Stephen Stanton’s Post

Earlier this year we had a sponsor bank lined up for the True Credit Builder Card But we decided against it, let me explain ↓ The more conversations I had, the more it felt wrong. The last straw was the SVB bank collapse. Shortly after that failure - we saw big banks increasing incentives to open and keep their accounts active. For example - APY 5.00% 👀 Here is my take... 1. Fintech friends who launched their secured credit builder cards are paying WAY too much to onboard a customer. CAC is insane. I know, we drive traffic to some of them from our blog. 2. Fintech's are having a hard time getting customers to use their cards as the primary choice, meaning low balance/spend. 3. Fintech's are dealing with massive fraud, I mean massive! 4. Fintech's are diverting potential interchange revenue to rewards programs to incentivize customers to join and stick around. 5. BaaS partners are expensive, they win while the fintech is losing. I expect BaaS companies to go out of business unless they pivot from card offerings. Conclusion: Fintech's are losing money by operating a card program. BaaS organizations will follow in loss too. Our team decided against the secured credit builder card, instead we added Think Save Retire, doubled down on the cash advance program, and are searching for the next bring product to add in 2024. Stay Tuned! Final word - I am cheering for every single fintech in my network! May 2024 be the year you WIN! May it be the year your customers WIN. Sometimes you need to pivot. It's okay. You got this! 💪🏼

Last week Fintech giant Revolut has secured UK banking license …well kind off…   Here are my 5 cents: 1. Securing the UK Banking License: After over three years of rigorous processes and overcoming regulatory scrutiny, Revolut finally secured a UK banking license. This approval marks a significant milestone for the fintech giant, which had faced issues with its 2020 and 2021 audits that delayed the process 2. Mobilisation Phase: Revolut has entered a voluntary 'mobilisation' phase, lasting up to 12 months, during which it will develop its banking operations and strengthen its senior management team. During this period, services for UK customers remain unchanged, and money will continue to be safeguarded through the e-money process rather than being covered by the UK's Financial Services Compensation Scheme (FSCS). The UK government is keen to position the country as a leading tech hub. The potential rejection or further delays of Revolut's full license could have broader implications for the UK's reputation as a fintech-friendly nation and could deter future tech investments. 3. Future Product Expansion: Once the mobilisation period is successfully completed, Revolut will expand its product offerings in the UK, including lending products like loans and mortgages. Its UK CEO, Francesca Carlesi, who was recruited last November, is the founder of mortgage fintech Molo Finance; an experience that won’t hurt these efforts.  This expansion could significantly enhance Revolut’s market position and support a potential IPO 4. Revenue Growth and Profitability: Revolut reported impressive financial results for 2023, with revenues of £1.8 billion and record profits of £438 million. The company is also in discussions to sell $500 million of employee-owned shares, potentially boosting its valuation to $40 billion 5. Leadership and IPO Preparations: Revolut's search for a permanent CFO continues, as the interim CFO, Victor Stinga, currently holds the position. This leadership role is crucial for their planned IPO. The choice of IPO location is still undecided, with both New York and London being considered due to their deep markets and knowledgeable analysts

The announcement that Treasury Prime will no longer sell directly to fintechs and is laying off approximately half its team seems like a sign of more BaaS turmoil.  And, obviously, the layoff part is unequivocally awful news.  However, I see a new business model emerging that aligns well with the needs of fintechs, regulators, and partner banks alike. Fintechs benefit from dealing directly with the bank from the outset, giving them a better idea of what the bank needs, more clarity about go-to-market timing, and greater certainty that the bank really understands and wants the business.  While Treasury Prime has always required direct contracts between banks and the clients, the new model removes incentives to try to close deals when the bank and client are not well aligned. Regulators want to see partner banks have direct control and oversight of fintech clients, without the relationship being intermediated by middlemen.  This change makes that explicit. For partner banks, the technology has always been the heart of Treasury Prime’s value proposition. More sophisticated banks have never regarded clients acquired through BaaS partners as a long-term, standalone business model.  For partner banks getting into the space, the new model makes it a lot clearer what they will - and won’t - get from integrating with Treasury Prime. Should other BaaS platforms follow suit?  In one sense, yes.  Direct partner bank contracts with, and oversight of, clients are now table stakes. Any remaining platforms not doing that need to adjust.  However, there is also considerable merit to a platform, like Marqeta or Unit, that provides operations and program management as a service.  This requires careful delineation of roles and responsibilities.  However, when done well it: - Reduces build and time to market for clients (particularly valuable in embedded finance). - Helps banks conduct robust oversight by reducing the number of KYC programs,Reg E dispute processes, etc. they need to oversee. Call me Pollyanna, but it’s hard to see leading BaaS providers making thoughtful moves that align with their stakeholders as anything other than a positive for the sector. https://lnkd.in/gmMJhBCi

Gagan Kanjlia, it was great sharing the stage with you at The Fintech Meetup. And your are dead on - there is no one better positioned to create consumable solutions for the FinTechs and our clients. It’s a symbiodic ecosystem if you know where you stand! #embeddedfinance #integratedpayments #fintech

Great post here from Gagan Kanjlia on the outlook and excitement on Embedded Payments at SVB. This quote resonated with me as both a payments professional and a consumer, "Embedded Payments leads to fundamentally better customer experiences by embedding payments seamlessly into software solutions." Consumers today expect a seamless experience in all digital interactions, and here at SVB we have the people and products to help business build and scale in the Embedded Payments space.

I was part of a great panel discussion on the current state and future of Embedded Payments with Greg Cohen, Bridgit Chayt, Brian o'Connor at @FintechMeetup. Moderated by the articulate Jeff Tijssen. “How to Win the Embedded Finance Game.” In Las Vegas on Tuesday, March 5. My key takeaways from the gathering of the geeks: 1. There is a return to rationality from the frothy last couple of years. As it becomes clear that winning in Embedded Finance requires a long game due to the unique organizational capabilities that are required, and because the sales cycles are be-spoke and long, only the serious players will survive. 2. Risk Management is the key enabler as well as differentiator for Embedded Finance. Embedded Finance solution providers  that are taking end to end view and engaging in deep partnership with the client, regulators, operational partners, and between the first and second line risk organizations are going to surmount the unique challenges that this solution brings from a regulatory and operational risk perspective. 3. That said, the outlook for Embedded Payments is bullish. Embedded Payments leads to fundamentally better customer experiences by embedding payments seamlessly into software solutions. It will continue to drive an increase in the total addressable market for digital payments by making digital payments ubiquitous. Very importantly, it is driving more inclusive access to banking services. 4. Banks need Fintechs, and Fintechs need Banks to realize the full value of Embedded Payments. It's important that the partner institutions have real dialogue around how to leverage each other's capabilities deeply, and to have a culture of challenging each other. We expect to see tremendous growth in embedded payments this year, and at SVB we have an amazingly dedicated team and platform. With years of experience as one of the first movers, we have a whole slew of solutions like OBO accounts and Payfac tailored for fintech companies, lending companies, enterprise software companies. What are you most interested in hearing about about Embedded Payments?

#banks generate #revenue from #embedded #finance by integrating their financial services into non-financial #platforms, allowing businesses outside the traditional banking sector to offer financial products and services. This trend has opened up new revenue streams for banks in several key ways: ①  Transaction Fees ✓ Payments and Processing: Banks charge fees to merchants or platforms that embed banking services like payment processing, money transfers, and loans. Each time a payment is processed, the bank earns revenue from transaction fees. ✓ Micro-transactions: Banks can collect small fees from frequent micro-transactions embedded in other apps or platforms, which add up over time. ②  Interest Income from Loans ✓ Lending-as-a-Service (LaaS): Many platforms offer credit or financing options through embedded banking services. Banks provide the capital for these loans and earn interest on them. This could include consumer loans, business loans, or buy-now-pay-later (BNPL) services. ✓ Credit Card Partnerships: Embedded finance sometimes involves branded credit cards, where banks collect interest and transaction fees from users who carry balances on these cards. ③  Subscription or Licensing Fees ✓ White-Label Banking Solutions: Some banks offer their banking infrastructure to non-banking firms (e.g., fintechs) as a service, allowing these companies to offer banking products under their own brand. Banks charge for access to this infrastructure through subscription or licensing fees. ✓ API Access: Banks charge for API access that enables other companies to integrate financial services into their own platforms, such as payments, KYC (know your customer) systems, or risk assessment tools. ④  Revenue Sharing Models ✓ Banks often enter into revenue-sharing agreements with the non-financial companies they partner with for embedded finance. In this case, the bank earns a percentage of the revenue generated from financial services like insurance, lending, or payment processing. ⑤  Cross-Selling Opportunities ✓ Embedded finance opens up opportunities for banks to cross-sell other financial products, such as insurance, investment services, or savings products, to customers of the platform where the services are embedded. ⑥  Data Monetization ✓ Embedded finance provides banks access to valuable customer data from the platforms they work with. This data can be used to improve products, reduce risk, or even be sold or leveraged for targeted marketing and personalized offers. By enabling non-financial companies to offer banking services, banks can broaden their customer base and earn revenue from non-traditional sources.

The question of whether SMEs should opt for Digital or Traditional Banks sparks debate due to the distinct advantages each offers. Digital banks present compelling advantages for SMEs: Lower Fees: Digital banks often have lower overhead costs compared to traditional banks because they don't have to maintain physical branches. Convenience and Accessibility: Digital banks offer 24/7 access to banking services through online platforms and mobile apps, allowing SMEs to manage their finances anytime, anywhere. Faster Account Setup: Digital banks typically have streamlined account opening processes that can be completed entirely online, often in a matter of minutes. Innovative Banking Features: Digital banks often offer innovative features and tools tailored to the needs of SMEs, such as real-time transaction tracking, expense categorization, integration with accounting software, and customizable financial reporting. Meanwhile, traditional banks boast their own array of benefits: Established Reputation: Traditional banks often have long-standing reputations and established brand recognition, which can provide SMEs with a sense of security and trust. Physical Presence: Traditional banks typically have physical branches located in various geographic locations, which can be advantageous for SMEs that prefer face-to-face interactions or need access to in-person banking services. Comprehensive Services: Traditional banks often offer a wide range of financial products and services under one roof, including business loans, lines of credit, merchant services, wealth management, insurance, and more. Integration with Legacy Systems: Some SMEs may already have existing relationships with traditional banks and use legacy banking systems or software that are more compatible with traditional banking platforms. Ultimately, the decision hinges on the specific needs, preferences, and circumstances of each SME.

Embedded consumer lending offers many benefits over BNPL. Working with a BaaS provider like Finastra allows banks to control their roadmap. #OpenBanking #banking #unitedstates #canada #embeddedfinance #authentication #identification #pfm #enricheddata #dataenhancement #customerinsights #personalfinancialmanagement

#banks generate #revenue from #embedded #finance by integrating their financial services into non-financial #platforms, allowing businesses outside the traditional banking sector to offer financial products and services. This trend has opened up new revenue streams for banks in several key ways: ①  Transaction Fees ✓ Payments and Processing: Banks charge fees to merchants or platforms that embed banking services like payment processing, money transfers, and loans. Each time a payment is processed, the bank earns revenue from transaction fees. ✓ Micro-transactions: Banks can collect small fees from frequent micro-transactions embedded in other apps or platforms, which add up over time. ②  Interest Income from Loans ✓ Lending-as-a-Service (LaaS): Many platforms offer credit or financing options through embedded banking services. Banks provide the capital for these loans and earn interest on them. This could include consumer loans, business loans, or buy-now-pay-later (BNPL) services. ✓ Credit Card Partnerships: Embedded finance sometimes involves branded credit cards, where banks collect interest and transaction fees from users who carry balances on these cards. ③  Subscription or Licensing Fees ✓ White-Label Banking Solutions: Some banks offer their banking infrastructure to non-banking firms (e.g., fintechs) as a service, allowing these companies to offer banking products under their own brand. Banks charge for access to this infrastructure through subscription or licensing fees. ✓ API Access: Banks charge for API access that enables other companies to integrate financial services into their own platforms, such as payments, KYC (know your customer) systems, or risk assessment tools. ④  Revenue Sharing Models ✓ Banks often enter into revenue-sharing agreements with the non-financial companies they partner with for embedded finance. In this case, the bank earns a percentage of the revenue generated from financial services like insurance, lending, or payment processing. ⑤  Cross-Selling Opportunities ✓ Embedded finance opens up opportunities for banks to cross-sell other financial products, such as insurance, investment services, or savings products, to customers of the platform where the services are embedded. ⑥  Data Monetization ✓ Embedded finance provides banks access to valuable customer data from the platforms they work with. This data can be used to improve products, reduce risk, or even be sold or leveraged for targeted marketing and personalized offers. By enabling non-financial companies to offer banking services, banks can broaden their customer base and earn revenue from non-traditional sources.