Is Stripe Treasury ‘game over’ for banking as a service?

Payments infrastructure company Stripe recently launched Stripe Treasury, a banking as a service API that allows platforms to embed banking services with a few lines of code. 

Stripe has partnered up with Goldman Sachs, Evolve Bank and Trust, Citibank and Barclays to provide banking services for the new product. The API will enable merchants and vendors to make ACH and wire transfers through Stripe’s banking partners. Stripe clients also get access to interest-bearing bank accounts and faster access to payments. 

“Everything about running an online business has been transformed by technology, but business banking has largely been left behind,” said Karim Temsamani, head of banking and financial products at Stripe. “But we’re changing this, just like we set out to change payments a decade ago. Offering a user-centric banking experience should be as easy as spinning up a virtual server -- that’s what we’re starting to accomplish at Stripe with our bank partner network.”

The move is emblematic of a larger trend of embedded finance that is layering in banking capabilities within companies in any industry and integrating financial services within platforms already used by customers. Goldman Sachs, one of Stripe's banking partners, recently launched its own banking as a service offering for transaction banking, TxB. 

“Together, Stripe and Goldman Sachs are focused on relieving the frustrations internet businesses find in making banking work for them,” said Hari Moorthy, Goldman Sachs’ global head of transaction banking. “The millions of ambitious, fast-growing businesses in the Stripe ecosystem will soon discover a dramatically improved end-to-end digital banking experience.”

Canadian e-commerce giant Shopify will partner with Stripe Treasury to build out Shopify Balance. Shopify Balance, part of the e-commerce platform's fintech strategy, allows merchants to directly open bank accounts within Shopify. Shopify merchants will have seamless access to revenue which can be easily spent or transferred. 

The launch of Stripe Treasury has industry professionals buzzing about how this product will impact BaaS providers in the long term.

“Stripe has taken the next logical step in their payments offering by entering the embedded finance arena. A tenured giant like Stripe entering the BaaS space will force other players in the industry to step up to the plate. The question is whether Stripe’s platform will be flexible enough to serve the fintech players that require more tailored solutions,” said Patricia Montesi, CEO of B2B payments hub Qolo. 

According to financial strategist Paul Sundin however, Stripe isn’t necessarily competing with other fintech providers or ISPs, but instead is seeking to be the backbone for everyone. “This is a mammoth project and if Stripe can pull this off with their Treasury product, it would be an entirely new universe of platforms that can offer their unique customers financial services that are perfectly tuned to their needs,” he said.

Incumbents have started partnering up with big tech players to combat the wave of disruptors in the BaaS space. Citi recently announced that it will be collaborating with Google for its Citi Plex account by Google Pay. Apple Card was launched by Apple in partnership with Goldman Sachs.

Traditional banks have built-in regulatory and compliance frameworks and long held consumer relationships that provide them with competitive advantages over challengers. They may push on this differentiation to offer competitive solutions.

“We will probably see the bigger banks open virtual solutions to compete. Many of the banks have their own payment processing arms, so offering similar services to compete with Stripe might not be too much of a stretch. While payment processing rates might not go down, merchants may have more options when shopping around for merchant services,” said Cris Carillo, co-founder of Allied Payments. 

Beyond the hype, there remains concern about how Stripe Treasury will measure up to the banking demands of other fintechs. 

“Overall, if you look under the hood, Stripe Treasury lacks features that are really needed to build powerful financial products for companies outside the retail space, such as neobanks or fintechs,” said Sankaet Pathak, CEO of Synapse Financial Technologies, a banking as a service platform.

Stripe Treasury, disruptive as it appears, may be limited in its applicability to real life use cases.

“It doesn’t make it any easier to develop products for lending or credit, the KYC framework shows room for improvement, and there’s no real bill-pay product - just ACH transfer. There’s also some questions about ATM ubiquity. While most competitors allow more customization, Stripe seems to be going after a very specific use-case of embedding deposit accounts in a modular way,” said Pathak.