Fintech is changing the face of financial services, but new products and services die on the vine every year because they can’t find the right sponsor bank.
Just under $54 billion of VC dollars went into fintech last year. That’s with a B. The banks that foresaw this wave coming a few years ago and built into it are thriving as a result - but it’s a small list. No one seems to know the exact number of “Sponsor Banks” in the fintech ecosystem however, there is common agreement that it’s less than fifty. Even fewer are “doing it well” and able to handle a robust portfolio of partnerships.
To support the future of fintech, we need more A+ sponsor banks. We are lucky to work with a few ourselves at Bond but we are writing this to compile the best practices for banks aiming to go from zero to one customer as a sponsor bank.
We recently sat down with one of the foremost experts on the subjects that just happens to work at Bond, Justin Moser, our Strategic Partnerships Manager. Justin comes from a deep background on the sponsor banking side of things; he helped build MVB Bank’s fintech powerhouse up from zero in his time there. MVB partners with a multitude of notable brands such as Credit Karma, Draft Kings and many more.
Below are four key takeaways that stuck out to us from our conversation with Justin.
Find Your Why
Before any bank jumps into the fray with fintech, it’s important to have codified “why” and a sense of what niche the bank wants to function in.
The way Justin defines this is to “find your blue ocean” opportunity. MVB’s CEO, Larry Mazza, talked a lot about blue and red ocean opportunities and this concept may remind you of your college business strategy classes. A red ocean is a busy market with many solutions and competitors; a blue ocean is generally a new or underserved market with lots of room for growth and competition.
MVB found a blue ocean in the world of fintech issuance. There were a tiny number of banks leaning into these partnerships and MBV had a culture that allowed for the speed and creativity necessary to stand these programs up in acceptable time frames. Sometimes those time framesq are over a year, but that’s fast in the world of direct to bank integrations for card issuance.
Find Those Who Have Done it Before
Justin and the MVB Team spent a good deal of time educating their partners. “On the issuing side, it’s almost 80% coaching the fintech(s) on what to do, how to do it, and what the bank needs from them,” Justin explained.
A good partner will always be there to work together on initiatives. Similar to MVB, Bond builds with its partners in a consultative manner. It’s not just about positioning the brand to succeed. Compliance management, terms and conditions, and reporting sometimes go overlooked when entrepreneurs are sprinting to get a new product up and running. Your partner can help make sure you don’t miss those details.
Launching the program is only the beginning. Building the relationships and rapport to manage the program ongoing is a whole different story. We’ll get into ongoing oversight and program servicing in upcoming episodes.
One consistent issue that banks and fintech brands run into is expectation setting on responsibility. Specifically, who is responsible for what and when.
When questioned about how much education the bank had to give around Program
Management (the day-to-day division of duties between the brand and bank as partners), Justin notes that he “doesn’t think the brands were really aware of it.”
He said that many fintech(s) expect “the bank will do this or the bank will do that. That’s really not the case because banking operations are actually entirely separate from internal fintech operations.”
Justin suggests that instead of assuming, you should understand who you’re working with and where their responsibility starts and ends. Make sure you know what you’re responsible for. Don’t be afraid to ask seemingly silly questions.
Partner, partner, partner
Finding the right partner is paramount to the success of your program. This is true for banks and brands alike.
According to Justin, finding the right partner “makes it easier on the brand, which in turn makes it easier on the end user. My biggest frustration with the entire process is that underbanked and unbanked Americans who could benefit from so many of these products that never quite make it out alive, [because] something goes wrong before shipping or scaling.”
If you’re a community bank with a strong desire to take steps in the direction of fintech, we’d love to hear from you and see if we can help!
Reach out to firstname.lastname@example.org or check out our careers page and let’s chat!