Common problems with bank partners

In the future, as issuing platforms become more mature and less expensive to experiment with, I anticipate you’ll see even more vertical neobanks. As the barrier to entry for issuing drops, you’ll see one of these from every company that has aggregated a captive segment of customers, and stands in their money flow.

Vertical neobanks are an emerging flavor of embedded finance, that happen to be on the issuing side rather than the acquiring side. They offer a product with core financial benefits, that differentiate them from the majors (Chase, Wells, BofA, Citi).

Financial institutions were built to on-board people as customers (retail) or business owners as customers (SMB); however, today there is a new class of users needing access to the underlying financial infrastructure these banks use - developers.

In addition, lots of customer segments have unique payment, financial or tax related problems that have grown complex enough to warrant a whole industry that solves only the non bank problem; think of things like bookkeeping, payments, taxes, etc.

For a fintech startup to launch ten years ago, the only way was by partnering with incumbents, as it would have taken months if not years to create their own core banking, obtain their license to operate, build their payments services, comply with regulation.