‘Partners are now more inclined to do their due diligence before engaging with a BaaS partner’: Green Dot’s Simran Singh

Banks are undergoing digital changes. However, this operational shift toward integrating digital technology across their core systems can come with a variety of challenges.

Despite liquidity issues in the banking sector coupled with the possibility of an economic recession, banks are trying to keep their tech budgets afloat to stay ahead of the curve. Amid a broad swathe of layoffs across the sector, some banks have also resumed hiring selective positions that can support their digital transformations while keeping the firms compliant with regulatory changes.

I spoke with Simran Singh, senior VP of Banking-as-a-Service at Green Dot, about how BaaS is evolving with emerging technologies, what trends he sees creating some of the biggest impacts in the banking industry, and what that can mean for consumers.

How is Banking-as-a-Service evolving in 2023?

Simran Singh, Green Dot: We’re watching the BaaS industry mature after several years of overzealous investment in the space that has led to some players with unsustainable business models fizzling out. What remains are companies focused on delivering measurable and sustainable value for their partners and end users through business models built around long-term value creation. 

Compliance has also come much more into focus due to the explosive growth in the space, ushering in a welcome environment of regulation and oversight that will ensure new partnerships are being built with the safety and security of the end user in mind.

How has the banking turmoil impacted payments firms in the larger scheme of things?

Simran Singh, Green Dot: The events of the past year have illuminated the importance of stability, diversification, and maintaining a well-capitalized balance sheet. Partners are now more inclined to do their due diligence before engaging with a BaaS partner, which is ultimately good for the long-term health of our industry.

How challenging has it become to launch new products/services or expand existing ones amid increasing regulations?

Simran Singh, Green Dot: As an established fintech and BaaS leader with a bank charter, we’ve had years of regulatory experience that has helped in how we build partnerships and products with customers' safety and security top of our minds. Deep focus and experience in regulatory compliance around KYC, money movement, AML, and other regulatory considerations and requirements are more valuable than ever to help ensure long-term sustainable growth and success.

How can banks constantly upgrade their IT Infrastructure, given they are reined in by regulations and legacy systems?

Simran Singh, Green Dot: Analysts estimate that more than 40% of US banks today still run core banking processes on legacy back-end systems designed nearly four decades ago. A technology transformation journey can be long and expensive, but institutions that fail to prioritize modernizing their tech stacks will pay in the long run through higher operational costs, lower stability of systems, and eventually a customer base that loses their trust and leaves for platforms with better services.

At Green Dot, we’re nearing the completion of a technology transformation that’s involved taking what was a complex technology stack and creating a more streamlined and cloud-native platform that enables more efficient, customizable, and nimble production. 

More consolidation might be on the horizon in the banking industry, what could that mean for consumers?

Simran Singh, Green Dot: Consolidation often leads to less choice for consumers. In the short term, this might negatively impact consumers (higher fees, lower approvals, etc.), but ultimately the stability of the banking system will benefit consumers in the longer term. The more trust and belief we have in the strength of the banking system, the lower the cost will be for banks to operate and eventually pass savings along to their end users.