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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putting more money away for tomorrow? That would be really fun to do.

Mobile is coming soon. Easily over the next two quarters. Mobile is a big deal; in particular, it’s going to allow us to cut out right at the source the last piece of paper in the whole banking system. Checks you want to deposit. You’ll have the ability to take a picture of a check you want to deposit and put that into your account. You don’t have to bother to send it to us.

X: How does the reception of PerkStreet point to bigger trends in the industry?

DO: I think the big trend we’re seeing is twofold. Banking needs to make the transition from holding people’s money to helping them save money on a daily basis. It’s not about an interest rate. That’s the old way of doing it.

Trend No. 2 is banking has to become more transparent. It’s sad that it hasn’t happened so far. The way we engage customers in social media is different than any other institution in the country. Banks shouldn’t be afraid of answering customers’ questions on a Facebook page. They’re going to have to do that.

We’re well positioned to take advantage of both. We want to be the institution that’s viewed as the biggest help to people in their financial lives. It’s taken banking a long time to catch up to the rest of the digital world and make that shift, and it’s finally happening now.

X: PerkStreet isn’t a nonprofit so what’s different between the way it and other banks make money?

DO: At the end of the day, banking has always been a really profitable industry. You make money when you hold people’s money. What we changed is giving a lot of that back to customers. We can do that because we don’t have branches. The industry pays 800 bucks a year to serve each customer. I certainly haven’t gotten that much back in value from my bank. We give a lot of it back. It’s a great model.

X: Do you still have a traditional banking account?

DO: Everything’s at PerkStreet. I’ve banked direct for about a decade. I loved it, I got a better deal. For me, that returned a fair bit of money. Our big insight was: higher interest is great, but what if you don’t have $50K in there? We give it back in cash, because everybody can appreciate that. Everybody has to buy stuff.

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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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