We’ve written before about how Banking-as-a-Service has the power to disrupt any business that deals with money in some part of its operation, which basically applies to any company or platform business in any industry.
Every company has contractors, employees and suppliers to pay or customers to bill and every company wants to maximize speed, convenience and efficiency. That’s why we at Open Platform believe there’s huge potential in the US for more companies to use APIs to offer payment services, bank accounts and debit cards as a native part of their product.
We at Open Platform believe there’s huge potential in the US for more companies to use APIs to offer payment services, bank accounts and debit cards as a native part of their product.
However, Banking-as-a-Service also has the power to transform the lives of consumers for the better. A powerful example of this is within the student loan industry. While the first generation of fintechs connected consumers with better student loans, a new wave of companies are helping consumers alleviate the burden of student loan debt.
These include PeopleJoy, Goodly and Vault, companies that allow employers to help with their employees’ student loan debt as an employee benefit, and Commonbond, a platform through which customers can access loan refinancing.
They are addressing a big problem. According to the Federal Reserve Bank of New York, outstanding student loan debt in the US rose to $1.49 trillion in the first quarter of 2019, up $29 billion for the quarter.
While the first generation of fintechs connected consumers with better student loans, a new wave of companies are helping consumers alleviate the burden of student loan debt.
One company currently in pilot with Open Platform gives individuals with student loans an easy way to pay down their debt faster. Its offering allows users to round up their daily card purchases to the nearest dollar amount and automatically contributes the change to their linked student loan account. That reduces the lifetime of loans and the amount of interest paid on that loan.
The company’s algorithm also identifies the best time to make payments on each student loan to minimize the amount of interest paid. Users can also invite family, friends, employers or universities to match some or all of their round ups each month.
The company tracks each user’s card transactions and the rounded up amount. Then it uses Open Platform’s Move Money API to initiate ACH transactions that pull the difference between these two amounts from the user’s bank account into an FBO (pooled) account at BBVA USA. It also uses Open Platform’s digital bill payment directory and digital bill payment service, another part of the Move Money API, to submit payments toward each user’s student loan at the optimal time.
These student loan fintechs join a number of other US fintechs that have launched services to help consumers alleviate debt, whether that is by transforming payday advances into earned income access, automating pre-tax spending or, in the case of Digit, a company that works with Open Platform, meet financial goals, pay off credit card debt and save for a rainy day.
This is likely just the beginning, as CB Insights identified the growth of fintechs tackling consumer debt reduction as one of the key trends in its 2019 Fintech Trends To Watch report earlier this year. We’re excited to see what the next wave of consumer debt innovation will bring.
Which industries do you think could be disrupted through Banking-as-a-Service? Contact us here.
The Open Platform team