Standard Treasury (YC S13) Wants to Bring Banks into the 21st Century

http://blog.programmableweb.com/2013/07/23/standard-treasury-wants-to-bring-banks-into-the-21st-century/

by zt • 13 years ago

59 19 13 years ago

blog.programmableweb.com

eddywebs• 13 years ago

Error establishing a database connection

zt5• 13 years ago

Standard Treasury wants to bring banks up to speed with the modern era. The Silicon Valley startup is developing a white label collection of APIs and webhooks that will allow commercial banks to give customers access to core banking services in their apps and backends.

Stripe, Braintree, Balanced Payments and several others already use APIs to enable online payments. But companies transact with banks in a number of other ways, and often in high volume. When done manually, such transactions can be tedious and time consuming.

Standard Treasury thinks there’s a better way. To that end, the Y Combinator-backed startup has created a menu of APIs that will enable banks to give developers access to a range of transaction types, including electronic checks (ACH), foreign exchanges, and rate-quoting.

For an idea of how Standard Treasury’s platform might work, imagine companies like Uber or Airbnb who regularly send out electronic payments to a lot of different people. Such companies could potentially benefit from one of Standard Treasury’s REST APIs to easily send electronic checks from their bank accounts via their own backend systems.

Another example might be U.S. company with an international subsidiary. Everyday the company turns Euros into dollars and sweeps those into a central bank account. Normally a treasury analyst or other staff member would have to manually log into the company’s, sometimes several times a day, to complete the process. Standard Treasury APIs and webhooks would automate that process.

Standard Treasury cofounders Dan Kimerling and Zac Townsend both hail from the tech financial community. Kimerling is the former COO of Giftling and Townsend worked at Stripe. Before launching their own venture, the two spoke to heads of more than 100 tech companies in Silicon Valley and NYC to get a better understanding of what firms needed from banks.

What the pair learned was that much of what went on in the financial back office in terms of treasury management and commercial banking was a painful and laborious process. Even something as simple as opening up a new account could turn into a multi-day affair.

Kimerling thinks the timing is right for what Standard Treasury aims to do. He explained:

“Banks are more comfortable now in building tools for developers than they were a few years ago, but they don’t have the in-house engineering capability to build the beautiful APIs that developers have come to demand and expect. That is where we come in and say, we have this platform as a service. You pay a monthly fee and we’ll do the backend integration work and hosting.”

Standard Treasury charges anywhere from $100,000 to $500,000 per month for its service under a two-year contract. Although unable to name names yet, Kimmerling said Standard Treasury hopes to close between two to four deals before the end of the year, two of those being with major top-10 banks.

“The sales cycles are long,” he said, “but I am optimistic.”

susi22• 13 years ago

And after the 3rd sentence you have:

http://i.imgur.com/ldrsJ8I.png

malyk2• 13 years ago

Dan is the former COO of Giftly, not Giftling! Reporters, bah!

* - corrected thanks to the comment below. Originally wrote CEO, which was way wrong. Oops.

xradionut• 13 years ago

As someone that works with financial institutions, good luck! the problem isn't technology, it's getting good technically qualified people to work for the small salaries that most banking institutions and their software vendors employ.

avelis• 13 years ago

I can not express the validity of this statement enough. I work for one of those software vendors and software as a technology solution is undervalued.

zt5• 13 years ago

I don't know if technology is generally valued within banks or not. What I do know if that we've had a lot of success working with product folks who "get it" and help us drive through the platform from the business side and then we work closely with the IT and IT security folks to make sure they're happy as well.

I worked for years getting things done in government bureaucracies and we have had a lot of success in approaching a bank and it's employees (almost all of whom are smart and well-meaning) as a puzzle to be solved rather than an enemy to be defeated.

jacques_chester• 13 years ago

Which is maddening. Banks are a wrapper made of people around a general ledger program.

I'm not particularly up with the banking industry here in Australia or abroad, but the only banks I've seen bothering to see IT here in Australia as an actual point of competition are SunCorp and BankWest. Naturally, they're smaller, so they need to find advantages outside of mere incumbency.

danaw• 13 years ago

A service like this would be much appreciated from the market. I can imagine the challenges are convincing banks to signup and to convince them of the value of a service that isn't directly consumer facing.

If they had a few key early adopters that could strengthen the sales pitch, but it becomes more difficult when trying to sign on the smaller banks and credit unions. I know a software developer at my local CU and he can't say enough how backwards, slow, and politically motivated decision making is in the company.

That is a huge barrier and I wish Second Treasurery the best of luck.

JackFr• 13 years ago

Best of luck to them. I would hold out more hope if they had spoken to 100 banks rather than 100 heads of tech firms.

The banking industry in general is not averse to automation (and has been for the past 55 years - see http://en.wikipedia.org/wiki/Magnetic_ink_character_recognit...), but there are cases where transactions are complex without being _needlessly_ complex.

VLM• 13 years ago

"I can imagine the challenges are convincing banks to signup"

Is closely related to

"backwards, slow, and politically motivated decision making"

Enough outsourcing and experimentation has been done that they already know how they'll get burned, making the sale hard.

I worked at a financial services company which spun off a megacorp-ABC and later got purchased by megacorp-XYZ. In between they tried to sell their services to everyone, but a major source of pushback was "Thats nice but you guys are megacorp-ABC and we are not" at the start, and at the end "OMG megacorp-XYZ is our biggest competitor".

Another huge problem is commoditization. There's not much difference between entities; that's a good thing for almost everyone involved, although it makes empire builders make ridiculous internal claims about their secret sauce. "Our secret sauce, the ONLY thing that makes us distinct from our competitors, is our TPS report headers". That's not exactly going to help outsourced TPS report generator startups.

So my startup advice would be to pitch that you're not trying to get bought out by their biggest competitor (but then, whats the point of a startup?) and that you're doing something "really new" not taking over a commodity companies secret sauce.

kirinan2• 13 years ago

Its a huge barrier industry (a huge industry though) that is kept on its needs by NDA's, non-competes and just people not wanting to work. Fiserv, Jack Henry, NCR all keep their customers where they want them, in their pocket, by not providing their data and services to third parties, and not playing nicely with competition. I've worked in this industry for years, and it is very very hard to get anything done when they view you as a threat. If that wasn't enough, PCI-DSS and other challenges in the form of regulation and governance adds another wrench in the gears of innovation when it comes to this industry. I REALLY wish you the best, I know the industry needs more startups and more innovation. I also hope you can get past the regulation and other companies to get the job done, its really needed. BTW If you ever get around to it: ATM Drivers (Transaction Processors) and Core banking systems also need disrupted, they are both completely garbage and only like 50 years old (most of them run on mainframes that are older than pretty much everyone on this site). Socket interfaces, ISO 8583 (Its a proprietary format used by Transaction Processors) and SOAP interfaces that are extremely poorly implemented plague those systems, as well as other extremely terrible problems that come along with terrible design decisions. Enough ranting for today though, You are working on interesting problems, that need to be fixed, so godspeed!

zt5• 13 years ago

Thanks for the details and the thoughts. It is a difficult industry, obviously. I think we're fortunate that we're starting as a wrapper around existing exposed endpoints (for example SFTP endpoints for ACH flat-files).

Core processing obviously needs innovative competition and we hope to get there if it's necessary (I've heard Palantir is considering getting in to that business as well).

SOAP interfaces are exactly what we're trying to get rid of. ISO8583 is likely here to stay though, despite it's problems.

kirinan2• 13 years ago

I can really see why people would want to keep ISO8583, and I can see why it was a good option at the time, but its dated and it shows a lot. I agree with your approach, if I didn't love my current job, I'd apply at Standard Treasury because its a good move. Baby steps into the industry with open interfaces and practices, people will catch on. The thing is, I think the power shift needs to go back to the banks from the vendors. If you can manage that convince them thats the way it should be, you'll win the market.

descala• 13 years ago

And why not simply build an open source banking platform? Functionally speaking banks are not so difficult.

zt5• 13 years ago

It's an interesting thought. Why not build an open-source credit card processor (not Stripe or Balanced, but First Data or Vantiv) as well? We'll get there.

Standard Treasury (YC S13) Wants to Bring Banks into the 21st Century

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