Rewards-as-a-Service, the Newest Layer in the Banking Stack

The banking stack frees up banks to focus on building unique experiences.

Modern Banking Happens Through the Stack

It’s almost silly to say it out loud: banking is complex. But some modern innovations have made it easier than ever to piece together all of the complicated parts of a bank, and the current paradigm is that the new breed of banks (conveniently called “neobanks”) can build their products by putting together a collection of individual banking software units into one big software stack. This is banking-as-a-service: the industry of software companies that don’t build entire banks, but build parts of the banking infrastructure for other institutions to use in their software stacks.

The question asked by neobanks (and larger traditional institutions) seems to be, “Why reinvent the wheel?” The market already has large, trustworthy deposit institutions that have navigated the ins and outs of government regulations. Issuing a payment card is easier than ever, thanks to card issuers like Kard partner Marqeta. Software companies are coming out of the woodwork to offer everything from crypto integration to — in Kard’s case — white-label rewards programs. Pile up enough of these solutions into, yes, a stack, and you’ve successfully built a bank.

Modular Banks are Nimbler, More Accessible Banks

What the banking stack does for fintech founders is free up their time, resources, and attention so they can focus on delivering the best experience to their target customer. More banks means more access to banking for traditionally underbanked populations, those who haven’t had access or interest for a variety of reasons. Nowadays, thanks in part to banking-as-a-service, there’s a good chance you can find a neobank that caters directly to your specific needs or interests. For example, our friends at Veryable serve blue-collar workers by integrating an employment system into their banking product. And our partners at Yotta have built a lottery-type system with a unique rewards system: There’s a chance that any of your purchases will be completely rewarded by the bank. This is all in addition to more mainstream ideas, like Afterpay’s BNPL platform and Coinbase’s crypto offerings. What was once for some an impenetrable and sort-of-beige banking industry is now accessible and interesting to a variety of customers who are looking for different experiences.

Even in the new paradigm of access, the base expectations of banking consumers have stayed the same. Deposit functionality, a payment solution, rewards for remaining a loyal customer…these features get a bank on the shortlist. And the bank’s unique vision gets it over the finish line. Those unique visions are the experiences worth building in-house — there’s no sense in every financial institution reinventing the concept of deposits, for example. As rewards like cash back have become more and more important to regular cardholders looking for a payment card, rewards infrastructure is becoming an indispensable part of the banking-as-a-service stack. But with an out-of-the-box rewards infrastructure, it’s hard to leverage the rewards experience to reinforce the unique vision a bank is trying to build.

That’s why we chose to build Kard’s rewards-as-a-service infrastructure as an API platform. It allows our partners to bake their own ideas into a basic service, customizing the rewards experience without having to build the whole thing. Consumer-facing banks get to focus on their customers, and we get to focus on building the most powerful rewards platform. 

APIs Fit Neatly in the Stack

The variety of visions and the pace of the neobank industry mean that customizability and speed are key. With an API, it’s reasonably simple to integrate functionality into any individual bank’s software stack. In Kard’s case, all of the heavy lifting is done on our side; transaction processing, matching transactions to live offers, returning rewards. This is all powered by Kard-sourced offers from merchants we build relationships with. The bank is in charge of building the front-end user experience; laying out access to offers, presenting nearby deals, and so on. Partners are telling us it’s the exact balance they were looking for.

Curious about the genesis of Kard’s entry into rewards-as-a-service? Our founder, Ben MacKinnon, appeared on the Bankadelic podcast to talk about the empty spot in the market he saw for Kard to fill. Check it out for some behind-the-scenes info on what it takes to solve the rewards problem at scale!