Month: December 2019

Fintech APIs Today

If you’re building a bank today, you’re in luck. Much of what you need is available via API so you can skip the months of legwork to find bespoke banking and compliance partners.

If you’re building a bank today, you’re in luck. Much of what you need is available via API so you can skip the months of legwork to find bespoke banking and compliance partners.

You can start building on day 1.

Here’s a few of the things you can start building quickly by standing on the shoulders of g̵i̵a̵n̵t̵s giants-in-the-making.

KYC/AML

To offer most financial products you’ll kneed to abide by Know Your Customer (KYC) and Anti Money Laundering (AML) rules. This will involve asking the user for personal and financial information and verifying it’s authenticity. These providers automate much of the work required to verify the information collected.

  • ID Verification — Is that picture of their passport or driver’s license they uploaded authentic and actually of them? Trulioo and Jumio will handle that check for both USA and international applicants.
  • Accuracy & Watchlist Scans — Is the address they provided really theirs? Is their legal status free of flags for money laundering or international watchlists? Blockscore handles those checks via its API.

Account Inspection

While onboarding the customer, you’ll often want to confirm and connect with financial accounts they own. Perhaps you’ll want to confirm balances or offer to ACH funds into their new accounts.

Checking

Want to offer a checking account? Skip searching for a banking partner to hold the funds and allow you to onboard customers. These APIs enable you to skip the partnership and plumbing legwork.

Credit Cards

Perhaps you’ve got a spin on the traditional credit card and think you can get into the flow of interchange fees. Maybe a card for teens or one to control your spending?Avoid the upfront fees and convincing card issuing partners and use one of these APIs instead.

Trading Equities

Now that you’ve got millions of people direct depositing their paychecks and spending using your credit card, let’s offer them some investment tools to put their money to work. Sure, they could open an E-Trade account, but wouldn’t it be easier to do this in the same account they already use for their personal finances? You could start the multi-month, multi hundred thousand dollar process to launch a Broker-Dealer, or leverage one these APIs to get started immediate.

These APIs are serving as the infrastructure anybody needs to get finance products to market quickly. The end result will be more products tailored to more market segments and hopefully better finance experiences and outcomes for all of us.

Automated Finance Apps Are Eating Deposits

Apps automating personal finance will improve financial health and relegate bank accounts to commodities offering highest yield and lowest fees.

Banks wage an ongoing war to hold your money. You’ve seen the tactics — higher interest rates and free credit reports are the modern free toaster to open a new account and setup direct deposit.

You get those free toasters because:

  1. Banks earn money by holding your money. 
  2. There’s inertia to deposited money. You’re too busy to move it around optimally, it generally stays where deposited. The bank that gets it first gets to keep making money from it.

In the perfect world, your money would flow from paychecks to where it’s needed at just the right moment. It would earn you the highest return in the right accounts for the right purpose, while ensuring your bills and payments are covered. 

A new generation of apps are changing money management by automating personal finance. These apps will become the primary way people manage their money, owning the customer relationship and ultimately their deposits.

Autonomous Finance apps that improves financial health and save time are the new battleground in finance.

Personal Finance Today

Today, your finances probably look something like this.

Your income flows into a main account and perhaps you move some for savings and bills elsewhere. If you’re like most people, you probably don’t do that, just operating out of that one account.

Banks battle to be that primary account. 

Maybe there are higher yielding accounts elsewhere? Maybe you should be moving set amounts every month for savings? Maybe you’ve exceeded the SIPC insurance limit and really should split money into separate accounts so you’re protected from a black swan? Maybe you’re forgetting to move funds some months and accruing overdraft fees? 

People are busy and distracted. So maybe they do none of these things even though it’s in their best interest.

How Autonomous Finance Apps Change Things

Tomorrow, Autonomous Finance apps will be the primary way you manage your money.

The application manages the movement of funds according to rules you set or that it figures out based on your behavior. 

  • Need $1,000 in your checking account on the 5th of the month? No problem, the app will make it happen and ensure you don’t get hit with an overdraft fee. 
  • Want to put aside $100 each month for a large purchase? Done.
  • A new savings account is introduced that offers higher yield? Easy, the app manages moving funds so you maximize earnings.

The key thing here is that your primary relationship is with the application. The accounts used become commodities that can be interchanged by you or the app itself. Accounts compete purely on their utility for the purpose they serve—interest rate, fees, etc…

Owning the customer will take more than getting them to open an account and setup direct deposit. The software eats the inertia of how accounts are used. Owning that software and providing the user the best experience is the new battleground. 

Who is best poised to create that software? Startups and FAANGs or the banks that most people like less than their dentist?

Autonomous Finance Apps Today

The universe of apps today is large and growing. Each approaching the problem uniquely for their target markets. Here’s a round up of just a few.

Ultimately, only one or two of these businesses are likely to emerge as large, standalone players. We’ll all benefit from how they will rewire the competitive landscape by having more options to manage our money more easily and efficiently.