OMB Bank launches OMBX to serve tech arena with banking services

Callum Bedos: OMBX brings relationship banking to the fintech space.

OMB Bank was founded in Springfield in 1999 as a hometown bank with conventional brick-and-mortar banking centers – places to walk in and sign up for a checking or savings account, or perhaps an auto loan.

That kind of traditional bank may at first feel at odds with the announcement of its launch of OMBX, a new division of OMB Bank focused on delivering banking solutions to fintechs and other digital companies.

Unlike its parent company, OMBX operates not just in the region, but in the online arena, with clients throughout the country.

The product OMBX offers is one centered on embedded finance and Banking as a Service – related terms, though they are not synonymous. Embedded finance integrates banking services into nonfinancial platforms, while BaaS provides banking infrastructure to third parties. As OMB Bank’s announcement of the launch states, the goal of OMBX is to provide clients with a scalable and compliant banking infrastructure that simplifies financial integration for innovators looking to embed financial products into their platforms.

Steve Bishop, president of OMBX and executive vice president and chief innovation officer of OMB Bank, referred to the product as white-label banking – that is, a product developed by one company, OMBX, to be sold by another.

“It’s the same boring old actual banking product – just with a different delivery mechanism,” he said.

What OMB has to offer that most fintechs do not is a conventional banking charter.

It turns out being a boring old bank is salable – and that’s what OMB is banking on.

“The regulations say you can’t have ‘bank’ in your name unless you have a charter,” he said.

Bishop said OMBX already has seven customers that are using its application programming interfaces, or APIs. To explain what an API is, he offered a restaurant analogy: The bank is the chef in the kitchen, while a tech company is a customer seated at a table. Moving between the two to take and deliver orders is an API – sort of a robot waiter.

A tech company can build an OMBX API into its platform, and when a client logs in to check inventory for a business or to pay a bill, the API means they don’t need to exit the app to do it – they can do it over breadsticks from their table.

“Our product is the behind-the-scenes API that’s consumed by the company,” Bishop said.

Asked if any other area banks are operating in this space, Bishop cited Perryville-based Bank of Missouri. A 2024 report in the publication Fintech Futures states Bank of Missouri entered a five-year partnership with banking and payments technology firm i2c to provide fintech clients with digitally native financial services.

That story quoted Mark Barker, executive vice president, who expressed a desire to deliver a full suite of financial products and services to fintech clients through the partnership.

A 2024 survey of banking executives found 33% of respondents plan to offer embedded finance solutions, and 17% others are evaluating them, as reported in 2024 in the American Bankers Association Banking Journal.

Bishop said to his knowledge, no other area banks are doing embedded finance quite like OMBX, whose customers are primarily based in New York City.

According to reporting by Banking Dive, the number of banks offering BaaS has hovered around 150 for most of the last couple of years, which represents about 3% of chartered banks in the U.S.

Big business
A 2024 report by Grand View Research estimates the global embedded finance market size at $83.3 billion and projects a compound annual growth rate of 32.2% between now and 2030, with the growth fueled by increasing adoption of digital platforms and the growing need of nonfinancial companies to offer financial services directly through those platforms.

The small to medium business segment is ripe for growth, according to a report in International Banker magazine, which noted 50% of 2,000 small to medium businesses surveyed across North America, Europe and Australia expressed “a high likelihood of adopting a full suite of embedded finance products” in the near future.

Bishop said OMBX has the capacity to double or triple its current seven customers to 15-20.

The OMBX launch announcement states the new division is committed to positioning itself as a leader in the space by offering an integration process, compliance support, fraud prevention, payment processing and robust analytics tools.

While stepping into the national tech space may seem like a surprising move for a local bank, Mark Harrington, president and CEO of OMB Bank, said the move is a natural evolution in OMB’s commitment to innovation.

“We see embedded finance as a key driver of the future,” he said. “OMBX allows us to serve fintechs in a way that aligns with our strengths, like stability, compliance expertise and banking infrastructure that empowers them to do more.”

He added, “The initiative isn’t about moving away from who we are. It’s about expanding the ways we deliver value.”

Harrington added that OMBX fits into OMB Bank’s long-term strategy by diversifying its business model and leveraging technology to create new growth opportunities.

Handshake marketing
To find OMBX clients, Bishop said he’s getting out where they are and talking to them face to face.

“Marketing in this space is completely different,” he said.

Some customers are finding the new division through word of mouth or referrals, he said, and he also creates brand awareness by presenting at conferences, like the U.S. Fintech Symposium, FinovateFall, Money 2020 and the American Fintech Council Summit.

Bishop said he also maintains a strong personal brand, with 26,000 connections on LinkedIn to help create potential partnerships. On that platform, he offers insights into an emerging financial market that many may not understand, and he gives readers a toehold into the topic with carefully chosen analogies from everyday life.

One example from a recent LinkedIn post: “Traditional banking is similar to waiting in line at a coffee shop. BaaS is like ordering ahead in an app.”

Backpack
The first company to sign on to OMBX for embedded finance tools was Austin, Texas-based Backpack Payment Technologies Inc., a fintech company founded to solve the problem of lack of digital payment infrastructure for most 529 college savings accounts. It is a situation that leads 529 plans to be underutilized, according to founder and CEO Callum Bedos.

Bedos called OMBX a gateway banking system for his company, one that acts as a conduit linking the U.S. banking system to Backpack’s platform.

“We repackage those banking services into our unique product and deliver them into higher ed institutions,” he said.

In small print at the bottom of Backpack’s website, the relationship between the two companies is spelled out: “Backpack Payment Technologies Inc. is a financial technology company, not a bank. Banking services are provided by OMB Bank, member FDIC.”

Bedos said the payment industry for higher education in the United States is dominated by mostly old incumbents.

“It’s very much a world of paper forms, calls, checks – all very unnecessary, I would say,” he said. “The irony is that higher ed will often cite safety and privacy concerns as the reason for being conservative on those fronts and wanting to stick with a paper check.”

However, Bedos said, although paper checks account for only about 10% of U.S. payments, they constitute about 70% of U.S. fraud.

The Financial Crimes Enforcement Network backs up Bedos’ assessment, noting an increase of 40% for checks and 57% for mail in the last three years, even as many cast a suspicious eye at the perceived dangers of online banking.

Bedos has an impressively long pedigree within the banking and fintech industries, having handled mergers and acquisitions at SoFi, with previous stops at Accenture, Reunion Capital Partners and UBS, according to his LinkedIn profile.

“What OMBX gets right is they bring the technical aspects that are really important – delivering U.S. payment capabilities – and they marry it with excellent people who have worked in banking operations for a very long time,” he said.

In partnering with OMBX, Bedos said, he has visited Springfield on several occasions.

“I like doing it,” he said. “I’ve become very close with the team there. Steve has built a fantastic thing. We were their first fintech, and we’ve learned from each other building the program.”

The differentiator, Bedos said, is OMBX’s willingness to dig into details when Backpack says they want to do something new.

“That’s not an easy thing,” he said. “You need a trusting relationship, and if you don’t have it, it’s not going to work.”

Bedos said the brick-and-mortar approach to banking is all about relationships – something that can get lost in bigger cities.

“It’s a good foundation,” he said.