The Balance of Power in Fintech: The In-House Approach vs. Third-Party Reliance

Yoeal Haile


In the dynamic world of fintech, companies are often faced with a crucial decision: do they build their infrastructure in-house or rely on third-party providers to get them to market faster? The recent situation between Mercury and Synapse serves as a poignant case study in this debate. 

Mercury, known for its commitment to providing a seamless business banking experience, chose the path of partnering with Banking-as-a-Service companies like Synapse. This decision allowed them to swiftly penetrate the market and concentrate on their unique value proposition. However, as with many third-party dependencies, it’s a double-edged sword. The same streamlined entry into the market also exposed Mercury to vulnerabilities. If Synapse experiences technical or regulatory challenges, Mercury may find itself in a challenging position, scrambling to integrate directly into core banking systems. 

Contrast this with companies like Sava. At Sava, a defining moment was when it was clear a third-party provider couldn’t deliver the expected product proposition. Instead of merely searching for another third-party provider, Sava took the bold step of building its in-house BaaS solution. This strategic move, while extending the product launch by a year, positioned Sava for greater control and flexibility over its platform, ensuring it could truly meet the needs of its users and control costs as it scales.

The decision to go in-house highlighted the balance businesses must strike between immediate deployment and long-term vision. At Sava, the strategic choice was to build from the ground up, prioritizing self-reliance and in-house expertise. This involved constructing three essential components of the tech stack internally: core banking, card issuance, and spend management. By doing so, Sava aims to mitigate risks similar to those faced by Mercury and, importantly, to capture more margin.

This approach offers Sava several advantages: 

  1. Complete Control: Tailoring processes to specific needs without waiting for third-party modifications. 
  2. Better Margins: Eliminating third-party costs can enhance profitability. 
  3. Risk Mitigation: Being less dependent on third-party vendors means fewer potential points of failure. 
  4. Global Scalability: Direct integration into global payment systems may allow for more agile and efficient scaling. 

Strategic collaborations also play a role in shaping the fintech landscape. Our collaboration with Mastercard, for instance, demands intricate spending rules on millions of transactions, emphasizing the need for robust and agile systems.

However, while the advantages are evident, this route also presents its challenges, such as increased upfront costs and the complexities of navigating global regulations. Security remains paramount, and at Sava, our APIs are reinforced with multiple security layers, ensuring our platform's integrity.

In conclusion, the fintech world is replete with choices, and there's no one-size-fits-all answer. Companies must balance their immediate needs against long-term goals, potential risks, and available resources. The Mercury-Synapse situation sheds light on this balance, reminding us all of the importance of strategic decision-making in this fast-paced sector.