However there are a number of new startups that are trying to entice users to do exactly that. A few of them, are coming up with truly innovative approaches that may very well, capture the hearts and minds of many people and give users enough comfort and transparency to entrust these start-ups with their money.
Three such examples, among many others, are:
1) Think Finance with their Elastic web-based bank account replacement that targets, as their CEO, Ken Rees puts it: '... the underbanked and unbanked - the estimated 60 million people who are not well served by traditional banks'
2) Square, who is targeting the approximately 30 million small business owners in the US that don't have a merchant account or credit card terminal. With only 6 million businesses in the US accepting credit card payments, there is a large untapped market they are ready to serve.
3) BankSimple, a start-up still in stealth mode who wants to offer 'banking on-line' as opposed to the traditional 'on-line banking'.
BankSimple has not yet launched but it is already making quite a splash with over 30,000 people having signed up to be part of the beta launch and over 50,000 ready to open accounts with them as soon as the business is fully up-and-running.
What exactly is BankSimple?
1) BankSimple is not a bank. It will partner with smaller banks who will hold the federally insured accounts.
2) What BankSimple will do is provide an on-line interface that allows users to combine all their credit, savings, checking and termed accounts into one banking card.
3) They will help you manage your money with their predictive money management model (part of their secret sauce). While users only need to concern themselves with a single account, there are actually checking, savings and credit accounts tied to that one login. Those will function behind-the-scenes with Banksimple automatically managing funds and transferring money between the accounts to ensure that the most money is yielding the most interest at any given time.
4) Because their focus is mobile design and usability (the first thing the company did was design its mobile interface), it allows you to do everything with just a few thumbs movements while on the move. For example, it will provide real-time updates on spending via the web and through Android and iOS apps; they will help combat fraud by providing instant alert on purchases and by checking if a user's location matches the location of the transaction to monitor for fraud; they will allow you to deposit a check by taking its picture with your mobile device and to make quick and easy transfers to your Facebook and Twitter friends. And they promise Zappo's style customer service so, if you run into any problems, there will be a expert at the other end of the line to help you out.
5) Finally they promise no fees. Their full revenue is based on taking a percentage of the interchange fees (these are fees that businesses pay to credit card companies to process transactions) and net interest margins.
This sounds like true customer-centric business and operational models. Obviously, we still need to wait for it to launch to see if they do deliver on all fronts but, at the very least, I would say they have the right idea. Perhaps one question mark is around their banking partners. They plan to partner with about 15 institutions. These will have to be smaller banks with no retail presence (similar to the ING Direct model) and with no aspirations of building brand awareness since everything will be branded BankSimple. These banks will need to integrate their systems and products with and cede full control to BankSimple. What banks will they have as partners? Will they be robust even if small and not well-known? For sure they will be FDIC insured but nobody wants to test federal insurance... I trust they will overcome this hurdle - in fact, my understanding is that they already have these partnerships in place - and be able to offer to us the great banking experience that we all deserve and very few of us get!
We all understand that banks could be doing all this themselves but, with their focus on ROI and the use of proven technologies and methodologies, have chosen not to do it. Will they wake up in time to avoid damaging customer migration?