What are the advantages and disadvantages of various BaaS platform models in terms of speed to market?

Guest: The reason why these banks use these middleware providers is because that's essentially their API strategy. For example, Synapse sits on top of Evolve. That's also where there's friction in that relationship. Evolve may want to be a little tighter as far as fraud checks and KYC generally, and Synapse might be a little looser where they want to get more people through the funnel. Synapse wants to get more startups, but Evolve would say, "Wait. We're a regulated entity. And we can't break the law because we're going to get fined. And we would get our license taken away and you Synapse aren't worth it for us for that to happen." So there's this push and pull. So Synapse essentially is the Evolve API strategy. Together, they can provide a developer experience.

FIS, Fiserv and Jack Henry are companies from the '60s and '70s that are centrally an aggregation of acquisitions over the last 40 years. You can imagine from a pure developer perspective that it's impossible to have a good user experience building on top of the FIS.

So Treasury Prime said, "You're totally right. Instead, we're going to do it for you, we're going to plug into the bank's core infrastructure and you just call our APIs." Which is great. Now, the reason why banks would want to do it is because they want deposits.

The problem traditionally that banks had before there was even a middle layer is that they were limited to clients in their vicinity because no one knew about Evolve Bank. The only people who knew about Evolve Bank and Trust are people who lived in Tennessee around the bank. So they knew about the branches, but now how does Evolve Bank and Trust get a client from Seattle? Well, they physically can't, they don't have a mobile app. There are no branches in Seattle. So instead if they partner with Synapse, then if you're a FinTech and you want to build something, you can just build on top of Synapse, but Evolve was going to be the bench sponsor.

In terms of pricing, the middleware’s pricing is not transparent. It’s based on negotiation. It's not obvious from their websites. They only talk about their capabilities. You have to talk to salespeople to start the process.

Synapse charges $5,000 a month plus basis points. And if you're a FinTech startup charging $25,000 a month, and rely on interchange, it means it's impossible for you to build anything. The economics just cannot make sense.

So if we look at Treasury Prime, essentially what Treasury Prime allows a FinTech to do is to embed money movement capability, whether it is ACH, wire card, you need to have a KYC offering. You need to underwrite the customer. If you and I wanted to build a little neobank, we could go to Treasury Prime and do the entire thing on Treasury Prime. And then we're going to offer ACH to our customers, which is going to be coming through Permont or one of the Treasury Prime partner banks.

When we think about Brex, who has their API strategy. They're kind of open sourcing their platform, they're probably starting to compete, but that's not their bread and butter. Brex is still getting startups to use their card and their ecosystem and charging interchange plus something for their expense management, real-time reconciliation etc. That's still probably their bread and butter.