There are plenty of ways to describe the technology behind our modern day banking system. We can talk about digital wallets, mobile payments, blockchain, cryptocurrency, and even Artificial Intelligence (AI). But what do we call something that's so much more than any one of these things individually? We could say "financial tech", but this term has become synonymous with AI and machine learning, which isn't quite right.
In fact, you'll find that there are two different types of financial tech out there today - BaaS and SaaS. The first refers to the idea of building your own product or offering from scratch, while the second focuses on using other people's solutions rather than creating your own. And both offer distinct benefits for businesses looking to get started in the industry.
But how exactly do they differ? What makes each type of solution unique? How does it impact consumers? And why might you want to use either over the other? To help answer all those questions, let's look at the differences between BaaS and SaaS.
Before we dive into the technical aspects of the two models, it helps to understand the difference between traditional banking and the emerging field of FinTech. Traditional banking involves physical banks and branches, whereas new technologies like online banking have made it possible to conduct transactions without ever having to leave home. These days, most of the work required to open a checking account takes place entirely online.
The emergence of FinTech has given rise to a new category called “white label” or "banking as a service" (BaaS), which allows small startups to build their offerings by partnering up with larger firms already established in the sector. This means that instead of developing an entire product from beginning to end, entrepreneurs will be able to access existing software platforms and tools via an API, allowing them to focus on growing their business rather than reinventing the wheel every time.
This approach offers some major advantages compared to traditional methods of starting a company. For starters, many of the pieces needed to launch a successful venture are already available through partnerships with large brands. Instead of trying to develop everything yourself, entrepreneurs only need to figure out how to integrate the features of the partner product into their own.
And because the partners handle customer support and maintenance themselves, the startup doesn't have to worry about dealing with customers directly. As long as the product works, users won't think twice before signing up and giving it a try.
So how did this model come to be? Why would anyone choose to start a business based around another firm's product rather than developing their own?
For one thing, it provides an easy way to scale quickly. By tapping into someone else's proven infrastructure, entrepreneurs don't have to deal with the challenges associated with launching a completely new product. They also avoid wasting valuable resources on developing their own version when they could just sign up for the same functionality offered elsewhere.
Furthermore, the whole process is easier to explain to potential customers. Because everyone knows what Amazon is -- whether it was invented by Jeff Bezos himself or not -- customers who know nothing about bitcoin or cryptocurrencies may still feel comfortable handing over their money if they trust the name attached to the product.
As a result, BaaS products tend to appeal primarily to non-technical audiences. In addition to being simple to use, they're often marketed toward millennials, since the younger generation tends to prefer convenience over complexity.
But perhaps the biggest advantage of using third party apps comes down to price. Since the startup doesn't have to pay licensing costs, development fees, or marketing expenses, it can charge less than its competitors. That means that even though the product itself is similar to others currently on the market, it may actually be cheaper overall.
If you want to learn more about BaaS applications, check out some of the best white labeled finance options below.
While there are several terms used interchangeably across the internet to refer to BaaS providers, none of them really capture the essence of the concept well enough. So in order to make sense of this confusing terminology, here's a brief guide to the three main terms involved.
A white label provider simply uses a different name and logo than the original manufacturer. It's not illegal under US law to create a fake bank, but it certainly raises ethical concerns. After all, if you were planning to rob someone and wanted to conceal your identity, wouldn't you go straight to the real estate agent?
Because of this, white labeling generally implies that the product itself wasn't developed by the company providing it, and therefore carries no guarantee of quality. Of course, this depends on whom you ask. Some experts argue that the only truly effective method for ensuring high standards is to hire developers who've worked previously with clients like yours. Other critics suggest that such safeguards aren't necessary, pointing out that the customer ultimately decides whether or not to give credit to a particular brand.
On the flip side, some believe that the mere act of branding a product gives off positive vibes. If you're a consumer, you'll probably assume that the company backing the project cares deeply about making sure its product performs perfectly. On top of that, the presence of a recognizable brand should inspire confidence among investors, giving the startup a better chance of raising capital later on.
Whatever your opinion on the subject, keep in mind that there's always going to be a risk involved whenever you hand over control of your finances to another person or entity. You never know what kind of consequences might arise as a result of trusting someone else's judgment.
It's also worth mentioning that there are certain laws governing the relationship between the parties involved. Under federal regulations, banks must disclose information about their lending practices to customers, including details regarding interest rates and loan amounts. However, they cannot provide personal data about individuals without their consent.
When talking about SaaS solutions specifically, we tend to refer to them as "bank labels". Although there's no legal requirement to adopt the name of an actual bank, the practice is common enough that it's been adopted as shorthand within the industry. Just as the term 'white label' describes the practice of integrating a third-party product into a startup's own offering, a bank label refers to the integration of an external product into a bank's own software suite.
To illustrate what I'm getting at, imagine that you had heard your friend tell you about her new job working as a salesperson for BankABC. She says she loves the work, and thinks they're doing great things with their innovative technology. One evening, after finishing dinner together, she invites you back to her apartment so you can meet the team.
At first glance, you'd likely agree that BankABC sounds pretty cool. From what you hear, it seems like the employees at the company are smart, friendly, and hardworking. Even better, you discover that BankABC recently partnered with BankXYZ to improve security and streamline processes throughout the organization.
After chatting briefly with your friend, you decide to apply for a position there too! All you have to do now is fill out the application form, submit it to HR, wait for approval, and then show up for orientation next week. Sounds straightforward, right? Well, unfortunately, there's a catch...
Since BankABC doesn't officially exist yet, it's impossible to legally accept donations from outside sources. When you filled out the application form, you gave BankABC permission to share your contact information with whomever they chose. Now, however, you're forced to hand over your private social media accounts to the company for review. Not only that, but once you join the staff, you lose complete ownership of your assets. Your employer owns them until you die.
You may wonder why this matters. After all, there's nothing inherently wrong with having your Social Security number stolen or your bank account emptied. Isn't it better to embrace technology than fight against it?
Well, yes and no. While it's true that the internet makes it incredibly convenient to transfer funds electronically, it also creates opportunities for criminals to commit fraud. As a result, many governments require citizens to register with local authorities in order to obtain identification documents. Banks typically follow suit, requiring proof of identity before issuing loans, opening savings accounts, or granting debit cards.
By adopting a SaaS solution, you're putting your privacy at greater risk. Once a hacker steals your credentials, he can impersonate you anywhere you log onto the web. He may even sell your identity on the black market, leaving you vulnerable to future scams.
Of course, not everyone is convinced that the risks outweigh the rewards. Many proponents of BaaS point out that the majority of online banking activity occurs inside corporate environments anyway, limiting the scope of damage hackers can inflict. Others counter that there's value in keeping such sensitive data away from prying eyes altogether.
Ultimately, the choice boils down to personal preference. No matter which option you pick, remember that there's always a risk involved whenever you entrust another individual or institution with controlling your finances.
If you’ve been following the world of finance for some time now, chances are that you will have heard or read about ‘white label’ before. The term refers to when two businesses collaborate together to create an entirely new product which both parties can sell under their own name.
In this article we explore what exactly white label means, how it works, and whether there is any benefit over traditional approaches. We also give you our thoughts on the most popular types of white label solutions currently available and discuss why they might be less attractive than you think.
The phrase “plug and play” has become synonymous with technology since Apple introduced its iDevices, but it goes back much further than that. It was first used by IBM in 1961 to describe a computer system designed to work without human intervention.
A decade later, the same concept became part of American slang vocabulary after being coined by John F Kennedy at his inaugural address in January 1963. He said of the then-newly completed National Aeronautics and Space Administration (NASA): "We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard."
Plug and Play describes a business model whereby one company provides another with software or hardware, allowing the latter to easily integrate into its existing infrastructure. This type of arrangement allows companies who don't want to spend time developing systems from scratch to outsource those efforts to specialists already working within their organization.
While the idea of outsourcing development of complex applications may seem like something straight out of science fiction, it's actually very real. For example, many banks use outsourced digital assistants such as chatbots to answer customer questions during live chats and automated phone calls.
Many of these bots are developed using AI technologies created by tech giants including Google, Microsoft, Amazon, and Facebook, among others. These tools allow firms to cut down on costs while increasing customer satisfaction levels. In fact, according to research conducted by Accenture in 2018, more than half of all consumers expect contact centers to offer self-service options.
This trend towards automation is likely to continue throughout 2020 as organizations look to reduce operational expenses while improving customer experience. As such, it makes sense for large corporations to seek ways to streamline their operations through partnerships with specialist providers.
As mentioned above, the phrase 'white label' originates from the 1960s, yet it wasn't until 2001 that the concept really began gaining traction. At that point, a number of prominent retailers were looking to diversify their portfolio by partnering up with smaller brands who could help them grow their presence across multiple markets. They wanted to avoid having to develop similar products themselves, so decided to partner with established manufacturers instead.
Nowadays, the industry operates on a global scale with hundreds of thousands of small businesses joining forces with major names every year. The goal of these collaborations isn't just to generate profits though – it's to increase sales and build relationships between different partners. To achieve these objectives, businesses need to ensure that everything runs smoothly behind the scenes.
One way to accomplish this is via the provision of white label software packages which allow vendors to quickly launch new projects based on pre-existing templates. Some of the best known examples include PayPal, Airbnb, and Uber. However, despite the success of these platforms, there are still plenty of opportunities for startups to carve out niche areas of expertise.
For instance, several well-known online casinos operate by offering customers access to games hosted on external servers. By doing this, operators can charge users higher fees compared to if they had built their own gaming platform. Meanwhile, ecommerce sites often rely upon payment processors and shipping networks provided by 3rd party suppliers.
Finally, companies in industries such as travel insurance and banking are able to save money by signing agreements with established providers rather than investing millions in setting up their own IT infrastructures.
It might surprise you to learn that certain forms of white label collaboration aren't technically illegal. While these arrangements are usually frowned upon by regulators, they're perfectly fine if both parties involved agree to abide by the relevant laws and regulations.
However, even if everything seems above board, it doesn't mean that you should necessarily jump onboard right away. There are numerous risks associated with entering into long-term contracts with unknown entities, especially when it comes to sensitive data protection issues.
Furthermore, although the majority of white label deals involve non-financial institutions, there are exceptions. Indeed, it's possible for individuals to enter into legally binding agreements with large corporates too. If you ever plan to pursue a career in law or consulting, it pays to understand the potential pitfalls ahead of time.
Another form of white label involves the creation of branded items that carry your logo alongside someone else's. Examples of this kind of licensing agreement would include the sale of t-shirts bearing corporate logos or the production of sports jerseys worn by players representing teams sponsored by private enterprises.
Some people believe that the emergence of these kinds of collaborative ventures represents a step backwards in terms of individual autonomy. After all, it implies that people no longer have control over the designs and colors of clothes they wear, nor do they get to decide who sponsors their favorite football team.
On the contrary, however, there are strong arguments against the notion that big corporations are taking advantage of ordinary citizens. Many argue that companies like Nike, Adidas, and H&M provide jobs to tens of thousands of employees around the globe, thereby helping keep communities afloat in tough economic times.
Meanwhile, many people see the rise of mega brands as a sign of progress. Instead of spending hours browsing through countless stores in search of the perfect outfit, modern shoppers prefer to tap a few buttons on their smartphones and receive personalized recommendations directly in front of them.
Although there are certainly downsides to this approach, there are also benefits. Not only does it make shopping easier and faster, it also helps prevent fashion trends from becoming stale. So far, it appears that the public likes this compromise. According to YouGov Global Data Insights, 75 percent of respondents said they preferred buying clothing online rather than in retail shops.
So, next time you visit a brick-and-mortar store, consider asking yourself whether it's worth paying extra for personalization features. Perhaps it's better to invest your cash elsewhere and buy an item from a reputable retailer instead.
Of course, there are always going to be naysayers who feel that nothing good can come from collaborating with larger companies. But if you enjoy wearing trendy outfits, you probably won't care either way!
The internet has opened up the world of business to everyone with an idea and a computer. The only limit now is how much money you can make from your product or service. However, this doesn't mean that every entrepreneur should start building his/her own company right away.
Instead, many are turning towards partnering with established businesses that already have everything in place for success. This form of collaboration allows entrepreneurs to leverage existing platforms without having to put all of the resources into creating something completely new.
In fact, there's even a specific type of arrangement called "white label" which simply means taking someone else's product and putting your own branding on it. In other words, if you're starting out and don't want to spend too much time learning about how to create a website, hire employees, etc., then white label might be perfect for you!
But what exactly is White Label Financial Services (WLFS)? What benefits do they offer? And who uses WLFS today? Let's explore these questions together below.
If you've ever heard of B2C marketing, you probably know that it refers to selling directly to consumers -- not through middlemen like retailers or distributors. For example, instead of buying shoes at a store, people will go online to purchase a pair of sneakers from Nike.
This same principle applies when looking at the relationship between banks and customers. Instead of going to a bank branch, people use mobile apps or websites to apply for loans, open accounts, transfer funds, etc.
Nowadays, most major banks offer some kind of digital alternative to traditional methods of doing things. That said, most users still prefer using a physical location because it provides greater security and convenience. But since banks aren't always able to provide both those features, they've developed partnerships with other providers that allow them to fill in the gaps.
For instance, if you live in one country but need help opening a personal account overseas, you'll often find that the local bank won't give you access unless you pay a fee to another provider known as a "gateway". Similarly, if you need assistance transferring money internationally, you may also end up paying fees just to reach the destination.
That's why so many banks nowadays partner with credit card issuers, payment processors, ecommerce sites, etc. These partners usually charge a small percentage of each transaction as compensation for facilitating payments, processing transactions, etc. They also handle customer support and ensure that any issues are quickly resolved.
Since these relationships are typically long term contracts, banks tend to focus more on providing value than making profits. As such, they generally try to keep costs low while maximizing revenue. Thus, white labeling offers them two main advantages over running their own operations:
1. It saves them time and money by outsourcing certain tasks that would otherwise require significant internal investment.
2. Since they don't have to worry about managing servers, IT infrastructure, customer support staff, etc., they can devote their efforts elsewhere.
To understand how white labelling works, we first must discuss what makes a typical bank different from others. Banks operate under several restrictions imposed by regulators around the globe. To comply with regulations, banks must maintain certain levels of capitalization, liquidity, assets, reserves, etc. If you look closely, though, you'll notice that none of these requirements really matter anymore.
It used to be that banks could choose whether or not to accept deposits, issue loans, invest in stocks, or engage in derivatives trading. Now, however, the government regulates virtually everything banks do. So instead of being left alone to decide how to run their businesses, banks must follow strict guidelines set forth by central authorities. These rules vary depending upon the region, but overall they prevent banks from engaging in risky activities and encourage them to prioritize profitability above all else.
As such, white labelling provides banks with additional flexibility in deciding how best to serve their clients. While they continue to adhere to regulatory standards, they can now concentrate their energies on offering innovative solutions to problems rather than focusing solely on compliance.
When you think of white label finance, you likely imagine a consumer facing application that lets individuals set up accounts, manage finances, track spending habits, etc. However, this isn't actually the case. Most white label applications fall into three categories:
Banks & Investment Firms: Companies like Citibank, HSBC, Wells Fargo, JP Morgan Chase, Goldman Sachs, Bank of America, UBS, Royal Bank of Canada, Barclays, Credit Agricole, Deutsche Bank, Commerzbank, etc.
Financial Technology Providers: Examples include Intuit, Square, Stripe, PayPal, Xero, QuickBooks Online, Wealthfront, etc.
Other Businesses: Examples include Amazon Pay, Uber, Airbnb, Lyft, Postmates, Shopify, GoDaddy, Google Cloud Platform, etc.
There are plenty of reasons why banks and other organizations turn to white labelling. Some cite increased efficiency and lower operating costs. Others point out that the technology required to build a robust web presence is increasingly complex and expensive. Still others believe that investing heavily in developing proprietary software is unnecessary given the proliferation of modern tools available.
However, no matter the reason behind it, white labelling enables banks to increase revenue while reducing overhead expenses. By allowing smaller firms to piggyback off of larger ones' products, banks reduce competition and cut down on risk. At the same time, they can improve user experience by adding extra functionality and streamlining processes.
And although white labelling sounds simple enough, it can sometimes prove challenging due to legal concerns. For instance, if you were to develop an accounting system based on Microsoft Excel, you'd technically violate intellectual property rights. Fortunately, there are ways to avoid infringing on any copyrights or patents.
Railsbank is a Singaporean FinTech startup that specializes in white label financial services. Founded in 2015, its mission statement reads as follows:
Our vision is to bring simplicity and accessibility to financial management by democratizing the way people transact, save and allocate wealth. We strive to empower our members throughout life – from early childhood education and financial literacy, to helping people get started in career paths and saving for retirement.
While it focuses primarily on Asia, Railsbank believes that white labelling represents a global trend. According to CEO Lee Hsien Yang, "the rise of digitization across industries means that there’s less room for intermediaries." He goes on to say that, "as a result, consumers have become increasingly empowered to seek better deals and more transparency in terms of pricing, products, services and delivery models."
So far, Railsbank has partnered with a number of well-known brands including RBC, Standard Chartered, OCBC, and CIMB. The company claims that it currently serves over 20 million active users worldwide and expects to double that figure within five years.
Despite growing rapidly, Railsbank remains profitable and has never raised venture capital funding. Rather, it relies on revenues generated from its various partnerships to cover operational expenses.
With the explosive growth of FinTech, expect to see more startups enter the industry in coming years. Many of them have plans to expand beyond white labelling and eventually replace banks entirely. Until then, however, we recommend keeping tabs on the latest developments. You never know when you'll come across a great opportunity!
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