Embedded Finance: Cores are not Built for Multi-Tenancy

There is an increasing comparison between Embedded Finance Technology providers like Infinant and Banking Core Systems. One of the key differentiators is the ability to house multiple tenants (FinTech Programs) within the same Ledger.

Bank Core Multi-Tenancy

The Banks Core System were designed for the Bank being the only Tenant, all accounts and customers were associated to the Bank, only the Bank’s employees are granted access to view and service the customers and accounts.

How do Bank Cores manage multiple FinTech Program?

Solution 1: FBO Accounts

Historically, with Card Processors, Banks allowed the account management to sit outside the Bank’s Core, allowing for all Card Processors to use For-Benefit-Of (FBO) Accounts where all the deposit across customers were comingled.  This limited visibility to any of the Card Accounts for the Bank’s Operations and Compliance teams, but FBO Accounts allowed for the ability to manage the funds without having the added expense of creating millions of accounts on the core.

As the Banking as a Service (BaaS) Providers came to market they further leveraged the FBO model for embedded finance use cases.  As many readers will know, this had severe drawbacks resulting in several consent orders.

Solution 2: Branching the Core

By keeping accounts on the Core Systems try and create a Branch within their Ledger.  This brings in its own sets of issues,

1. No visibility to the FinTech Partner for their customer account positions.
2. Program Managers (BaaS or Card Processors) take a percentage of fees for accounts and transitions, which cannot be maintained by the branch and Banking Finance teams need to expense these outside of the Ledger
3. New Branches take time to implement and carry heavy costs.

We’ve also spoken to certain banks that have had to implement separate Core instances to manage multiple programs, as Branching doesn’t scale well.

Solution 3: True Multi-Tenancy

Seeing the issues with multiple programs how they are managed by current BaaS Banks and BaaS Providers, Infinant was able reenvision multi-tenancy, providing completely segmented Tenants at the sibling level, but while still providing Bank Tenants with visibility and control. Infinant’s multi-tenancy provides:

• Separate Feature Configurations: Program A can have Consumer Profiles enabled for a Consumer Card Program, while Program B is an Employer benefits program, that manages Employers as Businesses and Employees as consumers.
• Separate User Management: Bank Administrators can provide Bank Employees with access to only the Programs that they service, while restricting access for Program Users to their specific Programs.
• Separate Customers and Prospects: Application Manager, holds the set of Prospects relevant to a Particular Program, while our Customer Search will only access the customer set for the Selected Program
• Separate API Keys and Webhooks: FinTech’s can setup API Keys cater to their Tenant and Subscribe to Webhook notifications only for their customer base.
• Separate Exception Handling: Allows the Bank to use third parties to help service specific Programs with high volumes, and gives visibility into FinTechs on Exceptions
• Tenant Hierarchy: Allows Banks to Manage Card Processors and their Clients as Sub-Tenants all in the same Console, providing a 3-tier hierarchy where Banks, Processors and the Programs themselves all have access to view and play a part in the servicing of the accounts.
• Cross Tenant Transfers: Between Banks and their Programs, automated funds flow to move fee revenue from end customer accounts to Revenue Operating Accounts to Revenue GLs and provide interest splitting between programs and end customers.

As traditional core systems are not built to manage Embedded Finance use cases, Banks may not anticipate the need for multi-tenancy, which is why most BaaS Banks today adopt the FBO model.  Using Infinant’s Interlace Platform helps banks take back control of the customer while staying compliant and providing the right level of visibility to the Program Managers.

For more info on the Interlace Platform, reach out to sales@infinant.com.