PerkStreet Financial was an American-based virtual bank that offered checking and debit card accounts with cash-back rewards. PerkStreet was one of the first so called Challenger Banks and was followed by players such as BankSimple and Moven. The company was founded in Boston, Massachusetts in November 2009, and was led by former Capital One executive Dan O'Malley and Jason Henrichs. With no bank branches, PerkStreet Financial had low operating costs. However, a cash-back rewards program that approached 2% for some debit card accounts turned out to be unsustainable, and contributed to the company's closure in 2013.
The company had several early rounds of financing, including a $9 million Series B venture round. In May 2011, O'Malley claimed PerkStreet had "more customers than half the banks and credit unions in the country.” By that time, the company had 25 employees.
In August 2013, the bank announced it was closing and laying off all 25 employees. O'Malley revealed that PerkStreet Financial had paid out more than $4 million in cash-back rewards since its founding, and the rates were no longer sustainable. PerkStreet also suffered from years of low interest rates, which reduced margins, and had difficulty partnering with other financial institutions.
"That was all done in the midst of the ultra low-rate environment, so clearly the low-rate deposit environment was no surprise to the bank and it's investors ... Falling debit interchange rates didn't help, but they were Durbin exempt, so that wasn't as dramatic of a revenue hit as it was at the big banks. In fact, CEO Dan O'Malley told the NY Times last year that their interchange had remained unchanged.".