There are several different types of bank accounts that individuals and businesses can open, each serving a different purpose and offering various features and benefits.

In this explainer we will focus on three main types of accounts that can be created and dive into their differences, their advantages and how they can be used by enterprises venturing into embedded finance. We’ll also look at where account opening sits in the embedded finance process.

The Three Main Types of Account

‍1. Demand Deposit Account (DDA):

   – Definition: A deposit account is a type of bank account where you deposit money, and the bank holds the funds for safekeeping. It’s a financial arrangement where the customer entrusts their money to the bank, and where the bank pays interest on the deposit deposits.

   – Nature: Deposit accounts are on the “asset” side of the customer’s financial picture because they represent money they own. These accounts include savings accounts, checking accounts, money market accounts, and certificates of deposit (CDs).

   – Function: In a deposit account, you can store your money, make withdrawals, and perform transactions like paying bills or making purchases. Banks use the money in these accounts to provide loans to borrowers and generate income.

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2. Credit Account:

   – Definition: A credit account, also known as a credit line, is a financial arrangement where a lender (usually a bank or credit card company) extends credit to a borrower. The borrower can use this credit to make purchases or obtain cash advances, with the obligation to repay the lender with interest.

‍   – Nature: Credit accounts represent a liability to the customer because they involve borrowing money that needs to be repaid. Common examples include credit cards, personal loans, mortgages, and auto loans.

   – Function: In a credit account, the customer can spend money up to a predetermined credit limit. The lender charges interest on the outstanding balance, and the customer is required to make regular payments, which include both interest and a portion of the principal, until the debt is repaid.

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3. Secured Deposit Account (SDA):

   – Definition: A secured deposit account, or secured credit card, is a unique financial product that combines elements of both deposit and credit accounts. It can be used by individuals with limited or damaged credit histories who want to build or rebuild their credit, but can also provide needed functionality for individuals who have no need or interest in building credit.

   – Nature: A secured deposit account requires the account holder to make a deposit (usually equal to the credit limit) as collateral to secure the credit limit on the account. The deposit serves as a guarantee to the lender that funds are available to cover any potential defaults.

‍   – Function: With a secured deposit account, customers can use the associated credit card for purchases just like a traditional credit card. However, the key difference is that their spending is limited by the amount of the deposit they’ve made. The account provides the ability to move funds in and out via an external bank account, as well as perform account-to-account transfers for on-time payments. These on-time payments can help improve their credit score over time, allowing them to qualify for unsecured credit products.

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The Account Opening Process

Enterprise-grade BaaS platforms like Bond are designed to offer financial services and infrastructure to businesses, enabling them to integrate banking and financial capabilities into their own products and services. 

It is important to note that while Bond’s platform facilitates the opening of accounts, the accounts themselves are held at the sponsor bank assigned to your program. This means that all accounts are FDIC insured and come with a routing number and unique account number making all sorts of money movement possible.

The ability to facilitate the account opening process programmatically is a fundamental aspect of our platform. Here’s some detail on how this works:

1. API Integration:

Bond provides a set of APIs (Application Programming Interfaces) that businesses can use to interact with the banking services available on our platform. These APIs allow for the automation of various banking processes, including account opening or creation.

2. Customer Onboarding:

When a business wants to offer its customers the ability to open accounts (deposit, credit or secured deposit accounts), they can use Bond’s APIs to initiate the onboarding process.

3. KYC/KYB (Know Your Customer/Business) Verification:

During the account opening process, businesses can utilize the Bond’s platform’s capabilities to collect and verify customer information, such as identification documents, proof of address, and other KYC/KYB requirements.

4. Account Type Selection:

Businesses can use the APIs to specify the type of account being opened, such as credit, deposit or secured deposit, and customize the account features and options based on customer preferences.

5. Funding and Initial Deposits:

Bond’s platform APIs also allow businesses to facilitate the funding of the newly opened accounts. This can involve options like linking external bank accounts, initiating transfers, or accepting initial deposits.

6. Compliance and Regulatory Checks:

Bond’s platform will conduct necessary compliance checks and verify that the account opening process adheres to regulatory requirements specific to the jurisdiction and type of account.

7. Account Activation:

Once all necessary steps are completed and the account is approved, Bond’s platform will allow you to activate the account and provide the customer with access to their account details, online banking, and other services.

8. Card Issuing:

Once an account has been created and activated, Bond’s platform provides the option for automatic issuing of both or either a physical card and a virtual card attached to the account. Physical cards are issued in an ‘inactive’ state and must be activated by the user, while virtual cards do not require activation.

9. Ongoing Account Management:

Beyond the initial account opening, businesses can continue to use Bond’s Portal for ongoing account management, such as facilitating transactions, monitoring account activity, closing, deactivating or closing accounts and handling customer support inquiries.

10. Reporting and Analytics:

Bond provides business stakeholders with access to all the data they need to create customized reports and analytics via webhooks. In addition, Bond provides an intuitive web interface referred to as Portal that allows businesses to gain insights into customer behavior and account usage.

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Once an account is created, it can be funded in various ways including ACH transfers and Payroll Direct Deposit contributions. Other methods of account funding including Remote Deposit Capture (RDC) are on the product roadmap.

It’s important to note that while BaaS platforms like Bond provide the infrastructure and tools to automate account opening, businesses are still responsible for ensuring regulatory compliance and adhering to industry standards in terms of customer due diligence and fraud prevention. Additionally, the specific features and capabilities of BaaS platforms can vary, so businesses should carefully evaluate their options to choose a platform that aligns with their needs and compliance requirements.

What Can a Business Do With Accounts?

As mentioned before, the opportunities made possible by the ability to open accounts for your customers is tightly linked to the opportunities generally provided by embedded finance as a whole.

Here is a brief summary of some of those opportunities that start with your ability to open accounts for your customers:

Enhanced Customer Experience: Companies can provide a seamless and convenient customer experience by integrating banking and financial services directly into their platforms or applications. This can lead to increased customer loyalty and satisfaction.

Monetization and Revenue Streams: Offering financial services on top of accounts allows companies to generate new revenue streams through account fees, interchange revenue, transaction fees, and interest income.

Cross-Selling Opportunities: By providing access to banking services, companies can cross-sell their core products or services more effectively. For example, a fintech offering business loans could also provide business accounts, simplifying the financial management of their customers.

Data-Driven Insights: Access to financial data from customer accounts can provide valuable insights into customer behavior and financial needs. Companies can use this data to tailor their offerings and marketing strategies more effectively. 

Financial Inclusion:  Embedded finance can help extend financial services to underserved or unbanked populations. This can be a socially responsible business opportunity while tapping into new markets.

Customized Financial Products: Companies can create customized financial products and accounts to cater to the specific needs of their customer base. This level of personalization can be a competitive advantage.

Ecosystem Building: Companies can build ecosystems around their financial services, partnering with other businesses to offer a wide range of complementary services, such as insurance, wealth management, or payment processing.

As the enterprise-grade Banking-as-a-Service platform, Bond continues to reshape industries by enabling a wide range of companies to participate in and benefit from embedded finance while providing customers with more accessible and tailored financial solutions.

If you’re interested in learning more about how our platform works or want to discuss a business opportunity, please reach out to us here.

Understanding Bond Grant Agreement

Bond Grant agreements are pledged from general contractors for construction projects to receive a grant to pay contractors expenses. It is obligation pledge that guarantee contract fulfillment. The Bond Grant holds a Bid, Performance, and Payment with Surety. They often go hand-in-hand, but serve different purposes.

What is a Bid Bond?

Bid bonds are a form of insurance that protects developers from loss. They benefit project developers in two key ways:

1. Contractor Insurance: With bid bonds in place, developers know the surety provider backs the contractor and will provide the necessary performance bond if the contract is awarded.
2. Price Security: Developers receive financial security if the selected contractor backs out. In this situation, the developer can file a claim to recover the difference between the lowest and second-lowest bids.

How To Withdraw Your Construction Bid Without Losing Your Bond

Contractors can only withdraw a bid without losing the bid security (the bond) if the withdrawal happens before the developer opens the bid. Once a contract is awarded, bid withdrawal will result in the automatic loss of the bond.

What’s a performance bond? 

A performance bond is a guarantee that a contractor will complete a project according to all contract terms. 

What’s a payment bond? 

A payment bond ensures that a primary contractor will pay subcontractors and material suppliers in full and on time.

How Do Payment and Performance Bonds Work Together?

Together, payment and performance bonds ensure large construction projects are completed appropriately and all parties involved are properly compensated. Both bond types create a legal agreement between three parties:

1. Principal: The contractor filing the bond
2. Surety: The surety company issuing the bond 
3. Obligee: Project owner/government agency requiring the bond

When Do You Need a Payment Bond vs Performance Bond?

Payment and performance bonds are almost always issued together. Most large public construction projects require contractors to get both a performance and payment bond. However, some contracts for private or smaller public projects will only mandate a performance bond. 

While typically purchased together, you can buy payment and performance bonds at separate times. A payment bond can be purchased while negotiating a contract, and performance bonds are necessary before breaking ground. 

Miller Act Payment and Performance Bonds for Public Construction Projects

The Federal Miller Act requires contractors to get performance and payment bonds for all publicly-owned construction projects over $100,000. Certain states and municipalities also require payment and performance bonds on smaller projects. These bonds protect investor and community grantor dollars from being lost in failed public construction projects. 

How to Get a Performance or Payment Bond 

Choosing Treasury Bank Organization is the quickest and easiest way to get a payment or performance bond. Just follow these four steps: 

• Step 1: Apply for your bond online
• Step 2: Provide any additional information as needed
• Step 3: Pay for your invoice online or over the phone
• Step 4: File the bond form with a program administrator.

We’re here to help streamline your bond process.

How Fast Can You Get Your Bond Grant? 

You can get Bond Grant under $750,000 in as little as 24 hours. For bonds over $750,000, the approval process can take anywhere from 3 to 10 days. The timeframe for application approval depends on how quickly you can provide supporting documents and information for the surety to review. 

Apply online today and an Administrator will contact you within one business day or less!

How Much Do Payment vs Performance Bonds Cost? 

Performance and payment bond premium rates typically cost 3% of the total project value. When issued together, you’ll only need to pay one premium for both bonds. For example, a qualified contractor would pay $3,000 for payment and performance bond coverage on a $100,000 construction project. Use our Contractor Bond Grant Cost Calculator to get a price estimate today.

What is a Surety Bond?

A surety bond is a financial guarantee that contractual obligations will be met. It is a three-party agreement between the principal (you), the surety (us) and the obligee (the entity requiring the bond).

What Does a Surety Bond Cover?

Surety bonds protect grantor, Investors, entities, and businesses from loss by holding bonded parties financially liable for their legal or professional obligations. If the bondholder breaches the contract terms, harmed parties can recover their loss by filing a claim on the bond.

For example, surety bond obligations can range from completing a contracted project to following industry licensing rules to properly managing estate assets.

Qualifying for a Bond Grants

Bond Grant require applicants to go through the procurement process. To complete your application, you may need to provide some additional information:

• Have you ever been bonded before?
• How long has your company existed?
• Project size and contract terms
• Bond coverage amount
• Procurement credit score
• Financial credentials
• Work history

A good procurement history and multiple years of experience are typically required to qualify for standard Bond Grant. If you’re a newer contractor or have low credit, call to discuss your options with a surety expert.

The clearing account is used as an external zero balance commercial bank product. It is the initial receiver of high value private funds. Private funds are transferred as straight through “Real Time Payment RTP” from Treasury Bank, as lending.

Private funds are debited from the Treasury Bank over the internet to HSC’s Clearing Account with Clearing Bank under

• compliance clearing measures
• assurance of regulatory rules,
• credit threshold limits with correct LTV ratio; and
• registered statement filed with the Federal Reserve under regulation U.

After clearing, HSC book transfer funds to members settlement account leaving a zero balance within the it’s clearing account with clearing bank for CIP Participants.

CIP Participants are:

• Public Body – SAR, Yield and Service and Products Beneficiaries
• Developer – Administrator, Contractors and Vender – Development Fees
• Clearing Bank – Correspondence – Collection Fees

Public Body means international Family and Community Members participate with in the CIP.

Developers means Treasury Bank Accountholder as Administrator Stakeholders, Contractors, and Subcontractors. 

Clearing Bank means a payment collection bank and acquirer for CIP public body and merchants as direct deposit or direct card top-up. In the form of Accountholder yield and development fees as Settlement. 

T2B Integration

Treasury to Bank T2B is a direct straight-through open bank relationship using HSC as Clearing Corporation. 

HSC create an open bank integration solutions for Treasury Bank T2B relationship commercial bank clearing account as H2H SFTP SSH connection by utilizing the following: 

• Treasury Bank – development, securities deposit 
• HSC – compliance clearing and liquidity 
• Bank and Card payment processor 
• Clearing Bank – Acquirer
• Clearing Account – Master bank account
• Settlement Account – Sub-bank account  

HSC clearing aiming to turn complex digital asset cash management tasks into simple processes.

Treasury Bank specialize in total cloud base T2B Technology solutions to integrate with third- party Clearing Bank core. 

Integration and Payment 

Treasury Bank has partnered with Third Partner Payment Processor TPPP a modern fintech company with multi level bank formats to make sure your our members and our clearing bank communicate seamlessly through our core cloud-based solutions.

Treasury Bank TTTP allow seamlessly integrate of HSC and Treasury Bank’s cloud-based ERP core systems with our respective clearing banks. This integration enables Treasury Bank to conveniently send payments and effortlessly receive Balance and Transaction Information directly within its ERP system.

Clearing account clear and liquidated data under security entitlement and interest under UCC 8-501. under choice of law of funds-transfer system rule pursuant to Louisiana commercial code j§10:4A-507.  

The term margin account is a Treasury Bank’s cash credit account which a Treasury Bank’s Treasurer, Administrators or Sureties lends equity accountholders capital within a margin accountholder as cash credit or cash equivalent. This is done to leverage working capital, purchase stocks, or other financial products. The Margin Account and security agreement is held within Treasury Bank as an asset and collateral for the margin.

Account Interest is straight forward with no periodic interest rate that the equity accountholder must pay to keep it active. leveraging the margin account from Treasury Bank through a margin account that allows equity accountholders to increase their supply change, purchasing and trading power. Investing with margin accounts means using leverage, which increases the chance of magnifying an equity accountholder’s profits and losses.

How a Margin Account Works 

If an investor opens a margin account within a community investment program (CIP) Because the investor has acted as surety for the equity accountholder when the accountholder earn profit on the CIP expenses the investor, make dividends through the margin account. When appreciate in value goes beyond the interest rate charged on the credit, the investor will earn a better total return than if they had only purchased securities with their own cash. This is the advantage of using margin credit.

On the downside, the Treasury Bank charges interest on the margin account for as long as the margin is outstanding, increasing the investor’s cost. If the stock decline in value, the investor will be underwater and will have to pay interest to the margin account.

If a margin account’s stock drops below the maintenance margin level, the investor call or will make a margin call to the equity accountholder. Within a specified number of days—typically within 30 day days, although in some cases it may be less—the equity accountholder must fulfill more procurement, deposit more cash, or sell some stock to offset all or a portion of the difference between the security’s price and the maintenance margin.

What Is Maintenance Margin? 

Maintenance margin is the minimum equity that must hold in the equity account after the margin call has been made.

Understanding Maintenance Margin 

Although FINRA requires a 25% minimum maintenance margin, because of the lack of open market participation Treasury Bank’s sureties may require 50% of the securities’ total value should be available pursuant to Regulation U. Maintenance margin is also called a minimum maintenance or maintenance requirement.

What is a Margin Call ?

A margin call happens when equity held in the equity account have decreased in value. The investor must choose to either deposit additional funds or marginable securities in the account or sell some of the assets held in their account when a margin call occurs.

A surety has the right to ask an investor to increase the amount of capital they have in a equity account, sell the investor’s shares if the surety feels their own funds are at risk, or sue the investor if they do not fulfill a margin call or if they are carrying a negative balance in their account.

The surety investor has the potential to lose more money than the funds deposited in the account. For these reasons, a margin account is only suitable for a sophisticated investor with a thorough understanding of the additional investment risks and requirements of trading with margin.

Our CIP accounts are not like depository and time accounts of standard banks, because they are non-cash securities that are available for cash and cash credit exchange.

Equity Account is an asset account that’s offered to accountholders to vest within CIP by providing products and services. 

Margin Account A type of CIP that allows the Treasury Bank Portal to extend to accountholders to purchase supplies and equipment to development CIP.

Bond Accounts are onligation account that offer to accountholder as vendors, contracts or merchants that purchase bonds to invest capital in exchange for future dividends.

Equity and bond securities are warehoused with Treasury Bank as securities custody for cash credit for investors members under Rule 147. Cash and cash credit is transferred to investment deposit accounts with investor bank depository accounts.

Bank Depository Accounts

Bank depository accounts are Treasury Bank’s third party investors trust accounts with commercial banks. The trust account is a For Benefit Of (FBO) sub account for members demand deposits; with an option of “virtual account or credit card issue.”

Both Accounts are be held as uninsured accounts within the depository Bank holding cash that is linked with Treasury Bank’s margin stock as cash credit or cash equivalents as:

• Mutual funds.
• Stocks and bonds entitlement
• Crypto assets value
• Municipal securities

Investment Accountholders

Accountholders are Community Investment Program CIP as equity or bond issuers and as equity and bond issuers. Both program investment and investor are beneficiaries of Treasury Bank.

Bank Benefit 

The bank will receive standard rates and fees for full value of investment credit transfer through the clearing account.

Note: Treasury Bank shall and does not offer a savings account, savings deposit, certificate of deposit, savings certificate, money market certificate, share account, share draft account, passbook account, checking account, or withdrawals from such accounts.