Embedded Finance Solutions: Benefits of a Direct Bank Partnership Through Treasury Prime
Entering into a partnership with a bank is one of the most important steps you will take as a fintech looking to launch embedded payment and other financial products into your application. Partnerships with chartered banks make it possible for fintechs and embedded finance companies to offer Federal Deposit Insurance Corporation (FDIC) insured accounts that customers can trust.
This relationship is at the heart of your business model — you will open bank accounts together, set up payment rails, stand up a compliance program, and troubleshoot together.
That’s why Treasury Prime — an embedded banking software platform — fosters and requires direct relationships between fintechs and banks. We view open communication as a crucial element in the success of your bank partnership because a direct relationship leads to:
- Stronger regulatory compliance
- Smoother integration
- Quicker problem solving
- More product options
- Mutual trust
Let’s dive deeper into why Treasury Prime facilitates a direct relationship between companies and bank partners.
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1. Stronger regulatory compliance and fintech fraud prevention
Banks are experts at regulatory compliance and have decades of experience modeling risk and navigating regulatory changes. When you have a direct relationship with the bank and stand up a compliance program in collaboration with them, you benefit from their expertise and guidance.
Word of caution: Some fintechs offload their compliance duties to Banking as a Service (BaaS) providers that act as the intermediary between them and the bank. This may seem easier in the short term but can put your company at risk and ill-equipped to deal with increasing regulatory scrutiny, particularly in today’s regulatory environment.
Treasury Prime has a different model and approaches compliance holistically. We provide the tools, resources, and guidance to assist fintechs and embedded finance companies to stand up their compliance framework in direct collaboration with the partner bank. This helps you to weather any future regulatory changes while allowing your company to scale. Specifically, in this paradigm, you control your customer’s onboarding journey.
Treasury Prime CEO Chris Dean and COO Remy Carole explain the role of banks in compliance:
2. Smoother bank integration
A direct relationship with your bank partner can help smooth the integration process. During the due diligence process of the bank fintech partnership when key business information and financials are verified, you will need to supply documentation to the bank partner. If you need to answer a question or get help, you can reach out to your bank partner directly. This helps to move the process along so that implementation can proceed.
In light of regulators’ obvious signals of increased regulatory scrutiny of bank fintech partnerships on the horizon, banks may require additional information about your app and products. Direct interaction may become table stakes because it allows the bank to understand the use case, complexity, and risk directly.
3. Quicker problem solving
After you have launched the partnership, you may occasionally encounter unexpected disruptions such as ACH returns. With a direct line to your bank, you can catch the problem and put out the fire quickly.
If your relationship with your bank is indirect, and you can only communicate with them through your API banking provider, it can lead to delays and details lost in translation. Also, changes on the bank’s end can lead to a broken experience on your end if you are not communicating directly. You want to be sure that updates to your bank’s system are reflected automatically in your app.
4. More product options
Fintechs and embedded finance companies can only open bank accounts through a bank partner. If your relationship with your bank partner is completely mediated through a banking software as a service provider, your options may be limited based on what the BaaS provider and the bank have negotiated. A direct relationship means more long-term flexibility.
If you already have a direct working relationship with the bank, they will already understand your business model and how to help as you grow. This can smooth the way for launching new products. Whether your goal is to offer a narrowly tailored service to customers, or you are operating as a full-fledged neobank app, you should build a relationship based on mutual investment. Your growth is their growth. Their support is your gain.
5. Building loyalty and trust
Building a startup isn’t easy, and at some point, your fintech will run into challenges. These could be technical issues, trouble with customer acquisition, a decision to pivot, or struggles navigating regulations. The last challenge is especially relevant for fintechs in cutting-edge and interdisciplinary areas like cannabis, cryptocurrency, healthcare, and insurance.
A bank partner is more likely to stick with you through the rough spots if they have developed a relationship with your people. While technology is important, it’s ultimately the people who conduct the execution. Having a direct relationship between your engineering team and their IT department, and between your executives and their partnership lead is crucial. It’s business, and it’s also personal.
Quicker embedded banking integration through Treasury Prime
You may ask, why wouldn’t I just partner directly with the bank and build my own integration?
The answer in a nutshell: that approach is extremely time and labor-intensive. While chartered banks make it possible for fintech firms to offer FDIC-insured accounts that customers can trust, building a direct integration with a bank is a complex undertaking and can take years to build.
The reality is that most banks have legacy systems that are not technologically equipped to integrate directly with your app. Even with the few that are more prepared, getting to market on their platforms can be incredibly complex from an engineering and project management standpoint.
Treasury Prime has solved that problem by developing state-of-the-art banking API software with close integration with bank cores, allowing fintechs and enterprise companies to plug in on the other end and launch in a matter of weeks. What’s more, we provide support to both parties to make sure the integration and execution run smoothly. Once you're in the ecosystem, you can connect more easily to multiple banks as well.
Our approach stands in stark contrast to some BaaS providers, who mediate the relationship between the fintech and the bank partner, forcing communications to be channeled through them. This type of setup can lead to time delays and important details lost in translation. What’s more, companies lose out on the chance to develop a long-term relationship with a bank, which can be a powerful catalyst for future growth.
Overall, a close bank relationship opens doors for business growth, helps prevent problems, and makes it easier to overcome any challenges in building your company. The larger and more complex your fintech becomes, the greater your need for direct communication. Building a direct relationship with the bank with software and integration support by Treasury Prime can set your company up for long-term success.
Wondering how embedded banking could help your business? Contact Treasury Prime — we have a true multi-bank network, the deepest bank core integrations, and extensive compliance experience. Read more about our $40 million Series C Funding and why Tearsheet named us the Best Banking as a Service company for the second year in a row. Talk to the best embedded finance team in the industry.