FIS; Jack Henry; bank infrastructure software companiesBanking-as-a-service allows digital banks, fintechs, and other third parties to connect with traditional bank systems through application programming interfaces . This enables third parties to build and develop new banking offerings and services on top of the preexisting regulated infrastructure.system, these fintechs have yet to differentiate and truly scale in the US, according to the partner at the California VC firm.
"This is ultimately a commodity function where you're some sort of layer sitting in front of an end bank," the partner said. "The entire ecosystem of venture-backed fintechs that were the customers for the BaaS vendors are all sort of shrinking, retrenching, pulling back. So pretty much every name in this category, I think, is an M&A target," they added.
Specifically, the New York partner named Synctera as a potential target since it last raised in 2021 and offers underlying technology for fintechs to connect with smaller banks partners. One managing partner at a Washington-based venture firm noted that Unit and Treasury Prime would be very attractive targets because"with decreased investment across the board and regulatory scrutiny slowing growth, there's a strong argument for taking these kinds of products in-house," they told Insider via email.