The white labelling concept has been around in finance world for a long time, with traditional banks manufacturing, managing and establishing co-brands or affinity programmes such as airline credit cards or supermarket financial products, such as general insurance financing.
In the Fintech world, we see many operators expanding their offering by partnering with other companies for distribution. We already see major retailers partnering with banks or PSPs to provide payments, transfer, deposit and withdrawal capacity, and using such solutions to provide credit for the sale of their own products. (This is very similar to the ‘buy now pay later’ concept.)
As mentioned above, the next step for a PSP is to become a fully licensed financial institution or a bank. The Banking as a Service model is a white labelling solution par excellence, as the bank allows a fintech to use its infrastructure and build its own brand on top of it.
Many Fintechs end up buying small and medium-size banks to speed up becoming a fully fledged financial institution. The destiny of Fintechs becoming financial institutions or banks is mainly driven by specific country regulations that condition the licenses to the size and risk of the companies. As Fintechs grow, the need for a financial institution or bank license may become unavoidable.
An exemplar of this movement is Zopa. One of the first and biggest peer-to-peer lenders in UK, which was initially launched in 2005, it was granted a full bank license in June 2020, and is discontinuing the peer-to-peer business.