How to add API banking products to your app for monetization
One of the top reasons companies embed financial services is to add new features that will bring in new revenue streams.
Different banking products— such as bank accounts, payments, cards and loans—make money through different mechanisms, and it’s important to understand these nuances before you decide what type of financial product is best for your app and your customers. A banking as a service (BaaS) provider like Treasury Prime can help enterprise companies determine which solutions will fit your business model and work with you to implement them through the use of BaaS APIs, software that connects your platform to banks.
Here’s an overview of those key functions, how you can monetize them, and how to explore other ways to get value out of embedded banking.
Earn interest or fees on bank accounts
No banking tool is more central than a bank account. Even if you offer other products, like cards, you probably still want to start with accounts as a foundation. One way to earn money from bank accounts is through accruing interest on accounts. While you can make some money from this, the average interest on a savings account is just 0.06 percent in the US right now. Though interest rates are currently low, this represents a basic opportunity for incremental revenue, which will only increase as interest rates go up.
Another way to earn money from bank accounts is by charging users fees to use them. There are different types of account fees. These include monthly service fees and transaction fees. Monthly service fees can range from $8 to $12 at traditional banks, but users can typically avoid them by maintaining minimum balances.
Zeta, a neobank that uses Treasury Prime, charges users a fee for the couples’ and multi-user accounts they offer. One reason users may be willing to pay the fee is that Zeta’s service is unique and saves customers from otherwise challenging processes of maintaining multi-user accounts at traditional banks.
To read our ultimate guide on how to offer embedded banking products, download our white paper.
Earn revenue from a payments feature
If you create an easier way to make or collect payments, your customers may be willing to pay to use it. This is what Treasury Prime client Tuvoli does for private air charter businesses with its payments platform.
Tuvoli handles complex, high dollar-amount payment operations between charter brokers and charter operators. A single private flight can require multiple transactions—from purchasing fuel to booking flights—adding up to a total average of $25,000 per trip.
To process these transactions, Tuvoli worked with partners Treasury Prime and Piermont Bank to establish an FDIC-insured bank account for every user. Tuvoli facilitates electronic funds transfer between any two parties, and charges a fee to use its integrated payments platform with each booking.
Revenue doesn’t have to primarily come just from customers who use banking tools embedded in your product. Sometimes the people using your product provide value for bigger entities. In the case of Wagestream, an app which provides savings accounts for workers, a larger entity such as an employer is willing to pay fees to access the platform as a perk for their workforce.
Earn interchange revenue from cards
Another banking service you can add to your offerings is cards. With card networks, a major source of revenue is interchange, which is the fee merchants pay card issuers to process transactions. When someone makes a purchase using a card, the issuing bank charges the merchant an interchange fee. If you’ve partnered with the bank to offer the card to customers, you would get a cut of the interchange fee.
Interchange is fairly complicated, and the amount of interchange revenue from a given transaction varies based on a lot of factors. These factors may include whether the card is for consumer or commercial uses, whether it is debit or credit, and the size of the issuing bank.
Some companies take a portion of interchange revenue and use it to fund rewards programs. This encourages further use of the card, and makes the feature – and your overall product– stickier.
Earn interest on loans
This one’s pretty straightforward: Lend money, charge interest, earn revenue. But there’s also room for innovation around lending. One good example is Affirm, which has made it possible for consumers to take out a loan with one click at online or in-app checkouts.
What makes Affirm novel, aside from how it embeds lending, is that Affirm charges the merchant interest. That means the consumer pays the same amount, whether they use Affirm or pay in cash – which can make Affirm even more attractive to use than a traditional credit card. Plus, there’s no waiting for the lender to approve an application.
If your app enables purchases, you may be able to embed lending in such a way as to make it easier and more convenient for the end-user. Interest rates on loans vary widely depending on the type of loan.
Long-term value adds from embedded banking
Bank accounts, payments, cards, and loans are all core features you can monetize. But fees and interest are just a few ways to get value from embedded banking features. Embedding banking tools also has long-term benefits.
First, these tools enable you to build customized features to attract your target customers and build deeper relationships with them. Features like faster payouts, mobile check deposit, cash advances, and special rewards program discounts on costs or fees can all make your app stickier. If you add in a bank account, and your users set up direct deposit with their paychecks, then they’ll be more likely to continue using and spending from that account long term. That gives you the opportunity to cross-sell other services—financial or not.
Embedded banking tools also give you access to troves of valuable customer data. When you can see how customers use their accounts and spend money, you can get insight into unmet customer needs and use that to build tailored features that make your service even more valuable to them.
You have a lot of options when it comes to embedded banking – and banking as a service (BaaS) provider Treasury Prime can help you find what’s right for you. We start by matching you up with a bank that meets your product offering needs, then move into implementation. We can move fast, in fact many of our customers launch within weeks.
To learn more about how different banking products make money, watch this on-demand webinar. We also welcome you to explore our offerings by visiting our Sandbox. To learn more about how Treasury Prime can help your bank or fintech grow through collaboration, get in touch with our team.