Trent Sorbe, Chief Payments Officer at First International Bank & Trust (FIBT), has shared key insights with CI.
Kotapay, a division of First International Bank & Trust (FIBT), has launched Kavinu, a direct-to-bank BaaS platform that eliminates the “instability of middleware-reliant models.”
By re-centering the partnership model and eliminating the fragmentation that has plagued traditional middleware, Kavinu offers speed to market and revenue potential with a “single, direct relationship” with FIBT. It’s described as a “developer-friendly, rail-agnostic” platform backed by FIBT’s banking expertise.
Trent Sorbe the Chief Payments Officer at FIBT and former FDIC bank examiner, talked about Kavinu and why the industry needs a direct BaaS approach.
Our conversation Trent Sorbe is shared below.
Crowdfund Insider: Could you introduce yourself and provide an overview of Kotapay?
Trent Sorbe: I joined First International Bank & Trust (FIBT) in 2023 as their Chief Payments Officer. In this role, I’m leading Kotapay, the bank’s electronic payments division, which has seen some really exciting growth. Last year, Kotapay processed $102B of payroll for more than 107,000 companies in all 50 states. And just recently, we launched a bank-direct banking-as-a-service (BaaS) platform called Kavinu.
I got my start working in payments at the FDIC which laid the foundation for my career in banking. Over the past 30+ years, I’ve had the opportunity to work at several major banks and card issuers. This allowed me to develop a deep understanding of the payments landscape and how it’s constantly evolving, especially the rise of fintech and embedded banking. I’m driven by finding new ways to bridge the gap between payments, fintech and traditional banking. In fact, my passion for payments innovation has led me to develop 14 patents over the years.
Crowdfund Insider: How do you see the BaaS industry evolving?
Trent Sorbe: The initial BaaS model that rose to prominence from 2018-2022 was centered on nonbank, middleware playing largely a matchmaking role in connecting fintech startups with bank partners.
This model was never capable of withstanding scale and scrutiny, which is why it is facing a regulatory reckoning today and is quickly giving way to a model centered around the bank as the chartering entity and member in most major payment networks.
In addition to addressing the obvious shortcomings of the early model, BaaS 2.0 creates a more vertically-integrated approach, by eliminating unnecessary middleware. The model is simpler and inherently more stable, allowing fintechs and companies offering embedded financial products to get to market faster, on a more stable foundation, and with greater financial upside.
Providing a more streamlined, bank-centric BaaS platform can help connect fintechs and other innovators directly to an experienced banking partner like FIBT/Kotapay, which has been processing electronic payments at scale for many years. This approach will help amplify the role of the next generation of BaaS.
Crowdfund Insider: Could you expand on the benefits of removing middleware? How does this compare to other models in the industry?
Trent Sorbe: Removing middleware from the BaaS model, which we call BaaS 2.0, represents a significant evolution from early BaaS approaches that were often hindered by fragmented, complex middleware architectures supported by venture-backed, financial unviable companies.
In this model, banks and fintechs were reliant on a web of middleware providers to facilitate their partnerships. This created unnecessary technical debt, integration challenges and barriers to scalability. The user experience suffered as a result, with customers encountering friction and inconsistencies as they navigated across different systems and platforms. Most importantly, it disintermediated banks from the marketers and developers of the user experience, which invites regulatory scrutiny and criticism.
BaaS 2.0 removes the middleware layer entirely with a bank-direct API platform. This method dramatically simplifies the technical infrastructure to efficiently integrate fintech capabilities without the need to manage multiple third-party vendors.
It also supports time-to-market goals and ensures a more cohesive, end-to-end customer journey. The elimination of middleware greatly enhances the stability and reliability of the BaaS solution. Banks and fintechs no longer have to worry about middleware failures or vulnerabilities creating downstream issues.
Crowdfund Insider: What advice would you give to businesses looking to stand up an embedded payments solution?
Trent Sorbe: Be patient and focus relentlessly on the customer experience.
The first priority is to find a solution that’s as streamlined and integrated as possible. Avoid being bogged down in the complexity of the core payments ecosystem – leave that to your bank partner. Your core competency should be fostering a customer acquisition strategy and delivering a fantastic user experience.
To make this happen, partner with a payments provider that can handle the regulatory, compliance and technical heavy-lifting on your behalf. Look for a solution that offers a turnkey, API-driven approach, allowing you to embed payments capabilities quickly and efficiently without having to become a payments expert yourself.
Take the time to fully understand your customers’ needs, test different approaches and iterate based on their feedback. The brands that win will be those that prioritize the user experience above all else.
Crowdfund Insider: What are the biggest regulatory challenges you’re following?
Trent Sorbe: Regulators have identified the shortcomings of BaaS 1.0 and the fallout from this flawed model is being felt by all industry participants. The most commonly cited example involving Synapse Financial Technologies and its bank partners has invited regulators to step in with a host of proposed rules and guidance documents all aimed at preventing the recurrence of the worst of all situations: massive, widespread consumer harm and associated confusion over the perceived protections of deposit insurance, all perpetuated by a model propped up by venture capital and designed to structurally alienate the bank partner.
It should be no surprise that the regulatory response is swift and far-reaching. Those of us who have already turned the page on BaaS 1.0 are left to deal with the fallout, separate ourselves from the bad actors and manage through the regulatory response.
Crowdfund Insider: What industry predictions are you making for 2025?
Trent Sorbe: Looking ahead to 2025, I think a few key trends will define the fintech and banking space next year. First, the bank-centric model will solidify as the dominant approach, especially in BaaS programs. Financial institutions have recognized that embracing technology is essential to delivering the seamless experiences customers now demand.
Closely linked to this is the rise of big brand embedded finance opportunities. Consumers are gravitating toward trusted, established brands for their financial needs. Large enterprises are seizing the opportunity to overtake fintechs which will drive significant new partnerships. This, in turn, will attract bigger banks to enter the space under the perception that they are better able to manage risk, despite no evidence to support it.
Navigating the complex regulatory landscape will also remain a critical priority. Banks and fintechs must stay agile to keep pace with evolving compliance requirements. Those that master this will be best positioned for success.
In 2025, the banking landscape will be defined by big brand embedded finance, a bank-centric tech focus and adaptive regulation. Financial institutions that can navigate these dynamics will be poised to thrive.