Modern customer-facing financial services are all built on a stack of third-party vendors. That stack typically looks something like the below, featuring market infrastructure, bank transactions, card transactions and data access:
The driving force behind the modern financial service stack is the unbundling of banking services, with each product and service on a level of the stack now delivered by a single firm. This compares historically to a single firm delivering services on every level of the stack directly to the customers.
The benefits businesses get from unbundled banking include: better products at much more visible prices and availability to a wider audience, particularly at the lower end of business size where high fixed costs are more of a blocker to get started.
The downside to the new stack is the need to build and maintain multiple financial integrations on each level depending on what service a firm provides to customers. That comes with upfront development costs, as well as the opportunity cost of not having developers focus 100% on the core offering.
Out of the new financial stack three business models have emerged to help businesses building financial services products:
- Unregulated BaaS Providers: these Fintech’s offer banking infrastructure APIs to customers and partner with a few banks or Fintech’s (usually 1-4) on the back end. Examples include Bankable, Marqeta & Swan
- Regulated Banks and Fintech’s Offering BaaS APIs: this includes both legacy (e.g., Citi, Goldman), digital-first banks (e.g., Clearbank, Cross River) and larger Fintech (Railsbank, Currency Cloud, Nium) offering APIs through BaaS platforms.
- Unregulated API Routing Layers Offering Financial Infrastructure API Marketplaces. (e.g Integrated Finance, Bond). A financial service routing layer offers access to a large ecosystem of banks and Fintechs (all of the providers in 1 & 2 above), giving customers much more choice over who to partner with and vastly reduce the risk associated with dependency on a single provider, should they go down.
We may be biased, but we think the third model (API routing layers) gives some major advantages to businesses building financial service products in the modern world.
Integrated Finance is an API routing layer for financial services. Our platform enables you to programmatically access multiple financial service vendors via a single API, removing costly upfront integrations and significantly reducing the often hidden ongoing costs of maintaining those integrations.
Get in touch to find out more.