Banking as a service helps community banks grow

Banking as a service will help community banks thrive in the digital age.

Jeff Nowicki, Treasure Prime’s vice president of banking, told PYMNTS in a recent interview that the network effect of linking large numbers of banks (smaller ones and their larger siblings as well) with businesses can lead to real innovation in financial services.

BaaS, he said, is a must have among their “going strategies,” especially smaller community banks that want to diversify into new revenue streams without having to invest the time and money involved in creating new digital or front-end additions. -end. initiatives. Rather than forging one-on-one partnerships with enterprise customers who already have engaged user bases, he said, BaaS represents an efficient way to attract more customers and more deposits.

As for the business “side of the house,” Nowicki said, integrated finance offers the ways and means through which companies can monetize engaged users and offer a range of new financial products and services.

“For anyone with a real user base, and with anything even resembling a ‘tap’ of finance or payment rails… well, that’s a great opportunity to think about integrated finance,” he said.

Looking ahead, he said, 2023 will be a year of growth for BaaS and for regulatory clarity. Regulators will need reassurance that there is “safe and robust” supervision of any financial services and data-sharing company, Nowicki added.

But growth is in the offing, in the long term, as companies create and promote checking or business accounts through non-traditional channels, in consumer-facing interactions and back-office workflows.

The benefits also accrue to companies

The benefits are especially useful for businesses that do not create such accounts or do not have them on their balance sheet and therefore enlist the help of banks and platforms like Treasure Prime.

Businesses, Nowicki said, may have invested in and built their own entire banking platforms (and call centers).

Mix it all up, he said, and “those worlds are merging more every day. He will see the terminology of BaaS and integrated finance used interchangeably.”

But for BaaS and a new generation of financial services to reach their full potential, he said, banks will have to shift their mindset beyond the limits of simply adopting APIs, and they will have to be comfortable with having an intermediary in the mix as they arrive. to your end customers.

BaaS platforms, however, give banks the same visibility into end-user behavior that a physical branch on the proverbial high street could offer.

Nowicki noted that data connects banks and businesses, and it is data that transforms the ways businesses operate. He offered the example where accounting software platforms can end up being convenient places to have checking accounts and “integrated” into the mix.

Against that backdrop, Nowicki said, “Why not Have your bank accounts within that same ‘user interface ecosystem’ instead of moving files… and instead of bouncing between sites? The small business selling on Etsy, in another example, can grow as its on-site bank account is well positioned to capture payments on a continuous e-commerce continuum.

The network effect takes hold quickly as multiple banks can “connect” with each other to help manage deposit, savings and loan offerings, Nowicki said.

The platform model “offers seamless integration…and therefore a community bank shouldn’t have to worry about one of the top 15 banks coming to ‘eat their lunch,’” he told PYMNTS. “There are opportunities on the table that everyone can participate in.”