As we close out the challenging year of 2020, a clear theme is emerging within FinTech: industry giants are no longer standing on the sidelines.

For the majority of the last decade, the largest banks and financial institutions kept business-as-usual when it comes to their business models, strategies, and technology. Digital transformation was a new technology initiative to update legacy infrastructure in banking, but adoption was slow and success limited. What was available in financial services (especially from FinTech) had yet to be integrated.

Innovation was left to FinTech startups. These small companies were the ones creating new business models and offerings — ultimately proving what’s possible from a product and user experience perspective. The firms evolved to become the Plaids, Robinhoods, Coinbases, Betterments, etc. who are established brands in financial services.

After a decade of waiting, companies are making moves in launching new product initiatives and expanding core components of their platform. The change towards action comes at a time when FinTech is the norm in banking and customer expectations of technology in financial services is at an all-time high.

JPMORGAN CHASE

As one of the top banks in the US, JPMC has set itself apart as the investment leader in technology over the last 5 years. When it comes to blockchain and cryptocurrency, its at the forefront in terms of adoption amongst financial institutions. With its recent announcement of Onyx — the bank is introducing a blockchain-based infrastructure for cross-border payments that runs on JPMCoin (its native digital coin).

Onyx would help central banks across the world launch their own digital currency and payment rails. For countries open to cryptocurrency, a stable model that is proven at enterprise and government levels can quickly lead to mass adoption globally. For companies as clients, Chase’s coin is already being utilized for international payments by a global tech firm; other customers are currently being added as well.

Separately, Chase is launching in the UK (under its own brand) in Q1 2021. The initial offering would include deposit and lending products. The expansion effort will be lead by Clive Adamson, currently a director for JPM Securities. The bank continues active discussions with FCA and other government entities in the UK about requirements. The overseas extension comes at a time when neobanks are saturating the market and customer demand for digital banking is on the rise.

GOLDMAN SACHS

The industry veteran made a major announcement this past October as the newest entrant in the Banking-as-a-Service (BaaS) sector. Goldman Sachs will target corporate clients with treasury products via open APIs. The move helps the industry giant capture part of a $30B market share of cash management for enterprise companies.

The Banking-as-a-Service model positions bank partners as wholesalers, the BaaS provider (Goldman Sachs) as a distributor, and platform customer’s (businesses with end users) as retailers. BaaS distributors aim to operate similar to Amazon’s cloud services in providing a banking ecosystem that can be customized and quickly operational in market (without lag time in bank approvals or implementation).

Customers create profiles, open accounts, link external accounts for funding, and perform money transfers both in the US and abroad seamlessly. Previous attempts from other large institutions are not developer-friendly and difficult to implement and automate.

For Goldman, diving into transactional banking adds an additional revenue stream and opens the door to both consumer and corporate clients. BaaS fits well with CEO David Solomon’s vision of expanding offerings, growing their user base, and diversifying away from investment banking and trading. The first client on this new platform is Goldman itself.

STRIPE

As one the most valued companies in FinTech, Stripe has established itself as an industry giant in financial services. Known for its widely adopted payment platform, the unicorn is continuously expanding its product suite and offerings for small and medium sized businesses. Moving from payment processing into broader banking is a natural progression.

Stripe Capital began offering business loans programatically in 2019, with the use of artificial intelligence for underwriting. With line of sight into merchant revenue history, the fintech leader was able to customize the product to its existing user base. The lending facility is through Celtic Bank (Utah-based industrial loan company).

The company’s most recent announcement is with Stripe Treasury, a banking-as-a-service offering designed to embed financial services in customer platforms. Stripe’s business clients would be able to allow end-users to send, receive and store funds. Evolve Bank & Trust (a community bank from Arkansas and Tennessee) is its key bank partner for user accounts and cards, and has experience within the FinTech industry. Goldman Sachs is another partner for the program in the US. Stripe also has its sights set internationally with Citibank and Barclays as bank partners.

What makes Stripe’s offering most compelling out of the new BaaS entrants of 2020?

• The company’s size in terms of customers and transaction volume;

• Stripe’s ability to build out product and scale rapidly;

• The complementary nature of banking services on top of payments processing;

There is no true small business marketplace leader in digital banking. Stripe’s presence in the industry as a FinTech giant can drive deep innovation forward for SMEs globally — payments, lending, and (now) banking services is an all-inclusive offering that’s difficult to beat. //

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