Original tweet thread:
0/ If you want to build a US challenger bank from scratch, you're not going to be able do it alone (if you want to move fast).
To make modern fintech banking happen quickly, here's the 13 most important strategic partnerships you need + common deal unit economics 👇 👇
— #Interspace (#@heyinterspace)
1:37 PM • Oct 18, 2021
Full post:
#1 The Sponsor Bank
They let you rent their charter, they interact directly with FDIC & hold member deposits. More coverage in this prior 🧵
0/ Fintechs get a ton of coverage, but did you know that behind every fintech challenger is an actual bank that powers it?
Fintechs use these banks to "rent-a-charter" to access the regulated financial system and park member deposits.
But who are the banks behind the fintechs?
— #Interspace (#@heyinterspace)
2:42 AM • Oct 11, 2021
Common partners: @thebancorp, Sutton, WebBank Common deal unit econ: bps of pur. volume, fees per txn
#2 The Issuing Processor
They act as (A) system of record (B) gateway to payment networks (C) processor of txns for your bank (e.g. auth / settle / card issuance).
Common partners: @GalileoFintech, @i2cinc, @Marqeta, @stripe
Common deal unit econ: fees per txn, API calls
#3 The Front Of Card Payment Network
They are front of card & facilitate Sig & PIN payments + ATM WDs. The set interchange (IRF) & give incentives to drive volume.
Common partners: @Mastercard, @Visa
Common deal unit econ: fees per txn, per txn + bps pur. volume incentive, IRF
#4 The Core Banking System
They are the banking platform used by FIs to track balances, enable products, manage accts and maintain ledger.
Common partners: @Fiserv, @FISGlobal, @thoughtmachine, @Q2_Software
Common deal unit econ: fees per acct, fees per txn, API calls
#5 The Fee-Free ATM Network(s)
They power your free ATM network presence at retail locations or at other FIs.
Common partners: @Allpoint (55K at major retailers), MoneyPass / @Fiserv (32K at FIs, retailers, c-stores, 7/11) Common deal unit econ: fee per ATM WD, monthly fees
#6 The Cash Deposit Network
They provide members with a way to deposit cash into their accts, primarily via POS at retail locations.
Common partners: @GreenDotBank, @InCommPayments
Common deal unit econ: fee per cash deposit, rev share on cash deposit fee to members
#7 The Acquiring Processor
They process instant funding (AFT) and instant payouts (OCT) on payment rails for members by enabling you to act as merchant (vs issuer) on a network.
Common partners: @finix, @stripe, @tabapayments
Common deal unit econ: fees per txn, interchange fee
#8 The Secondary PIN Network
They are Durbin req'd 2nd PIN networks that facilitate PIN payments. They use fees & incentives to drive volume.
Common partners: @Fiserv (STAR) @Mastercard, PULSE, @Visa
Common deal unit econ: fees per txn, interchange rev, per txn incentives
#9 The Bank Data Connection
They connect member bank accts & txns to your service. They also connect your bank to other FIs and fintechs to facilitate acct funding.
Common partners: @finicity, @MX, @Plaid, @Yodlee
Common deal unit econ: API calls, fee per connected acct
#10 The Know Your Customer (KYC) Provider
They do KYC to verify & validate applications for your service and handle ongoing AML compliance.
Common deal unit econ: API calls, fee per acct
#11 The Automated Direct Deposit (DD) Provider
They make switching your member's DD provider easy and instant so you can onboard engaged, high spend members.
Common partners: AtomicFI, @PinwheelAPI, @Q2_Software (Clickswitch)
Common deal unit econ: API calls per DD switch
#12 The Member Support Provider
They provide outsourced member services and dispute / fraud investigation agents that scale on/off-shore w/ your growth.
Common partners: @SutherlandCorp, @TaskUs, @Teleperformance
Common deal unit econ: fees per ticket / claim and/or fees per hr
#13 The CRM and Interactive Voice Response (IVR)
They provide the phone and chat support platform for your agents, incl. self-service solutions like IVR + chatbots.
Common partners: @Talkdesk, @Twilio Flex, @Zendesk
Common deal unit econ: API calls, fee per seat
There you have it!
While those are the top 13, there are 100s of other important players that make fintech banking possible.
Hitlist:
-Hosting: They host your app (@awscloud, @googlecloud) -Mobile Check Deposit: They enable check deposit w/o BaaS: (@miteksystems, @Urban_FT)
