Portland's 'financial technology' cluster aims to simplify online commerce

Simple co-founder Josh Reich moved his startup from Brooklyn to Portland in 2011. He says the city is better suited to his company's client-focused approach to online banking: "I think it'd be really difficult to hire the quality of people that we've hired, hiring in New York."

Imagine that managing your money was as much fun as arranging the songs on your iPhone.

Taking design cues from Apple and inspiration from social media, a Portland startup called Simple Finance Technology Corp. hopes to create a more straightforward, low-fee form of banking designed for a generation accustomed to continuous connectivity, their gadgets always within arm's reach.

isn't a bank -- it's a banking service. Clients manage their money on their smartphones, annotating transactions with Twitter-style hashtags to include searchable details about whom they dined with, or a digital snapshot of their coffee.

Simple reviewed

Brent Hunsberger, The Oregonian's personal finance columnist,

.

The hope is that by making banking more engaging, people will be more attuned to their money -- and smarter about how they're spending it.

"It's like a storybook," said Josh Reich, 34, Simple's Australian co-founder and CEO. "It doesn't feel like you're doing accounting when you're dealing with Simple."

Simple,

, is the highest profile member of an emerging cluster of Portland companies focused on the field of "financial technology."

They're using digital tools to change the way we pay, give and save.

Digital technology has already transformed the music industry, news, movies, books and shopping. Finance, a tightly regulated industry in constant peril from fraudsters, has been stubbornly resistant to change.

No longer.

"This was, technologically, a very high barrier-to-entry industry," said Eli Alford-Jones, chief executive of

, an electronic payments startup in Portland's Pearl District. "Within the past three years, that's changed dramatically."

'Digital finance'

Companies in the Portland area working to change the way money moves, online

(Portland): Financial transactions on Twitter.

(Portland): Digital gift cards.

(Portland and Iceland): Event tickets, online coupons and other mobile commerce.

(Beaverton): Invoice payments for businesses.

(Portland): Online payments for small and midsized businesses.

(Portland): Online banking, customized for mobile devices.

. (Tigard): Electronic payments and fraud protection for online transactions, mobile payments and at retail stores.

(Portland): Mobile payments.

Various intermediary companies have stepped up, providing standardized underpinnings for online transactions and fraud protection. That's enabled small businesses to jump in without huge up-front expense.

Meanwhile, banks, retailers and consumers have all become more accepting of online banking and online commerce.

"My timing was all wrong," said David Nelsen, who started an online gift card company,

, in 2005. Banks wouldn't support the concept, he said, and retailers didn't see why they would shift away from physical gift cards.

"The market was not ready," he said. "The message didn't resonate."

That slowly began to change. From its first client, the Stephanie Inn at Cannon Beach, Giftango landed a slew of top brands -- Amazon, Apple, Sears, Old Navy, REI and Nike, among others. The Portland company also raised $7 million in outside investment.

At the end of last year,

, which retained the Portland office and staff of 75.

The companies didn't report the sale price, but Nelson said backers enjoyed a return between four and 10 times their investment, illustrating the growing appetite for financial technology.

"There's a lot of opportunity in the payments ecosystem because there's such a switch from traditional methods of payments," he said.

Tigard-based

. was a pioneer in online payments, and has grown into an industry giant. Founded in 1995, the privately held company keeps a studiously low profile, but processes payments worth more than

$1 billion

$3.5 billion annually and employs several hundred in the Portland area. (

Updated with additional information from Vesta.

)

"No one was paying attention," said founder and chief executive Doug Fieldhouse, who has advised or invested in a number of the companies in Portland's digital finance cluster.

"Fundamentally," he said, "we got a huge, huge head start."

Now, everyone's on board -- and Portland, Fieldhouse said, is "riding the wave."

Google, Apple and many others are pushing various forms of mobile payments. A San Francisco company, Square, seems ubiquitous at Portland coffeeshops and food carts with a credit card reader that attaches to iPhones and iPads.

Simple fits naturally into this new environment. Its bright, funky Pearl District loft contrasts starkly with the classic sterile bank branch. Employees field customer calls in jeans and T-shirts, brainstorming new features over a cups of gourmet coffee.

The 50-person company delivers clients’ debit cards in stylish oversize envelopes, in which the cards come nestled between sheets of laser-engraved card stock. That's how Simple builds its brand, with a sense of style and personal touch.

"It costs us more," Reich said. "But people tweet about it."

And they notice. The New York Times

, and The Wall Street Journal posted a

this past week.

Simple is one of only a handful of consumer-oriented Portland tech startups, and perhaps the most ambitious of the lot. It's taking on the big retail banks in hopes of remaking an entire industry.

Simple has 20,000 clients today, with a waiting list of 200,000.

That backlog illustrates both the promise, and the pitfalls, of charging into this new market.

There's obviously huge demand, but signing on new clients is much more cumbersome than establishing, say, an Apple ID to buy iTunes songs. Simple, after all, provides banking services and so its clients must prove their identity and pass other hurdles designed to prevent fraud and crime.

Simple has also been cautious about expanding as it works out bugs in its system. It still has outages of various kinds -- including a brief outage on New Year's Eve that rendered debit cards useless at ATMs and at retailers. The company posts word of those outages on Twitter and its blog, but continued to have issues as recently as this week.

If Simple isn't ready to be a client's only banking service, it's working hard to be the most appealing.

Various tools help clients track their spending, set financial goals (saving for a down payment on a mortgage is the most common) or spot spending habits that add up to a big financial drain.

Online banking isn't just friendlier than the old way, Simple maintains, it's demonstrably better. The company says its typical clients are in their 20s and 30s, an age when many people live paycheck-to-paycheck.

Simple clients who set "goals" for their spending are constantly reminded when they're approaching a limit, and Reich said their spending is a third less volatile than those who don't.

That adds up to more money saved, to invest in a home, a car, a new career, rather than being frittered away one happy hour at a time.

The goal with every feature is to draw on mobile, digital or social experiences that clients are familiar with in other ways and to make them applicable to financial management. When saving isn't a chore, Reich said, people do it better -- and are happier with the results.

"It just doesn't feel like you're setting up a savings account," Reich said. "It feels like playing."


-- Mike Rogoway; twitter: @rogoway; phone: 503-294-7699

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