• Noel Smith, Business Development Director at Transact Payments


• 25.08.2021 12:15 pm
#Banking #Identification

The pace of product development has never been quicker in the financial sector, with the number of fintech companies trebling since 2018. Within this fast-changing environment, it makes Banking Identification Number (BIN) sponsorship even more critical because this offers a shortcut for many businesses seeking to get their innovative proposition to both domestic and international markets. 

By partnering with a BIN sponsor, a well-established, reliable solution has become available to companies of all shapes and sizes as they have the ability to process payments through an intermediary that is, crucially, a direct scheme member. This is also an essential step given the wealth of fintechs now operating within the UK and European Economic Area (EEA). 

Yet there are some pivotal issues to understand when partnering with a BIN sponsor.

At the outset it is essential to understand that BIN sponsorship is not something that merely gets turned on, instead, it requires diligent project management. Coupled with this, in the beginning, there must be clarity over potential challenges and also goals, backed up by realistic, truthful timeframes underpinning everything from the get-go. Having such clear, honest conversations sets the partnership up to succeed over the long term. 

In addition, trust must be at the heart of this relationship. For example, BIN sponsors have deep expertise across UK and EEA markets, yet many companies often assume that expansion to new markets can take a cookie-cutter approach, without due consideration required for each individual expansion market. However, in reality, each EU member country does have a distinct set of rules and regulations that must be followed. And while scheme rules do not generally change, country-specific laws are always evolving, meaning a fintech or its product can be impacted upon nearly overnight. 

For example, when the EU reduced the interchange rates for consumer products across all member states in 2015 and 2016, the effect was widespread. Entire business models were faced with profound changes in revenue, as companies relied on income generated by the interchange rate. Thus, having a trustworthy BIN sponsor who is highly attuned to ever-shifting legislation can not only be the difference between compliance and non-compliance but can also act as an early warning system against larger legislative issues that could have a hugely negative impact on a fast-growing fintech. 

While there are no quick fixes to launching financial products into a highly regulated market such as the EU, there are still a host of opportunities within this market. Beyond the size of the market itself (it is the world's largest trading block), there is a desire to deliver user-friendly, effective solutions to both customer and business needs that are currently underserved today. Segments ripe for innovation include those underbanked consumers and corporate customers who are still reliant on legacy, incumbent financial products sorely lacking innovative services and convenience in this digital era. 

To achieve success over the short and long term, fintechs should partner with a flexible, supportive BIN sponsor with bags of experience. This will enable fintechs to focus on delivering innovative solutions, while their BIN sponsor ensures stringent regulatory and scheme requirements are met. Such a perfect partnership will enable fintechs to grow and innovate in markets ripe for disruption.