Building the embedded finance proposition for sponsor-banks
The client designed a bank-grade sponsor-bank proposition and operating model so bank executives could greenlight embedded finance with clear ownership, controls, and economics.
Starting point
By 2024, embedded finance had moved onto bank strategy agendas. Banks and credit unions could see payments, cards, lending, and deposits shifting into non-bank ecosystems, but executives were cautious about risk, oversight, and third-party dependence, especially after incidents like SVB collapse. Many had sat through “embedded finance platform pitch” conversations that sounded compelling but broke down under scrutiny from risk, compliance, treasury, and finance.
The client, a global fintech enterprise, had built an embedded finance platform with strong capabilities across card issuing, money movement, embedded wallets, and Pay by Bank. Commercial teams also had great momentum with brands and fintech programs. What was missing was a bank-grade proposition: a storyline and operating reality that a regulated institution could pressure-test, govern, and approve.
Bank executives kept returning to the same questions:
- How does this fit alongside core systems, risk appetite, and regulatory oversight?
- Who owns KYC and KYB, underwriting, onboarding, billing, fraud and disputes, and compliance reporting in practice?
- How do issuer economics, deposits, and fee income work for the bank, not just the platform?
- When does it make sense to be a sponsor bank, versus staying out or playing a narrower role?
Without clear answers, conversations stayed high level. Each new bank required bespoke explanations, and progress slowed once the right stakeholders joined the room.
Approach
The work focused on shifting the conversation from “here is our platform” to “here is the embedded-finance path for a sponsor-bank, end to end.” The client engaged an internal team of key cross-functional stakeholders that included Bhuvan Maingi, now Managing Partner of Strathen Group, to translate embedded finance platform capabilities into a banking executive decision framework and to codify how sponsor-bank programs would run.
First, the team built a bank-facing proposition grounded in bank decision logic, framed in P&L, balance sheet, and control terms:
- Fee income from programs and flows the bank can host and supervise.
- Deposit dynamics created by accounts and wallets.
- Governance expectations for regulators, internal audit, and third-party oversight.
Next, the team produced a bank-ready storyline and reference architecture. The narrative covered market context, where banks still have a right to win, and a focused set of use cases, including card programs, co-brands, marketplace payouts, digital accounts with wallets, and Pay by Bank flows. The architecture showed how the platform sits alongside the bank’s core, with a phased delivery path aligned to change capacity.
At the center was an operating model that removed ambiguity. A single ownership matrix laid out how responsibilities can split across bank, brand, and platform in different configurations. It covered KYC and KYB, underwriting, onboarding, billing, fraud and disputes, and compliance reporting. The goal was not to force one “best” model, but to make tradeoffs explicit and governable.
The operating model was paired with practical control scaffolding. Notes on AML, sanctions, PCI, and data privacy gave risk and compliance teams a structured starting point. Draft runbooks for audits, issue management, escalation paths, and joint governance forums showed how programs would operate once live.
Commercial guardrails were defined alongside the model. Issuer and BIN strategy, deposit considerations, fee models, and term structures were laid out in a way that respects bank capital, liquidity, and regulatory expectations. Simple quantitative templates helped deal teams test scenarios against a bank’s hurdle rates rather than relying on generic claims.
To support partner development, the team also created a repeatable engagement workflow, including qualification criteria and a conversation guide that surfaced risk boundaries and economic objectives early.
Banks move faster when value, ownership, and economics are integrated into one bank-grade decision story.
Outcome
The enterprise moved from fragmented product conversations to a coherent, bank-facing embedded finance strategy. Bank leaders could now see, in one narrative, how sponsor-bank programs work end to end, where their institution adds value, how responsibilities divide across parties, and what realistic economics look like under different program shapes.
Relationship teams reported that meetings became more structured and credible. Instead of rebuilding content for every prospect, they worked from a single storyline and companion tools that could be tailored without changing the underlying logic. When risk, compliance, finance, or treasury leaders joined, the ownership matrix and economics templates gave them concrete material to challenge and align around, reducing late-stage churn and repeated resets.
Sponsor-bank strategies win when leaders make ownership and controls explicit, not implied, before the first program goes live.
At Strathen Group, we start from the bank’s vantage point, then make operating model, risk controls, and economics explicit so programs can be governed and scaled.
