Strategic Finance, Corporate Development & Investments @HRT | Prev: @Unit, @Chime, @Sift, @JPMorgan | Duke '13
*It's time for BaaS providers to simplify billing, not just banking* Banking as a Service (BaaS) has revolutionized fintech by streamlining the way companies integrate banking services. But there's a glaring issue that often goes unaddressed: the complexity of pricing. Term sheets and invoices are notoriously convoluted, making it a nightmare for clients to decipher what they're actually paying for. The call for simplicity is loud and clear. For BaaS to truly mirror the success of SaaS models like Plaid, pricing must be straightforward, transparent, and easy to understand. Imagine a pricing model so simple it could fit on a single page, where every charge is client-auditable, eliminating the dreaded "pass-throughs" that no one trusts anyway. The dream? A model that charges a blended basis points (bps) on spending volume, account fees, plus a monthly minimum. This setup not only makes pricing transparent but also allows clients to easily audit and understand their costs. The concept of minimums caters to initial ramping and onboarding phases, while account fees can accommodate growth. Such a model could be adapted for various use cases, whether business or consumer-oriented, or differentiated by their reliance on payments, ledger, or account services. Simplification doesn't mean sacrificing margins; it's about understanding your business well enough to distill complexity into clarity. This issue isn't unique to BaaS; it's rampant across fintech infrastructure, where the intricacies of upstream provider fees often result in indecipherable pricing for customers. Yet, complexity in pricing should not be a given. Other industries, like shipping logistics, software operating systems and digital music have managed to simplify their pricing structures despite their inherent complexities. Why can't fintech? Of course, with great dependence on third-party providers comes great reliance on pricing that’s not under your control in terms of inputs or outputs. But while periodic pricing adjustments are understandable, piling on complexity is not. It’s harder to abstract complexity in fintech versus with other software products, but it’s potentially even more necessary to be truly better than the legacy fintech that’s being replaced. Some BaaS providers are attempting to simplify contract pricing, yet comprehensive solutions remain rare. It appears that the broader the scope of services offered, the more intricate the pricing becomes—a notion that isn't necessarily true across other industries. Simplifying fintech pricing isn't just about easing the burden on clients; it's about establishing a new benchmark for transparency and trust within the industry. It’s high time for BaaS—and fintech at large—to adopt simplicity not just as a convenience, but as a strategic imperative. That's a wrap! If you liked this post, please repost for reach and follow me or check out interspace.samir.xyz for more fintech, tech and stratfin nerdery.
