BBVA bagged a bargain with Simple

Author: Udayan Goyal

As some of you may know, Anthemis Group was one of the seed investors in Simple and also invested in subsequent rounds as the company grew. At one level, you could argue that this was a good outcome for us as an early investor. However, I have a slightly different view – I believe BBVA got one hell of a bargain and the sale rather diminishes the promise of a platform like Simple, which had a lot of potential to grow as a standalone company.

Let me explain. $117m has been paid for the platform and its 100,000 customers. That equates to a price of $1,170 per customer (it seems these are the metrics in vogue since the WhatsApp acquisition). The typical cost of customer acquisition by US banks is in excess of $1,500 per costumer – if they are really efficient. However, this metric detracts from the real value drivers – redefining how customers are acquired in the first place and the power of a high user-centric data led banking platform. Banks today do not have the wherewithal and expertise to acquire customers in the way the likes of Simple, Moven and Fidor have been able to prove and this has been the primary innovation of these “apps” (and I use that word for a reason). Given that Simple and Moven both rely on third party balance sheets proves another key thesis of ours at Anthemis[1] – the stratification of the traditionally vertically integrated stack in financial services. It also illustrates beautifully that a relentless focus on customer experience is the best way to acquire customers whilst being freed from the shackles of a balance sheet. BBVA has smartly acquired a pioneer in this field for close to nothing.

When Sean and I first came across Josh and Shamir (as it happens, completely separately and coincidentally), we were both elated at finding two entrepreneurs who understood what we had been harping on about. We immediately agreed to fund as much as we could at the time; this was in 2010 when Anthemis was coming to life, so we literally had to scrape the pennies together to make it happen. They espoused two key principles we had been talking about: the stratification of financial services and a data led model in banking. The Simple model combined some of the features of a PFM with the integration into a primary transacting account. One of the early innovations was the ‘safe to spend’ number, which gave consumers a holistic view of their real spending power once account recurring expenses, uncleared balances[2] and discretionary spending patterns had been taken into account. For the first time a “bank” was looking out for the consumer, as opposed to its own interest in income generation. Then Alex Payne, the original CTO of Twitter, joined Simple. He reworked the technology to create an ultra fast query based data analytics. For example, one could ask for “expenses for my NY trip last week” and the system would instantly and intelligently aggregate all the expenses in the account related to being in NY the previous week. One happy customer paid his tribute to the speed and efficiency of this with a song – http://www.youtube.com/watch?v=1r6cA5X2KGU. In case you’d like to know, this was completely unsolicited; further proof that a good product creates raving customers.

Indeed, we have been proud to be part of the evolution of this revolution with both Moven and Fidor. Moven has taken the data paradigm to the next level by being able to provide instant feedback on a transaction – for example, if you buy a coffee it will tell you immediately how much you spent on coffees that month, your discretionary spend and if that spend is above or below your usual spend (see http://www.youtube.com/watch?v=ZLwvTZGMhRE). This is useful, value added analytical information to a consumer; again a banking app that is trying to manage finances and expenses by changing behaviour at the point of sale. And this is the root of all successful innovation – technology changing the behavior of the consumer.

Fidor is all about what the future can be in terms of the cooperative ecosystem that Banking has the potential to become. From the original concept of “banking with friends” (see http://www.youtube.com/watch?v=Br39kKaCKxA), we are now starting to refer to Fidor as a BOS or “Bank Operating System”. The core unified account functionality[3] allows users to do everything from move money around, to swap into one of 120+ currencies[4], to acquire and store virtual currencies, to acquiring precious metals that are stored in a vault in Zurich, all at a click. The BOS sits on top of a traditional core banking system and provides a unified API that allows partners to connect and provide their services to Fidor customers (now in excess or 250k). Fidor therefore becomes an aggregator of services, rather than trying to be everything to everyone, by partnering with the provider of such services. We think this is the future.

To give credit to Francisco González, BBVA’s executive chairman, he is one of the few leaders out there who really sees the change coming. He recently remarked, “Some bankers and analysts think that Google, Facebook, Amazon or the like will not fully enter a highly regulated, low-margin business such as banking. I disagree. What is more, I think banks that are not prepared for such new competitors face certain death.” With that foresight, González has made a move which I think others will seek to follow, only like Facebook with WhatsApp, at price points that are multiples of Simple. We salute him and wish the Simple team all the best in their new home – they are lucky to have such an enlightened partner.