How banking-as-a-service is enhancing financial technology
In traditional banking, to get a loan, make a deposit or speak to a banker, customers have usually traveled to a physical branch.
But today, more banking services are available digitally. As a complement to existing online banking services, innovators are building the new and improved financial experiences that consumers are looking for. These innovators may not even have a brick-and-mortar presence, but they add multiple layers of value on top of existing financial services.
The digital movement is giving customers more tools and options to build their financial lives in the way they see fit, and Banking-as-a-Service (BaaS) is making this possible. Customers can now turn to innovators who offer niche financial services that cater to their unique needs, creating new ways for them to split dinner bills, take out a microloan, invest in crypto, track spending, saving and more.
But creating a new fintech company, app or product has not been simple. The traditional path to creating financial services was a long, hard road, from getting a banking license to building a new tech stack. Synctera is one fintech that offers an easier on-ramp to new, innovative financial products through BaaS. BaaS platforms and technology solutions provide the building blocks necessary for a fintech or neobank to quickly start creating innovative financial use cases for the modern consumer.
Synctera acts as a fintech banking platform, connecting a fintech builder with a community bank that has the requisite banking license. On the development side, Synctera provides an end-to-end toolkit, offering the critical technology services and providers that help innovators build their ideas. This includes consumer-permissioned data for account verification through Mastercard’s open banking platform, to help bring financial service ideas like quick money movement to life.
Modularizing banking solutions
All the things an entrepreneur needs in order to offer a banking service—including the ability to accept deposits, make loans and payments — BaaS service providers like Synctera encapsulate into the application programming interface (API) as modular blocks, so a fintech can tap in and build new solutions. Whether it’s issuing cards, sending ACH payments or more basic financial operations, developers can take these blocks and reassemble them to meet their needs.
The key to building with a BaaS provider is having just one API that’s simple to connect to. This reduces architecture and modeling requirements on the fintech development side. These tools allow fintechs to set up new customer accounts without delays from microdeposits, using instant verification, enabling customers to connect their external accounts and transfer funds into new financial services faster.
Another advantage of BaaS: Since multiple solutions are offered in the same API, it’s easy to make changes. If a company that’s scaling up tries an account authentication solution that’s slow and not quickly verifying that customer accounts are funded, they can replace it seamlessly with an alternate solution. That means less disruption to operations; money can keep moving.
Offering a marketplace of options
BaaS wraps all of its services, including those developed in-house and those from outside developers, into one API marketplace to make it easy for fintechs to launch everything together. Instead of trying to integrate tech from multiple financial services partners, a fintech developer can come to a BaaS provider like Synctera and build more, with less overhead and less plumbing.
Working with a BaaS provider allows fintech builders to focus more on the features of the product they’re offering to customers, like offering a virtual storefront to artists, discounted pet insurance to pet owners or easier access to small business capital. The marketplace solution means a fintech could choose a waterfall approach; if one solution fails, the system can be set up to automatically try another one.
How Mastercard fits in
Consumer-permissioned financial data can also be piped into BaaS solutions. Mastercard’s open banking platform provides secure connections to consumer-permissioned financial data from 95% of bank deposit accounts in the U.S. This data can power use cases like credit decisioning, account opening and linking. It creates more choice in payments and transaction data for better financial insights.
Every fintech product needs financial data, the ability to manage consumer permission and to access those accounts. It’s one thing to have a customer knock on your door. It’s another to help them walk through the door without unnecessary obstacles blocking their way, and to make the first deposit into their new accounts happen quickly and compliantly.
Mastercard’s open banking platform provides consumer-permissioned data to power the tools that Synctera and other BaaS providers and innovators create. By using account verification and transaction data from Mastercard’s open banking platform, all ecosystem players can authenticate users and get them online fast, and in a compliant manner.
Fraud detection and speed are of utmost importance
Understandably, the risk, compliance and customer experience balance is delicate–efficiency can’t compromise fraud prevention. By adding open banking data to the BaaS platform, financial service providers can verify and access bank account data with instant account verification, helping to ensure that the person opening a new account actually owns the account they are linking to the new fintech app, before moving money.
Speed is another top concern for fintech builders. And since banks are not tech companies, many operate on pre-internet tech. COBOL, a programming language developed in 1959 that underpins many banking systems, can make it difficult to upgrade systems quickly, or to seamlessly connect with today’s technology. This can result in a speed mismatch between banking networks and the world of fintechs, who want to be able to release new products and services in a few weeks. Mastercard helps connect customer accounts quickly and speeds up the customer onboarding process.
There’s a lot of new and improved technology being created in the world of financial services, and more options for developers result in more next-gen products that help consumers on their financial journeys.
Learn more about how Synctera and Mastercard are helping neobank and fintech builders unlock better financial access for people at synctera.com.