U.S. Fintech & Payments Crash Course
Discover more from Fintech Explainers
U.S. Fintech & Payments Crash Course
If you’re new to the world of fintech and payments, or you’re hiring people who are new to the industry, this post will help with onboarding.
The learning curve is steep for new hires at fintech and payments startups. It can feel like your coworkers are talking in code, constantly using terms you might have never heard before like FBO, DDA, VBANs, Durbin-Exempt, etc.
Even googling these terms can be a pain because you need to understand 3-5 other concepts just to fully grasp the definitions.
This is a common problem and the reason why so many job posts say “experience in fintech or financial services preferred.”
But the best person for the job doesn’t always have a fintech background. That’s why many startups now have internal glossaries and some even send their new hires copies of “Payment Systems in the U.S.” or “The Anatomy of the Swipe”.
In this post, I share the reading list I send to new hires to help them get up to speed on the industry. While the list can seem long, it should be easy to knock out during the first week of onboarding.
I recommend taking notes and writing down questions as you go. You can send these Qs to your internal subject matter experts and speed up your learning.
Books that explain the basics
Field Guide to Global Payments by Sophia Goldberg. This book will give you a solid foundation of the payments space. It’s a super easy read that’s written like a series of blog posts. I think Sophia actually considered writing a blog/newsletter at first and instead opted to self-publish a book.
Sophia used to be a product manager at Adyen and has recently founded a fintech startup. She really knows her stuff. Lithic's general counsel Matt Janiga (former Stripe, Square, Capital One) wrote the chapter on compliance.
The Anatomy of the Swipe by Ahmed Siddiqui. This is another easy read that’s packed with a ton of illustrations. It’s practically a graphic novel. When Ahmed joined Marqeta, he didn’t have any experience in the space and found learning about cards difficult. Anatomy of the Swipe is the book he wish he had when he first got started.
Ahmed was previously the VP of product management at Marqeta and is now a product leader at Branch.
Payments Systems in the U.S. by Carol Coye Benson. This book is like the US payments encyclopedia. It’s extremely informational and a great resource, but I won’t sugar coat it. This book is as boring as watching paint dry lol. Sorry, Carol.
Banking-as-a-Service
BaaS providers partner with banks to make their products available to tech companies over an API. This allows companies to easily embed bank accounts, cards, and loans directly into their software.
You can also use the APIs to manage and customize these products (e.g. creating authorization rules, setting spending limits, checking balances).
If you want to understand most fintech use cases today, you need to learn a bit about BaaS and API banking.
Introduction to Banking-as-a-Service by Stripe
What is Banking-as-a-Service? by Treasury Prime
The New Nomenclature Behind the BaaS Partnership Boom by Alloy Labs
What is Embedded Finance? by Treasury Prime
How API Banking Is Changing How People Pay by Privacy.com
Revenues in Financial Features by Unit
Buyers Guide to Banking as a Service by Tearsheet
Fintech dictionary by Moov
Cards
Cards are pretty complex. There are several different card constructs (debit, prepaid, unsecured/secured credit, and charge) and card types (physical, virtual, tokenized).
Each of these function differently and have their own rules, regulations, fees, and limitations. And that’s not even getting into the long list of parties that are involved in making these product function or the various use cases.
My Payment Cards Deep Dive will help you get up to speed quickly. Lithic, Unit and Treasury Prime also have some great content on this topic, which I feature below.
The Anatomy of the Swipe (Blog version)
How card transactions work by Privacy.com
Children of Durbin by Ayokunle Omojola
Fintech and Regulatory Arbitrage by Tanay Jaipuria
Interchange Guide: How Fintechs Earn Revenue from Cards by Lithic
Interchange in 1,000 Words by Matt Brown
Guide to Interchange Revenue by Unit
How do virtual cards work? by Treasury Prime
Credit Card as a Service: Part 1 Part 2 Part 3 by Cokie Hasiotis
BNPL: The Unbundling of Credit Cards by Lithic
BNPL Research Guide by Fingerprint
Payments
I included the best resources on payments up top in the books section. The blogs below help provide additional context, but payments is a really huge topic that’s constantly evolving.
I’m going to write explainers for this section, but I recommend reading Sophia’s book if you’re looking for a primer on payments.
The innovation of the Payment Facilitator (PayFac) model by Jonathan Ching
What is a Payment Gateway? by Bansi Shah
Guide to online payments by GoCardless
What is an EFT Payment? by Authorize.net
What is ACH? by Plaid
An introduction to ACH for builders by Sardine
What is a Wire Transfer? by Modern Treasury
What is Bill Pay? by Lendingtree
What is an eCheck? by GoCardless
What is a Book Transfer? by Investopedia
Compliance and Fraud
For a long time, compliance content was surface level and there weren’t a ton of in-depth resources for fintech professionals. We’ve been working to change that at Lithic.
We hired some of the best compliance professionals in the business and they’re not shy about sharing their knowledge. Our product counsel Reggie is also the author of the popular Fintech Law TLDR newsletter. You should check it out and subscribe to it.
Explainer on Fintech AML requirements by Lithic
How are Neobanks Regulated by Treasury Prime
TLDR on AML and BSA by Reggie Young
TLDR on Payments Laws by Reggie Young
Explainer on EFTA and Reg E by Lithic
Guide to Payment Card Fraud by Lithic
Guide to Building a Compliance Program by Lithic
KYC Guide for better onboarding by Unit
Fintech Guide to Chargebacks by Lithic
If you need any legal templates, we published a free open library of standard legal docs for card programs at Lithic.
Banking
In the US, you can’t open up a bank or offer banking products unless you have a bank charter (which aren’t easy to get). Neobanks like Chime aren’t really banks, they are fintechs that are built on top of other banks.
I’m not going to go too deep into banking here, but these terms come up often if you work with or at a BaaS provider. I’ll write some explainers on banking as it relates to fintech in later posts.
What is a Core Banking System by SDK.finance
What is an FBO account by Modern Treasury
What are Virtual Accounts by Modern Treasury
What is the Flow of Funds by Modern Treasury
What is a Banking API by Modern Treasury
What is Remote Deposit Capture by FDIC
Crypto
Crypto is really an industry of its own and I won’t get too deep into cryptocurrencies or web3 in this section. Instead, these articles help you understand how crypto comes up in the fintech space.
Crypto and Fintech by Lithic
What Are Cryptocurrency On/Off Ramps by Master Ventures
How Companies Build a Fiat Onramp and Offramp by Treasury Prime
What is a DeFi Platform by Prime Trust
How are crypto trades settled? by Prime Trust
Custodying digital assets by Prime Trust
Recommend any other resources?
Feel free to share any links you think I should add to this list in the comments section.
Cheers,
Eduardo
About me
👋🏽 Hey, my name is Eduardo and I lead product marketing at Lithic. I’ve spent the last few years helping fintech startups nail their GTM strategy and marketing.
Connect with me on LinkedIn and Twitter.
Subscribe to my newsletter to receive more explainers and fintech resources.
And if you found this post useful, please share it on social and tag me 😎
U.S. Fintech & Payments Crash Course
We need more of this Eduardo.
Hey Eduardo,
Thank you for curating this. Any good reads on cross border payments as well?