Bank-as-a-service (BAAS) is the new black. Former Barclays CEO Antony Jenkins has launched a new startup that aims to modernize the back-office technology used by banks. 10x Future Technologies is working on a cloud-based core banking system—the technology that allows banks to hold deposits and accounts. Essentially, it’s the heart of banking. Antony Jenkins, who founded the company and serves as CEO, says: “Our core digital banking platform, based on advanced data modeling and database design, will allow financial services providers to develop a much deeper understanding of their clients, cut costs and deal with regulation.” 

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Recently Mondo and Starling Bank, the latest two challenger banks to win their UK banking licenses, have placed open APIs at the forefront of their strategies to maximize their competitive advantage over their incumbent rivals. Application programming interfaces (APIs) are the pieces of software that allow two separate IT systems to communicate and interact with each other. Open APIs will allow both Mondo and Starling Bank to crowdsource the development of new products and services far more quickly and cheaply than they could manage on their own. This is a vital consideration for new entrants with limited resources and the need to deploy a full-service proposition.

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Suresh Ramamurthi, an ex-Google engineer, and his wife Suchitra Padmanabhan, a former Wall Street banker, used their own savings to purchase the 124-year-old CBW Bank in Kansas. It was 2008, the height of the financial crisis, and CBW—then called Citizens Bank of Weir—was under orders from the Federal Deposit Insurance Corp. (FDIC) to cease operations due to inadequate capital reserves, ballooning levels of bad loans, and internal fraud. Over the last few years, the bank has become a secret weapon for other FinTech companies (like Moven) as BaaS-platform, which relies on both its technology and status as a state-chartered bank to build their own businesses. FinTech companies are somewhat unusual in that they offer new consumer products in a heavily regulated space. Rather than applying for a charter themselves, these startups often find it much easier to work with a bank through open APIs that has passed regulatory muster and can already take insured customer deposits or loans. FinTech companies need to focus on what makes the payments work, and working with a bank gets them to market faster and lets them focus on what makes them different. 

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