The Takeaway — June 2022
This is the first edition of The Takeaway. Every first Tuesday of the month, we bring you some of the biggest and most interesting pieces of news from the fintech, banking, and embedded finance world, and the key takeaways. Think we missed something? We’d love to get your thoughts. Tweet at us or send us a DM.
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1. Half of all banks report new urgency to offer embedded biz payments innovation:
In a study done in partnership with FIS, PYMNTS says that 90% of financial institutions (FIs) with more than $100 billion in assets plan to develop in-house solutions to combat B2B payments friction — that’s based on a survey to over 300 heads and executives across different banks. These efforts come in the face of 75% of respondents reporting that their corporate customers already experience roadbumps to when making B2B payments.
Just as consumers crave a more seamless way to interact with and move their funds, so do businesses, and banks need to keep up with that demand.
"It’s become clear that over the last 12 months both fintechs and traditional FI’s have shifted their attention from modernizing how consumers interact with payments to helping commercial businesses do the same." said Shane Geisslinger, business development manager at Treasury Prime.
Innovations in embedded finance and payment modernization will help companies to retain customers and reduce churn and stabilize and grow revenue. As the PYMNTS report suggests, a sizable portion of respondents, namely from smaller community banks, lack in-house support to work on these payment innovations. Working with a BaaS platform like Treasury Prime can provide much needed support for opening up these new services.
Treasury Prime can unlock new revenue streams for banks to help them easily integrate with fintechs and enterprises. To discuss how we can work together, contact us.
2. Embedded finance: A retention strategy for marketplaces:
Competition is heating up in the marketplace business sector. As Helghardt Avenant reports in Finextra, gone are the days of there just being one place to get a product or service. Rideshare competition is stiffening (not to mention car sharing platforms), food delivery has a growing lineup, and more.
Avenant says that the time is now for marketplace businesses to make investments in embedded finance services for their vendors to ensure that their businesses retain talent and thereby keep customers.
The Takeaway: Marketplace businesses need to provide ancillary value to their vendors, otherwise competing businesses with differentiating perks will leave you with a smaller pool of vendors, or at the very least, an unhappy vendor base.
“Customer loyalty and retention is top of mind for marketplace businesses given increased competition and general market trends.” said Nick Berman, head of embedded finance sales at Treasury Prime. “Embedded finance is proving to help businesses offer more value to their clients, differentiate their offering, and generate a new revenue stream.”
To get an idea of what embedded finance could look like for a marketplace business, check our our newest video:
3. Neobanks need a longer-term strategy for monetization to survive and attain profitability:
Neobanks are growing at a breakneck speed, but data seems to show that a majority of them aren’t turning a profit. Despite some of the largest neobanks being backed by larger legacy banks, only a handful are out of the red with many earning less than $30 in revenue per customer, as reported in Business Insider.
The Takeaway: The rush to have a digital-first banking platform makes sense as legacy banks fight to stay relevant to a consumer base and workforce that desires the flexibility that neobanks provide. However, these neobanks need to find a way to recoup on the costs for attracting new customers, like providing a premium subscription cost or offering lending. This is especially important as neobank compliance and regulation tightens amidst reports from the CFPB and OCC. Read our blog post on app monetization which breaks down the revenue options.
4. US Treasury Secretary Janet Yellen pushes for stablecoin regulation by end of year:
Cryptocurrency had a tumultuous couple months with a massive sell-off spurred by downward market trends. As NPR reports, Bitcoin is trading at less than half of its all-time high. Similarly, Stablecoin, which is theoretically backed 1:1 with a fiat money — meaning if you want to cash out a stablecoin, you should get $1 in return — has also taken a tumble.
U.S. Treasury Secretary Janet Yellen is now calling for stricter oversight and regulation of cryptocurrency like stablecoin due to the high risk it poses to the consumer.
The Takeaway: While cryptocurrency has experienced recent shocks, its popularity persists as more people invest in it and play the long game.
As Sheetal Parikh, associate general counsel and vice president of compliance solutions at Treasury Prime commented:
“Increased activism at a federal level for traditionally unregulated industries like crypto is not surprising as these industries become more popular and more readily consumed globally. In my view this is not a negative signal; it only solidifies how these nontraditional forms of financial services are occupying a permanent place in the entire ecosystem. It likely will precipitate greater investment on the part of fintechs to invest in their respective compliance cultures."
5. SAFE Banking Act and cannabis:
Spike in cannabis dispensary robberies has reignited talks of the SAFE Banking Act that would protect banks that work with cannabis-related businesses. Even with many states legalizing cannabis, many banks are still unwilling to work with cannabis businesses due to the lack of federal legality. This leaves these businesses in a lurch. With limited banking options, they are forced to carry a lot of cash in-store. The SAFE Banking Act would open up many more viable banking options for cannabis businesses and potentially open up the possibility of tax breaks.
The Takeaway: As cannabis becomes legalized across the country, it will become important for willing banks to find a way to work with these types of businesses. Similarly, cannabis businesses need to find banks that are not only willing to work with them but understand their business, including operations, risk profile, and end user.
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