What is banking-as-a-service orchestration
The FinTech revolution of the last 10 years has created the ‘banking-as-a-service’ (BaaS) industry including companies like Marqeta, Nium, Modulr and Clear Bank. Recently, merchant acquirers like Stripe, Adyen and Checkout have also entered this market.
These companies make it faster and easier for platforms and neobanks to offer financial services by offering white label banking services such as holding funds, connecting to local payment systems and issuing cards. A detailed explanation of banking-as-a-service can be found here.
These BaaS providers are now starting to look beyond the FinTech market to also serve non-FinTech customers and with good reason. We believe that every business that helps is customers buy, sell or manage money should think of itself as a bank and integrate financial services into their services. Even larger businesses that make a lot of payments would benefit from using BaaS providers who are often cheaper and easier to integrate into software than traditional banks.
Why banking-as-a-service in its current form is not ready for non-FinTechs
There are however important differences between FinTechs and non-FinTechs:
- FinTechs have financial services knowledge and compliance teams in-house. Many non-FinTechs don’t have these skills.
- Most FinTechs are present in only a few markets. Many non-FinTechs, in particular businesses in the B2B software and service sectors are global
- FinTechs will process millions of transactions and can therefore spend more time integrating. Non-FinTechs may have much lower volumes and need a more out-of-the-box service
As a result, banking-as-a-service providers struggle to service non-FinTechs adequately. Their product assumes advanced financial services and compliance skills which means non-FinTechs need to bring these skills in-house which is time-consuming and expensive. They often also don't have the global coverage non-FinTechs need.
Banking-as-a-service orchestrators solve this problem.
What is a banking-as-a-service orchestrator?
A banking-as-a-service orchestrator fulfils a number of functions:
- Select and connect to multiple banking-as-a-service providers to offer global coverage and lower fees from using the right provider in every country and from strengthening their negotiation position
- Offer value-added services to make the service more out-of-the-box. These may include Know Your Customer (KYC) automation, payment reconciliation, payment scheduling and user interface components for banking and payment apps
- Provide compliance knowledge and help the customer meets its compliance requirements
This offers a number of benefits to non-FinTechs. Multi-sourcing banking-as-a-service providers increases payment margins by more than 30% while a single banking-as-a-service API and other value-added services reduce time-to-market and implementation costs by up to 70%. Savings from compliance support services are harder to quantify but hiring your own compliance team and putting in place company wide compliance processes yourself is expensive.
How to choose the right banking-as-a-service orchestrator
There isn’t a one-size-fits-all for banking-as-a-service orchestrators. You have to choose the one that fits your business. Here are some criteria to look out for:
Geographic coverage : an important reason to work with a banking-as-a-service orchestrator is their geographic coverage. Not every country in the world has a thriving banking-as-a-service market yet, but your banking-as-a-service orchestrator should be able to get you to at least 80% of your spend.
Sector knowledge : value-added services, training and compliance are core components of the banking-as-a-service orchestrator model and they differ by sector. At a minimum your orchestrator is specialized in B2B or B2C just like you but ideally they understand your specific sector and have worked in that sector before.
Savings analysis : a banking-as-a-service orchestrator should be able to explain how they will increase payment margins by more than 30%, ideally using a detailed country-by-country savings analysis.
Yordex is a banking-as-service orchestrator. We make it easy for platforms to implement white label banking.
We connect to a global network of banking-as-a-service providers which allows our customers to use the optimal provider in every country. This improves payment margins by over 30% and gives global coverage and resilience. We also offer a range of value added software and services which reduces the time to implement white label banking by over 70%
For more information or a free-of-charge analysis of how much you can save by using a white label banking orchestrator, please contact us.