A few articles about the US banking-as-a-service market have caught my eyes this week.
Firstly, Simon Taylor highlighted in his weekly Fintech Brainfood that due to the actions of regulators, many banks have reconsidered their choice to play a role in embedded finance and banking-as-a-service. Luckily, there are many banks that are doubling down, like Fifth Third Bank and Green Dot. However, many banks are also reducing their activities and some even completely shut down their efforts. Simon notices that those who are able to sell to enterprises or big tech companies are more likely to continue but they will also be more selective. This could potentially mean that only large companies are able to launch new financial products.
This is being echoed in a similar way by Tearsheet’s article, that says that US sponsor banks need to focus on quality partnerships and not quantity. The article does not say that only larger companies are quality; however, you could argue that this is likely the case.
Simon ends his piece with the ask to various industry stakeholders to keep working so that potential sponsor banks are “drowning in resources to do their job well”. I guess we all agree that embedded finance can have a very big positive impact on society, but there are a lot of challenges. Education and knowledge are necessary elements to solve them. Therefore, sponsor banks must find the right talent, which is what this American Banker article argues.
