What Banking Services Can Be Accessed?

Much like traditional banks, fintech vendors and banking partners offer services primarily focused on money movement (payments), fund custody (accounts), card issuance (prepaid/debit/credit), user onboarding, and data utilization (e.g., linking external accounts or reviewing transactions).

• Payments: Various payment methods exist, including (i) ACH (Automated Clearing House), commonly used in the U.S. for bank transfers; (ii) card processing for acquiring funds or disbursing payments; (iii) wire transfers for larger or urgent transactions; (iv) check issuance and mobile deposits; and (v) bill payments (such as RPPS or Bill Pay for utilities). Depending on the vendor, one or more of these options should be available.
• Data Aggregation: Accessing a user's banking data, like balances and transaction history, helps facilitate ACH transfers, validate income, offer budgeting insights, and assess loan applications. Plaid currently leads the industry in bank data access.
• Identity Verification / KYC: Identity can be verified through cross-referencing names, social security numbers, dates of birth, and physical identification against government databases. This process forms part of the Know Your Customer (KYC) protocol, crucial for Anti-Money Laundering measures, ensuring users are vetted against government watchlists. KYC compliance is mandatory based on the services provided, especially for deposit and card programs.
• Accounts: Individuals and businesses can open checking, savings, and loan accounts, akin to traditional banking services. Some partner programs may utilize an FBO (For Benefit Only) account, consolidating all user funds in a single account managed by the platform, which is responsible for reconciliation and settlement. However, many platforms are moving away from this model due to regulatory risks and limited functionality.
• Cards: Options for prepaid, debit, or credit cards are prevalent, often featuring rewards programs tailored to specific user demographics. Platforms can offer incentives such as cash back, cryptocurrency, or points based on spending, with monetization typically sourced from interchange revenue or affiliate partnerships.
• Lending: Platforms can provide various loan options, including installment loans, advances, and credit cards. Often, platforms need to establish a loan reserve with either a capital partner or their own funds. Secured credit programs are also available, allowing users to use deposits as credit limits to help build their credit profiles.

The actual implementation and design of these services depend on the partnership structure and the chosen provider, as well as the specific use case.

How Do Providers Differ?

Startups, mid-sized businesses, and enterprises must evaluate multiple vendor and partnership options before making a final decision based on their MVP (minimum viable product), product roadmap, costs, timelines, and overall requirements.

• Vendors can quickly address basic needs with minimal setup costs and variable fees linked to activity, without fixed contracts. For simple services like payments, companies might select vendors for ACH (e.g., Dwolla) or card processing (e.g., Stripe). Some prepaid card providers also fall into this category, charging fees per active card.

The advantage of vendors lies in their speed and low initial costs. While this model is suitable for limited payment volumes or users, scaling can make vendors more expensive than partnerships. Additionally, there is typically no revenue sharing with vendors; platforms can only charge users for payments or card access, making it easy for users to switch to cheaper alternatives.

• Partnerships are better suited for platforms with higher transaction volumes and comprehensive needs. These partnerships often involve banks—platforms may either integrate directly with a bank (direct-to-bank partnership) or collaborate with a Banking-as-a-Service (BaaS) provider that has developed a tech infrastructure around a bank.

Leading neobanks and challenger banks, such as Chime, Revolut, N26, and NuBank, work with financial institutions. Prominent fintech partner banks include GreenDot, Sutton Bank, Evolve Bank & Trust, Bancorp, WebBank, and NBKC.

Bank partnerships generally entail higher implementation costs and fixed monthly fees based on banking licenses, product offerings, program management, and compliance support. If such support is lacking, platforms must employ additional vendors to fill those gaps, raising total ownership costs.

The benefits of bank partnerships include multiple revenue streams—interest on deposits and interchange revenue from card usage. Companies can also introduce their own additional services, such as expense management or budgeting tools, for a monthly subscription fee.

Leading BaaS providers include SynapseFi, Railsbank, Galileo, and Q2/Cambr, with new entrants like Unit, Treasury Prime, Bond, and Stripe Treasury emerging recently.

What Are the Steps to Get Started?

Beyond selecting a bank or service provider, platforms also play a crucial role in user experience, design, funding, and program operations.

• Front-End: Most platforms have a customer-facing application or website (the front-end) where users create profiles and interact. Vendors, banks, and BaaS partners typically operate as white-label providers, managing onboarding, screening, and account maintenance through APIs. Companies lacking a front-end can engage firms like 11:FS, TrueNorth, MX, or Blackbird Studios to develop customer portals.
• Team: A team of in-house or contracted engineers is essential for integrating with back-end service providers. The implementation timeline can range from days to weeks, depending on the use case and services. Many bank vendors or partners offer immediate access to testing environments (or sandboxes), allowing platforms to gain hands-on experience and assess staffing needs.

If the chosen vendor or partner does not provide program management support, platforms may need to hire their own program manager to oversee operations between vendors, banks, and back-end service providers.

• Capital: Payment-only services (with transaction-based fees) are the most cost-effective options, followed by prepaid card vendors charging up to $5 monthly per card. Some payment firms may opt for a percentage of the transaction volume, decreasing as volume increases. Monthly costs can range from $1K to $5K, depending on transaction activity.

Engaging with BaaS providers and bank partners entails higher overall costs due to licensing and ongoing regulatory compliance requirements. Initial setup fees for onboarding, bank approval, user testing, and go-live can lead to total costs ranging from $150K to over $500K in the first year, depending on the banking program, bank partner, and necessary vendors.

Is Licensing Necessary?

The necessity for licensing can differ based on specific use case details, product scope, and partnership structures. Vendors and bank partners typically operate in ways that do not require platforms to obtain separate licenses for payments, account openings, or card issuance. However, some provided options may expose platforms (and their partners) to potential regulatory scrutiny. It's essential to seek external legal advice based on your product vision.

• Money Transmitter Licenses (MTLs): Each use case involves a flow of funds that outlines how a platform facilitates transactions among multiple parties. If a platform takes custody of funds from one user and transfers them to another, it may need to be classified as a money transmitter. Conversely, if the platform simply connects users without holding funds, MTLs may not be necessary.

For most neobank, savings, and payment use cases, platforms can collaborate with bank partners without needing MTLs. However, obtaining a legal opinion is advisable to ensure compliance before approaching bank partners.

These licenses are more commonly required in the cryptocurrency space, where platforms act as custodians, or with FBO accounts ('For Benefit Of Users'), which can simplify user onboarding but may lead to regulatory inquiries.

• Lending Licenses: Platforms intending to directly underwrite, decide on, and issue loans must secure lending licenses in the states they operate. Requirements and limitations differ from state to state, making lending use cases (e.g., credit cards, loans, lines of credit for consumers and businesses) complex. Platforms may also collaborate with licensed banks, with underwriting and decision-making processes managed by the bank partner.
• Specialty Registrations and Licenses: Platforms in the investment or securities sectors must obtain these designations during their establishment. Additional audit and reporting obligations may also apply. Common use cases requiring specialized management include crowdfunding, real estate investment, securities exchanges, and platforms with accredited investors.

Do I Need to Find My Own Bank?

If a bank partner is required, programs often incorporate banks into their structure or provide a list of previously associated banks. Platforms with existing bank relationships can inquire whether their bank has worked with a BaaS firm.

The next question is whether platforms need to manage their bank relationships. Typically, BaaS providers adopt a hands-off approach, giving platforms a list of banks to select from and apply to directly.

Negotiating with a bank and launching an approved program demands additional time, resources, and comes with minimal support. Platforms must navigate the bank approval process independently, which can lead to delays. Experienced BaaS firms with several years of activity have established integrated bank partnerships that streamline the approval process for platforms.

How Long Does the Go-Live Process Take?

The timeline for setup or implementation is influenced by the product solution and the chosen vendor/partner. Use cases with limited offerings (e.g., basic payment processing or data aggregation) can be ready in a matter of days or even hours, with a simple API or SDK integrated on the back-end without extensive approvals or due diligence.

For platforms issuing accounts—enabling payments, transfers, deposits, and fund custody—a bank partner must hold the funds in FDIC-insured accounts. BaaS providers assist with user onboarding, KYC procedures, and infrastructure development, which can take 6 to 12 weeks, depending on the bank and BaaS provider. Direct-to-bank partnerships may take over four months.

When it comes to card issuance, platforms providing deposit accounts typically offer debit cards to enhance user engagement and generate interchange revenue. The card issuance process can last 6 to 8 weeks, requiring approvals from card networks, design, and testing. Platforms interested solely in virtual cards can save time by bypassing printing. Prepaid card vendors may offer limited, single-use cards without banking capabilities within 2 to 3 weeks, though custom designs can extend the timeline.

Adding features such as international transactions or comprehensive use cases (e.g., cryptocurrency, lending) can further prolong the overall timeline due to additional compliance reviews and approvals.

What is the Total Cost of Ownership?

The total cost of ownership (TCO) varies based on the use case and vendor/partner selection. Vendors offering limited services (payments, data aggregation, or KYC) generally impose low setup fees and transaction-based pricing (e.g., per payment or per user). Prepaid card providers typically charge a higher setup fee but maintain minimal monthly per-card fees (around $1 to $5 based on volume).

Bank partners and BaaS providers manage more intricate use cases that involve licensing, regulatory considerations, and compliance assessments. Implementation costs cover not only technical integrations but also bank approvals, marketing, disclosure reviews, and user testing, often starting at $5K monthly and increasing with complexity and integration duration.

Once launched, platforms incur fixed monthly costs to cover bank licensing, program structure, and compliance monitoring. If services like KYC, end-user support, and fraud monitoring are not included, platforms must either supplement these services or engage separate vendors, increasing TCO. Generally, the more vendors involved, the higher the TCO for platforms launching banking programs.

To mitigate the higher initial and ongoing costs associated with banks, platforms can benefit from revenue sharing based on user deposit balances and card expenditures (from interchange for card-issuing use cases).

How is Fraud Managed?

Platforms bear responsibility for user activities and balances, particularly regarding fraud, chargebacks, and returns. Fraud is a risk that all platforms should anticipate, especially during the initial months of operation. Traditional banks face similar challenges, including attempts by fraudsters to open fake accounts or submit fraudulent deposits.

Providers offer various methods to mitigate fraud, such as KYC protocols, limiting transactions for new users, and verifying fund availability. For ongoing fraud prevention, platforms can seek vendors like Jumio, Beam Solutions, Kount, and Ekata.

Who Handles End-User Support?

To provide a custom user experience, platforms often prefer to maintain customer interactions in-house. Timely responses to calls, emails, and chats, along with effective issue resolution, are vital for customer support. Certain inquiries can have regulatory implications, leading to complaints and potential penalties for platforms and their banking partners. Issues related to card transactions often fall under Regulation E, necessitating prompt responses and resolutions within a specified timeframe.

Platforms intending to manage customer inquiries must train their support teams to handle claims and undergo annual audits to ensure compliance. Alternatively, they can work with certified customer service firms, both onshore and offshore, on a per-ticket, hourly, or monthly basis. Generally, banks do not outsource their customer support, and BaaS partners have limited capacity for cost-effective call center operations.

What Other Aspects Should I Consider?

In addition to the discussed pillars—provider types, ownership costs, platform requirements, and finding a bank—other factors are worth considering:

• APIs and Documentation: The technology in fintech is foundational for evaluating performance, reliability, and integration ease. Service providers should offer sandbox access for developers and transparent documentation for product teams. High-quality solutions provide detailed testing environments and product documentation on their websites.
• Product Roadmap: The best long-term partners offer additional products and services that evolve with user needs. Fintech applications typically follow similar development trajectories: payments ? deposits ? cards ? lending. A lack of offerings may require platforms to seek new partners later, incurring additional setup costs.
• Existing Clients: Inquire about the number of existing fintechs a program serves, the user volume, and specific examples. As more providers emerge annually, newer platforms might face initial challenges testing their capabilities and could have suboptimal experiences as partners refine their products.
• Track Record: Financial services can be complex due to legacy policies, regulations, and innovative models pushing limits. Bank partner approvals can be inconsistent, and compliance requirements may change abruptly. Established vendors and BaaS providers with four or more years of experience have navigated major challenges and learned valuable lessons, while newer entrants may still be refining their approaches.

Bringing It All Together

When discussing embedded banking, the most productive conversations arise from founders and product leaders who understand the fintech landscape and their platform's specific needs. Unproductive discussions often stem from a lack of provider awareness, resulting in an overwhelming list of unanswered questions.

Regardless of vendor or partner choice, contextual understanding enables companies to make informed decisions when integrating financial services.

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