FinTechs, just like any other firms, are constantly on the lookout for new ways to increase customer loyalty and their revenue streams.
But they’re challenged by having to partner with banks with outdated and complex systems in order to access the financial system, which makes integration extremely difficult.
At a high level, she said, BaaS can help FinTechs shorten their product development cycles.
The ability to develop new and innovative offerings and get them into the hands of end users as quickly as possible is critical, she told PYMNTS. But financial services, of course, is a heavily regulated environment, and there are any number of regulatory boxes to be checked before anything is launched.
Connecting banks and FinTechs — and filling the gaps — can streamline product launches by leveraging the respective strengths of the digital upstart and the traditional financial institution that have been around for decades (sometimes even longer).
Those same partnerships can help create scale as those new offerings come to market — helping ramp up volumes and end-user adoption at the same time.
A BaaS provider with a wide bank network makes it possible for FinTechs to pivot across a range of banking partners — after all, the FI partner of today may be sufficient, but two years down the line may not be able to support a FinTech’s technology and ambitions and growth prospects.
Working with a BaaS company like Treasury Prime, which is integrated with multiple banks, allows a FinTech to leverage a single API to work with several banking partners. Should a FinTech need to switch banks, there is no interruption in development or deployment, since all the banks in the network use Treasury Prime’s API software.
After all, she said, “when you think about working with a singular bank partner, having a single point of failure in any business model is high risk.”
Partnerships offer mutual benefits to the banks and the FinTechs alike, Ryan maintained. The banks can offer lower pricing to their end customers, and the FinTechs offer those FIs the ability to acquire deposits at scale, and with efficiency.
“FinTechs have shown that they are very good at offering a seamless user experience and have broad customer reach,” which is a particular advantage for smaller community banks that want to manage their margins prudently over time.
Looking ahead, she said there’s particular urgency for banks and their FinTech partners to build their brands across several categories. She pointed to potential in the B2B space, where enterprises are in need of invoicing and budgeting software. For FinTechs and banks to band together to create products that enable commercial clients to send and receive payments holds immediate appeal.
“The providers can ‘add on’ to the engagement with their ecosystems — and they get the benefit of the data that can be gleaned from the money flows going in and out from their platform.” Data, of course, is hugely useful in fueling new (and future) product development cycles, with an eye on lending products not yet explored.
“The greater customer loyalty and stickiness they can drive,” she said of FinTechs and embedded finance enterprises, “the higher growth that they can achieve.”
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