The UK alternative banking sector is growing at pace and fintech-enabled challengers are harnessing new world technology and practices to revolutionise age-old banking processes.
Consequently, the industry has emerged to be a highly competitive space, driving providers to move ever faster and innovate ever more. Alternative banks are under pressure to operate more efficiently and offer a wider range of options. After all, if you’re an alternative bank, you need to be a credible alternative.
But many new and existing alternative banks still struggle to deliver the full range of payment solutions their customers expect. And this problem is exacerbated by the fast pace of regulatory change.
So, if you’re an early-stage digital alternative bank aspiring to become the next financial super app or an established financial services company looking for more than your current payments provider can offer, then this blog is for you.
Join us as we take a look at how Modulr can help you quick-start (or even restart) your financial proposition and deliver a real alternative to your customers by leveraging some embedded payments power.
Tech stack complexity is real
It may seem counterintuitive that alternative financial services companies would need an embedded payments provider - after all, they’re the digitally-first fintech innovators built on the premise of offering wider and more flexible solutions than traditional banks. But, the reality is that many still lack the resources to scale, the flexibility to adapt to changing customer demands, and the ability to provide a seamless, truly embedded alternative banking experience.
Unable to offer the full suite of embedded payment and account services themselves, such as Direct Debits, Faster Payments, cards or initiatives such as Confirmation of Payee, they’re forced to work with multiple partners, driving up cost and complexity. What were once ‘best-of-breed’ tech stacks built on the ‘as-a-service' delivery model have now morphed into complex payments ecosystems that are inefficient to run and time-consuming to manage. In addition, early stage and mature alternative banking businesses often lack both in-house expertise and the required regulatory licencing and permissions; needing a partner that can provide regulatory access into the payment schemes.
In trying to address these challenges, many look to established payment agency providers (e.g. traditional banks). But, they soon realise that they offer an inferior, unreliable service offering and a poor end-to-end customer experience (with payments processing in hours as opposed to seconds).
Why embedded payments are the answer
Embedded payments are the enablers of the alternative banking proposition, allowing for new and innovative ways of delivering financial services. Embedded payments are fully integrated, seamless, invisible and instant - supporting rather than obstructing the business flows they have been designed for. For this to work in practice, embedded payments need to be based on rich APIs making the underlying payment systems accessible through a single point of integration and with a degree of flexibility that has not been seen before. Once fully integrated, embedded payments offer a separation of the user journey from the underlying processing of a payment. This ensures that alternative banks leveraging embedded payments can keep their clients fully engaged within their brand experience.
And, thanks to payments powerhouses such as Modulr, it’s never been easier for alternative banks to incorporate embedded payments into their own platforms without the need to become payments experts themselves.
How Modulr powers alternative banks
Modulr's embedded payments platform makes it easy for alternative banking companies to offer a faster, more reliable service and gain a competitive advantage - all while reducing costs and the time spent on manual processes.
We’re one of the few non-bank payment service providers (PSPs) to have direct access to the Bank of England and the UK payment schemes, with no third party in between. We’re the top of the payments’ food chain, as it were.
We package up this payment scheme access together with our regulatory permissions and bespoke payments infrastructure to enable alternative banks to quickly and easily embed payments directly into their technology stack, delivering exciting new services for customers. And, because we take on all the regulatory and scheme heavy-lifting, we insulate them from the complexities of industry changes such as those being introduced in the New Payment Architecture; ensuring they retain access to the latest payment capabilities.
With Modulr, they can leverage our EMI licence to set up unlimited customer accounts, within seconds. These come with UK sort codes and account numbers or IBANs for EU accounts and are ready to receive funds instantly. And, thanks to our direct participation in the Faster Payments scheme and SEPA Instant, accounts can be topped-up quickly, with funds arriving in seconds, 24/7.
Real time account and transaction notifications for users, whenever they transact or interact, increase visibility, decrease the risk of fraud and reduce queries to support teams. Our platform functionality also includes Open Banking capabilities such as Payment Initiation and initiatives such as Confirmation of Payee (CoP), for seamless and more secure customer journeys. We can also enable alternative banks to instantly generate virtual or physical cards for their customers, providing them with multiple ways to start transacting, straight away.
And, for alternative banks with European ambitions, our fast, reliable and embeddable solutions help to overcome the payment obstacles that have historically been in the way. Our API-first access to the Single Euro Payment Area (SEPA), combined with our underlying accounts infrastructure, allows alternative banks to collect and disburse money and issue instant digital (EMI) EUR accounts in whatever way suits their proposition, all embedded directly within their tech stack. Our licensing support in both UK and EU regions saves both time and money and we’re connected to the SEPA rails, enabling real-time EU payments to be sent and received 24/7 with SEPA Instant.
In short, with our proven payments engine and full-stack solution, we’re the alternative bank’s one-stop-shop for all UK and EU embedded payments needs; enabling it to go further and grow faster. With Modulr, these FinTech challengers can bring new (or improved) alternative banking propositions to their customers far more cost effectively and efficiently than they could do alone, while opening the door to becoming the primary account for their users.
Now that’s what we call a real banking alternative.
So, if you're an alternative bank and you want to find out more about the embedded payments potential and what it could mean for your business, download our free guide today.