US banking-as-a-service provider Treasury Prime has announced a strategic shift and will be focusing on banks instead of fintech companies and brands (this shift also includes a substantial reduction in workforce). Treasury Prime was founded in 2017 and has received investments from notable VCs such as Deciens and QED.
Treasury Prime enables non-regulated companies to launch financial products such as card and account products. Due to the absence of the concept of an e-money licence in the US, those companies usually work with two partners: a technology partner (like Treasury Prime) and a licence partner (a bank). But this model has recently gotten under a lot of pressure due to the various actions from US regulators (see news section below). The main challenge is that the bank often does not have the necessary oversight of the fintech programmes it supports and, therefore, cannot take action when it is necessary.
To avoid this, a bank could offer the technology themselves, which is, for obvious reasons, a big challenge for many banks. Crossriver Bank is one of the very few exceptions, and Treasury Prime’s offering aims to enable other banks to offer the same.
It appears that Treasury Prime, despite being one of the best-known players in the space, has struggled to gain momentum with it’s banking-as-a-service product. The regulatory scrutiny is likely just the cherry on top. Thus, the strategic shift does make sense from the outside, especially if this model is preferred by the regulator. Nevertheless, focusing on banks instead of fintech and non-financial brands seems (at least a bit) less attractive due to a smaller number of potential customers, even longer sales cycles, and a higher chance that some customers want to build the services in-house. But the market has obviously changed a lot since companies like Treasury Prime started. It will be interesting to see how the new product offering is being received by the market and if other BaaS players consider making a similar switch.
