Embedded Finance. Scarlett Sieber

continued innovation led to the creation of a new category of fintech called neobanks—digital-only banks built from the ground up. Neobanks aimed to take over the customer experience entirely from banks, and offered a broad suite of products for their users, though this range of products was generally narrower than that offered by banks.

The first neobanks launched in the early days of fintech: Simple, co-founded by Shamir Karkal and Josh Reich, and Moven, founded by Brett King, are two well-known retail examples on the US side. Both saw great initial traction, and Simple was known for having the second highest NPS (net promoter score) across all of financial services behind USAA, which serves members of the armed forces and their families.¹¹

      Simple

      Founded: 2009

      Market cap: n/a

      Number of employees: n/a

      Early Approach

      Founded by Shamir Karkal and Josh Reich, Simple's mission was to deliver clear and transparent digital banking to a population disillusioned by the financial crisis of 2008–2009. Simple was the paradigm of the neobank in the US.

      Simple, which operated completely online, pioneered the Safe to Spend feature and was legendary for its hands-on customer service. The service was bought by the global bank BBVA for $117 million in 2014, and shut down in 2021.

SIMPLE

      Shamir Karkal remembers the early days when the idea for Simple emerged:

I was chatting with Josh who was (and still is) a good friend. And he sent me this email saying, “Let's start a retail bank.” I remember this was 2009, and we spent a lot of time chatting about the financial crisis and everything that had happened from ’07 to ’09. It wasn't completely out of the blue for him to talk about entrepreneurial ideas with me, but, starting a retail bank was like, what was out there? He laid out this vision of how customers hated existing banks. The whole financial model of banks was built around trying to sell more products to customers and charge them more fees. What customers wanted had not been articulated, but what customers wanted was financial wellness, and they wanted to have access to their money, and really to live a better life. There was such a deep disconnect between what banks were selling and what customers were asking for. And Josh's idea was, “Hey, let's just build a simple, easy-to-use customer-friendly bank that held your money, helped you pay your bills, gave you loans when you needed them, and then got out of your way and let you live your life.” And it was just such a compelling idea. I read that email and I was, like, “Oh man, we should do this now.” Facebook and Twitter were already beginning to take off. And yet most banks did not even have a mobile app at that point.

Josh and Shamir launched a website saying, “Hey, we're going to build a better bank. If you like the idea, drop your email and we'll add you to the waiting list.” 200,000 people signed up before the company launched a product.

      Simple offered a number of innovative features, including displaying a “safe to spend” amount, to help customers stay on budget, and also put a great deal of thought into the customer experience, including customer service, and both Shamir and Josh logged many hours and late nights helping their early customers solve problems. Simple was ultimately sold to the global bank BBVA.

      Moven

      Founded: 2011

      Valuation: $418 million

      Number of employees: 49

      Early Approach

      Banking consultant Brett King launched Moven in 2011 with an emphasis on mobile-first banking. King and Moven were strong advocates for mobile payments, and delivered stickers for customers to use with point-of-sale devices years before iPhones were NFC-capable. Moven's app allowed other banks’ card to be linked to it, and delivered more insights and context around those cards and their fees than the issuing banks themselves.

      Still privately held, Moven's business focus has moved from consumer-focused to enterprise, and counts several global banks as its customers.

MOVEN

In 2009, Brett King was a consultant and newly minted author of a book about the future of banking called Bank 2.0:

      I was on the book tour talking about banking and how it would evolve with technology. I was talking about the fact you'd be able to download your bank account in the future. It'll be embedded in your phone, you'll pay with your phone. It'll give you advice and coach you on money. This is the vision I was talking about associated with my book. And I was speaking to a bunch of VCs from California and they said, “You know, banks aren't going to do this. So who's going to do it?” And I said, “I will.” And literally that afternoon, I went home and registered the domain movenbank.com, which became Movenbank, which then would drop the bank and it became Moven. That was August the 18th, 2010. Now, at the time, there was no such word as neobank or challenger bank. Josh and Shamir at Simple and myself, we would often talk on the phone and collaborate because there was just no one else doing this stuff back in the day. And so we called ourselves nonbank banks at that time. And then the term neobank, I think Dave Birch (author and commentator on digital financial services) came up with that one.

      King continued:

We were the first mobile direct bank in the world. We were at least the first to offer a debit card from an in-app application for a bank account for Moven. We launched that capability in 2012. We had a bunch of other firsts we did. We were the first mobile banking app that used the home page differently than just listing your accounts. We put our spending meter and money path on the app, the financial wellness focus. We were the first to do contactless. This was pre-Apple Wallet and Google Pay, so we stuck a contactless sticker on the back of your phone that was RFID-based initially, then there was an NFC tag. We were the first to do a real-time receipt with categorization for your expenses, which we had by 2013. So we really did pioneer the space. But the problem is that we were too early. In 2013, we had a quarter of a million customers in the United States.

      King believes that, despite its traction, Moven was too early, but that its features were influential on neobanks that followed, as well as on traditional banks, and remain selling points for Moven's current iteration as a banking-as-a-service tool.

      The gap in the market simply was that the bank account would evolve to be contactless, cloud-based, and would coach you on your money. The biggest selling point we used to talk about were things like, you go to a store and you swipe your plastic card, and you don't know what your balance is. You don't know whether the transaction was good or not. The only thing you know is whether the transaction was approved or not. There's not a lot of context in terms of day-to-day spending that will help you make decisions. So now that's how we position Moven and initially the idea was that it would give you smart feedback. If you're getting out of a taxi and you get a receipt on your phone that says, “Hey, you spent $200 on Uber this month” or you come out of Starbucks and it says, “Hey, you spent $400 on dining out and coffee this month” and that elicits behavioral change because most people just simply aren't aware that they spend that sort of money on those activities. So raising the awareness level was a tool to change behavior and make people financially healthier. And that's the way Moven has always worked.

Why did these early neobanks gain traction? They focused on the technology, making it extremely simple to use, and then doubled down on the customer experience. The concept of neobanks wasn't only gaining traction in the US though. Across the pond, neobanks like Fidor, Monzo, Starling and N26 are prominent European examples as well.

      Chief research officer at Cornerstone Advisors, Ron Shevlin, known for his contrarian opinions on many subjects,