Giving FinTech wings

Disrupting Finance IT with Banking Service Providers

Lars Markull
Cash image via Shutterstock

FinTech startups or other innovative players are capitalising on the rise on new services in the industry, however the technical and regulatory requirements remain. Banking Service Providers could decrease the problems new players are facing.

The term Banking Service Provider has not yet found its way into the FinTech language. However, there are parallels to the development of Payment Service Providers. During the rise of ecommerce, startups were facing problems outside of their core competence.

Due to customer demand they had to integrate several different payment methods. This gave rise to Payment Service Providers that were able to offer convenient solutions to all. We could not see so many ecommerce shops nowadays if each and every shop had to manage all these methods by themselves. The same will apply to the FinTech industry.

The missing layer

Financial data is strongly fragmented among many different kinds of providers: banks, credit card companies, depository banks and so on. And this fragmentation will only increase, since new entrants often create new silos. Providers of innovative new financial solutions could heavily benefit from aggregating all available sources into their new offering, since they will then be able to increase the touching points with customers.

Developing this connectivity to thousands of sources is resource-intensive, and a Banking Service Provider could offer this connectivity in a better and probably less cost-intensive way. The foundation of such a service would be the technical connection to financial sources, which could be based on existing bank APIs or other infrastructures.

Regulation as a driving force

A Banking Service Provider adds different services around its core offering. Legal conformity while accessing financial service providers will be a key selling point. This will become an even more important issue once the European Union has finalised the Payment Service Directive 2 (PSD2).

figo is one of the few Banking Service Providers and while working with many FinTech startups or other innovative players, we have realized that a Banking Service Provider takes our partners to the next level. The development teams of our partners are able to focus on their core product and do not have to manage the complex banking backend. The product outcome is much slicker and smarter since each party focuses on its strengths and the user benefits from services that are available for every bank and not a few selected ones.

Lastly, speed is crucial in the current FinTech situation and as a Banking Service Provider we enable our partners to quickly develop new services and they learn much faster from the outcome.

All about the right context

The current FinTech development is just at the beginning: new startups will continuously enter the space and innovative banks will develop new financial services as well. These players can offer certain banking services in a better and less cost-intensive way than a bank does, hence, banking services will become more and more “unbundled”. For all of them, banking in the right context is the motivation. In order to do so, startups and banks are already actively looking for Banking Service Providers to use financial data in their newly developed services.

In the long term, the connectivity to new financial services could create yet another selling point: traditional players are actively looking for new services to implement in their existing offering. A Banking Service Provider will be in the position of offering access to many different services through one single access point – a potentially massive advantage in the future.

Lars Markull
Lars Markull works at the leading German banking API provider figo and additionally as an independent FinTech consultant. He combines experience from traditional banking and consulting jobs with a big passion for innovation and disruption.

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