This referenced posting in TechCrunch briefly describes a new banking product from Stripe, the San Francisco-based unicorn for internet payments. The new product is called Stripe Treasury and is a the latest example of embedded finance. The product represents trends in a new open banking era that is mandated in Europe and a few other markets, essentially now also taking hold in the U.S. due to market realities.
It is a BaaS offer for Stripe clients, utilizing APIs to connect banking capabilities into the client existing infrastructure. Stripe is not intending to be a bank, so has developed partnerships and connections with chartered FIs, such as Citi and Goldman Sachs. Providing access to a bank account through Stripe allows them to extend increasing financial services to their business clients.
‘This is part of a bigger trend called embedded finance. Essentially, instead of separating banking services from other services that you use, embedded finance products provide financial services as close as possible to the end customer in the services that they already use….Other companies have been working on embedded business banking products, such as Wise. Stripe could take advantage of its existing user base to convince them to use Stripe Treasury for new banking products.’
In our CEP Outlook for 2021 we included the themes of Platform Banking and Collaboration as keys to success going forward for banks. The growth in platform approaches in banking has been generally slow to develop, but has been given a boost by the PSD2 directive as well as success among challenger and neo-banks, most readily in the consumer and small business banking space. Technologies such as APIs and cloud delivery underpin how the various platform models work.
Only a few short years ago, the generally prevailing attitude among financial institutions regarding fintechs was either trepidation or disinterest. That has changed for a number of reasons, including open banking regulation, further technology gains, and, more importantly, there has been an evolving recognition between the two sectors that working together is not a zero-sum game; instead it creates expanded opportunity. So look for more of this going forward.
‘Stripe turns everything into API calls. An API is a programming interface that lets you interact with third-party services using simple instructions. For instance, a developer can take advantage of Stripe Treasury to open bank accounts directly from their service by triggering Stripe’s API….Similarly, you can move money or pay bills using API calls. Combined with Stripe Issuing, you can also issue a virtual or physical card and connect it to a bank account. Slowly, Stripe is building products that cover a bigger chunk of the payment chain.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
