‘How to build a credit card product like a Lego rocketship’: Railsbank’s Dov Marmor

Embedded Finance is becoming more competitive. New platforms are launching and existing platforms are expanding into new products and geographies. My guest today has seen it all. Dov Marmor has helped build some of the leaders in banking as a service, including Currencycloud, Green Dot, and now Railsbank.

Railsbank’s chief operating officer for North America, Dov Marmor joins me on the podcast to talk about the embedded finance field — where the market is headed and who’s best positioned to take more marketshare. Railsbank is launching in the U.S. with its credit cards as a service solution to both fintech and brand customers. 

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The following excerpts were edited for clarity.

Credit cards as a service

The big problem we’ve identified is everyone who’s launched a debit card has credit next in their sights — it has different economics, it helps them reach a broader swath of the population. It just has a bunch of features that you can’t do with debit on its own.

But most of those companies have also been blocked because of the incredible complexity of actually building a credit card program. Because on top of the processing, and the cards and all the things you do with debit, you also have to learn to manage credit and raise funds and manage risk, different elements of banking, sponsorship, different regulations. And it’s an alphabet soup of things that one needs to do to go from debit to credit.

SPONSORED

We saw a big opportunity of automating all of that. So putting together all of the different infrastructure pieces that you need to launch a credit card program, building in the bank sponsorship and the credit line. And then working with our GC and Chief Compliance Officer who is a former FDIC regulator over banking and credit cards to actually build a compliant program that teaches someone how to create their own products from soup to nuts.

I kind of equate it to my son’s Lego set. I get a box with a bunch of little pieces in it and an instruction manual. And it takes me step by step on how to build a rocket ship. We bring that same flavor to building your first credit card product.

Railsbank’s launch in the U.S.

We’re a global company. And actually one of our differentiators is that every API that we create in a customer facing format is country agnostic. So we’ll use functions like open accounts, send money, receive money, check transactions, and run credit. The idea is that everything we’re building on credit card as a service is intended to be expanded globally.

The concept of rails is that we connect those customer facing APIs to the back end supplier rails, powering each one of them. So we’ll have a credit rail, we’ll have a banking rail, we’ll have a payments rail.

The first go to market region for credit card as a service will be the US but we built it in a way that we can very quickly expand it across the other regions. That becomes really powerful if you’re a global app, a global rideshare company or a global market company. Today, if you use a domestic [banking as a service] infrastructure, you actually have to go build your product 10 times if you’re in 10 countries. With Railsbank, you build the product one time, one set of APIs, and that same experience can exist no matter where you are in the world.

The importance of being global

I think the biggest companies all need companies that can support them globally. So it’s become an increasingly large demand of the customers that everybody wants to go after. Where I think we have a leg up is that we designed the core of our platform to be global. It’s a lot harder to take a domestic platform and make it global after the fact.

The credit card market in the U.S.

If you think about debit cards, I don’t really spend money on my debit card, I use it to go to the ATM basically. And the rest of the time I’m spending it on my credit card, I spend on my credit card because of rewards, because it lets me pay at once a month, because I don’t want to watch my balance going down. There’s a bunch of different psychological issues that happen around why I pay with my credit card.

But credit cards are pretty basic financial products — there’s nothing special about the experience, and it doesn’t really connect with anything. So as an example, I love Alaska Airlines. And before COVID, I would be flying once a week on Alaska, and I always use their app. It’s really incredible. But if I get the Alaska Airlines credit card, my credit card experience lives somewhere else, I have to go download a second app, and I use it just like I would any other banking app. Why isn’t that experience living inside of the platform and the brand that I’m already going to do so many other things every day?

The reason is co-brands are built on a legacy kind of static infrastructure where they can slap your label on it and [that’s it]. I think today’s brands are moving more and more into embedded experiences to ensure that the customer can remain on their platform, and they can get more and more value out of offering services there.

On a typical credit card, people are probably going in and checking their balance, and they’re checking their transactions on a regular basis. Now, every time they go in to check their transactions, they also see, hey, there’s a good deal to fly to Hawaii; hey, there’s a good deal to do this or a good deal to do that. It brings customers back to the experience instead of letting them live in a separate bank’s experience. That’s one area that I think the co-brand market has a massive opportunity for innovation that just required a bit of a BaaS thinking to be applied to it.

The second market is that you have all of these massive fintech brands that have been hugely successful at acquiring customers, right. And all of them are today debit only and they all want to move into credit. And I think there’s another big opportunity in enabling them to do that by being the simplest, fastest turnkey solution to get a product like that to market. Because no matter who you are, if you’re the biggest company or the smallest company, everyone has the same goal. How can I get products into the hands of my customers quickly, so I can learn how they use it? Today, it’s a three year contract. Hopefully, you figure out in three years. We think we can do a better job than that.

Use cases

A lot of [new use cases for credit cards] are interesting rewards based programs, tying rewards to other aspects of their ecosystem. Other ones are mixing credit and investing. Today, my points on my Amex go into this bucket of points that I don’t really do anything with — they just kind of sit there and pile up. Imagine if instead, those points went into an investment account that generates an eight to 10% annualized yield?

We’re looking at charity use cases. Could I take the points that come from my credit card, and have those directly funded, directly funneled to a person in need, and have a charity match the balance on that?

There’s lots of really cool use cases that folks are coming up with. And every day we hear the idea that we can provide that kind of core platform that can build all those different varieties of use cases, and most of the innovation and differences come in where the points go, and how that operates.

The embedded finance market

I don’t think it’s a winner take all market. I think there are going to be a few winners. That said, I don’t think there’s going to be enough meat on the bone for too many players. I think you have to have scale to operate this business. I think you have to have the right partner-centric mindset. I think you have to really invest in the programs and build on your platform and ensure that they’re successful. And I think you have to be fair and transparent with pricing.

So, all those things combined are going to set Railsbank apart from some of the others in the space — but also just the reliability and the scalability and kind of everything else that we built in our tech stack. I think those are super important to create a long lasting, competitive advantage.