In Profile: Andy Mielczarek of Chetwood Financial and Ammar Akhtar of Yobota

This month’s In Profile breaks the usual mold, as we hear from two CEOs from the emerging Banking as a Service (BaaS) sector: Andy Melcharick, founder and CEO of Chitwood Financial، Ammar Akhtar, CEO of yupota, a cloud core banking platform built on open source technologies for maximum flexibility and scalability.

Yobota recently announced a new partnership with Chetwood Financial to enter the BaaS segment, allowing its cloud-native banking platform more flexibility, making customer experience a greater priority and alleviating operational concerns. Yobota’s BaaS service reduces time to market for those without a banking license and infrastructure, allowing businesses to have customized and scalable financial products.

However, BaaS may still be a new concept for some. To illustrate the uncertainty surrounding it, Mielczarek and Akhtar delve into the what, why and how of the service:

Andy Melcharik, Founder and CEO of Chetwood Financial
Andy Melcharik, Founder and CEO of Chetwood Financial
Ammar Akhtar, CEO, Yobota
Ammar Akhtar, CEO, Yobota

For those of us who haven’t kept up with the latest industry trends, what is BaaS?

Ammar: The BaaS describes a business model in which new companies with innovative ideas for financial products can avoid the delay, expense, and, quite frankly, the hassle of applying for their own banking license, using an existing bank’s license to launch their products to market in a way that remains compliant with all relevant regulations. . Although there are many companies talking about BaaS, it is really important to note that the real BaaS is in B – you need to provide the banking license and balance sheet.

Andy, why did Chitwood decide to show her?

dew: We are really proud to open our banking systems to third parties that want to create better journeys from start to finish for their customers. Together with experienced partners like Yobota, we can handle both the regulatory and technological complexities involved in helping brands include financial services directly in their offerings.

There seem to be a lot of positives, so who is the target?

dew: We have identified three main groups of companies that could benefit the most from BaaS:

  1. Financial services companies that do not currently offer banking products – or at least do not offer the full range of banking products that their customers might want. For example, insurance companies and wealth managers have established relationships with their clients in their own product areas, but cannot offer loans, credit cards, or deposit accounts, because they do not have the required regulatory permissions. These companies have all the key ingredients to creating a healthy product business flow — a strong brand, strong customer relationships, well-developed communication channels and CRM systems — but they don’t have the means to manufacture products. Likewise, some financial services firms may be capital constrained and thus unable to self-finance the growth of their lending portfolio. For these companies, BaaS provides a pathway to offer a range of credit-based, fully funded and equity-backed products. Moreover, BaaS providers that are licensed banks themselves will be able to obtain financing at retail deposit rates, rather than having to use wholesale financing, which comes at a much higher cost.
  2. Organizations outside of financial services with large customers, members or fan bases, where the brand provides access to financial services. Many sports clubs, guilds and professional associations have the strength of the brand and the trust to support their branded financial services product offerings from selected and trusted partners. We’ve seen this most popular model in the credit card market with affinity programs, which gives us a sense of opportunity for value that can be addressed by introducing BaaS to a broader industry group.
  3. The third area where banking products are required as a secondary component to the sale of the primary product. This type of offer is already popular across the retail, automotive and telecom industries, all of which offer financing along with high-value purchases, for example a car lease or a sofa loan. Buy Now, Pay Later (BNPL) is becoming an increasingly important component of the retail offering, and BaaS provides professional and proven management of this component, rather than being sidetracked.

How does it apply in practice for one of those companies looking to get involved?

Ammar: A BaaS client can access the market with Chetwood’s regulatory permissions and, if required, existing operations capabilities, all running on top of Yobota’s ultra-flexible core banking platform. Customers can develop an offer that is perfectly suited to their target customers and their future plans, apply their own customer experience on top, or use existing templates from Chetwood. All of this is supported by the original multi-brand capabilities that Yobota provides, along with highly expressive APIs, without the trouble of integrating an ecosystem from the start.

What are the benefits of BaaS for the financial industry?

dew: The benefits to a bank or financial services company are fairly straightforward: they can launch new financial products to market without the need for their own banking license, or even a balance sheet. Not only that, but they can work with Chetwood to access their balance sheet and use their capital to issue loans. This means that even if they have a really specific niche product in mind, the cost of entering the market drops dramatically, so an idea that might not have been worth pursuing before, is suddenly. This isn’t the only saving of course, our partnership with Yobota means they can access all the third-party integrations they need, right away. It’s easy to underestimate the amount of work that is saved compared to treating each integration personally.

And what does that mean for the customer?

Ammar: Well, this is where it gets more exciting. The implications for the customer are huge, firstly because it means it is much easier for new providers to enter the market, forcing older banks to be more competitive with their standard product ranges, and pushing them to advance more quickly than they might otherwise. But the most important thing for me is that it means a really straightforward way to market to these companies with great product ideas that will really help people do more with their money. The ability to enable these companies to address financial inequality through human-centred product development is what makes all of this worthwhile.

What kind of products are we talking about?

dew: Well, a great example is Chetwood’s LiveLend. It allows people with a low credit rating to access the financing they need, without being penalized with exorbitant interest rates for the life of the loan. By decreasing the interest rate dynamically as their credit score improves, people can actively improve their financial situation, whether they are working on reducing debt or saving for the future. So BaaS customers can either choose to resell existing Chetwood financial products for a faster route to market, or by using a whitelabel solution, they are only limited by their imagination, as Yobota’s platform has the flexibility to support almost anything they can think of.

How long does it take to start?

Ammar: Naturally, it varies depending on the specific requirements and the complexity of the product offering, but for example, Fronted has come to us with a new idea for lending in the rental deposit space. They wanted to provide short-term loans to people who can’t afford the overhead of moving rental homes, which is another really great thing for people who are, say, trying to move out of the house for the first time, or need to leave a difficult local situation. The flexibility of our platform means that we have already been able to fully get it ready for production in less than six months, and standard products can already be available in just a few weeks.

dewFor BaaS solutions specifically, if they go the distributor route, using Chetwood’s existing suite of products, this is a very straightforward integration at the distribution site, and can be up and running in no time at all.

Ammar: For a whitelabel solution, we only need to spend two weeks to understand the exact requirements of the proposed products, and to ensure that they are fully supported by the system before they go live.

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