The Power of White Label Fintech Services

Written by Rodolfo Passeri

In a world where financial services are rapidly evolving, and consumers demand more convenience, white-label fintech services could be the way forward. With these types of white label banking or financial software solutions, companies can provide all of their customers with an exceptional experience without having to invest in time-consuming development work.

The Power of White Label Fintech Services

Sumit Bansal, Founder, and CEO of TrumpExcel, believes even non-financial companies could start to choose fintech white-labelling services if they become an option. He said, "Unless you exclusively accept cash, you'll need to have a way to process credit cards, wire transfers, cheques, and other forms of payment."

The three options he goes on to suggest are;

1) Create your own system. This allows you complete payment control, but it requires a significant investment in engineering resources as well as regulatory knowledge.

2) Use a full-stack payment service provider (PSP) like PayPal, Marqeta, or Stripe to handle your payments. This is the quickest way to include payments right now, but it comes at a cost. PSPs have value-added services, including authorization, anti-fraud, and systems integration right out of the box. PSPs gather the majority of the data in exchange for these services. It's a more convenient alternative for startups, but they lose control of an essential aspect of the consumer experience. If users have difficulty with a transaction, they should contact the PSP's customer service team, not yours.

3) White-label fintech infrastructure using API platforms. A white-label platform connects your company with best-in-class service providers to wrap around essential payment processing. White-label platforms, on the other hand, enable you to provide your customers with a native-branded experience.

What exactly is white-labelling?

In short, white labelling (or private labelling), is an agreement between two parties where one party provides services or products to another party under that other party's brand name.

There are now companies based solely on white labelling, such as Dollar Shave Club, which sold for $1bn USD in 2016. It's a subscription service for men's grooming and lifestyle items and sources its branded products from South Korean razor manufacturer Dorco.

What does this have to do with fintech?

White label fintech services are not only for small business owners looking to save money on starting a new company, but they're also perfect for established businesses looking for an edge over their competition while saving time and resources.

According to Girish Redekar, Co-Founder at Sprinto, "Digital technologies are democratising information across industries, allowing for more competition and innovation. As a result, the tendency toward 'open access' will only grow in popularity. For the past few years, the open banking trend in the banking industry has been spreading globally from its epicentre in the United Kingdom."

In essence, a white label fintech service can be thought of as a partnership between a company and a financial institution. They share responsibility for providing financial services without legal ownership of each other's assets or liabilities. It's a win-win situation for companies of all sizes to offer their customers valuable services without having to worry about the speed bumps associated with developing software from scratch.

What are the advantages of private labelling financial services?

White labelling fintech solutions offer companies the ability to provide services such as virtual accounts, payments, credit facilities, stockbroking, digital wallets, or even a combination of all those as mentioned earlier under their own brand name while leveraging on another company's technology stack. In addition to this, white-label fintech solutions can offer a company the ability to manage risks and comply with all necessary policies.

"This option has several major benefits," added Sumit, "Fees are frequently lower than those charged by PSPs. Payment operations are automated with white-label payments infrastructure, which reduces your workforce. Instead of depending on a one-size-fits-all solution, you may personalize authorization rules for your specific organization or vertical. You get control over the customer support experience, including the capacity to deal with chargebacks and remediation, which is a delicate subject."

At its core, white-label fintech services mean faster product development cycles by allowing businesses access to an established platform that has already been tested in the market. It also allows financial institutions or companies of any size to provide customers with financially centered digital products using their own branding.

"Through our Banking coverage area, Insider Intelligence gets ahead of trends such as private label financial services. This vertical, which is tailored for top financial services decision-makers, covers digital transformation all across the industry, including open banking and BaaS, mobile and online banking, consumer and corporate banking, digital account opening, and neobanks," concluded Girish.

What are the risks of using white label fintech services?

There can be some drawbacks to using white label solutions in certain circumstances, but only if a company misuses them. The first risk comes from not developing their own technology and instead relying on someone else's platform, which means they'll have limited control over how things are done.

The second risk is that there may be a lack of features people need to run a business, or the actual providers might not have built the APIs yet if it's a new product on the market. In some cases, white-label solutions can also contain bugs and security vulnerabilities, leading to data breaches and other problems down the road.

Article taken from Fintech Magazine.


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