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Expert opinion

Has fintech become banking's new Legoland?

Monday 15 July 2019 | 07:00 AM CET

Sandra Schriek of Ginger explains the differences between banks, issuers, acquirers, and PSPs, as well as PaaS and BaaS providers, that offer payment services to end users

Who does what?

Banks, issuers, acquirers and PSPs play a regulated role in payment transactions. They offer payment services to end users: business and private account holders and to companies that receive payments such as retailers, government, hospitality, and utilities. Typical differences between these parties that offer payment services to end users include:

  • Banks usually only offer payment services to their own account holders. The other parties, issuers, acquirers, and PSPs originally offer payment services to anyone regardless of at which bank they have an account.

  • PSPs have their origins in offering online payment services, in particular in the aggregated offering of multiple payment methods to ecommerce retailers (one-stop-shop principle). Acquirers have their origins in offering POS payment services to physical stores, while issuers in offering international and/or local credit/debit cards to individuals or companies.

  • Banks originally offer many forms of payment services to private and business account holders and to all companies that receive payments. Think of cash, checks, transfers, and direct debits. Incidentally, not all banks offer payment services to retailers.

PaaS (Payments as a Service) parties can fulfil several roles:

  • Offer payment services to end users as an acquirer or PSP. The role of a bank with corresponding broader banking services to end users is not fulfilled by PaaS parties.

  • Offering IT platform solutions as a solution provider to banks, acquirers, and PSPs and possibly supplemented with managed services: the implementation of one or more operational processes, such as customer onboarding, customer service or fraud handling.

  • Examples of PaaS providers: Ginger, Ixopay, Mesh Payments, ACI Worldwide.

BaaS (Banking as a Service) parties, compared to PaaS parties, focus more on the broader banking services to end users by banks, for example, issuing and managing payment accounts, offering business or private loans and various FX solutions. BaaS can also play several roles:

  • as a bank, acquirer or PSP, offering payment services to end users;

  • as a solution provider to banks, acquirers and PSPs, offering IT Platform solutions and possibly supplemented with managed services;

  • examples of BaaS providers: Banking Circle, Banking Blocks, Railsbank, Onpex, Five-Degrees, Synapse.

Layered structure of offerings

Which shifts are visible?

Due to new technology, new regulations and new providers, all banking value chains, such as payment transactions, loans, investments and mortgages, are changing. In particular, the changes in the value chain of payment transactions are going fast.

Due to the rise of PaaS and BaaS Providers, it is now possible for everyone in the value chain to move up the chain, cut out parties between them or fulfil multiple roles in the chain at the same time.

The Paas and BaaS parties have, as it were, created a Legoland with all kinds of modular payment and banking services that can be put together quickly and easily in various ways. This allows everyone in the chain to explore new roles, put together new services and try out existing or new customer target groups and/or new eco-systems.

Build your own bank

Everyone is going to reinvent how they can create value in the broadened, cross-sector, value chain.

  • PSPs move up the chain and become acquirer to save costs, achieve growth or broaden their services to merchants, e.g. for lending to merchants based on average turnover in the store. PSPs can partner with BaaS parties for this broadening of services. Larger PSPs even move up the chain up to include a banking license.

  • Large retail companies are shifting to the chain and become PSP in order to arrange payment transactions with as few intermediaries as possible and to integrate it into the optimal shopping experience of the shopper. Retailers with sufficient own development capacity build this themselves. Retailers who cannot or do not want to rely on their own development capacity partner with PaaS parties and/or PSPs.

  • Large ecommerce companies are changing roles, are no longer going to sell their own products and only become a sales platform for the products of their affiliated retailers, for example, BOL.com, OTTO, Zalando or Bax Music. The new role is often accompanied by the redesign of the customer experience, including the optimal integration of payment traffic on the platform and obtaining the license for offering payment products.

  • Banks are transforming and will offer payment and banking services to everyone, regardless of where the customer runs their bank account. On the basis of a new perspective on customer data, banks offer new, for example personalised, services to customers.

  • New sectors are embracing integrated payment solutions (consider, for example, the car and transport sector).


Build your own marketplace

It is difficult to predict what the consequences of all these developments will be. It is certain that with the help of BaaS and PaaS providers, the current business models are being redesigned, new products, services and revenue streams will arise, the customer experience is improved, and the optimisations will lead to more efficiency and cost savings.

About Sandra Schriek

Sandra Schriek, Chief Commercial Officer | Managing Partner at Ginger and Managing Director | Founder at Pro2Change, has worked for over 30 years in the payments industry. She has always worked at C-Suite level and has developed payment strategies, functionality roadmaps, and has led large-scale transformations for banks, banking and payments associations, payment providers, issuers, and acquirers. She has also spent considerable time creating new payment services and solving complex industry issues for her clients, providing her today with a unique overall insight of market developments.

About Ginger 

Ginger, founded in 2014 by a team of industry experts, is a fast-growing PaaS Platform Provider based in Amsterdam, The Netherlands. Ginger helps banks, FI’s, corporates and fintechs to build, improve, reroute, or replace their payment technology with its unique payment platform. With Ginger’s modular infrastructure and API that unlocks the continuous integration of new products, services, and functionalities, the possibilities are endless. Reduce costs, increase efficiency, and flexibility and shorten time-to-market.

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