If the past week has taught us anything, it’s not to put all your eggs in one banking basket.
That’s especially true for FinTechs and tech startups, the backbone of innovation within financial services.
Many of them are scrambling to find new financial services providers. And are unsure just where to turn.
Simply put, FinTechs need a way to work with and within the banking system while moving money in a safe and secure manner.
Treasury Prime CEO Chris Dean told PYMNTS’ Karen Webster in a recent conversation that banks (like any other business) have vulnerabilities — the trouble lies when clients put their proverbial eggs in that single basket.
“There’s the concentration risk, which we’re all seeing now. There’s the operational burden. And you have to get those things right. It’s clear to me that there’s not a single bank in the U.S. that can do that — but the U.S. banking system can.”
Of banking in general, he said, “there are a lot of different regulators, and different banks — and they’re held together in a cohesive whole.” Treasury Prime’s goal, he said, is to make that cohesiveness available in a streamlined manner for the FinTech community.
To that end — to connect FinTechs to the banking system rather than just a provider or two — Treasury Prime said on Wednesday that it has officially launched OneKey Banking.
It’s an embedded finance application programming interface (API) billed as a solution that allows FinTechs and enterprises to choose the best banking partner, across the more than 15 financial institutions (FIs) tied to the Treasury Prime network, for a particular product or service.
The network effect, said Dean, allows these enterprises to shift away from relying on a single BaaS provider and to move money between banking partners instantly. And within that cross-network functionality, companies can more adroitly manage deposits, transfer funds and send instant payments as they manage accounts between banks.
The Treasury Prime network, he said, has banks that range in size from top 20 players to smaller, more nimble banks. Depending on the FinTech’s use case, money can be moved seamlessly across different banking providers.
“Generally,” he said, “it’s hard to open a bank account, but it’s easy here…and it’s easy to open up several bank accounts all at once.”
It’s the latest move to unlock the potential of a network built over years, with real-time integration of back-end systems and a growing roster of traditional FIs on one side and digital-only upstarts on the other.
Dean said the OneKey offering also has inherent advantages for the financial institutions, allowing them to grow deposits and find the right FinTech partners.
“There’s been a lot of inbound interest from banks,” he observed, who are interested in advancing their innovation roadmaps and forging partnerships with FinTechs through a standard API. “Banks are good at managing their clients and realizing where their clients are going.
They see that FinTechs are growing dramatically, and embedded banking, with different enterprises, is growing dramatically too. And the banks want to be part of that …. this is a channel that allows them to get the ‘best’ FinTechs.”
With a nod to the concerns about governance and operational risks that have become so dominant in finance these days, Dean noted there’s a rigorous internal vetting process for banks that join the network.
“We’re constantly for new banks,” said Dean, “but we don’t say yes to everybody. If there’s a bank that we think is ready to handle to complexities of a FinTech relationship, that’s the one we want.”
The demand for that two-sided network flexibility (and advantages of diversification for both sides), noted Dean, is evident in the fact that within its first month, OneKey Banking enabled more than $350 million across multiple Treasury Prime network banking partners. The collapse of Silicon Valley Bank, Silvergate and Signature banks have only served as tailwinds to that activity, and billions more in deposits are likely to come by the time summer’s over as FinTechs seek to leverage OneKey to help them manage everyday fund flows and operations.
“We launched,” he recalled to Webster, “and we were in beta with a couple of clients for a while — and everything was working great. And then [the banks collapsed]. What does it all mean? It means that all the FinTechs are knocking on our door, saying ‘how can we get involved in the network so that we don’t have the same concentration risk?”
Looking ahead, he said that Treasury Prime will seek to add banks to its roster with features or concentrations that are not yet on the network. Some banks, he said, focus on retail customers, while others make their niche with serving international clientele (and have FX expertise).
“Chance favors the prepared,” he said. “We’ve been working on this for years. The whole point is that there is no bank big enough and complex enough to deal with all possible problems. But the network itself can — and that’s key.”
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