March 2020 - Vertical Neobanks

You can think of a vertical neobank as a checking account + debit card product, focused on a specific customer segment (rather than focused on a broad swath of “consumers”) that solves a money movement problem for that customer segment segment, and monetizes by capturing the balance available to that customer segment at the end of the money-movemen... See more

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).

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.

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.

A big hurdle to this stuff happening today is that the banking-as-a-service platforms that exist are so intensive to integrate with, that for most companies