This story was delivered to BI Intelligence " Fintech Briefing " subscribers. To learn more and subscribe, please click here . Many fintechs rely on partner banks to perform certain functions, like providing access to financial systems or the ability to hold deposits. That’s because getting their own licences for these activities is complex and can be expensive due to capital requirements and, in the US, the need to get multiple licences to operate in different states. But some fintechs have decided it’s worth the hassle — including UK money transfer fintech TransferWise, which is looking to move away from its banking partners and acquire state licences in the US, according to the Wall Street Journal. Meanwhile, other fintechs, including UK digital-only bank Monzo and German competitor N26 ,are getting full banking licences. There are a number of reasons why fintechs likely believe the financial outlay and cumbersome process are worth it: Reduced complexity. Having a licence that allows it to hold deposits or directly access systems means that a fintech can control a customer’s end-to-end journey. For TransferWise, state licences would enable it to register to perform its own know-your-customer checks, and thus cut out a step in the customer journey. This would likely reduce complexity, which could help speed up transfers. Ability to offer a wider range of products. With its own banking licence, Monzo can offer products like savings accounts and overdrafts. Meanwhile, TransferWise said its state licences would enable it to "potentially offer a wider range of features," according to the Wall Street Journal. Reduced ongoing cost. Licences may be expensive initially, but relying on a third-party typically involves paying them a recurring fee. This is particularly important for TransferWise, which competes with other providers aggressively on price but operates a similar business model , […]
