Programmatically open and manage FDIC insured bank accounts at Column on behalf of your customers. We support FBO, sweep, clearing and custom account types.
Using this configuration, you have the ability to open bank accounts at Column for your consumer and / or business customers. Your customers will have their very own FDIC-insured demand deposit account(s) at Column. As with our other use cases, we provide the payment rails (Wire, ACH, book transfers, checks in beta, and soon international payments), which enable these bank accounts to transact with the U.S. banking ecosystem.
The ability to create bank accounts for end-customers is designed for companies offering financial products where customers will have their own bank account(s), and where the companies are able to market that specific offering. Bank Accounts also serve as the foundation for many card based use cases (debit, credit, charge...etc), which you can read about here. If you are thinking about providing a digital wallet to your customers (but not necessarily a bank account in their name), you may be able to do that with fewer steps through our Payment Origination use case.
How it works
In order to open bank accounts for your customers, you would be partnering with Column under a Program Management Agreement, which defines the relationship as one of a third party service provider for Column.
You can leverage Column's APIs to automatically create bank accounts for your customers when you onboard them onto your product. And you will be able to originate transactions on U.S. payment rails to and from these bank accounts, on behalf of your customers.
You'll need to ensure you can take on certain program manager responsibilities, most of which are required only if you are opening bank accounts for consumer entities (vs. commercial / business entities).
Example Use Case
Nina's Neobank is a banking platform which caters specifically to bakeries. Nina's Neobank offers core banking services such as checking accounts, debit/credit cards, and the ability to pay vendors. Nina's Neobank also offers some unique perks, such as extra rewards for wholesale flour purchases and social media advertising purchases. Because Marie's Muffins buys a lot of flour, uses social media ads to acquire customers, and has a lot of vendors to manage, using Nina's Neobank is an obvious choice.
Nina's Neobank is built on Column. Under the hood, funds for Marie's Muffins are stored in an FDIC insured bank account at Column. When Marie's Muffins pays a vendor, Nina's Neobank is using a Column API to transfer funds from Marie's Muffins to the vendor's bank account.
Considerations & Risks
Returned ACH Debits is a key risk to be aware of. When using a Column bank account to pull money from an external account, the account from which you are pulling funds has up to 60 days to tell Column that this transfer of funds is unauthorized (this goes down to 2 days when pulling funds from a business entity instead of a consumer entity). When Column receives these requests, we are obliged to honor them and this is a risk that needs to be addressed and mitigated.
In this use case, you may be subject to rules and regulations around having custody of funds of your end customers. We recommend discussing this with your legal counsel. As with many financial products, the Bank Secrecy Act and Anti-Money Laundering regulations are a key consideration. You'll want to learn about these regulations and how to ensure you remain compliant with them, which is something Column can help you with.
With the Bank Accounts use case, you also need to ensure you are compliant with UDAAP regulation by abiding by Marketing guidelines.
Benefits of this use case
- You are able to offer and market bank accounts to your customers.
- Column will serve as the ledger and system of record for your customers' bank accounts and transactions.
- Bank accounts serve as a foundation for card programs.
Drawbacks of this use case
- Additional compliance requirements, both documentary and operationally.
Compliance & Legal Requirements
Please see below for the list of Compliance, Program Manager and Legal requirements in order to leverage this use case for your Financial product(s). As a reminder, certain situations may necessitate additional requirements.
- Know Your Business checks on your business: Column will conduct KYB checks based on information we ask you provide.
- Electronics Communications Agreement: You will be asked to agree to this.
- Deposit account agreement: In order to open your root bank account with Column, you'll be asked to agree to this.
- Bank Secrecy Act / Anti-Money Laundering (BSA / AML): To fulfill regulatory requirements around BSA / AML, you'll be required to perform Know Your Customer / Know Your Business verification on all your customers. There are a number of vendors that can help with this. You'll also have to provide policies documenting your Customer Identification Program (CIP), BSA / AML Compliance and OFAC checks. Column can help you get started with these policies if you do not already have them.
- Customer Application and / or Onboarding: We'll ask you to provide an overview of how you take in customer applications and how you onboard your customers onto your products.
- Proposed Terms and Conditions (which you would provide to your customers): you will need to provide these to Column and we will help provide necessary language to include in these T&Cs.
- ACH Risk: You'll be asked to validate that you have a way of assessing ACH risk involved in originating payments for your customers, and that you are getting the proper authorizations for any ACH origination.
- Governmental Issues and Litigation: You'll need to provide context for and copies of any pending or actual government inquiries, investigations, CIDs, and/or enforcement actions, since inception, and pending or threatened litigation and any/all litigation involving company since inception.
- Marketing Guidelines & Reviews: We'll provide you with Column's Marketing guidelines to adhere to, and ask you to provide insight into your Marketing process, policy and materials.
- Vendor Management: You'll need to provide your Vendor Management Policy as well as a list of your third party vendors.
- Fraud Monitoring & Complaints Process: Transaction and Fraud Monitoring, and Complaints Process: You'll need to conduct BSA / AML transaction monitoring, OFAC checks, and fraud monitoring for your program. You'll also need a process for ingesting and actioning customer complaints and disputes.
- Customer Electronic Communications Agreement and Deposit Account Agreement: You'll need to provide your customers with an Electronic Communications agreement and the correct Deposit Account Agreement prior to their onboarding.
- Consumer bank account policies: If you are creating bank accounts for consumers, you will need to have a number of policies such as Truth in Savings Act, Electronic Funds Transfer Act, Expedited Funds Availability Act and Error Resolution policy and procedures. Column can help you with these policies if you do not already have them. If you do not already have these policies, Column can help you get started with these.
- Consumer bank account program management: If you are creating bank accounts for consumers, you will need to provide your customers with periodic statements, a customer service phone number, and a process for dispute intake and resolution.
Financial due Diligence
In order to provide you with a reduced program reserve amount, we ask you to submit basic information about your company and standard financial statements so we can properly evaluate the financial and operational risks of partnering together. This includes, but may not be limited to: Company overview, Compliance team overview (if you have one), most recent Financial Statements, and all on and off balance sheet liabilities.
Create your data model
- One Root Entity which has gone through KYC / KYB
- Program Reserve and Overdraft reserve Bank Accounts (created automatically) which belong to the root entity. See here for more information on these accounts.
- An entity for each end consumer/business which has gone through KYC / KYB
- A bank account for each entity, for which a customer has signed a Demand Deposit Account Agreement
Flow of funds
Step-by-step flows for money movement
- Switch your platform to live mode
- Create non-root entities and accounts
- Leverage the Column APIs to build your neobank
Switch your platform to live mode
To switch your platform to live mode, follow the instructions here.
Create non-root entities and accounts
You should create an entity and account for each customer for whom you are opening a demand deposit account. Non-root entities and accounts can be created both via the dashboard and with the API. Each entity you create needs to go through KYC/KYB.
Leverage the Column APIs to build your bank account based financial product
You can now use the Column APIs to provide bank accounts to your customers. Consider the following flows:
- Build a flow that enables your customers to sign up for an account for your neobank (collect their information, conduct KYC/KYB, create an entity + account...etc).
- Enable your customers to fund their bank accounts by using an ACH debit to pull in funds from an external account.
- Enable your customers to send money to external bank accounts through ACH credits and wires.