The Benefits of Embedded Fintech with Elizabeth Gujral // Cornerstone Hot Takes

Liz, thanks for joining us. One of the things I think a lot of our clients are interested in is talking about banking as a service. I know there are a couple of different versions of that. I’m curious if you could maybe break that down for some folks.

Yeah, of course. Like you said, banking as a service is really this umbrella term for two major pieces. The first is embedded banking, and the other one is embedded fintech.

When we think of embedded banking, think of the Chimes of the world. Because they’re not a bank, they can’t hold the deposits, and actually The Bancorp is holding the deposits. That can apply for payments, lending, treasury management, any kind of products that fintechs are offering.

Then the other one is embedded fintech. This one, I think, is really, really interesting because you don’t have to be a fintech to offer the capabilities of a fintech. This is where you partner with a fintech.

One interesting one that I’m hearing a lot about right now is Greenlight. It’s the neobank for your kids and teenagers. They vacuum the floor, they check it off, and $5 gets deposited into their account.

What Greenlight is doing currently is offering its product to banks and credit unions. It’s a co-branded solution as a way for our financial institutions to tap into that younger demographic. So it’s the partnership between the bank and the fintech to offer the fintech offering to the bank and credit union customers.

Let’s take a minute and talk about embedded fintech first, because I think that’s one folks probably aren’t as familiar with. But I think the example you gave is a really good one, right?

Greenlight is a functionality. In some ways, it’s like a vendor, but it’s a little bit more unique because it’s a unique functionality that doesn’t exist from standard vendors, from your FIS and Fiservs of the world.

So it’s the ability to offer something like parent-child accounts, family wallets, that type of capability as a financial institution.

I think SavvyMoney is probably another example, right? Where they offer credit bureaus and scores and things like that.

So embedded fintech, I think, is a part of this. And honestly, you tell me, but my guess is, for most institutions, it’s probably more likely to be viable for most of our clients because using those fintech capabilities within your financial institution is a much easier process and much more likely to be viable than becoming a BaaS bank, a.k.a. becoming the bank behind a Chime or another fintech in the space. Is that fair?

Right. And that’s a whole other topic to talk about, the compliance and the technical requirements of becoming a BaaS bank. There are about 100 institutions that do that.

But I think the really great thing about embedded fintech is being able to offer these products that you don’t have to build yourself. It really is just a partnership between you and the fintech.