Just to start off we would love to hear about your background and career path that brought you to launching Tern.
Thank you so much for taking the time to interview me. My background started in enterprise software systems and moved into payments in 2010 when I became the Managing Director of MerchantPlus and launched an enterprise focused division, ROIPayments. After a couple of years, I realized the innovation in the payments space was happening more on the issuing side, rather than the acquiring side, so I set out to find a use case to issue cards globally. I identified cross-border ecommerce as an interesting niche in prepaid, combining global money movement and virtual cards, and set up a meeting with US Unlocked who had a platform that seemed to fit. We ended up acquiring US Unlocked, and replatformed the tech stack to be white-labeleable and web service enabled, and Tern was born.
Could you tell us more about Tern and the company’s offerings? What do Tern`s customers do, and what do they use Tern for?
Tern has a lofty goal of making every company a fintech company. Understanding the financial services industry as a whole is being displaced by fintech, companies around the world need easily deployable compliant services to embed. Tern helps these companies by lowering the barriers to entry to launch card products, bank accounts, and onboard customers. By allowing our customers to progress through a variety of deployment options including low code, no code, and traditional API, Tern can support early stage startups, unicorns, or traditional brick and mortar companies. Tern helps customers launch fintech programs cost-effectively, with the easiest to deploy technology stack. We also coach our customers on how to maximize fintech revenue and add end customer value while managing risk and compliance. Tern customers are encouraged to pilot and test additional fintech services to discover new ways to add incremental value. This “land and expand” approach is supported by Tern’s team of industry veterans who are available to offer guidance on how to best optimize fintech deployments.
Could you please provide an overview of the state of the BaaS markets and competitive dynamics in the US?
Absolutely. The wave of Banking-as-a-Service (BaaS) companies that have launched in the last couple years is daunting, and for good reason. BaaS fills a much-needed gap by aggregating all of the pieces to launch card programs into a single API, but beyond that, there are some key differentiators in the market. Some BaaS providers focus on distributing interest-bearing accounts, others focus on connecting fintechs to banking partners, and some are working toward becoming a direct processor rather than relying on Marqueta (as most BaaS providers do). The last I counted there are 30+ BaaS providers in the US, but there are only a few, including Tern, that offer ready to deploy fintech components that can be easily integrated into existing platforms. Another potentially limiting factor for this new wave of BaaS providers is trying to convince their customers to stick with them when the customer becomes so large the BaaS commercial models no longer make sense.
We see different BaaS platforms offering different services and speeds to market. What are the pros and cons with different models?
Speed to market is often a driver for deciding which BaaS platform to use. Branding a program and getting approval by a bank and network on all of the materials can be the longest pole in the tent. At Tern, we allow our customers to launch on our branded (or co-branded) cards first, and enable live transactions embedded into our customers’ platforms within hours of signing up. If a fully branded experience is needed, we assist our customers, in parallel, in those approvals. The Pros of this speed to market approach is collecting valuable user feedback quickly in case you need to iterate or change aspects of the program. The Cons are not having full control of branding out the gate.
What differentiates Tern from other BaaS companies?
Tern deploys BaaS, but dramatically lowers barriers for customers, allowing companies to instantly embed fintech services and launch products on demand. We also have our sights set on enabling global BaaS; our first EU program went live this year. We feel Tern fills a gaping hole in the BaaS market by allowing our customers to grow with our platform. Startups may start with a no-code option to launch and achieve product / market / fit, then move to low code to tailor the user experience more toward their vision. Eventually, they may connect directly to us via API and layer in some of our other services for remittance or crypto. Our platform goes pretty far beyond offering bank accounts and prepaid cards via API, which seems to be the primary service offering of most BaaS providers.
Embedded finance is one of the hottest topics in fintech today. How do you see this trend evolving in 2022 and beyond? What are the key trends to watch in the embedded finance and banking-as-a-service arena?
I truly believe we are just scratching the surface with embedded finance, and the BaaS market will be the vehicle to deliver these functions to the masses. We have seen a wave of new credit instruments in the form of BNPL, which turns merchants into lending facilities. If you look across the broader corporate landscape, there are seemingly endless opportunities to layer in financial services to traditional businesses to add value, transactional revenue, and stickiness.
What goals and objectives do you set for Tern in 2022? What milestones do you plan to achieve this year?
2022 for Tern is all about on-demand. We are replatforming to allow customers to onboard themselves and launch fintech solutions as quickly as Day Zero. Customers can “try before they buy” by linking their bank account and immediately start issuing cards and bank accounts, and sending remittances, or even crypto. Our team and tech stack has one key advantage in the market, experience, and maturity, we are now bundling this experience into a platform that eventually anyone on the planet will be able to use.
About Brion Bonkowski