Debit Cards Aren’t For Stupid People: Q&A with PerkStreet CEO on Flying Into the Startup Abyss

5/24/11Follow @xconomy

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me. I wanted to create a totally different model, and give hundreds, if not thousands of dollars in cash back.

I pounded my head against the wall for about a year and a half, and thought, I’m not going to stay here and look back in 10 years and see someone start this business instead of me. Most bankers just don’t get it. That’s what led me to jump off the cliff, leave Capital One, and fly into the abyss of starting a company.

X: This was about three years ago, in 2008…?

DO: Sounds really crazy, huh? Right as the world was ending I quit an executive job at one of the strongest banks in the country. I was passionate about building an institution about changing the lives of the average American. It was never going to happen at an existing bank. This idea is too cannibalistic to the profits of an existing bank.

X: How did you sell the idea of a financial services startup to VCs in ’08?

DO: It was both easy and hard. We had a team of really good people coalesced around an idea that had so many growth trends around it. Debit cards, online banking. Everyone was excited about the idea of making a lot of money. The hard part was making the power of our product in the lives of the average American really come through. Most investors and startup executives are in a similar boat to an average banker.

X: What do you mean?

DO: Zero percent of venture capitalists use a debit card. Zero. None. Never. You never come across one. I needed to make that story come alive to a group of people that didn’t really need money. Our product can give the average family 600 bucks a year for doing what they’re already doing. I needed to tell the story of the average American. It was about hearing the difference a product can make in the lives of people. That’s what led us to do a fundraise and get people excited about PerkStreet.

X: So Highland was your founding investor?

DO: Yes, we raised a $6 million first round with them.

X: Tell me more about your team.

DO: The unifying characteristic about all of us—and this is pretty special—is we’re all from financial services. If you want to start a financial services company, you have to have this in your DNA. At the same time, we don’t just come from the industry, we’ve all built businesses before.

X: What does the average PerkStreet customer look like?

DO: The exciting thing about working on checking accounts, is it’s kind of a product that everybody has. What we have seen is that we’re signing up a good cross section of the country. Our average customer is 40 years old. We’re not just serving the 22-year-old, bleeding-edge adopters. We’re not just serving people here in Boston; we’re serving people in Tennessee and Colorado. And that I think has been one of the most exciting things about our business, and what I enjoy. We’re building this business for the everyday person.

Who we’re signing up most aggressively is the person who’s the smartest about … Next Page »

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  • Gerrit Bradley

    I wish more mechanics of the business model were discussed. After reading the fine-print for PerkStreet and their rewards it appears that you only get cash-back when you use your debit card as a credit card. When a customer completes a transaction this way the merchant pays a much greater fee (based on percentage of sale), as opposed to the customer who types in their debit card number (flat fee). Congress is trying to reduce the fees charged merchants when customers unwittingly use their debit card as a credit card. Banks are all to happy to give back fees collected from merchants. Yes PerkStreet is the best at giving back the most money, but what really is happening is a transfer of costs from a merchant and their other customers to the rewards program of PerkStreet and other banks. If my understanding is wrong please detail how, and explain why there is so much lobbying by the banks to prevent Congress from reducing fees related to debit cards.

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