During IBM’s TechCon 2022 conference, we presented the technical details of integrating our new Fedwire-as-a-Service solution using IBM MQ – the required middleware for connecting to the Federal Reserve. Fedwire-as-a-Service (FaaS) is a cloud-native, API-led integration to the Fedwire Funds Service. It includes a fully-automated wire transfer process for banks and their Fintech partners. However, this modern approach to wire transfers would not have been possible without our customer and sponsor bank – Choice Bank. In this post, we will share more about our experience with sponsor banking and how it enabled the FaaS solution.
What is the Fedwire-as-a-Service Solution?
We collaborated on the idea to develop the FaaS solution for Choice and its Fintech customers. Choice Bank has been a long-time customer and strategic partner of ours and has a proven track record over the last 20 years of partnering with Fintechs to enable the new era of financial services. Not only was Choice our customer for the project, but we partnered with them to provide sponsor bank capabilities.
FaaS, now a part of Payment Manager, leverages a secure cloud-hosted connection to the Federal Reserve and exposes a modern, REST-based public API, making it easy for innovative FIs to build simpler, more automated Fedwire solutions and more. For Choice and its Fintech customer, we built in a customer-specific process flow. Payment Manager allows for this level of customization out-of-the-box, enabling any FI or Fintech to tailor the automated process flow to custom-fit its business. PortX customers can apply the appropriate limits, conduct OFAC checks and other KYC responsibilities, and limit manual approvals to those required by company policy.
Want more? Check out our demo connecting the Mambu banking core to Fedwire.
What is sponsor banking, and how did it enable FaaS?
The financial services industry is in the midst of an evolutionary cycle – the era of Fintech. Thanks to technology advancements, mobile applications are preferred in many sectors and demographics. Finance is no exception. Fintechs can offer customers a more user-friendly experience, especially when focused on a particular market. However, despite their ability to deliver the slickest app, banking regulations require Fintechs to be sponsored by a chartered financial institution known as a sponsor bank.
Sponsor banking is the function that a traditional financial institution performs to enable “niche neo banking” and embedded finance by assuming responsibility for maintaining regulatory compliance. However, not all FIs are equally prepared to act as effective sponsor bank partners. A sponsoring bank must be able to expose banking services as digital assets, such as APIs, which is only possible for those FIs that have digitally transformed to abstract their banking core.
For Fintechs evaluating potential sponsor bank suitors, it’s critical to find a partner who meets expectations concerning price, support, and reliability and is also as technology-forward in its strategy as the Fintech itself. This was key in our partnership with Choice Bank as the sponsor for the Fedwire solution. Choice is a leader among sponsor banks because they emphasize investment in both people and technology. The bank’s commitment to advancing technology helped drive success across every aspect of the project, from an agreement in which both companies profited from the solution to assigning people and resources that helped secure on-time delivery for the end customer.
“We evaluated a handful of suitors for our sponsor with the Fed. We chose Choice Bank because of the significance it placed on technology and being a people-first organization – a value we share in our company,” said David Wexler, CEO of PortX. “Because of our shared vision, we’re looking forward to building more capabilities and connections in our PortX products through our partnership with Choice.”
Want to learn more about our sponsor banking or Fedwire-as-a-Service?
If you would like to learn about PortX and the Fedwire-as-a-Service solution, we would be happy to walk you through the details. You can also watch this full-length recording of our technical presentation at IBM’s TechCon 2022. Or, if you are evaluating sponsor bank options, we would be happy to discuss our experiences and some best practices learned along the way. Don’t hesitate to start a conversation with our team today.
