Who Would Start a Bank Now?

May 9, 2017 | Ryan Hildebrand

I’m what you might call an accidental banker.

I didn’t set out to become one, but most of my career has been related to it. During college, I worked at Wells Fargo selling loans. My second job was as accounting manager at Umpqua Bank, which bills itself as “The World’s Greatest Bank.” Then there was a technology provider for banks. Before starting Seed, I worked for the consumer banking startup Simple.

I also saw, from the outside, how frustrating banking was for the people who use it. My mom struggled with the finances of two different businesses when I was growing up. There were lots of hurdles to jump through that had nothing to do with the actual selling of a product or service. And working at small businesses, I was exposed to the painfully poor technology and service at banks.

My Seed cofounder Brian and I talked about these frustrations and wondered how we could give small businesses a little of their time and money back. For any small business, the first thing you do is start what can become a tedious and time-consuming relationship with a bank. There’s a general feeling that you’ve “hung your shingle” once you’ve got your bank account. The problem is that in many cases you have to make an appointment at a local branch to talk to somebody who doesn’t understand your business and wants to sell you things that you will never need. It’s an ordeal for a new business. We thought we could do better.

As business decisions go, this may have been bananas.

A Familiar Kind of Hard

Starting a bank is hard. But the truth is, starting any business is scary. Brian and I thought that if we took on some of the pain of banking, it would make it less scary for other small businesses.

Despite my frustrations, I love banking. It’s an amazing industry. But banking in the U.S. has gone through a lot of change in its short history, not always for the better. From the first bank created in America in 1781 to the Great Depression to the financial crisis of the late 2000’s to today, when technology for most banks comes from a handful of providers and payments in America lag behind other parts of the world. (We still have checks in the U.S.! This is crazy.). While we see advancements to our payment networks, it still sometimes up to four days to receive an electronic payment. One of the biggest recent innovations in banking? The ATM.

We want to get right in the middle of this. We’re focused on building the best product and service platform to help small businesses. This used to be easier.

How Things Have Changed

In 1990 the U.S. had more than 12,300 commercial banks in operation. You and some buddies could get a charter pretty easily. They were just handing them out. But, by the end of last year, eight years after the 2008 financial crisis, only 5,083 banks remained. So to act like a bank you have to have a charter granted by a number of regulatory agencies. Between 2010 and 2017, regulators granted only only one charter to an Amish bank in Bird-in-Hand, Pennsylvania, in 2013. Things are starting to unfreeze, but the industry still presents a lot of obstacles for an aspiring bank to navigate.

And that’s where we are now: Regulators are trying to keep the industry safe. With interest rates at 1% and rising, banks are sticking to the business plan — grow through fees and lending. We see some innovation, but there’s still a notion at some banks that you shouldn’t break things that are working. I was told by the CFO of a $20 billion bank that his target customer is 50 years old and looking for a second mortgage. Being a public company, this bank has quarterly results to maintain. Banks are looking for the sure thing. Sometimes that means businesses looking for better services are left out in the cold.

We’ll Be Crazy So You Don’t Have To

For the average small business, this is the landscape these days. Not understanding one bank from the next. Confusing fee schedules. Taking hours and sometimes weeks to get an account open. Hidden fees. Poor customer support. Problems logging into accounts. Having to pay for financial records. Poor technology. No mobile application. Frustration of sitting on a phone tree. General waste of time.

U.S. banking has a lot of room to grow.

When we started building our business, we were told by bankers that you can’t open a business-banking account online. That was true at the time, but not anymore. Because with Seed, you can open an account on your phone in less than five minutes.

We love banking, frustrations and all. We’re trying to reduce that frustration for everyone else. We wanted to make the process of starting, running, and growing a small business easier. And I think we are. It’s crazy a lot of the time, but our goal is to spare you all that. We want to build something hassle-free, something that stays out of your way so you can run your business without the whole history of banking weighing down on you.