Yeah, agreed, it looks like they are very efficient. But I'm very familiar with the Bank as a Service space, and your data points very much prove my point:
1. The reason so many BaaS companies partner with existing banks is because the process of getting a bank charter is incredibly time consuming and expensive. There are tons of costs just in legal/compliance before you've even done anything. I'm not 100% clear if Column bought an existing chartered bank or got a new charter, but either route is millions right off the get go.
2. As you point out, they were at 3 years from founding to launch. That's an eternity in the VC-funded startup world. Most startups have an initial MVP in a ~6 month time frame.
Not quite. BaaS just provides the banking rails. The ability the send, receive and store money.
But it’s up to their customers to build actual products on top of it. Such as bank accounts, loans etc. Otherwise all you really have is a REST API that happens to be able to move money. But good luck getting your average consumer to pay for that.
And who's owning the banking license in that case? Because to me that sounds a lot like, well, banking. And wasn't aware that the ability to move money from one account to another is actually a big issue. And if it's just the software banks use, well, they already use it, don't they?
The diagram on Column's homepage (scroll down a bit to "our advantage") explains it quite well.
There are a bunch of banking-as-a-service middleware providers like Galileo, Treasury Prime, Unit, Synapse etc. who provide nice, easy-to-use APIs for things like opening a bank account, sending an ACH, provisioning a debit card, etc. Doing these things "on your own" can be incredibly difficult, e.g. the NACHA rules around sending and receiving ACH files are incredibly complex. These companies do NOT own a bank charter. Instead, these companies partner with lots of different banks that DO have a bank charter and integrate with their "core banking" systems (core banking systems usually run on mainframes and are provided by companies like Fiserv). Then, fintechs like Chime you want to provide banking services to their clients can focus on the "user facing" part of the experience and less on the difficult, nitty-gritty parts of the banking stack.
What Column has done is consolidate the roles of the middleware provided, core banking system and chartered bank into a single company so there are fewer middlemen to take a cut.
Banking licence is owned by the BaaS company, and they allow others to borrow it when using their platform.
The companies building on top of a BaaS are not banks. They’re fintechs building products like privacy.com, or something else.
Moving money between accounts at the same bank is obviously trivial. I’m talking about the ability to move money to other financial institutions via card payments, wire transfers or whatever.
1. The reason so many BaaS companies partner with existing banks is because the process of getting a bank charter is incredibly time consuming and expensive. There are tons of costs just in legal/compliance before you've even done anything. I'm not 100% clear if Column bought an existing chartered bank or got a new charter, but either route is millions right off the get go.
2. As you point out, they were at 3 years from founding to launch. That's an eternity in the VC-funded startup world. Most startups have an initial MVP in a ~6 month time frame.