Out of Cash, PerkStreet Financial to Shut Down

  • JJ Hornblass
  • August 12, 2013
  • 1

perkstreet_lockeddoorPerkStreet Financial, a banking startup, has run out of cash and will shut down.

News of PerkStreet’s demise was first reported today by The New York Times.

PerkStreet raised a total of $15 million since its 2008 launch, amid a wave of post-credit crisis startups, according to Crunchbase. Among its investors were Highland Capital Partners and Globespan Capital Partners. Its last fundraising, a $9 million Series B, took place in 2011.

The company aimed to reinvent banking, offering a virtual banking experience with deeply discounted pricing for products like checking and debit cards. The company simply ran out of money.

Dan O’Malley, PerkStreet’s chief executive, said in a telephone interview that several factors had led to the company’s demise, including regulatory changes that made fewer potential bank partners available, the interest-rate environment, and a reduction in fees that banks could earn from merchants accepting PerkStreet’s debit card.

The company has been actively working on improving its business in recent months. In June, the company added Provident Bank as a second banking partner to The Bancorp. The banks provided PerkStreet with banking charter cover. Jason Henrichs, COO of PerkStreet, told Bank Innovation at the time:

We didn’t actually switch from Bancorp, we just added another banking partner (always part of our plan). Putting up Provident as a denovo was much faster than doing a conversion, so we did this serially to get the new technology in the hands of customers faster. The biggest benefits to the platform switch were control of the User Experience (back office immediately and we’ve begun the process of customizing the UI), tighter analytical integration, mobile+RDC and a savings account.

According to The Times, The Bancorp and Provident Bank accounts will function differently now that PerkStreet is closing down:

According to [PerkStreet’s] Web site, accounts held at Provident will be closed; those held at Bancorp can remain open, if customers want. They can use its banking functions, like online bill paying, but won’t earn cash-back rewards on their debit purchases. Mr. O’Malley would not say how many customers had unredeemed rewards or how much those rebates totaled.

The company will cease business operations September 26.

 

 

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JJ started the first iteration of Bank Innovation back in 2007, and has been working on it ever since. He also serves as President & Chief Executive Officer of Royal Media, Bank Innovation’s parent. He founded Royal in 1995 and oversees all aspects of the New York-based diversified media company. Prior to forming Royal, JJ was on the editorial staff of American Banker, the daily newspaper, and worked as an editor of a business magazine in Hong Kong. As a reporter and editor, he has won journalism awards from the National Press Foundation, Newsletter & Electronic Publishers Foundation, and the Reader’s Digest Foundation. He has a BS in Economics from Yeshiva University and a Master’s from the Columbia University Graduate School of Journalism. He was also a Fellow at the University of Wisconsin-Madison Graduate School of Banking. He lives in New York City with his wife, two daughters, and son. He counts among his accomplishments one New York City Marathon, two New York City Triathlons and the 2010 Father’s Day 5K, the first race he ever ran with his daughters. He can be reached at hornblass@gmail.com or 212-564-8972.

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