Global Fintech Series featured Sankaet Pathak, co-founder and CEO of Synapse, in an article detailing the evolution of banking as a service (BaaS), the complexities of scaling the Fintech-BaaS-Sponsor Bank ecosystem today, and the need for a new ecosystem model, Modular Banking.
Highlights from the article include:
- The origins of non-bank, consumer-facing fintechs
- The rise of banking as a service (BaaS), noting that as more fintechs emerged, the dimensions of regulatory risk and compliance obligations inherited by the sponsor banks grew exponentially.
- The need for a modern BaaS platform that leverages multiple banks integrating a specialized set of services that are fintech-optimized to meet each bank’s scale, risk, and compliance profile.
- The value of Modular Banking, including Synapse being a regulated BaaS provider, bank partner specialization, and the diversification of bank services provided by multiple banks on a modular platform, makes the entire ecosystem more reliable while lowering risk.
- Modular Banking also helps customers bring their own sponsor banks for certain modules of their choice (like BIN sponsorship) with little-to-no effort.
- For banks, there is value in not only a regulated entity working with them but also working with multiple banks to provide incremental capabilities for a larger solution.
- How Synapse’s broker dealer license adds value to customers because it makes Synapse the account administrator of record rather than an underlying bank holder. Our lending entity enables us to underwrite and originate loans for individuals and businesses in designated States without needing a sponsor bank. This lightens the load for banks, which don’t have to onboard accounts directly and can move from an ‘all-or-nothing’ approach to a specialized, back-end service approach.