Banking Partners

Why successful fintech companies go multi-bank

Édouard Mandon
April 2023
min read

Banks are the foundations upon which successful fintech companies build their offerings. Fintech companies get access to payment schemes and networks through partner banks. It is also partner banks that hold their accounts and customer funds. 

If these foundations collapse, fintech companies can collapse too. Partnering with multiple banks is key to a fintech company’s product, resilience, and success. 

In this article, we explore the various reasons why a fintech company should consider partnering with multiple banks.

Building the best product

Not all banks have the same capabilities and offer the same financial products and services. As a fintech company, you might need to assemble multiple partner banks to deliver your product and run your operations. Bank A might hold your safeguarding account, Bank B might enable you to send and receive SEPA payments, and Bank C might enable you to send and receive SWIFT payments.

As a fintech company, being able to be effectively onboarded by multiple partner banks is key to your ability to offer the best financial products and services to your customers.

Expanding internationally

As you expand internationally, you might need to partner with new banks to give your customers access to local accounts to circumvent IBAN discrimination as well as local payment schemes for faster and cheaper payments.

Very few banks are truly global. They might only have a limited presence, capabilities, and offering outside their home markets. Truly global banks such as Citigroup, J.P. Morgan, or Barclays might be out of reach for small - to medium-size fintech companies. 

Expanding internationally might also mean complying with new, local regulations. Such regulations can include safeguarding customer funds with a local partner bank.

As a result, you might need to partner with one local bank in every country where you operate.

Building redundancy

When a bank fails, its customers are left hanging. They are unable to access their funds, receive payments from customers, pay suppliers, and make payroll. It is even worse for fintech companies. They instantly become unable to deliver their services. They might need to report it to the regulator.

It is not only about a partner bank shutting down but also a partner bank changing its commercial strategy or compliance policies (for instance, deciding to no longer serve gambling or travel companies), or changing its pricing, discontinuing a product, migrating to a new system, having a prolonged operational failure, etc.

Building redundancy means working with at least two partner banks for a given product or feature. One partner bank will serve as the main provider, while the other will serve as a fallback solution.

To achieve true redundancy, you should be able to switch smoothly from one partner bank to another, without interruption of service and degradation of the quality of service. This means having direct integrations with both partner banks and a routing solution to choose the partner bank to use for a given payment.

Improving unit economics

With an increased focus on profitability across the entire fintech industry, improving unit economics has become a priority, switching from years of growth at all costs. Fintech companies are mandated by their shareholders to capture margin everywhere possible.

Working with multiple partner banks enables fintech companies to create positive competition from their partner banks and eventually get better terms. Pricing is not only about actual account or payment fees but also higher interest rates on deposits or lower interest rates on loans.

Depending on their commercial strategies as well as their own banking infrastructure, some partner banks might be looking to attract deposits through higher interest rates, encourage outgoing payments through lower payment fees, or be more competitive than others for a given payment route (for instance, SWIFT payments).

Being able to pick and choose across partner banks and effectively allocate funds and route payments across partner banks is key to a fintech company’s ability to optimise unit economics.

How Numeral enables fintech companies to go multi-bank

Very few fintech companies have multiple partner banks. Even fewer fintech companies have built direct integrations with multiple partner banks. And almost no fintech company has bank-agnostic connectivity software. This means that adding or switching partner banks becomes a product and engineering project, which has to be scoped, prioritised, and delivered.

From identifying the right partner banks to getting live through onboarding, partnering with multiple banks can be long and tedious. Numeral can help with introductions as well as a single API to our network of 10+ (and counting) partner banks.

If you would like to book a consultation, please get in touch.

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