What Does the BBVA Acquisition Mean for Simple?

Feb 21st, 2014 | Posted by

The financial world is abuzz about the recent acquisition of Simple by the Spanish banking giant BBVA.  The news is surprising, but not unusual for a banking group that has invested in other innovative companies such as Freemonee, SumUp, and Radius.  The deal also legitimizes a financial start-up that has garnered quite a bit of skepticism among some in the industry, despite a small yet dedicated and growing customer base.  Banks are clearly considering these innovators to be significant enough to validate their acquisition.  Simple is a brand, not simply a product offering. It has recognition outside of the industry, and the effect on existing customers makes this acquisition different from the norm.

As the relationship unfolds, it will be interesting to see how Simple responds to the following:

  • Will Simple really remain independent? The statements released by both parties claim it will. Recent acquisitions of Nest by Google and WhatsApp by Facebook also made similar claims of maintaining autonomy, but that doesn’t mean it will remain the case.  Yahoo acquired Flickr in 2005 with similar promises of independence, yet in the subsequent years drove an up-and-coming innovator straight into the ground.  The fear for Simple customers is that the unbeatable user experience and exceptional customer service that made it so appealing will slowly be lost as the two companies integrate. Accounts will remain at Bancorp bank for the time being, but the inevitable move to BBVA must be graceful, or a once innovative product is liable to lose the only edge it had in the market
  • Does this deal allow Simple to become more complex?  The big attraction of this deal for Simple is that it gives them access to the resource of BBVA, a massive multinational financial institution with a clear penchant for funding innovation.  The main complaint with the start-up since launch was the limitations that came with not actually being a bank.  Simple didn’t do mortgages, it didn’t do investments, and there were no credit cards.  For the PFM features to be truly useful, users would have to go ‘all in’ with Simple.  More resources could allow for more development into a more diverse set of products and financial offerings, increasing the potential of the already well designed PFM platform.  The test will be the following: will Simple be allowed to continue its own brand with its own products, or will it simply become (pun intended) a funnel to push BBVA’s core business?

The acquisition of Simple, no matter what happens, is a good sign for financial start-ups, especially those that compete directly on Banks’ turf.    The industry could learn from the way BBVA has taken a page from tech giants and big pharma. There are hundreds of innovative Fintech companies out there, and great ideas don’t always have to come from internal development—in fact for large banks they rarely do. But Simple has now become part of the traditional banking world they used to decry.  Will the financial services industry’s challenging record of financial innovation rub off, or will the resources of a megabank allow Simple to grow into a true disruptor?  Only time will tell.

  1. Meenu Bagla
    Mar 5th, 2014 at 09:54
    Reply | Quote | #1

    Good point Steve. Do you see a time in future when firms like Simple will be on the other side of the table and will acquire banks?

  2. Stephen Greer
    Mar 5th, 2014 at 10:57
    Reply | Quote | #2

    Meenu, this is a good question. I think the more likely scenario will be that banks, especially large institutions with significant resources, will begin to act more like BBVA. The BBVA Ventures arm of BBVA, in my opinion, represents a trend that will become more relevant in the industry as time goes on. Banks are slow movers, and acquisition can be a way to stay on top of trends. I think firms like Simple will continue to pop up to fill gaps in the market, and big banks will start to think about investing in them.