There are some well know names in the BaaS List including BBVA Compass, Capital One, Silicon Valley Bank and Citi to name a few. But what really is the difference between traditional banking, BaaS and “Banking As A Platform” (BaaP)? Traditional banking works off a platform that is programed for a specific entity that does not allow the ability for others to leverage its technology. BaaP is a banking platform that allows the platform to offer BaaS. Whereby BaaS is the mechanism thought which specific services are offered without purchasing the entire BaaP, meaning the sharing of the infrastructure.
Dov Marmor, Head of Banking as a Service at Green Dot Corporation shares his thought in the Fintech podcast. Yes, Green Dot does push its prepaid debit cards for sale at places like CVS but it’s also expanded into a banking service that allows companies like Uber, Walmart and fellow Fintech-ian Stash Invest to facilitate financial services.
You are the Head of Banking as a Service at Green Dot. Explain exactly what that means.
Banking as a Service is our term for our partner banking and payments and card businesses that we operate. Essentially, it’s a platform that is the end-to-end infrastructure for managing a banking or payments program at scale. We allow other companies to link into our infrastructure to design, develop, imagine, sky is the limit as to what they want the future of financial services to look like. Through that partnership, Green Dot is able to take care of the regulated and the infrastructure piece while the partners can truly innovate and create the next generation of financial products for their customers.
What is the biggest challenge facing banking as a service right now?
I think the biggest problem that we’re all trying to solve is how do we teach every individual in this company personal financial management. Now that’s something that they don’t teach in school. You learn about Moby Dick and Huck Finn and economics and this and that, but no one ever tells you what to do with your paycheck every month or how to invest in the stock market or how to optimize your taxes. I think that’s probably the biggest underlying problem that everyone’s trying to solve and the partners that we work with have just really innovative ideas on how to encourage some of those things.
Is the target Green Dot Banking as a Service customer any business that requires some sort of online payments tool or banking tool?
That is definitely a subset of the customers. I think that if you see a financial service as being valuable to your customer and integrating that financial service in a seamless way so that it feels like a part of your platform, I think banking as a service is a perfect option.
And when I say it’s not just limited to payments, what you might actually want to have is an account that lives within your platform. What you might want to have is a payment vehicle so that you can pay people but also give them their first bank account on the back end.
So, all these different pieces. It also might be the ability to text money to your friend. Any one of these items we’ve developed the underlying infrastructure to make that happen and then the partner puts their own little magic pixie dust on top of it by creating this really unbelievable user experience that ties to another ecosystem.
Banking and payments have come a long way in the last 10 years and will continue to evolve and change the way consumers bank and pay. Bank accounts will no longer be availabe only at and through a regulated bank, but through entities that offer the service to the public through many different intermediary’s from the public’s perspective, as will payments. One does not have to look far to find them … PayPal, Square, and all the Pays (Apple, Android, Walmart, etc.)
Overview by Sue Brown, Director, Prepaid Advisory Service at Mercato Advisory Group