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Simple Not Working Out

Adam Rust's picture

Posted June 2, 2014

Details from an unintentionally-leaked document show that BBVA's recent acquisition of Simple may not be going as planned. In other words, the deal may be turning out as the skeptics expected. In this blog entry, I sided with the latter group. 

Current Simple CEO Josh Reich mistakenly emailed a draft presentation to a reporter at Quartz magazine which outlined

how the company's prepaid card program was underperforming. The document said that Simple had 33,387 active users in April and that the deposit growth rate was "slower than expected." Thirty-three thousand is more than it had been back in February, but only by a small amount. 

That reiterates the skepticism of many surrounding BBVA's decision to spend $117 million for the company. At the time of BBVA's acquisition, Simple said that it had 100,000 accounts. Details on the usage rates were not made available, but the document did say that 29.2 percent of the current crop is active.  Do the math and you can see that this suggests a total sum of 104,000 accounts and a batch of 30,368 accounts.

Twenty-nice percent is pretty low. NetSpend recently said that more than half of its account holders have set up a recurring direct deposit. 

At the time of the sale, Bradley Leimer (@leimer) attributed the valuation of the company to two things. First, he said that there are barriers to entry in this space. De novo banks face a hard path. Branchless banks face a hard path. Branchless de novo banks have it even worse. Simple had already crossed the border and thus, BBVA may have perceived the acquisition as a cheap ticket past a difficult moat. Secondly, banks have a perception problem: lots of people don't like them. Bank-haters tend to co-locate with prepaid card users. 

But even if Simple could claim to address both those issues, their passage was hardly unusual. Lots of program managers already have a relationship with Bancorp. Fewer have managed to develop a marketing strategy that rivals Simple. But packaging only goes so far. 

Oddly enough, Simple's web site currently notes that their cards are still being issued by Bancorp.