FinTechs, FIs Uniting Over Distributed Banking For Disbursements

Ingo Money CEO Drew Edwards recently told PYMNTS that “Historically, banks have viewed FinTechs through an ‘us versus them’ lens — and rightly so, because, in so many cases, the banks were disintermediated or relegated to become ‘dumb vaults’ for the FinTechs they partnered with. However, there is a new game in town [in which] the FinTech actually empowers the bank to enable its own services, such as disbursements, for its corporate clients and all the way through to the clients’ end users or recipients.”

That’s distributed banking, a FinTech model that “remains invisible and never enters into a customer relationship with the end user but rather facilitates the technology, payment choices, risk management and customer experiences necessary to delight everyone in the value chain.”

PYMNTS’ January 2021 Disbursements Tracker® done in collaboration with Ingo Money explores the new era of greater cooperation between legacy banks, financial institutions (FIs) and FinTechs as the financial system works to overcome lingering lags, even as the U.S. government prepares to disburse another massive round of stimulus payments to anxious citizens.

Consumerization Continues

Consumerization of disbursements has been on a roll of late, with rocket-like momentum provided by the COVID-19 crisis moving faster disbursement solutions to the front of the line.

“The pandemic is … shifting how banks, lenders and consumers view emerging or alternative lending methods, including P2P payment apps and other product offerings,” per the January Tracker. “A recent PYMNTS report noted that consumers are becoming less satisfied with paper check disbursements, with less than 10 percent of consumers stating that they would prefer to receive payments in this manner.”

Shifting to digital requires FinTech partners that can rapidly deploy innovative capabilities, among them, distributed banking. Edwards said this model “already enables some of the largest banks and insurance companies in the country today to modernize the way they pay consumers and small businesses with use cases such as claims and vendor payments. The bank strengthens its treasury banking relationships with super-large corporate clients, and the corporate clients get branded customer experiences that delight their recipients while saving them money.”

Challenge And Opportunity For Lenders

Distributed banking is proving out in the mortgage loan sector, for example, where players are adapting to patterns created by the confluence of a global crisis and the tech to work around it.

Per the new Tracker, Tim Elkins, chief production officer for home lender and refinancing firm PrimeLending, notes, “Most borrowers are now expecting that the whole of the lending process — from applications to loan disbursements — can be managed digitally, even when it comes to larger transactions, such as mortgages or home loans. This represents both a challenge and an opportunity for lenders, especially as consumers in younger age brackets begin to represent a larger percentage of those buying homes for the first time or seeking these types of loans.”

To that end, Elkins told PYMNTS that PrimeLending is digitizing disbursement, replacing paper wherever possible. “The company is also seeking to implement emerging technologies that could further strip the amount of time that goes into this process,” per the new Tracker.