Founder and CEO of Wildfire Systems.
While there’s no precise recipe for creating a white-label enterprise platform to serve the highly regulated, high-touch financial institutions (FIs), there are specific ingredients needed in that space.
One thing is clear: Collaboration between banks and fintechs is evolving. Financial institutions are increasingly turning to partnerships with fintech companies in order to speed up their product development cycle and deploy new technologies and benefits for their customers—in part to compete with the more nimble challenger banks.
The services that white-label platforms provide can be effective competitive differentiators for today’s financial institutions. These services can include features such as payment processing, virtual accounts, card issuing, cashback rewards and cryptocurrency wallets.
As fintech providers, in order to become an effective partner for traditional FIs, it’s essential to recognize the regulatory environment, compliance requirements and scale of operations within which FIs operate in order to provide dependable enterprise platforms that meet their needs.
What It Takes To Build An Enterprise Platform
Delivering a platform for white-label enterprise partners in the banking industry is different from offering a single-purpose direct-to-consumer product or service.
What are the components to building a safe and easy-to-use enterprise white-label platform for banking? While each situation is different, here are some insights culled from our experiences broken down into three overarching categories: security and privacy, reporting and scalability, and customization and embeddability.
• Security and privacy. Because FIs handle some of the most sensitive customer data, account details and credit card numbers, they need formidable perimeter protection. However, some fintech companies that thrive on innovation, quick development and time-to-market can sometimes leave security and privacy fortification as an afterthought or give it no thought at all. Instead, fintechs need to view information security as a really big deal.
Fintechs should take a multifaceted stance on protecting the privacy and security of their banking partners’ data. This can start with getting certified in SOC 2, a voluntary compliance standard developed by the American Institute of CPAs (AICPA) that sets a framework for working with all organizations, including those that outsource significant processes. Attaining SOC 2 compliance—which covers security, availability, processing integrity, confidentiality and privacy—can demonstrate how seriously a fintech takes protecting consumer banking information.
It is also important for fintechs and FIs to stay current with global policymakers that continue to push for customer protection guidelines. For example, the United Kingdom has outlawed screen scraping and requires third-party providers to acquire consumer consent. The European Union expects augmented consumer protection from companies offering goods or services to its residents. On this side of the pond, the Federal Financial Institutions Examination Council has proposed a potential framework for U.S. financial institutions to conduct due diligence regarding third-party vendor risks.
We take an absolute stance on protecting privacy—so much so that we have gone far out of our way to architect our platform from the ground up to completely ignore personally identifiable information (PII). We are not touching, collecting or storing PII, and we’re certainly not sharing it. Our privacy-focused approach, where all users are tokenized, allows us to allay FI concerns by never handling PII in any way.
We recommend this approach to any fintech player that seeks to partner with banks and other FIs, especially in cases where their payment processing and other offerings plug into data systems and handle sensitive information.
Security audits, including proactive penetration and vulnerability testing, can help ensure your data protection does not spring leaks. Whether an FI embeds your platform into digital apps or integrates it with its back end for user authentication, all applications of your enterprise platforms need to be “bomb-proof” from a security, privacy and compliance perspective.
• Reporting and scalability. Enterprise-grade offerings for FIs require sophisticated and secure reporting systems and the capacity to handle massive throughput.
First, FI partners expect business-grade reporting systems that protect data custody and integrity by only allowing accessibility to those authorized to use it. Make sure banking partners can manage reporting and retrieve key performance indicators through a dashboard, complete with password-protected two-factor authentication logins. FIs also need access control levels for siloed data to further limit and shield contacts from specific information.
In addition, fintechs often encounter potholes when they fail to accommodate for rapid, step-function increases in transaction volumes as they light up new partners. Unlike direct-to-consumer platforms, which can scale and expand capacity in step with steady user growth, launching white-label offerings for B2B partners means you need to be ready to handle the immediate system demands when they go live with your offering to their installed base of customers.
• Customization and embeddability. White-label enterprise platforms require a degree of tailored deployment to meet the distinct needs of each partner. This can be achieved by a combination of configuration and customization.
Configuration is often accomplished by a modularized, pick-and-choose approach to the suite of features and functionality that your platform entails. To accomplish this, feature sets should be designed and built in discrete components—and for your own sanity and well-being, these components should be able to be easily added in (or excluded from) your platform offering.
Customization, on the other hand, means altering and adapting the facets of your platform to meet the very specific needs of a partner. This can include something as simple as rebranding the platform for white-label implementations. In other cases, be prepared to innovate to create unique feature sets that enable your partners to deploy differentiated offerings.
Customization can often be made possible via software development kits (SDKs) as well as application programming interfaces (APIs) and headless APIs, which can provide banking partners with embeddability and flexibility options when deploying your features and functionality.
By considering the three themes provided above, partnerships between fintechs and FIs can become not just mutually beneficial but possible. This is the price of admission for fintechs that want to meet the strict standards and expectations of banks and financial institutions.