Fintech Best Practices for Changing Your Bank Partner

Your bank powers core features in your fintech app. For that reason, changing banks is a complicated process — but sooner or later, it may be necessary because having a single bank partner comes with inherent risks. If something happens to that bank, you will have to find a new partner. And in the long run, that bank may not have the capabilities to support your continued growth. 

You might have to seek a new bank partner if:

• Your current bank is de-prioritizing fintech partnerships. 
• Your bank is getting out of your line of business.
• You’re adding a new line of business that your bank doesn’t support. 
• You need features your bank can’t provide.
• You have grown beyond your bank’s capacity to support accounts. 

The easiest way to change banks is to switch to an alternative within your banking as a service (BaaS) provider’s network. Treasury Prime offers enterprises a vast bank network of more than 16 bank partners and growing, enabling our fintech and enterprise partners to change banks without having to rebuild their API banking integration. 

But sometimes fintechs are integrated directly with a single bank, without a BaaS provider as an intermediary; or, they are working with a BaaS provider that offers only a limited bank network. In these situations, your company has to change both its bank and API banking setup. 

Here’s what to expect when you’re changing bank partners, along with tips to position yourself for smoother transitions in the future should you need to change banks again. 

Bank Partners TL:DR

The process of integrating with a new bank is different depending on your setup. Here are the key takeaways:

• A BaaS provider with an extensive bank network can make future integrations easier if you do change or add banks through the same banking API. 
• Banks that better align with your growth needs can provide a more lasting relationship. 
• A multi-bank network allows you to add more than one bank partner to get the best pricing and features across different banks.

Want more insight into embedded banking products for B2B SaaS companies?  Download our ultimate guidebook.

How to switch banks

Changing banks can be an intricate process. You need to notify customers and get their permission to move their money to the new bank account. The API integration process varies depending on specifics. The process of transitioning customers is generally the same, whatever your current bank situation. 

If you’re building a brand new integration directly with a bank, the process can be extremely time-consuming. Most banks have legacy systems that are not technologically equipped to integrate directly with your app. Even with the few that are more prepared, getting to market on their platforms can be incredibly complex from an engineering and project management standpoint. 

If you want a quicker and more reliable way to partner with banks, working through a banking as a service (BaaS) provider that has built deep integrations with multiple banks may provide more protection so that you don’t have to go through this process again in the future.

Integrating with the new bank

The process of integrating with the new bank is different depending on how you integrate with your current bank. 

Changing banks within the bank network of your current BaaS provider

This is the most straightforward transition as it does not require you to rebuild your banking API integration. You keep your integration as-is with your BaaS provider, then the provider helps you change banks on the back end with less disruption to your customers and less work for your engineers. While you still need to notify customers, the technical lift is minimal in this scenario. This only really works if your BaaS provider has a vast bank network like Treasury Prime that can accommodate your company’s evolving needs, since not every bank is a good fit for your business case.

Changing from your current bank setup to both a new bank and BaaS 

This transition is more challenging but will make things easier for your company in the future. Whether you are coming over from a direct bank integration or from a bank integration that involves a different BaaS provider, you will need to integrate with your new BaaS provider’s banking API. The difference is that if you choose a BaaS provider with an expansive bank network, you can stay with them even if you change or add new bank partners in the future. 

Switching from one direct bank integration to another direct bank integration, no BaaS involved

This is the most challenging transition, and the most limiting. As with changing to a new BaaS and bank, you need to build a new API integration from scratch. Depending on the technical capabilities of your new bank, you may need to invest additional developer time in completing the new integration. If you ever want to add more bank partners or change to a different bank partner, you will have to repeat the whole process.

Transitioning customers to the new bank

Step 1: Onboard net new customers to the new bank

Assuming you’ve integrated with your new BaaS and bank partners and tested the integrations, you’re ready to start onboarding customers. You’ll usually start by onboarding net new customers to the new bank.

Step 2: Onboard existing customers in phases

You will need to notify existing customers before transitioning them to the new bank and generally provide an updated deposit agreement with the new bank. To entice customers to transition more quickly, you might time the transition to coincide with new features such as a new card rewards program or higher-interest savings accounts. Occasionally, the new bank will require that transitioning customers go through KYC again. Transitioning banks within a single BaaS network can help minimize disruptions.   

Step 3: Refund balances to unresponsive customers

Some customers may not respond to requests to transition their accounts. This often indicates they are generally less active with your app, and they likely have lower balances. You will need to send them their balances as a check in the mail. If customers have negative balances, you may need to cover those balances with reserve funds. 

Step 4: Post-transition housekeeping

Consumer protection laws allow customers a certain amount of time to dispute transactions. For example, customers may still have time to dispute unsolicited charges that are due to alleged fraud or other unauthorized transactions.

Finding the right bank and BaaS partners

Many fintechs will switch banks at some point, but you don’t want to switch frequently if you can avoid it. Changing banks costs time and labor. This is especially true if you’re changing BaaS providers as well, as you’ll need to integrate with a new banking API. You may have to pay for access to both your old and new BaaS provider for a period while you complete the transition. 

Finding the right new bank and BaaS partner can limit future disruption. A bank that better aligns with your growth needs can provide a more lasting relationship. A BaaS provider with an extensive bank network gives you more choices, and if you do change or add banks in the future, you can still maintain the same banking API integration. 

Here’s what to look for in each partner as you prepare to transition. 

What to look for in a BaaS provider

The right BaaS provider can be your key to finding your bank partner. By searching for a BaaS provider first, you can evaluate which platforms have the best bank networks for your current and future needs. 

In addition to bank networks, you want to make sure your BaaS provider offers the right kind of connection with partner banks. You want a provider who allows you to build an open and direct line of communication with your bank partner. 

Here’s a full list of qualities to look for in your BaaS provider:

• Extensive bank network: change or expand to new partners as needed without having to integrate with a new and unfamiliar API. 
• Direct bank relationships: there is no substitute for direct communication so that you can get banks on board with your product roadmap and work together on challenges like compliance. 
• Extensive vendor list: offers more opportunities for customization of features, KYC process, and other core aspects of your product. One-size-fits-all never truly fits all.
• State-of-the-art API: A BaaS provider that continually updates and enhances its modern API will be better equipped to meet your evolving needs, and will ensure a smoother end-user experience. 
• Both FBO & on-core integrations: choose between opening your end users’ accounts directly on the bank's core, or under the umbrella of your own dedicated FBO. Options are always helpful.
• Dedicated FBO: If you choose an FBO approach, make sure you are getting your own dedicated FBO account and not having your accounts commingled with those of other fintechs. Otherwise, you’re needlessly sharing risk with other companies. 

What to look for in a bank partner

Your new bank partner should meet the needs your former partner couldn’t. That could mean supporting certain features, or just being easier to work with. Maybe your former partner met all your needs, but could no longer work with you due to an acquisition or other change in their business. 

Here are qualities to seek out in a new bank partner: 

• Communicative and responsive: Just as you need a BaaS provider that allows you to communicate with your bank directly, you need a bank partner that is responsive so that when issues arise, you can solve them quickly and efficiently.
• Works with your niche: Maybe you focus on small businesses, or maybe you’re branching out into cannabis or crypto. Make sure your bank partner is willing to work with the types of customers you intend to serve.
• Supports your product perks: Whether you want to offer specific features or are looking to offer customers perks such as higher interest rates, seek out a bank that can support those plans. 
• Supports your growth: You definitely want a bank that can support your projected growth in the near term. Long-term, working with a BaaS provider that has an extensive network of banks can empower you to expand your app to additional bank partners. 
• Tech-forward: Your partner bank likely doesn’t build the tech you use to integrate — your BaaS provider does that – but you still want a provider that actively engages with the fintech side of its business and works to keep up with innovation. 
• FBO vs on-core: Make sure your bank partner can accommodate your preferred account structure. Some banks may only support one option. 

How Treasury Prime makes switching banks easier

Treasury Prime offers a network of 16 banks and growing. Our partners work with a wide spectrum of industries and use cases — consumer banking, business banking, crypto, cannabis, healthcare, and more. Whatever your fintech or embedded banking goal, we are more likely to have a bank partner that matches your needs than other BaaS providers. 

During your transition between banks, we offer tailored technical support to guide you through the process. We also help you deploy customer-centric strategies to minimize disruption to end users. For example, we can help you focus initial customer communications on upgrades that come with switching banks. You might add a special rewards program to new cards that you issue, or entice customers to make an early transition by highlighting new features that will be available as part of the switch.  

Once you join our community of fintechs, things only get easier. Our broad network means fintechs can add or change banks with ease. You only have to integrate with one banking API, then make changes around that integration as needed. 

Changing banks can be challenging, but sometimes is necessary for your company’s continued growth, and when you partner with an experienced BaaS provider, the process can go much more smoothly and set you up with a more flexible infrastructure in the future. If you’re thinking about switching, Treasury Prime would be happy to answer any questions about what the process may look like for your company. 

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Wondering how embedded banking could help your business?  Contact Treasury Prime — we have a true multi-bank network, the deepest bank core integrations, and extensive compliance experience. Tearsheet named us the Best Banking as a Service company for the second year in a row.  Talk to the best embedded finance team in the industry.‍