Embedded Banking and Payment Processing

How should we set up payment processing between the Fed, our Core and this new Banking as a Service Provider?

Over the past year, we at Infinant, have heard this question hundreds of times, whether it’s Banking Operations, Banking Finance up to the CFO’s and CEOs of Banks.  The process of payments coming through the Fed, into the Core or BaaS Partner seems to be a black box.  In this article we will open that black box and show a few of the ways Infinant has helped banks solve this problem.

Dedicated RTN

Creating dedicated Routing Number (RTN), can feel like a large endeavor if the Bank has never done it before.  However, the process is fairly simple, there is some paperwork around enabling ACH, Wire and/or FedNow, if your BaaS Partner is also a Third-Party Service Provider (TPSP) with the Fed, they can directly process payments on your behalf.

This is Infinant’s preferred approach, by creating the dedicated RTN all the traffic for your Embedded Finance program redirected at the Fed.  Infinant has a direct Integration with the Fed and can automatically pull-down NACHA files, Wire and FedNow messages directly from the Fed, alleviating any burden from Banking Operations.

If your BaaS Partner is not a TPSP with the Fed, this method is still available to you, there is just a little bit more work involved.  The traffic for the RTN can be sent directly to the Bank, and Banking Operations can download the NACHA and Wire messages from FedLine Advantage, drop the files in a secure file share location for the BaaS partner to pick-up and process.  However, since FedNow is real-time, an integration to the Fed is required, it won’t be available to BaaS Partners that are not registered Fed TPSPs.

If the dedicated RTN is not an approach your bank wants to take, there is an alternative, Core File Splitting.

Core File Splitting

Some Cores will process NACHA and FAIM (Wire) files and split the messaging out for Accounts not on the Core.  This ideology also plagues bankers, leaving so many unanswered questions.

• If an account is not on my Core wouldn’t the Core just mark it as a return?
• How would the Core know if this Account number truly exists in the Virtual Ledger for my BaaS Partner?
• Does Banking Operations now have to triage every ACH and Wire and mark it for the BaaS Partner?

The solution is simple, Account Number Prefixing.  Each Program is provided with a prefix, that the Core can use to identify if this is truly an Account for your BaaS Partner or something that needs to be rejected.

As part of Infinant’s Payment Hub offering we provide NACHA file splitting in this way. Infinant currently uses this method of file splitting to process several hundreds of thousands of ACH transactions daily for Banks like Sutton Bank in Ohio, who work with several Card Processors using this solution today.

Conclusion

Now that all of that is simple, how does settlement to the Core work?  Unfortunately, we cannot share all our secrets in one article, to learn more about Settlement Processing, Payment Hub, or even our Card Processing solution, reach out to our sales team at sales@infinant.com.