For many consumers, banking today looks different. Long gone are the days of visiting branches, writing checks, and paying fees for services because they are manually monitored. Instead, today’s customers are looking for mobile apps, peer-to-peer payments, and no-fee accounts—and they really don’t care who the bank is behind the technology. This has given a rise in FinTech companies getting into more traditional banking functions, with some help from legacy banks.
While companies such as Chime and Rocket Mortgage have disrupted traditional banking functions, they haven’t done it alone, of course. Instead, they have partnered with banks to provide many of the functions and services they offer through banking as a service (BaaS).
Bank Sponsorship and BaaS Markets Boom
According to Future Market Insights, the global BaaS market revenue reached $2.5 billion in 2020 and is expected to reach $12.2 billion by 2031, growing at a CAGR of 15.7% between 2021 and 2031
And, with expected growth in the market, there are opportunities for community banks to work with FinTech companies coming into the market.
Speaking at our latest webinar, “The Power of Data: See how bankers are using data to band together on technology,” FedFis leaders Dave Mayo, CEO & Founder, and Tanner Mayo, President, pointed out that there are “351 FinTechs today that are using a bank and there are 75 sponsor banks that are sponsoring those 351,” they said. “That is a really important metric because those numbers are quickly on the rise.”
Mayo added that there are about 1,025 FinTech companies “looking in the background” at getting into the banking game. While traditional banks have seen this as a threat, he said that it is an opportunity for community banks to diversify their revenue streams by providing the services and regulatory compliance for the FinTech companies for a fee.
“They’re really not trying to change your bank. There are a lot of sponsor banks helping process for somebody else,” Mayo said. “It’s kind of like a branch system, except this branch is actually a digital FinTech that’s got everything from card-issuing to checking accounts, FDIC insurance, all those parts, and pieces.”
Data is Vital for FinTech Sponsorship Success
Of course, with so many players knowing which ones are worth partnering with can be laborious and risky. The FedFis leadership showed how its platform helps banks learn about their potential FinTech partners—not to mention other banks and more—all in one easy-to-navigate platform.
“We can go figure out earnings categories, ratios numbers, different technology stack innovations, and things that are going on,” they said. “This is free for bankers. Almost everything we do for banks is free.”
In addition to research on FinTech companies, the company’s website has several sections that contain data on everything from banks to bank tech stacks to call report financials, vendors, bank cores, and more.
There is even a section, Bankers Helping Bankers, that provides a community that is built exclusively for community bankers to share information and insights on industry trends and interact with each other to help bankers do their business better.
To see more about the opportunities FinTech sponsorship can provide for community banks, as well as insights on the way data can be used to grow your business effectively, watch this webinar today.