7 questions: How to make bank fintech partnerships profitable with Treasury Prime
Banking features are increasingly available in apps that don’t center on finance. It’s happening through embedded finance — a market that’s expected to expand three-fold to $138 billion by 2026. The result of this trend is greater revenue for banks.
Financial institutions can save as much as 95 percent on customer acquisition costs by offering their services through a BaaS model, according to management consulting firm Oliver Wyman. Research from Cornerstone Advisors estimates that by supporting a mix of consumer and commercial accounts via BaaS, a bank can earn $40 million in additional annual revenue.
The way embedded banking works is this: Banks connect with third-party fintech or non-financial enterprise partners via an API provided by a banking as a service (BaaS) provider. These third-party partners then leverage the bank’s services to offer them to end-users.
Banks that work with Treasury Prime report lowering deposit acquisition costs by 50 percent, and increasing deposits by 30 percent.
There are a lot of ways to build out embedded banking or embedded finance integrations, as well as fintech integrations (the difference being fintech apps are actually centered on finance.) The paths available to a given bank generally depend upon the bank’s BaaS partner.
Here’s how BaaS provider Treasury Prime handles these integrations, including what makes us different from other companies in our field.
1. Why embed bank services into third-party apps?
Before learning about Treasury Prime’s approach, you might first be wondering, why bother with embedded banking or fintech at all?
When banks partner with third-party apps, they expand their access to deposits, enabling them to gain market share. Embedded banking features and fintech apps are not restricted by geography and can be tailored to meet the needs of specific consumer demographics or types of businesses.
To reap the full benefits of third party relationships, you want a BaaS provider who can get products to market fast. Treasury Prime uses pre-built tools and workflows alongside customization options to enable apps to launch embedded banking services within as little as six to eight weeks.
2. How do banks find the right partners with Treasury Prime?
Treasury Prime treats every integration with the individual care it deserves. When banks partner with us, their services can’t be leveraged by just any third-party app. Banks and apps forge their own direct partnerships.
Our multi-bank model means fintechs of all stripes are able to find a bank ready to meet their needs and accommodate their risk profile. As they grow, they can also expand to additional bank partnerships to support new features that fall out of scope for their initial bank partners.
The setup goes both ways: Because Treasury Prime partners with 10 banks and growing, as well as more than 100 fintechs, we’re able to connect banks with fintechs they are excited to support. Whether your comfort and interest lie in supporting traditional bank accounts and features, or you’re interested in diving into bleeding edge fintech such as digital currencies, we have partners that meet those parameters.
Our bank matching algorithm does part of the work by aligning fintech and embedded banking apps’ use cases, feature needs, and integration preferences with potential partner bank preferences and capabilities. From there, we help banks and fintechs navigate their options and figure out which parties are interested in meeting.
3. What is Treasury Prime’s account integration model?
We offer two integration models that each balance security with flexibility. The first option is traditional on-core accounts for end-users; the second is an FBO account option.
- Individual on-core accounts: In this setup, end-users — by which we mean the people or businesses using the fintech or embedded banking app — have their own accounts directly on the partner bank’s core. This option functions in every way like a traditional bank account, but managed through the white-labeled interface of the partner app. (In some cases, there isn’t even white-labeling if the relationship is an affiliate relationship.)
- FBO accounts: Under this option, the fintech or other partner app opens an FBO account on the bank’s core, from which virtual accounts for end users are created. This option gives banks less direct visibility into end-user accounts and requires that fintechs be proactive in sharing information with their bank partner. Fortunately, this information sharing is supported by Treasury Prime’s facilitation of direct relationships between fintechs and banks. One benefit of the FBO model is that it allows fintechs to open end-user accounts more quickly, enabling partner banks to grow account market share at a faster pace.
4. What services does Treasury Prime support?
Treasury Prime supports a growing number of banking services falling under five main categories: Account opening, account servicing, payments, debit cards, and compliance.
We also work with leading industry partners to ensure top-of-line tools to cover all needs. Our partners include global banking core provider FIS, KYC identity verification vendor Alloy, risk monitoring vendor Unit 21, data network Plaid, and card issuing platform Marqeta.
5. How does Treasury Prime approach compliance?
Treasury Prime takes a proactive approach to compliance. First, we match you with a fintech that fits your risk appetite using a risk-based approach that looks at each fintech’s unique regulatory and compliance needs. We then partner with fintechs every step of the way, guiding them through the development of a customized compliance program tailored to their risk profile and business needs.
Our four-step compliance process starts by assessing a fintech’s risk profile and counseling them on how regulators and banks will view their risk. We connect fintechs with vendors like fraud monitoring platform Unit21 and KYC vendor Alloy to provide expert support with policy development and governance early in the fintech’s journey as a business. Once a bank integration is up and running, our fintech partners also have the option of leveraging our integration with Plaid to make sending payments more secure.
We also give banks visibility into client-facing content for review and approval, and ensure fintechs and embedded banking apps have processes in place to ensure ongoing communication and transparency with their partner bank. Finally, we put monitoring rules and practices into place such as ACH return rate monitoring and parameters for following Reg E to ensure fintechs are doing their part in ensuring compliance.
6. How does Treasury Prime get bank-fintech integrations to market fast?
Treasury Prime leverages out-of-the-box functionality and key partner relationships to speed up time to market. With our platform, banks can get their fintech partnerships to market five times faster and cheaper than if you did your own integration. Fintech partnerships through Treasury Prime are profitable while maintaining compliance and requiring no system changes on your end.
Once banks join our network, they have access to standardized workflows that allow for fast onboarding as well as rapid addition of new products. But you’re not restricted to workflows we’ve already built. We also enable banks to create proprietary, customized workflows so they can tailor offerings to unique fintech needs, or create unique offerings that enable them to stand out to potential fintech partners.
In addition to our own tools, our integrations with partners speed up processes. Banks that run their cores on FIS are able to fast-track on-core account opening through our fintech partners. And our customer success team provides robust support throughout the process.
7. Which of our banking peers already work with Treasury Prime?
Treasury Prime counts 10 banks — and growing — in our network. Our bank partners include LendingClub Bank, Piermont Bank, BankProv, and Grasshopper.
Radius Bank, which is now LendingClub, gained 3,600 accounts with over $21 million in new balances in just a short time after launching small business bank accounts through Treasury Prime. Piermont Bank CEO Wendy Cai-Lee praises Treasury Prime for enabling the bank to “move at the speed of the fintechs.”
We’re also happy to connect you with our customers to hear what they have to say directly. You can read about how fintechs and embedded banking apps leverage our platform and bank partners by reading our case studies.
Interested in learning more? We’d be happy to chat. Contact us here.