How fintechs can work with banks and BaaS partners to get to market fast
Your bank is your biggest asset. What fintechs need to know about leveraging that relationship.
Your bank is your most important partner. Embedding your app with a chartered bank enables you to open insured accounts for your customers, and gives you the flexibility to grow and add services your customers need.
Do some fintechs go through the arduous process of getting chartered as their own banks? Sure, but that approach is as rare as it is unnecessary. Even the biggest and most successful fintechs, like Chime and Stripe, work with partner banks.
So how do you find the right bank partner? And how do you leverage that relationship? The answer to both, in short, is that you need the right banking as a service (BaaS) partner at your side to help simplify the opaque and complex system you will be dealing with.
The longer answer has to do with asking the right questions and setting the right expectations. Here’s what Treasury Prime CEO Chris Dean and Piermont Bank CEO Wendy Cai-Lee have to say in a webinar with TechCrunch.
You need a direct relationship with your bank
The work banks do is complex, and very difficult for a fintech startup to replicate.
“If you look at just the banking infrastructure, it's so easy to think it's a commodity. And let me just tell you, as someone who's worked at a bank and outside a bank, it is not. If you think it's a commodity, you probably don't understand the perils” of fraud, or the challenges that go with regulatory oversight, says Dean.
So practically speaking, fintechs need bank partners. And they also need to be able to build direct relationships with those partners — something Treasury Prime excels at.
“When it comes to client resolution, especially when they have a very urgent problem, you need the API partner to be responsive, you also need the bank to be responsive, because at the end of the day, it sits with the bank,” says Cai-Lee.
To find the right bank partner, ask the right questions
Just because a bank is chartered and meets all of its legal requirements does not mean it’s a great partner for your fintech. Every fintech company needs a bank partner — as well as a BaaS provider — who will move as fast as them, and who will be highly responsive.
Here are some questions Cai-Lee recommends asking before committing to working with a particular bank.
- Is the bank the right size to work with your company? Cai-Lee is a proponent of what she calls “right-sizing.” If the bank is a commercial bank, do they work with companies of your size?
- What is the bank good at? For example, are they a commercial bank? Or do they do personal banking?
- What is the bank’s target audience? How does that audience relate to yours? Having a bank that knows “the industry specific pain points that you are targeting,” says Cai-Lee, “is going to solve a lot of issues.” This becomes especially important when customers run into issues.
- How available will the bank be? Do they close at 5 p.m., or will someone be around to answer when you call or a customer calls, later in the day or evening?
Here are some questions Treasury Prime recommends asking potential BaaS partners.
- What’s your approach to banking as a service?
- Do you facilitate a direct relationship between fintechs and banks?
- How many bank partners are you integrated with?
- What is the full list of services you offer?
- How fast can my fintech get to market with your BaaS services?
- What can I expect in terms of implementation support?
- How many fintechs have you brought to market — and who are they?
- Why are your clients happy with your service? And can I speak to some of them?
- What is your pricing structure?
- What makes your offering different from your competitors?
Your bank partner is very important, but can’t do everything
Reputable banks are great at banking. They are not very good at translating banking services and compliance processes into technology. So while a bank has the infrastructure a fintech needs to succeed, if a fintech just goes to the bank without the help of an intermediary, they won’t know how to work with the bank.
“They don't know what they don't know,” said Dean.
That’s where BaaS providers come in. Treasury Prime has built its API so that fintechs “can’t do the wrong thing” when they are using it. “So that they have to run the KYC, that every card swipe is handled properly,” for example, said Dean.
Treasury Prime can provide technology, handle compliance, and partner you with the perfect bank. That said, neither Treasury Prime nor the bank can tell you how to run your business — and that’s a good thing, because founders need to fulfill their own visions.
“If you’re a fintech, find out what your market is, and then find the right banking-as-a-service (BaaS) partner who can help you with that,” said Chris. Your BaaS provider and bank “will not help you find your market, we’re just going to help you get to market super fast.”
To learn more about how to get the most out of working with your bank partner, watch the full webinar — which includes a Q&A at the end.
Treasury Prime is unique in that it works with both banks and fintechs, and has expertise in both areas. Developers can experiment with Treasury Prime’s API in our Sandbox, and our sales team is always available for your questions. Contact us.