How the Right Bank Account and Data Structures Strengthen Bank Oversight of Fintech Partnerships

Why does account structure matter? 

A Bank-Direct relationship is the right way for banks and fintechs to partner, a statement so core to the Treasury Prime approach that we orient our product set around Bank-Direct. In addition to having a direct relationship with a bank partner, when working with embedded banking software providers like Treasury Prime, it’s crucial to understand the underlying integration and account structure that exists at the underlying bank partner. 

Poorly designed account structures by providers can obfuscate the true end user account balances and end up hurting consumers when the tech provider cannot reliably ascertain whose money is whose. This importance was further clarified by the FDIC article, Banking With Third Party Apps, as the agency clarified that FDIC deposit insurance does not protect against the insolvency or bankruptcy of a nonbank company. 

What is the right account structure? 

The 2023 bank failures and subsequent fallout have highlighted critical risks to competing BaaS and bank relationship models. The Treasury Prime Model is oriented around these key characteristics, with account and payment structure emphasized:

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The Treasury Prime approach mitigates the following existential risks for fintechs: 

1. No single point-of-failure in one bank partner
2. No ambiguity over compliance and oversight responsibilities
3. Clear understanding of funds belonging to each fintech
4. Complete access to funds / no liquidity risk 
5. The bank owns the ledger, so there is no need to reconcile end user funds between a third-party ledger and the bank’s core

Our account and data products continue to evolve to strengthen compliance oversight 

This Bank-Direct approach is the right way for banks to have oversight of its fintech partnerships, and we have big plans about how, in addition to world class account architecture and payment orchestration, enhancements to the data infrastructure of Treasury Prime platform strengthens compliance oversight. 

In support of the responsible, Bank-Direct approach and account architecture already highlighted, Treasury Prime offers robust data infrastructure to provide Banks with clear, complete, and timely access to all relevant data concerning their respective fintech and embedded finance programs.  This allows our Bank partners to proactively manage (2) of the other critical risks highlighted above, Compliance and Reconciliation, and presents an opportunity to turn those risks into strengths for the Bank's overall program.  We provide Banks access to account, application, transaction/payment, counterparty, and person/business information (and more) in a permanent and reliable database with controlled and secure access available only to the Bank.  Any data passed via the API is available to a given Bank for its own use.  

This robust data infrastructure supports myriad Partner use-cases as well, with more on the way.  From transaction monitoring (TxM), KYC/KYB Compliance, and even invoicing support, many Banks and their Partners have already realized the value of consuming the program data we make available (Treasury Prime can share this data directly with a partner, eliminating additional integration work by the Bank).  Our Bank partners have been able to rapidly launch and scale Onboarding/KYC/KYB and TxM programs to support compliance requirements by leveraging integrations with existing Partners.  And since launching and scaling our Partner Marketplace, we've seen more and more creative use-cases and applications making use of this data, and many others are sure to follow.  

Finally, we look forward to soon offering another way for Banks to consume their data at-a-glance by surfacing data visualizations in the web application/Bank Console itself.  Think reconciliation reports, billing support, or general program activity and health dashboards presented in a seamless interface within the Bank Console.  While the database solution mentioned above is more appropriate for in-depth and critical use cases where careful investigation may be required, the data visualizations presented in the UI will make high-level trends and other general information readily available in the application.  And if more granular data is desired, the application can support that kind of data exploration as well.

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