How ‘Invisible’ Tech Is Revolutionizing the U.S. Banking System

Way before he was a Broadway star, Alexander Hamilton was a formidable presence on another stage — in this case, the development of the U.S. financial system.

He made the case at the end of the 18th century for sweeping changes, arguing for a cohesive banking system and the availability of credit.

Fast forward a couple of centuries and the time has come to make some changes again, according to Mark Vermeersch, chief platform officer at Treasury Prime.  Banking-as-a-Service (BaaS), he told PYMNTS, has the potential to modernize the U.S banking system and bring anywhere, any time functionality to consumer and commercial customers.

Since Hamilton’s time, Vermeersch said, “The biggest economy in the world has also given rise to a very fragmented banking system.”

A Fragmented System 

There are upward of 10,000 depository institutions, spanning banks, credit unions and other providers. All of them, Vermeersch said, are grappling with a continuing shift in the way banking is being done and a shift in how consumers and commercial enterprises want to bank.

An increasing slice of daily financial life is being conducted on mobile devices and tablets — and apps, too, of course. The pandemic has given a tailwind to the shift itself. Using Apple Pay, contactless payment options and digital wallets may have been new and novel a few years ago, but now they’re mainstream.

The Invisible Layer

“Banking is becoming an invisible layer — for example, you step out of your Lyft,” he said, “and you don’t even think about the transaction” to pay for the ride because it happens in the background.

To meet those consumer expectations, said Vermeersch, creating a seamless end-user experience is critical in a bid to enable multi-channel, multi-faceted touch points. Banks have been increasingly more amenable to forging partnerships with FinTechs and enlisting the aid of providers such as Treasury Prime, which offers BaaS technology that eliminates a number of friction points.

Treasury Prime, he said, facilitates relationships between banks on one side of its platform and FinTechs/embedded finance companies on the other, with support on how to set up proper protocols to address compliance and regulatory concerns (and in the meantime, a network of banks takes shape).

The ultimate goal, he said, is to help companies provide a good user experience and add value through financial products — without getting bogged down by the technical hurdle of integrating with banks directly and connecting different pipes to facilitate payments.

The evolution of omnichannel banking, he said, need not exclude the bank branch. Just as physical stores are important in retail, banks, too, must have brick-and-mortar options, even though the branch counts might decline. There’s still a role for cash to play, too, as some consumers (and merchants) prefer that payment option.

“We need banking experiences that take all of these things into account,” he said, “where banking gets subsumed into everyday activities.”

Asked by PYMNTS how he, himself, would change the banking system, Vermeersch said that regulators would do much to modernize financial services by creating frameworks that invest in firms (Plaid comes to mind) that seek to digitize banking and introduce continuums of products and services.

Along the way, challenger banks can compete with one another for that funding, which gives rise to best-in-class innovation.

As he told PYMNTS, “The world’s biggest economy should also have the world’s best banking technology.”