What is the importance of establishing a direct relationship with the sponsoring bank as a neobank in the market?

Guest: So the risk is, for example, if any of your platforms do something wrong, say Synapse violates some law and they have to pull the rug under you, you will lose that banking relationship if you don't own it.

It's important to own it because you can set the interchange terms directly with the bank. For example, from what I understand, Treasury Prime seems to take its own cut. They weren't super transparent or the salesperson didn't fully understand it, but we see a majority of BaaS platforms take a cut and do not do passthrough. You want to get the gross passthrough interchange rates or as close as possible to it. Each BaaS tries to make the billing complicated or obfuscated to increase their margins, but you can tell which service will work best based on how honest they are when you call them out.

The margins on debit are already crazy low as it is, so this is why you see a bunch of BaaS providers come out and say: we have only one card provider we work with and we need to charge you $5-7 per card with monthly per account fees of up to $2-4. That makes no sense, and you shouldn’t allow them to lock you into these ancillary services.

This is why all these debit cards startups have to charge their end-users, but newer cardholders don't realize yet that those startups offer a product with features that most people could get for free. Credit reporting can be done through debit-style credit cards and you see the incumbents in this space actually go through the hard work of setting up correctly. All these new neobanks that are popping up are taking way too many shortcuts that will actually trip them in the long run.

You could be paying millions of dollars easily per month. A lot of the early BaaS providers think they're going to be a hot ship, but they're really killing these companies in the long run. Because they're not going to be able to monetize in time.