Tech startup boosts retention 6X with embedded banking

Enter Wethos. The New York-based startup makes it easy for independents to team up and transform their one-person shops into full-service studios. Founded in 2016, Wethos started as an agency and quickly learned first-hand the pain of managing cash-flow and finances. In 2021, they decided to launch their platform to power hundreds of thousands of others to start and scale their own small businesses.

“When it comes to managing your finances, independent contractors have been left behind,” explains Claire Humphreys, Co-Founder and COO at Wethos. “The high account minimums and hefty fees of legacy payment processors squeeze these businesses, and the need to juggle various banking and payment platforms is cumbersome.”    

Wethos saw an opportunity to go the extra mile for their users by embedding business banking services into their platform. But they knew they couldn’t do it the old way: until recently, integrating with a bank meant years of development work, not to mention hiring a compliance team and a dozen partner vendors.

With tens of thousands of Wethos users looking for a better cash flow solution, the company needed a banking-as-a-service solution that could launch quickly and scale with demand. That’s why they turned to Unit + Plaid.

Unit is a banking-as-a-service platform that enables companies to offer financial products to their end-customers: things like bank accounts, cards, payments, and lending. By shouldering the burdens of bank relationships, compliance, and technology, Unit enables their clients to get up and running quickly and focus their engineering resources on strategic priorities.

“We own all the pain,” says Itai Damti, Co-Founder and CEO at Unit. “All the compliance, bank relationships, and tech are built into Unit. That way, our clients can launch in six weeks with two engineers.”

Wethos partners with Unit to provide banking services to their customers. But in order to make it work, Wethos also needs a way for customers to connect to outside financial institutions and platforms. For example, Wethos customers want to give clients an easy way to pay invoices by connecting an external bank account from within the invoice.

Wethos uses Plaid Link for this functionality. With Plaid, anyone attempting to connect their outside bank account to Wethos simply selects their financial institution from a list and enters the username and password associated with that account. Plaid enables Wethos’ customers to connect to more than 12,000 financial institutions around the world—often in a matter of seconds. And because they use Plaid’s processor token infrastructure, Wethos doesn’t have to store any of their customers’ sensitive financial information, such as account and routing numbers.

Another big benefit to Wethos is cost. Using a connected bank account through Plaid is 3x cheaper than using a payment processor like Stripe or PayPal, according to Wethos.

In addition to enabling connectivity with other financial platforms, Plaid also helps Unit and Wethos mitigate fraud. When they create an account, Wethos customers use Plaid to securely share their financial data with Unit: things like name, address, phone number, and account balance. This helps Unit identify bad actors and keep them off Wethos’ platform.

Finally, Plaid Exchange helps Wethos customers connect their Wethos accounts to business services like Xero and BlueVine. That way, when they need to do things like file their taxes or get a business loan, they can instantly find and connect their Wethos account from whatever platform they happen to be using. Best part? Unit has built Plaid Exchange into their banking-as-a-service platform, so Wethos doesn’t have to write any code; they just opt in.

Wethos was able to launch banking in just 41 days (six weeks). In the seven months since, they’ve seen some promising results. User growth has increased to 40% month-over-month. And users who bank with Wethos are retained at a rate 6x greater than those who don’t.

“Banking has been incredibly sticky for us,” says Humphreys. “Even as an MVP,
we saw 80%+ retention after three months.”

“It’s absolutely insane that we were able to launch banking in six weeks, with just two engineers,” continues Humphreys. “As an early-stage startup, time is our scarcest resource. When we evaluated how long it would take to build this ourselves versus how cost-effective it was to partner with Unit + Plaid, it was a no-brainer.”

Looking forward, Wethos plans to feature banking more prominently on their
platform. At first, these products were buried in the UI; Wethos wanted to be
sure they were providing value to independents before placing them front-and center.

But given the early popularity of banking and payments, Wethos users can
expect to see more such features on the platform, including credit card
capabilities, international payments, invoice factoring, financing, and more.

“Wethos doesn’t exist to build strong banking relationships; we exist to put
more money into independent’s pockets. And the best way to do that is by
partnering with trusted companies like Unit and Plaid,” concludes Humphreys.
“At the end of the day, our users benefit because we can dedicate all of our
time to ensuring they have the best user experience.”