Envision a stack

From payments processors aggregators to those that aggregate sponsor bank relationships

Closer to the infrastructure...

• Means a higher need for risk / fraud / KYC knowledge

• More upfront costs and maintenance but also better unit pricing

  • Decide if it is worth it

Types of API providers

All-in-one API provider like Bond, Synapse, Unit, Lithic

• aka BaaS

• They do the hard work with bank partnerships, regulation, 3rd party integrations

• Usually pretty fast to get a live card to market

Core processors like Marqeta or Galileo or i2c

• Build your own stack

• Takes longer

• Gets more vendor choices and unit economics

How neobanks monetize

Usually debit interchange

• Works in the US albeit not very lucrative in Europe

• First profitable neobank was Starling in the UK though

• Unit economics matter a lot so maybe you should go down the stack and dive into the weeds

Subscriptions / RTP / memberships / partnerships

• Less focused on complexity, more focused on value to the customer directly and quickly

• Needs to understand customer problem like no other

• Rarely works except with mass market community driven neobanks

• Works for non-banks whose core value prop isn't payments related anyways like Shopify

  • Avoid all complexity and just buy Stripe to get payments

What you are buying with an API provider

Opinions on which product for AML for example

• They might be able to always do it better than you like Unit 21

Choice of provider / configurability / third parties

• Landscape does change a lot with partner banks, if a BaaS can adapt that for you that's pretty great

Or choose to self build

• If it is core to what you do

Dream API is one that allows you to drive when you want to and you can get all the data. not really possible but yeah.

Notes inspired by Simon Taylor and others