“We are not just going to take on business for the sake of taking on business”: Fifth Third’s Dan Dall’Asta on how Newline structures BaaS partnerships

In 2023, Fifth Third Bancorp acquired the embedded payments platform Rize Money. The bank’s Head of Wholesale Payments Bridgit Chayt said at the time that the addition would “enhance” its existing embedded payments offering. Rize, which was founded in 2014, enabled non-financial brands and fintechs to launch their own financial products and services through APIs. Fifth Third’s new offering, Newline, is partly based on the technology built by Rize but also draws from the bank’s own payment network built in 1971 called Fifth Third Processing Solutions, which was eventually merged into Worldpay.

Ever since the launch of Newline, Fifth Third has been building up the program. The firm recently made two announcements of note: i) Enhancing money movement with Trustly: The firm announced it will be working with Trustly on payments coming through the ACH and RTP networks and Trustly’s pay-by-bank ecosystem. Newline’s API platform would also enable Trustly to transmit payments via Fifth Third Bank, helping the company grow its payments products.

ii) Powering Stripe Treasury: Stripe Treasury which allows the company’s software platform clients to offer embedded finance products to their customers will be working with Fifth Third’s Newline to expand the embedded product suite available to customers on Stripe’s platform.

So far, the embedded finance play by the bank has been good for its bottom line. The firm’s commercial payments revenue was reported to have grown by 10% at the end of Q3 compared to the same quarter last year.

“We’re not going backwards. Since 2011, consumers and SMBs are only further expecting lower fees, better point of sale experiences, better embedding of payments, banking, and other types of financial products within their point of need,” said Dan Dall’Asta, Director of Revenue Strategy for Newline by Fifth Third at the recent The Power of Payments conference by Tearsheet at the SVB office in New York.

Dan Dall’Asta, Director of Revenue Strategy for Newline by Fifth Third

Banks need to move deeper in the embedded finance ecosystem

Dall’Asta asserted that his firm would like to see more experienced and well-capitalized banks entering the industry.

“The last thing we need are banking institutions that don’t have enough compliance and regulatory wherewithal – or just technology intermediary layers – that are fueled by the need for growth rather than need for stability and security,” he said.

One cause for the recent tribulation in the BaaS and embedded finance space is the way prominent players misjudged priorities. So far the industry has been focused on building the “pipelines” between different technical infrastructures like banks, fintechs, and BaaS providers. With the recent regulatory shift and onslaught of consent orders, Dall’Asta thinks the industry needs to shift gears.

“What was not being solved was translating everything that decades of banking regulation and banking expertise has built, to make sure that consumers and small businesses are taken care of, and that everything is done above board – but doing so in a technology first way,” he said.

At the moment, traditional banks are being called upon to step up and take an active role in this next phase of BaaS. “We need more of those foundational banks to be able to provide real clarity, direction, and guidance into some of these new and existing large fintech platforms that need to possibly switch banking providers because of the tumult over the past couple years,” he said.

There is a concern that if banks don’t step up, different layers in the embedded finance tech stack would continue to operate with a lack of coordination, with each player optimizing their piece of the pie for their own gains.

“Without those banks being a real participant in the design element, those front end layers are always going to be a bit naked from knowing how do we really step forward in a safe, friendly [manner] with risk and compliance at the forefront. All of these layers need to really be as connected as possible,” he said.

Don’t sit back and relax: How banks can build resilient embedded finance strategies

For banks that are thinking of realizing Fifth Third-like gains, taking a long term view and reducing the noise are the most important steps.

Here is what Dall’Asta says Newline is doing to ensure that it’s able to run efficiently and sustainably:

1. One oversight model to rule them all:  For Newline, sustainable management of all of its programs means ensuring that things are as “black and white as possible”. The push towards providing clarity works in tandem with the firm’s policy to have a standardized oversight model for all its programs. “We work very closely together with everyone within legal risk and compliance to really set the standards that are going to be uniform across all the programs … where other FIs have had trouble is each program had a very bespoke compliance oversight layer,” he said.
2. In for the long haul: The firm is also choosing its clients extremely carefully and turning away those that are only interested in speed to market. “As clients are coming to us now, the first thing I tell them is, if you want to get to market fast, go elsewhere. We’re looking to build 10 to 20 year partnerships, and that has to be driven by oversight,” said Dall’Asta. One reason for this cautious approach is that when one program runs into a compliance issue, all programs are affected. Dall’Asta finds that there is merit in ensuring that the number of fintech programs remains under control and that each fintech holds up to scrutiny.

3. 20/20 vision across the payments chain: Fifth Third is focusing on ensuring that it not only has an understanding of each fintech it decides to work with but a clear full system view of all third parties involved. “We want to make sure that we have full visibility and transparency on all the transactions down the full chain. And if there is a suspicion of activity that’s not been vetted, we don’t allow it,” he said.

Sidebar: A quick look at how Fifth Third is reaching individual consumers

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