FinTechs, like all other businesses, are constantly looking for new ways to increase customer loyalty and revenue streams.
But they face the challenge of having to partner with banks with outdated and complex systems to access the financial system, which makes integration extremely difficult.
Meghan Ryanfinancial director of First of the Treasurytold PYMNTS that bank as a service (BaaS) solves this problem.
At a high level, she said, BaaS can help FinTechs shorten their product development cycles.
The ability to develop new and innovative offerings and get them into the hands of end users as quickly as possible is critical, she told PYMNTS. But financial services, of course, is a heavily regulated environment, and there are a number of regulatory boxes to check before launching anything.
Read more: How ‘invisible’ technology is revolutionizing America’s banking system
Connecting banks and FinTechs – and bridging the gaps – can streamline product launches by leveraging the respective strengths of the digital startup and the traditional financial institution that have been around for decades (sometimes even longer).
These same partnerships can help create scale as these new offerings come to market, helping to increase volumes and end-user adoption at the same time.
A BaaS provider with an extensive banking network allows FinTechs to pivot on a range of banking partners – after all, today’s FI partner may suffice, but two years later it may not be. able to support a FinTech’s technology and growth ambitions and prospects.
Working with a BaaS company like Treasury Prime, which is integrated with multiple banks, allows a FinTech to leverage a single API to work with multiple banking partners. If a FinTech needs to switch banks, there is no disruption to development or deployment, as all banks in the network use Treasury Prime’s API software.
After all, she said, “when you think about working with a single banking partner, having a single point of failure in any business model is high risk.”
See also: Banking-as-a-Service Fintechs venture into new regulatory waters
Partnerships provide mutual benefits for banks and FinTechs, Ryan said. Banks can offer lower prices to their end customers, and FinTechs offer these FIs the ability to acquire deposits at scale and efficiently.
“FinTechs have shown that they are very good at providing a seamless user experience and having a large customer base”, which is a particular advantage for small community banks that want to manage their margins prudently over time.
Looking ahead, she said there is particular urgency for banks and their FinTech partners to grow their brands across multiple categories. She pointed to the potential in the B2B space, where companies need invoicing and budgeting software. For FinTechs and banks, coming together to create products that allow business customers to send and receive payments has immediate appeal.
“Providers can ‘add’ to the engagement with their ecosystems – and they benefit from the data that can be gleaned from money flows in and out of their platform.” Data, of course, is extremely useful for fueling new (and future) product development cycles, keeping an eye out for lending products that have yet to be explored.
“The more customer loyalty and stickiness they can generate,” she said of FinTechs and embedded finance companies, “the higher the growth they can achieve.”
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