Evaluating BaaS partners: the 10 questions every fintech needs to ask

Financial technology companies need a chartered bank partner to  connect  their products and services into the larger, regulated financial system. By working with a bank partner, fintechs can open FDIC-insured accounts for customers, and build stickier products with more opportunities for growth and diversification down the line.

Banking as a service (BaaS) providers are the intermediaries that make relationships between fintechs and banks possible. These companies are often  integrated directly with banks’ systems, and provide API banking services so that fintechs can build directly on banks’ cores.

Not all BaaS companies are the same. They may offer broader or narrower ranges of services, or work with a broader range or narrower subset of fintech partners. They may build on multiple banks’ systems, or just one. They may take an account-centric approach, or a card-centric one. All these differences add up to a complex field that your fintech startup must navigate.

So how do you navigate this web? You do it by asking the right questions. Here are the top 10 questions for assessing potential BaaS providers. (Want to see how Treasury Prime answers these questions? Click here.)

1. “What’s your approach to banking as a service?”
2. “Do you facilitate a direct relationship between fintechs and banks?”
3. “How many bank partners are you integrated with?”
4. “What is the full list of services you offer?”
5. “How fast can my fintech get to market with your BaaS services?”
6. “What can I expect in terms of implementation support?”
7. “How many fintechs have you brought to market — and who are they?”
8. “Why are your clients happy with your service? And can I speak to some of them?”
9. “What is your pricing structure?”
10. “What makes your offering different from your competitors?”
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Download a single page cheat sheet with these questions for quick reference during calls or meetings.
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1. “What’s your approach to banking as a service?”

On its face, BaaS may sound like one type of service. It’s just about connecting banks and fintechs, right? In a sense, yes, but there are very different ways to do this. Here are three big areas where BaaS provider approaches can vary:

• Customer focus (Fintech, banks, or both?)
• Industry or use case focus (B2B banking? Retail banking? Neobank? Lending? Do they cover cannabis and/or crypto?)
• Account-centric versus card-centric approach (This is important! We will explain.)

Customer focus

Some BaaS providers focus on helping banks digitize and don’t really work with fintechs. Others help fintechs develop the tech they need to connect with banks, but these providers themselves don’t have many (or any) bank partners.

Only a few BaaS players build relationships on both sides of the fintech/bank divide. The reason this is rare is that building relationships is a time-intensive endeavor, and attracting partners in both areas requires building a staff of people with the right mix of expertise and professional connections. BaaS providers that have made this investment will be able to help your fintech not just build the right tools, but actually find banks who will support your growth.

Industry or use case focus

A BaaS provider who doesn’t work with your area of the fintech industry won’t be of much help to you. Does the BaaS provider work with neobanks? Can they support the full range of a neobank’s needs? Do they work with fintechs in emerging spaces like marijuana/cannabis and cryptocurrency? Have they supported fintechs in the health care space, which has its own unique regulations?

Especially if you are forging a path through an area that scares some banks away, you will want to find a BaaS provider who understands your challenges and can help you connect and embed with banks that are ready to meet your needs and support your growing business.

Account-centric or card-centric

One fintech trend is for companies to start out card-centric because they perceive that to be the easier route. But ultimately, if you limit yourself to cards, you won’t be able to expand your services to areas like fintech lending, or support wire transfers or ACH payments. If you want to grow, you will still need to launch accounts.

All this is to say, the future of your fintech will be shaped by whether your BaaS provider takes an account-centric or card-centric approach. The most basic service of a bank is an account, and an account-centric philosophy responds to how banks actually work.

2. “Do you facilitate a direct relationship between fintechs and banks?”

Assuming you find a BaaS provider that works with both fintechs and banks, another question will be how they connect those two lines of business. Do they provide you a direct relationship with the bank, or handle that relationship themselves? Because if they don’t provide you with a direct relationship, you won’t have as many options for solving problems when they arise. (And they will arise, because growing a startup in a disruptive industry is challenging!)

Consider the following (and maybe ask potential BaaS providers these follow-up questions):

• What happens if your partner bank shuts down its BaaS capabilities?
• What can you do if payments aren’t going through your bank(s)? How do you get to the root of the issue and solve it?
• What if you want to start offering your customers credit through the bank? Will your relationship with the bank (or lack of one) enable you to negotiate better rates?
• What if you want to launch new products the bank offers?
• What if you want to take advantage of a bank’s abilities to deal with and prevent fraud?

3. “How many bank partners are you integrated with?”

Different banks will offer different benefits, will have different areas of expertise, and will be able to support you in different ways. So does your BaaS provider integrate with just one bank? A couple banks? Several? Quantity isn’t everything — the quality of the banks matters — but having options is important. What does your potential BaaS provider’s overall product market look like?

A BaaS provider with only one bank partner, but a large and trusted one, could be able to handle some fintechs’ needs. But you may want to connect with multiple banks, or you may need a bank (or banks) with very specific offerings and you can’t find all of them at a single bank.

The more complex or targeted your business, the more bank options you may need. If you work in cryptocurrency or fintech blockchain, you will need a BaaS provider with crypto-friendly or blockchain-enabled banks. The same goes for finding a bank that is cannabis friendly if you work in marijuana. You’ll need to find a bank — or banks — chartered in states where the drug is legal.

Whatever your industry, you may also want to consider partnering with multiple banks to take advantage of their different strengths. It depends on your use case — every fintech is different.

4. “What full list of services do you offer?”

Few individual features are make or break. If your potential BaaS provider is perfect in all ways but lacks one specific feature you need, they may be able to connect you with a partner who can fill that niche. (And if they’re worth their salt, they will help with those intros.) That said, you will want to make sure the BaaS provider meets your most crucial needs — things like account opening, fintech payments, and debit cards.

The big idea is that you want a BaaS provider who will help your company grow, and won’t hold you back from fintech innovation.

5. “How fast can my fintech get to market with your BaaS services?”

If your BaaS provider can connect you with the right banks and meet most of your service needs, then congrats on finding a promising contender. So, how soon can you launch with them? If it’s going to take weeks to go live, you could end up burning out your runway, and at that point the relationship isn’t worth it.

Pressure the provider to show how going to market with them will take the amount of time they claim. Have them break it down step by step. If they say it takes days, do they mean from the date you agree to sign a contract, or do they mean from the date a bank agrees to connect with your service? Is there a chance a bank could take their time deciding (and waste yours)? Ask them for specific examples of companies they’ve gotten to market in that time frame and contact them.

Faster is better but make sure your BaaS provider will deliver on their promise.

6. “What can I expect in terms of implementation support?”

Snags in the implementation process can cause delays. What implementation support does the BaaS provider offer, so that you can avoid problems and overcome them quickly if they occur?

• Who will walk you through implementation?
• How can you contact them if a problem arises, and how soon will they respond?
• Will your developer team have access to an open sandbox to experiment with tools before you commit to a contract?
• Who does the program management for specific services like card issuing?
  

Be concerned, if the provider gives vague answers or leaves you feeling like you’ll be on your own.

7. “How many fintechs have you brought to market — and who are they?”

A trustworthy BaaS provider will be transparent about who their clients are. If they have worked with top fintech companies, that’s a good sign. You will also want to know if they have worked with companies in your niche, because you want a provider who understands your business. This is especially true if you are in an emerging field (like cannabis or crypto), or if you are dealing with additional compliance or regulations outside of banking in areas like health care.

8. “Why are your clients happy with your service? And can I speak to some of them?”

Knowing who the BaaS provider has worked with is great. Even better is knowing why those fintechs worked with the provider. Ask them why their clients are happy with their service. How have they helped companies like yours thrive?

Case studies about other clients and video or written testimonials make for helpful resources. But you should push the BaaS to connect you with customers directly. When fintech firms are willing to talk about their experience with a provider, that’s a good sign. And off-the-cuff comments offer insights that might not shine through written or recorded materials. Don’t hesitate to ask for a reference call with an existing customer.  

9. “What is your pricing structure?”

If you’ve gotten to the point where you think you’ve found the BaaS provider who meets all your highest priority needs, you’ll want to find out what it’s going to cost to work with them. Will they charge you on a usage basis or a flat fee? For many startups, usage-based pricing is best as it aligns interests, meaning the BaaS provider is incentivized for you to successfully launch and scale.

Ultimately, you know your company best so you’ll know what pricing structure will work best for you. Be mindful, however, that cheaper doesn’t mean better. If the BaaS provider costs little but is missing key features or has given you concerning answers to important questions, you could end up paying in other ways when you encounter problems later in your relationship with them.

10. “What makes your offering different from your competitors?”

It’s always good to end on a catch-all question to cover your bases. By now you’ve probably heard your potential BaaS provider’s elevator pitch, and you’ve certainly learned a lot from other more specific questions. Asking them what sets them apart will help bring things back to the big picture, helping you see their offerings as a whole.

The broader consideration underlying all these questions is whether a particular BaaS provider meets your unique needs. Think Treasury Prime might be the BaaS provider you’ve been looking for? Contact us here.