How to assemble a full stack bank in 5 steps without a license or a core system

By Bernard Lunn


Image courtesy of Starling Bank

This is like furniture that you assemble at home that comes with instructions that tell you that you will need:

  1. A great Customer Experience design team.If the shop wants to be more brutally honest, it will add something like this:

“Your Minimum Viable Product must have a bit of design magic. You don’t need Steve Jobs level magic but you need to be closer to that end of the spectrum than a cheap developer that can configure a basic web site. Without that, your MVP will be functionally OK, but will fail to get customer traction”.

  1. A mobile wallet that is allowed to accept payments and make payments. In other words, a checking account aka current account. Check out Frees to see how to do this well (our coverage from a year ago is here). If you are in India, please get a Payment Bank License (or partner with one of the 11 new licensees). If you are in America, partner with an existing Credit Union or the USPS if they succeed in getting a Postal Bank Lite license. Your global rollout will have to follow the regulators in each country as they pass these Bank Lite Licenses (many initiatives are already underway).
  1. Get access to one or more Lending Marketplaces via their API so that you can offer loans to your customers.
  1. Get access to a licensed deposit-taking bank, so that your customers can keep excess cash safely. For wealthy clients you can spread this over multiple banks so that they avoid loss due to counterparty risk in case any too big to fail bank is actually allowed to fail. All in one place is dangerous. Spread your risk.
  1. Partner with multiple Robo Adviser to offer an investment account.  One may do simple low cost allocation using ETFs, others may offer more exotic “low cost alpha” products.

This is another example of what we call the Great Fintech Rebundling opportunity. It is part design magic, part business model innovation and part win win partnership deal-making.

Rebundling does not require a banking license. Nor does it require one of those multi decade old core banking systems. Garage startups and giant global banks have a relatively level playing field:

  • Banks have access to capital and a brand that is well known albeit a bit tarnished.
  • Startups have agility and execution discipline (and plenty of capital if they execute well).

Daily Fintech Advisers provide strategic consulting to organizations with business and investment interests in Fintech.


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.