In the modern banking industry, the concept of White Label banking exists in a close relationship with Banking-as-a-Service, which this article aims to explain in detail. While the former opens the doors to newcomers that are willing to provide financial services and “borrow” the ready solution for that, the latter allows for a fast and consistent launch of these services. Looking at the combination of two, it realizes the potential to bring a revolution in the sphere of financial products, as well as their distribution. How does this system operate, though?

Main actors

There are various parties that collaborate in order to create customized banking products that are later offered as an on-demand service. Let’s take a closer look at them.

Licensed bank – a full service licensed and regulated bank is the fundamental player in the game. With its help intermediaries receive financial products, while it also bears the responsibility for ensuring consistent regulatory compliance.

White Label provider – this actor uses a licensed bank’s core facilities in order to develop innovative solutions, which are later sold to front-end service providers. Clients of these entities are able to customize the products they select according to the needs of their company. This is what lies behind the concept of Banking as a Platform.

Fintech service providers – they provide the necessary interface and work on the actual product delivery implementation. Besides, they are often responsible for offering a communication interface between the multiple third-parties and the client. FinTechs continuously work on building a unique and user-friendly platform that is upgraded with advanced analytical and authentication tools.

Distributors – here we are simply talking about companies that specialize on mass distribution, such as those that are phone service providers to millions of customers, or supermarket chains. The latter are useful, as they have an access to a wide client base and are able to efficiently distribute financial products.

Keep in mind that some companies can play more than one of these roles, although the strength of the mechanism is the specialization of firms in different interconnected sectors, which allows for the provision of a customized solution to the end customer.

Be the engineer of the product you get

Now we can transplant the model into the real-world scenario. The fundament is created by a licensed and regulated bank, then there is a white label service provider (e.g. a credit card company), and then a local distributor. All of these actors communicate through encrypted and secure channels that are created by a FinTech company that is also responsible for a mobile or web portal for transacting and viewing the card details.

You could spot similarities with a conventional platform, but the value of this system is the ability to change every single element of it. For instance, you can select a bank that provides the lowest rates, a white label provider with the most suitable solution, an end user platform that provides an effective management of finances, and simply purchase this through your local distributor. You can compare it to being able to choose the manufacturer of every singe detail when buying a car.

The future of digital banking is here, and it is built on White Label and Banking-as-a-Service solutions.