Banking Review

Partnering with start-ups can pay for banks

“If banks were doing their job correctly there wouldn’t be a PayPal or a Mint” says Richard Aberman.

In reality if banks made business accounts simpler there may not be a need for Aberman’s business WePay either, and he knows it.

WePay is a start-up founded in 2008 to help groups collect and manage money. Aberman and his college friend Bill Clerico reckoned they could vastly improve the painful experience faced by organisers when collecting funds for clubs, associations, social events or share house bills. So they set about building a simple and easy payments interface and an API that is now capturing the attention of some serious web heavyhitters. WePay counts PayPal cofounder Max Levchin among its investors, and it recently hired Rasmus Lerdorf, creator of the programming language PHP, and formerly of Yahoo, to further improve its API.

We caught up with Rich Aberman at WePay’s headquarters in Palo Alto, San Francisco to talk about WePay, but quickly got talking about the increased likelihood of banks choosing to work with start-ups.

“There’s a lot of room for innovation if big financial institutions are willing to serve as the back end and be the partner to start-ups like us” says Aberman.

WePay’s banking partner is The Bancorp Bank which provides private label banking and technology solutions to non banks. Bancorp is very much a silent partner, and Aberman admits although WePay has no desire to call itself a bank and raise the ire of regulators, customers of WePay think of their WePay account as a bank account. Aberman says this sometimes translates into customers believing WePay is their banking provider.

This represents a significant change in the trust users are placing in start-ups providing bank-like services.

So what’s to stop an existing Australian bank from providing private label services to a start-up?

Aberman says banks are finally starting to take start-ups more seriously, particularly in the payments space.

“There’s going to be a couple of big wins in terms of innovative new payment companies and those businesses will always start off small as start-ups.  I think banks need to act more like investors. They need to place bets on start-ups because if they don’t they’re going to get eaten alive by them.”