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I really do think there is a great opportunity for a better bank! However, I think BankSimple is making a big mistake by not becoming a real bank, and instead a

I really do think there is a great opportunity for a better bank! However, I think BankSimple is making a big mistake by not becoming a real bank, and instead acting as a front end interface. BankSimple claims that all accounts will be FDIC insured "at launch." However, from what I am gathering, it will be impossible to keep these accounts FDIC insured in the long term especially since the company claims it will be transferring money around from bank to bank in order to acquire the best rates. Really? Banks are going to be open to opening a new account for every new customer (which is what would have to happen in order to be FDIC insured)? I am skeptical. Also, a big concern of mine is the claim they will move money between savings and checking automatically for you. Recent legislation prohibits more than 6 electronic transfers from the savings to checking accounts in a month. So if a computer is pushing your money around; you might be out of luck towards the end of the month when you need some extra cash, but all six of your transfers have already been used. Also, at the credit union I work at, we charge the normal returned ACH payment fee if you surpass these 6 charges ($25! yikes!!) and BankSimple states all fees will be passed onto the consumer. So in actuality, BankSimple is really just a nice mobile experience that moves money around the top few banks (which really aren't that great). You still incur the same fees. Just doesn't seem like a very good business structure to me. However, I would invest in BankSimple because a big bank would pay big $$$ to acquire the technology the company is developing. Mobile is the future of banking and that is what BankSimple recognizes so perfectly. Look for a big acquisition in the next few years.

oasisbob 15y ago
Recent legislation prohibits more than 6 electronic transfers from the savings to checking accounts in a month. IIRC, this is regulation DD, and is quite a traditional rule. On the books, banks account for savings and checking funds separately, and have separate capitalization requirements because checking accounts are assumed to be more liquid. Under these circumstances, you don't want consumers to treat savings accounts like checking accounts (which they have an incentive to do, because of traditionally higher interest rates), so you create a disincentive through transaction limits. For BankSimple, this is probably not much of a problem. Reg DD allows for more than six transactions if you charge a per-transaction fee. Most banks charge a buck or two (or $25), I'm not sure if there's any regulatory problem with them dropping the fee to $.01 or $.001
- HoyaSaxa 15y ago
  Regulation D was amended in 2009 to take away the 3 sub-limit that applied previously increasing it to 6 in all circumstances. But you are correct in that this is really a traditional rule that has been around for years. It is definitely becoming more of an issue as more and more people rely on online transfers and shy away from in-person banking (which is exempt from the rule as is ATM transfers). Are you sure about your last point? I have never heard of this, but I wouldn't be surprised if the bank lawyers found some type of loophole. But just to clarify the $25 I referenced is a returned ACH fee. The money is never actually transferred out of savings into checking when this happens.
  - oasisbob 15y ago
    Ahhh, you're entirely right, I misremembered. Fees aren't required at all under Reg D (not Reg DD, damn alphabet soup). The FI does have a responsibility to monitor excess transactions and prevent non-occasional violations by either converting the account, or removing transactional abilities. So yeah, a token fee wouldn't be a viable strategy. Getting back to the topic at hand though, I don't think this would be much of a problem for fancy automatic transfers. Deposits to savings accounts aren't covered transactions, so something like "If I spend less than x budget this week, send the rest to savings" would work. If the FI designed a product that would see more frequent withdrawals, they could just designate it a transactional account and skip the whole issue entirely. Fits in the spirit and the letter of the law.

oasisbob 15y ago

Recent legislation prohibits more than 6 electronic transfers from the savings to checking accounts in a month. IIRC, this is regulation DD, and is quite a traditional rule. On the books, banks account for savings and checking funds separately, and have separate capitalization requirements because checking accounts are assumed to be more liquid. Under these circumstances, you don't want consumers to treat savings accounts like checking accounts (which they have an incentive to do, because of traditionally higher interest rates), so you create a disincentive through transaction limits. For BankSimple, this is probably not much of a problem. Reg DD allows for more than six transactions if you charge a per-transaction fee. Most banks charge a buck or two (or $25), I'm not sure if there's any regulatory problem with them dropping the fee to $.01 or $.001

HoyaSaxa 15y ago
Regulation D was amended in 2009 to take away the 3 sub-limit that applied previously increasing it to 6 in all circumstances. But you are correct in that this is really a traditional rule that has been around for years. It is definitely becoming more of an issue as more and more people rely on online transfers and shy away from in-person banking (which is exempt from the rule as is ATM transfers). Are you sure about your last point? I have never heard of this, but I wouldn't be surprised if the bank lawyers found some type of loophole. But just to clarify the $25 I referenced is a returned ACH fee. The money is never actually transferred out of savings into checking when this happens.
- oasisbob 15y ago
  Ahhh, you're entirely right, I misremembered. Fees aren't required at all under Reg D (not Reg DD, damn alphabet soup). The FI does have a responsibility to monitor excess transactions and prevent non-occasional violations by either converting the account, or removing transactional abilities. So yeah, a token fee wouldn't be a viable strategy. Getting back to the topic at hand though, I don't think this would be much of a problem for fancy automatic transfers. Deposits to savings accounts aren't covered transactions, so something like "If I spend less than x budget this week, send the rest to savings" would work. If the FI designed a product that would see more frequent withdrawals, they could just designate it a transactional account and skip the whole issue entirely. Fits in the spirit and the letter of the law.