Who needs a BaaS partner, anyway? – TechCrunch


In the last Several years ago, a series of startups have emerged to reduce the complexity of launching financial services by offering technology that relies on the infrastructure of partner banks and allows developers to create bank accounts, payments and card capabilities through API.

These Bank-as-a-Service (BaaS) startups promise to bring fintech capabilities to other companies without them having to enter into agreements with partner banks, integrate into the core of the bank, or hire technical or compliance staff needed to test or launch a new financial product.

Therefore, it has never been easier or faster to launch a fintech application or add a banking component to an existing vertical SaaS business. To better understand the problem that BaaS vendors are trying to solve, we spoke with several founders of this space, including Unit CEO Itai Damti, Bond CEO Roy Ng, and Synctera CEO Peter Hazlehurst, among others.

Reduce the complexity of financial services

In the early days of the fintech market, startups were largely on their own when building or launching a new financial services app. Bringing a new financial product to market usually meant finding a banking partner and signing a long-term contract, creating and implementing compliance policies with that bank, and then finally developing the technology needed to support the application or the financial service you were looking to provide. to end users.

For startups, this meant large initial investments of time and money just to lay the groundwork for launching a new product long before establishing the fit between the product and the market. It also meant a lot of duplication work not only on the part of startups to create the infrastructure needed to launch a financial product, but also between banks when they signed up and offered fintech partners access to. their banking systems.

“The amount of work and pain of starting something simple, even checking accounts – you have to navigate the ecosystem of partners from 30 to 40 banks who don’t always understand your business, then you have to write 15 to 20 compliance policies and operationalize them, ”said Itai Damti, Founder and CEO of Unit.

Now, much of this complexity can be outsourced to BaaS companies that already have banking relationships, APIs to integrate financial services into their applications, and the ability to run compliance programs on behalf of their clients. And venture capitalists have lined up to fund them, including fundraisers announced by companies like Rize ($ 11.4 million), Synctera ($ 33 ​​million) and Unit ($ 51 million). in the last three months only.

But who benefits from working with a BaaS provider?

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