Synctera is creating a marketplace model for its banking as a service platform
- New BaaS firm Synctera is differentiating itself from competitors by giving fintechs options from more than one bank.
- Still, platform risk could slow the company’s progress.
BaaS firm Synctera launched in December.
The company’s vision is for fintechs to be able to use the platform to launch financial products like ledger and ACH. While some older BaaS platforms are wedded to a single partner bank, Synctera wants to offer fintechs options to work with different banks and products on its plaform.
Peter Hazlehurst is the CEO and co-founder of Synctera. Prior to starting the company, he was head of Uber Money. It’s this experience that informs the company’s vision for the power of embedded finance.
Hazlehurst compares Synctera to a transparent taxi ride.
“[A fintech is] a rider on Uber who actually wants to meet the driver before it takes a ride with them. And obviously that doesn't really work,” said Hazlehurst. “With us, the fintech basically says, ‘Hey, I'm a rider, I want to go for a trip.’ And we have a bunch of banks on the backend that say, ‘Yeah, I'll give you a ride’. And that way we help the infrastructure and the ecosystem be much more efficient.”
For now, the company is still in its early stages. It’s onboarded two community banks, including Coastal Community Bank and Lineage. Coastal has a history of providing banking capabilities to fintechs, including family banking solution Till and environmentally focused challenger bank Aspiration. Lineage is new but its goal is to bank fintechs.
Synctera’s fintech clients, meanwhile, include Ellevest, a robo-advisor targeting women, One Finance, a challenger bank, and CheckAlt, a payments solution company.
The company has also onboarded Socure, a digital identity verification and fraud prevention platform that works with financial service providers like Varo, SoFi, and Chime.
Moving into the partner bank space is a potential growth avenue for smaller financial institutions looking to reach new clients with digital banking solutions. A platform like Synctera could benefit community banks, which may not have the budget to keep up with the increased demand to create digital banking solutions, or lack the infrastructure to effectively onboard fintech clients.
Synctera’s marketplace model could also appeal to fintech startups. Landing a partner bank partnership can be a long, circuitous route for a young company. Founders often voice regrets at their choices of partner banks and how long the process took. With more options of banks and products, Synctera’s multi-bank BaaS platform could allay some of that risk. These relationships also frequently require a fintech to pay upfront to offset the integration costs of the new partnership.
“Right now, fintechs are agreeing to quite expensive minimums -- upwards of $25,000 to $50,000 a month -- just to sneak into the ‘queue for launch’ option,” said Hazlehurst. “And the reason banks are charging minimums is because they try to cover the cost of operations and so forth.”
According to Hazlehurst, Synctera could be a low risk alternative for partnerships like these. Because the onboarding process is in the platform’s hands, community banks don’t need to worry about risks, and fintechs don’t have to worry about paying minimums.
“With Synctera, our goal is to make it so that banks can bank everybody with low risk and low friction. And so the minimums aren't needed,” said Hazlehurst. “And when that happens fintechs get an outlet, which is multiple banks that will want to work with them.”
Still, risks can be everywhere, and that can include within the platform itself. Kaushik Tiwari is the CEO and co-founder of Better Bank, an early stage challenger bank that aims to help customers with financial shocks The fintech recently switched from one partner bank to another when, after spending over eight months working on tech integration and marketing, it was notified about last minute additional requirements surrounding cybersecurity compliance.
The move cancelled out everything the company had been working on and meant it needed to start over with a new provider.
“It nearly killed us, and we were lucky to survive,” said Tiwari. “Startups already have odds stacked against them -- platform risk is something that startups need to be keenly aware of. We learned this the hard way.”