By Brian Patrich Aha for American Banker
A recent fumble in transitioning accounts from its old partner bank to its current one has left Simple scrambling to mollify distressed customers.
The fiasco may hold a valuable lesson for fintechs and banks alike about the need for closer integration.
It all started when Simple began last year to sever ties with The Bancorp, which until recently had held all of the startup’s customer accounts. Simple has spent the past several months moving the accounts in batches to BBVA Compass, which acquired the fintech for a reported $117 million in 2014.
Customers making the switch are required to go through much the same process as they would to open a brand-new bank account. During the transition, some have complained of problems accessing their funds, making automatic bill payments and using their debit cards.
Now, with the deadline to complete the transition fast approaching, Simple is dropping a sliver of its customers, whose accounts it hasn’t been able to port over to BBVA in time, and asking them to reopen. The company has not disclosed the exact number of customers who have been left in the lurch, but said it is less than 0.7% of the total.
“The exact situations leading to this can vary from customer-to-customer, so there isn’t a blanket answer to ‘why’ each account has to be reopened,” said Amy Dunn, a spokeswoman for Simple. “Simple wasn’t the first banking or payment company to undergo a processor migration, so we knew that historically these were challenging moves with a lot of technical and logistical ‘unknowns.’”
The customer account closures were reported earlier Monday by Bank Innovation.
One affected customer is Aaron Frank, the CEO of Final, a credit card startup. He received a message on April 13 telling him that his account would be closed in a month, and instructing him to move his funds out in order to prevent them “from being tied up in the closure process.” He protested that his monthly transaction limit was too low for him to get his money out in time.
The problems resulting from the transition seem almost as diverse as the customers affected. One woman, for instance, temporarily lost access to her funds after Simple closed her account in February with what she says was insufficient notice, though the online bank did prompt her to open an account with BBVA.
As financial institutions continue to find synergies with fintechs, their partnerships will require that they come up with ways to integrate their systems and policies more seamlessly. Only then can they avoid problems such as hanging out to dry non-citizens who are living in the U.S. on green cards or work visas.
In the meantime, Simple is performing triage. Thanks to the intervention of Josh Reich, Simple’s CEO, Frank was able to discuss his situation with a Bancorp representative. But in the end, the person with whom he spoke couldn’t offer any help beyond suggesting that he close and then reopen his account.
“Main takeaway I got,” Frank tweeted, “is that conversions [are] hard.”