    If you take all the money and put it in a vault, the rate it earns the bank is 0%, and it costs you tens of dollars in admin, because you have an infrastructure to run.

    You want 6-figure salary earners, who will deposit 6 or 7-figure amounts, but you’re not going to offer them any return on that.

    You restrict accounts to the FDIC limit – a scheme you will have to pay to take part in, incidentally – but then fail to make use of its safeguard. Put everything *over* the FDIC limit in a vault, and offer no return on that excess, while risking the first $125k on low-risk investments.

    Your alternative method of obtaining a return is the traditional mortgage route, which I’m guessing you’ll baulk at because of the sub-prime mess, but can earn you money. However, then you need to either underwrite the mortgages yourself or use a commercial lender.

    I don’t see how you get out of the current mess except by having been lower risk, or less naughty. And there are already many banks and credit unions who take that line. You just don’t know about them because they are beneath your radar.

    To finish, you have also aggregated everyone into the same use case. Grandma wants her pension payouts, her savings for the kids and safety safety safety. She doesn’t care about your iPhone app; she wants a building to go to, with a nice person to talk to. Mr Fresh Startup, however, wants to bank his $2m trust fund, get a credit card that he can impress the ladies with and borrow $40m from you for his startup. He does want the iPhone app, but he wants to get a real rate of return on that trust fund, and to borrow at a reasonable rate. You run significant risk of being master of none here, because the thing that banks do – invest money and return interest to their depositors – is what you don’t want to do.

    Sorry Matt. I’m a dreamer too. I suggest you find a nice credit union with an iPhone app.

  68. Matt, most of the people they just want an extra top up on their interest rate or have a face to face relationship.
    You should not mess investment banking with retail banking. The second is the old boring stuff that Safebank will do.
    Having funds over 2-3x the Fed reserve does not mean the bank is a lot more safer, it makes liquidity management easier. A safer bank would be the one that does not need to go to other banks to ask for money (it relies on depositors). Any retail bank that did not get excitated by the WallStreet CDOs and subprime would have not experience any problems.
    You idea of replicating Mint is the same I heard in 2001, the main problem is… do you want your bank to monitor your expenses, what happens when the credit card is from another bank you will not have this info, are you going to give a premium to people that share this info

    1. @Alex … it is essential that Matt mess investment banking with retail banking because that is precisely what the large banks have done. I aagree with someone that there are some conservative smaller ‘below the radar banks” who have not, but darned few.

      Think derivatives and off balance sheet financing and investments – that places banks squarely in the investment banking space.

      There remain 3/4 of a quadrillion dollars outstanding in derivatives, and the associated liabilities form a large part of the concern over ‘too large to fail’ that perpetuates bad banks.

      A new bank that scorns the investment banking approach, maintains a defined level of risk, and offers a value proposition along the lines mentioned by Matt has merit and could charge for that offer.

      The challenge would be in offerring suitable interest rates on deposits. SafeBank could experimnet with achieving those returns using P2P Lenders as a low cost origination channel, offerring decent rates at reasonable risk levels.

  69. Matt,

    I loved reading your post. The attention to detail you put in and the simpleness you strive to achieve is excellent.

    It would be a hard switch though for me, from USAA. I love USAA. We use them for our banking as well as insurance needs. The customer service is wonderful and the refunded ATM fees is definitely a bonus.

    What I like most about your idea is the attention to the web, and how you would like to incorporate something like MINT in to the site. I think that would give you a REALLY long leg up on the competition.

    Hope you can turn this dream in to reality some day.

  70. Scratch the FDIC, they’re pretty much bankrupt anyways. It’s also a way to socialize losses. Every bank pays in but the poorly managed ones get the money, so there is a transfer of liability.

    This type system punishes the banks that have good management and follow sounds practices forcing them to absorb the losses of their competitors. Also creates moral hazard when gov. socializes business losses. Hmmmm … all this sounds like it has happened before πŸ™‚

    Put your reserves in gold and silver and I’ll be first in line. You can’t devalue hard assets through inflation.

  71. Hi Matt,
    If every time you brush your teeth in the morning you come up with ideas like that, I officially apply to be your next roommate.
    (with a shared-bathroom)

  72. I’d sign up to a bank like SafeBank in a heartbeat, i’ve lost count of the amount of times various banks have let me down or annoyed me to the point where i decided to close my account and go elsewhere with my business (only to be annoyed again at a later stage).

  73. To be honest, I like your ambition, but I think it’s all a bit, well, naive. There is a lot more behind the scenes that actually do need the “top shelf” bankers with the knowledge and intuition of the market to actually earn more money with money so that loans / mortgages and all the other things people are holding onto for dear life are readily available. However, a more cautious bank wouldn’t go a miss.

  74. Matt, found your site a little while ago, interesting stuff. I am not in the Web 2.0 scene much so didn’t even know you were the guy behind WordPress. Must be getting old!

    Anyways, I have been mulling this same thing for years now. I hate banks! As a entrepreneur and small business person they just suck.

    There’s an old saying, “Banks are not in the business of taking risk.” I would add, “…unless it’s with your money.”

    I have strong opinions against the Fed system and fiat money. Might not change that, but I have decided I will do a bank someday. I loved the micro lenders and you can find out what happened to them, I am not sure if Prosper ever came back online when the SEC or whoever went after them.

    I would start up a bank or a lending company in a heartbeat and I got the drive to make it work too. I’ve been researching it now for almost two years. Regulations stink!

    By the way, you don’t have to be a member of the FDIC.

  75. Everyone is talking about why something cannot be done, what happened to entrepreneurship? I hear people mentioning regulations, compliance, other barriers to entry. So what!

    We only do things that are easy?

    If it’s hard, it makes it that much more enjoyable in my opinion.

    Did someone mentioned USAA? I bank with them, only for military or dependents, but a pretty good bank. They don’t fee you to death and are very helpful. I can scan my checks anywhere I have Internet.

    I agree with Bruce, we need less regulation not more, but the minute something bad happens you got the certain groups who scream for more government oversight. The regulators really helped this last decade, eh?

  76. I have suspected that small business and microfinance areas are underserved, and low risk. Some combination of Kiva with Zopa in a form that has the transparency to allow depositors choose the loans seems very interesting.

  77. This is so much better-worded than what I’ve anted to do for the last 10 years on the finance front.

    Startup banks ought to exist all over the place – localizing money, inducing local investment, etc.

  78. Matt, I desperately tried to start a bank to finance entrepreneurs last year in Arizona with a dozen friends. My vision wasn’t that far from yours (go figure) and it would have been great to have you on the web site:-)
    The OCC wouldn’t give us a charter because of all the other bad banks in Arizona; they wanted us to buy a bad bank instead/ We refused and blew over a million dollars in investment. But I would still like to do it.

  79. 1) Matt, I’m with you. Yours is better than a great idea: it is a great way to execute an old idea.

    2) When you’ll execute your idea, you’ll realize that zero risk is short term treasury bonds. This fact will allow you to pay some interests and still be profitable. Money in a safe can be wiped out in a few years of 14% Inflation. Some economist do forecast two digits inflation due to huge liquidity pumped lately into the economy.

    3) Why not ask us the money for such venture? Why not a “Google Style” community fund raising? You can raise the risk capital from us and keep risk free Bank deposits. I’ll be happy to send you two checks: first one for shares of the start up, second one for my first deposit πŸ™‚

  80. You know Matt, I’ve been in the game a long time…mortgages, equity loans, car loans, investments, etc. etc. etc., and find banks right up there with insurance companies and credit card companies. I even get the once over when I do business at a different branch of my own bank. Recently, I was in Ireland and had trouble with all of my credit and debit cards. I went to a Bank of Ireland branch and a young man took the time to try my credit card in in the ATM and when it didn’t work took it to his teller window, asked for identification and handed me five hundred pounds, no fuss/no muss. If I tried that at a bank in the states they would have had me tailed my the dept of homeland security. Our banking system makes it too hard! I’m with you.

  81. Dear Matt,

    I would encourage you to go with bonuses; really.

    In fact, they’re a really neat trickery, ‘invented’ to keep overhead (base salaries) as low as possible and extra costs and incentives backed by turnover: we give you $1, but when you make us make $10, you’ll get another $1 (we keep the $9, pay you the other one and made $8) .

    Thing is, you’re facing a perverted industry, with people motivated by their extra $1’s. It’s a matter of character when you can reel in the very best of blokes without giving in to perverted bonus-demands (stocks, options, backoff-fees). And you do need boring dudes in a bank; really.

    Good luck!

  82. I’m not sure if SafeBank is such a great name after all that “banking trouble” lately… but I would sure opt-in for an alternative to PayPall or MoneyBookers.

    Just don’t forget to place it on a lonely, tax-evading island somewhere in the southern seas… just to be sure you also get a grip on the “big money”. πŸ˜‰

  83. Genius. When all this craziness started at the end of 2007 and early 2008, I worked on database and website development for a client who had the same vision. Eventually the project couldn’t get funded because he couldn’t get traditional investors behind the idea. I figured it must have just been a crazy idea. But reading this makes me realize he was just asking the wrong kinds of people.

  84. Your sketch sounds remarkably like Everbank. Privately owned, well-funded, stable, offers foreign currency CD’s and investment accounts.

    I would like to start a worldwide credit union that also has a lower-fee (for both merchants and customers) brand credit card and does local stuff like microloans in various communities. Large depositors know their deposits are helping the local community, and people who receive microloans are then customers with increasing equity in a community-oriented financial institution. Both win.

    There are many local banks that can be had for a comparative song right now. Why not buy an undervalued one out and alter it to fit your goals? Berkshire Hathaway used to make shirts…

  85. To clarify my credit card brand comment, I think there is a ripe opportunity right now to start a new credit card brand and depose the overpriced offerings currently available.

  86. You say if Goldam Sachs never paid out any bonuses, they would never need government intervention. That’s such a ridiculous statement. If Goldman Sachs never paid a bonus, they wouldn’t have ANY of the employees they have today. Goldman also did not need a bailout. The treasury department forced them to take the money. They were also one of the firsts if not first to pay it back in full. They are also more profitable today than ever!

    I’m just a bit tired of all the Goldman bashing. Someone needs to defend them on the interwebz.

  87. Great idea Matt! I think it’d get a lot of people very fast. You should see the revolution going on down here in Kenya. The mobile phone operator Safaricom launched its M-PESA mobile money service about 2 years ago and now they have about 12 MILLION subscribers — most of them UNBANKABLE by snobby banks.
    I can go to thousands of M-PESA agents throughout Kenya and upload money via my mobile phone. I can send money to peeps, pay bills, and buy credit of course.
    Boy, the banks are PISSED off.
    But Equity Bank (an award winning bank serving low income markets) added an M-PESA button to its 400 ATMs so now lots of peeps can WITHDRAW cash WITHOUT a bank ATM card. They just have to press the button, enter the transaction ID from the M-PESA system, and choose how much of their balance they want to withdraw. Then you get an sms telling u that your balance is now reduced.
    All that for a few shillings…waaaaay cheaper than postal wire transfer or Western Union.
    Now they’re taking it to other parts of East Africa and The West. Kenya is now #1 in the world for mobile money thanks to Safaricom’s innovative idea.

  88. Keep brushing…Hidden cost is compliance since 911 all banks are big brothers. Regulation is extensive. Jumping borders you run into currency and capital controls. My partner and I are thinking of applying for a license so we will see which of your ideas will work.

  89. your bank should also provide a payments gateway for your customers… so they could take payments from the web straight into their accounts.

    Wouldn’t be much need for huge transaction fee’s etc. as all the money would be going into the bank anyways.

  90. Simple, useful and very realistic. The world needs more start up entrepreneurs like you. The world needs more minds like you. Sometimes we get so caught up fantasizing about such a huge success only to be carried by these dreams and accomplish unfinished projects whereas you were not afraid to think small, act big.

  91. And here would
    “” apply as well (you linked to it).

    Here in South Africa we now bank with – mostly relying on technology, low key branches (ATM indoors) and a web interface that got me wondering where the buttons went – as they only use links – sometimes only 2 or 3 on a page. No massive sponsoring (like the 4 other abysmal dinosaurs that ‘monopolise’ the country.
    They are actually so ‘David’, that the State Telco monopoly doesn’t accept payments from them (and can get away with it!)
    But yes, often dreamt about the same: how to run my own ‘honest bank’ – but that might be a contradictio in terminis…

  92. Negative balances could almost disappear overnight if banks would find a way to send the current balance to not only ATM withdrawals, but everytime someone uses their Debit card for a purchase.

    Banks don’t want to do this for two reasons (and besides these two reasons they say it is technically not feasible – mostly because they don’t WANT to):

    (1) They claim people will take the balance literally and not realize that checks or VISA/MC charges may still be pending. This of course is just dumb. Not only do their own user agreements defend against such witless thinking by some dumb user, but they could also (shocking!) print a disclaimer below every balance that says just that: “Balance does not reflect pending checks and Visa/MC charges yet to have cleared”, or better, “Balance may be smaller than it appears”.

    (2) And of course, this is really reason #1, the banks don’t want to give any kind of warning to users that they may be perilously close to overdrawing their account.

    I, like most people, am responsible and check, but we all have that one moment in our year where all heckaroo breaks loose (death in the family, etc) and we don’t really check because we think we know. But we don’t know that our wife took something out. Or we guess wrong. Or, well, life! Life is for living – not checking balances (iPhones or otherwise).

    First bank that does this across all vendors and ATM’s wins by loyalty and future business. Hint: It ain’t much in $$, but I’ll throw in as much free P.R. to my friends and family as I can. At the least, it shows they care about making OUR lives easier – not theirs.

  93. In England there is no choice.
    There needs to be a new breed of bank and financial ideas.
    The old five or six banks are boring and rather terrible at customer service.
    Great Idea Matt

    BankPress I love it!

    Opensource banking!

    1. I’ve heard great things Metro Bank and they’ve just been given the go ahead here in the UK.

      Matt, an amazing post and I only see these things as having to be implemented, slowly but surely perhaps, whether it’s you. a company, me or the girl down the street, lets go for it (:

  94. Found this post when doing some research on disruption in the banking & payments industries, SafeBank reminds me a lot of BankSimple ( ), a startup bank that’s been getting some press as of late.

    Sounds like they’re taking a different approach though, and avoiding starting a bank entirely, just partnering with several existing banks for a variety of services and hiding the messy details behind one slick web UI. Interesting idea, though I don’t have the expertise to know whether it’s really feasible or not… Seems to me that the partner banks would want to maintain their current profit margins and then we’re back to square one.

    Anyone else with some banking experience care to chime in?

    1. Bank Simple sounds brilliant, perhaps they could get some inspiration from Matt’s post.

      I’d love my bank to blog, I just think it would show they cared, anyway I’m reading Bank Simple’s blog for now great stuff!

  95. Banks truly need your skills. At present, they face too many attackers and not enough creative thinking to counter the threat.

    Meanwhile, their customer service is going down the tubes.

    I’ve found that the banks in 2nd and 3rd world countries usually are more technologically savvy. This is sad.

  96. I really enjoyed reading this whole comments list. UNFORTUNATELY as a retired “good servant” of the Owners Of The World, all of the lovely ideas presented lack one thing:
    Money chases money. EVERY time.
    The only hope of altering matters is by making the theft of money/lives INDIVIDUALLY too expensive to risk.
    Minimum 50 years hard labour, no parole and seizure of all assets – all assets including family.
    a simple alternative, do not let Banks risk funds outside of their specific declared zones of investment.
    Never allow a Bank to invest in markets of any kind directly.
    No more recessions/depressions ……
    Except THAT is where the the big killings are made!
    THAT is what they are for, culling the flock…

  97. Forget the money, Matt, the big future is in Bitcoins!,, See, you could convert all your assets to Bitcoins and start a Bitcoin exchange! Seriously, though, if you did start a banking enterprise of some sort, I’d feel safe starting an account with you! I think you have enough “business savy” to pull it off! You know, at the current rate it takes about 300 USD to buy 25 Bitcoins! And absolutely NO backing!

  98. Glad you put that last sentence in, I was thinking ‘why on earth would you want to be a banker?’. Shows that really you were just enjoying the marketing exercise, and it is one I have envisioned (fairly similarly) in the past too.

    One point tho – banks make money by lending more than they take as deposits, and trusting that everyone won’t want their money back at once. If you weren’t money lending (and earning x% interest), you wouldn’t have anything to pay your depositors any interest with (at x-2% etc). If you paid interest out of new deposits, that would be a ponzi/pyramid scheme. Just taking people’s money wouldn’t actually earn you anything unfortunately.

    If it was an easy business to undercut, someone would be doing it!

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