MAY 11, 2022
8 min read
When it comes to creating your neobank or other type of fintech, there are many platforms and providers to select from. So, how can you know which is best for your business? In this article, I’ll tell you how to choose the best fintech platform provider and what to think about when doing so.
We already discussed which financial providers are vital for the fintech industry. Each of them has a lot of major advantages, but you have to make choices. Before the jump, it’s critical to understand what factors are important to take in first.
Four tactics when selecting a vendor
The bank will always choose a vendor using one of four strategies, depending on the size and scope of the investment, the level of detail expected, the time given to make a decision, and any existing partnerships.
- Traditional: Vendors are selected using the typical method of issuing a request for information, followed by a proposal, and finally, compiling a final list.
- Proof of concept: While the request for information process is often bypassed, the emphasis here is on having the proposal combined with comprehensive business specifications, followed by the decision process.
- Market leader: When there is a short timeline to pick a solution and there is an acknowledged market leader, banks often use the market leader technique, which is a low risk strategy.
- Strategic partner: If the bank or institution already has a connection with the vendor, or if it has a subsidiary unit that delivers the needed service, the decision is to work with a strategic partner. This is also a rapid-fire tactic of selection.
The traditional selection procedure and the Proof of Concept technique are more detailed, and the timeline is likewise longer. This is unavoidable given that the vendor selection process also necessitates receiving a proposal.
The other two ways are more simple, but the risk and return ratio is obviously a consequence of how well you know the market (and its leader) as well as the level of trust you have in the strategic partner, if there is one.
Factors to consider while selecting the right vendor for your fintech business
Let me assist you in identifying the checklist you may review before considering a vendor. To provide perspective, below are some of the main factors to focus on.
- What value must it bring to your product?
To get the most return on investment, you should thoroughly consider the challenges that the vendor would address for your company. What kind of services and goods are you going to provide for your own customers? How will it benefit your business and its bottom line? The right vendor may assist your fintech product in streamlining processes, increasing customer engagement, and creating new income sources. Before you begin searching for providers, you must have a clear idea of how your company can generate more value from them.
- What services are needed?
After you’ve determined how value will be produced, you should think about the capabilities you’ll need from a vendor. What operations do you require it to carry out? All banking providers do not give the same services. Check that you understand the services you want and that the company you choose can supply them. Based on these factors, compare the different suppliers to determine which ones give those qualities.
- What are the regulatory risks?
Most countries, including the UK, require you to get a banking or EMI licence if you wish to provide financial services, which is a time-consuming and costly procedure. The most significant burden, independent of your geographical location, might be maintaining compliance with an enormously complicated and large regulatory environment throughout the application process for permits and after they are obtained. As a result, it’s vital that the vendor you choose has a strong compliance policy and is up to speed on all the newest rules.
Many suppliers allow you to create your own financial business while using their licence. However, some providers are constructed on top of other third-party licenced companies, which might result in unanticipated changes to security policies and extra expenses, so read the provider’s policy thoroughly.
- Is a vendor investing in the future?
Because the Banking-as-a-Service industry is still in its early stages, choosing a supplier that invests in and develops new technologies is important. You should ideally choose a vendor that is always developing new functions and solutions. A supplier who is dedicated to its partners’ long-term success. Request the roadmap and compare it to your vision.
- How much does it cost?
Of course, cost must be considered when selecting a banking vendor. But don’t simply look at the price; it’s also critical that you understand and that the supplier can quantify the value you’re receiving for your money. What features are provided, and are there any hidden charges? Before making a selection, be certain that you can be sure of all of the charges.
What are the technical considerations?
Once you’ve chosen a banking software supplier, you’ll need to get the new platform in place. Most banking service vendors will try to make the change as simple as possible for your business and your customers. Here are a few factors to keep in mind on the technical side.
- Easy-to-use APIs
The vendor should provide simple APIs for integrating the technology into your current systems. RESTful APIs make it easier to build a financial app because they reduce the need for customizations that are big, expensive, or hard to keep up with.
The provider’s APIs should come with detailed documentation so that you can simply connect the system into your existing model. They should also offer help, such as a manager of implementation, if you have any problems.
- Layered services
When picking a banking vendor, technology is simply one factor to consider. Think about what other services you might need, like “know your customer” (KYC), encryption and security, onboarding, transaction monitoring, access to data, and compliance with regulations.
Vendors should allow banks to digitise all of their procedures in the front, middle, and back offices. A digital banking software provider should be able to give the bank a full digital experience by digitising transactions, Know Your Customer (KYC), onboarding, security, and customer support, not just the UX.
- Single platform
It is common for banking software providers to weave a web of services in order to meet the demands of as many businesses as they can. It may become too big and hinder the integration procedure.
So, even if they operate with many services, I’d advise going with a vendor that can activate each functionality using a single API. Even though it is unlikely that potential suppliers may arrange their workflow in an uncomfortable manner, you should keep this in mind.
One of the most significant drawbacks of certain BaaS providers is the necessity to link several systems in order to deliver specific functionality. This raises overhead and increases the likelihood of support and integration issues.
Businesses should choose a BaaS solution vendor that combines all of their features under one roof. It is much simpler for them if the company already offers account and payment services. Nobody wants to be isolated by various suppliers.
- Service-level agreement (SLA)
In the contract between a firm and the banking software vendor, SLA is crucial since it describes the provider’s duties regarding uptime, support, and security. Before you sign anything, be sure you’ve read the SLA completely and understand all it says.
SLAs are an essential aspect of any contract with a vendor. It is a single document that summarises all of the contractual services and the dependability expectations that have been established. It guarantees that the requirements are understood equally by both parties.
It is ideal for SLAs to be linked with the technical or commercial goals of the engagement. Deal price, service quality, and the customer experience may all be harmed by misalignment.
ClearBank: Our Experience
ClearBank is a UK-based BaaS platform that is regulated by the FCA. In addition to virtual accounts, ClearBank’s platform offers segregated accounts, operational accounts, and client accounts. The company also offers full solutions for payment clearing, such as access to Bacs clearing, Bacs Direct Debit, CHAPS, and Faster Payments in real time.
We at Deshdevs have worked on integrating ClearBank for one of our clients, a fintech platform extension. The main goal was to create a service that would let people put GBP directly into their bank accounts in the UK.
What we did with the ClearBank API was the following:
- The Account Management module to enable payment processing abilities, including creating accounts, creating sweeping rules, and mapping account IDs.
- The database that holds all the transactional records and account info that could be used as a back-up when necessary.
- A simple Admin Panel for e-wallet managers.
RailsBank: Our Experience
Founded in London, Railsbank enables users to construct their own fintech solutions, or to incorporate these capabilities into existing business systems. Among the features that are covered are digital banking, crediting, card issuance, financial transactions, and data provision.
Railsbank’s primary focus is on financial transaction automation, monitoring, and diversification, and they offer a broad variety of automation, monitoring, and diversification capabilities. However, despite the vast range of currencies available, the list is somewhat restrictive, making it difficult to operate with those that aren’t on it.
Our team has worked with RailsBank several times for different clients. The most recent example is a fintech platform extension that lets customers use SEPA payments to send and receive money in euros between countries.
What we did was the following:
- The Account Management module to offer payment processing functionality, including establishing accounts, defining sweeping rules, and mapping account IDs.
- The database that stores all the transactional records and account details that might be utilised as a back-up when required.
- A set of APIs for all individual and bulk actions with accounts, a light-weight UI module for managing accounts and transactions that can only be used to read information, and the ability to look at and answer questions about transactions.
Choosing the correct banking software provider may be tough, but I hope that by following these recommendations you’ll make a wise selection that is best for your organisation.
To wrap things up, here are some of the most important criteria that banks should consider when looking for a vendor for their digital banking platform to ensure that it is both future-proof and resilient.
- If you want to receive the most return on your investment, think carefully about what problems the vendor can solve for your business.
- Make sure the vendor you’re considering can provide the services you need.
- Choose a vendor that has a good compliance policy and is up-to-date on all the latest regulations.
- When comparing prices, don’t just focus on the cost; it’s also important to know how much value you’re getting for your money. Before making a choice, be sure you understand all of the expenses.
- The vendor must have APIs that are simple to work with. It also should give you easy-to-use APIs that let you add the technology to your existing systems.
- It is better to choose a provider that has a single API for all of their services, even if they run on a variety of platforms.
- An SLA is a key part of the agreement between a company and a banking software provider because it spells out the provider’s responsibilities for uptime, support, and security.