This is Part 2 of a 3-part series on neobank infrastructure for healthcare. Part 1 covered FBO account complexity. Part 3 analyzes unit economics.
Six months into building CLIN neobank infrastructure, I faced the decision every fintech founder encounters: build it ourselves or partner with existing infrastructure. For healthcare practices, this decision carries unique complexities that make the traditional fintech playbook inadequate.
Consumer neobanks can partner with generic Banking-as-a-Service (BaaS) providers and launch quickly. Healthcare neobanks need specialized compliance, unique account structures, and regulatory expertise that generic providers don't offer. The partnership landscape looks different.
Here's how I evaluated the build vs partner decision for healthcare banking—and why we ultimately chose partnership despite the limitations.
The Build Option: Why We Considered It
Building neobank infrastructure offers maximum control and customization. For healthcare practices with unique needs, this seemed initially attractive.
Advantages of Building
Custom healthcare features: We could build exactly the account structures practices needed—segregated professional funds, trust accounting, insurance receivable tracking.
Compliance integration: Direct integration with professional license verification, state board monitoring, and healthcare-specific regulations.
Practice management integration: Deep API connections to practice management software for automated reconciliation and reporting.
Competitive differentiation: Proprietary infrastructure would be harder for competitors to replicate.
The Reality of Building Healthcare Banking
Building banking infrastructure for healthcare practices requires capabilities most startups don't have:
Banking charter partnership: Even building your own infrastructure requires partnership with a chartered bank for FDIC insurance and regulatory compliance.
Compliance expertise: Healthcare banking regulations cross federal banking law, state professional licensing, HIPAA, and healthcare industry oversight.
Development timeline: Conservative estimate: 18-24 months for MVP, 36+ months for full feature parity with existing solutions.
Capital requirements: Minimum $2-3M for infrastructure development, compliance, insurance, and legal costs before serving first customer.
Technical Architecture Complexity
Building healthcare banking infrastructure requires different architectural decisions:
// Consumer neobank architecture
const bankingStack = {
accounts: 'single customer account',
settlement: 'daily automatic',
kyc: 'individual identity',
compliance: 'consumer banking regulations'
}
// Healthcare neobank architecture
const healthcareBankingStack = {
accounts: {
professional: 'segregated business accounts',
trust: 'patient payment handling',
receivables: 'insurance company tracking'
},
settlement: {
timing: 'practice-controlled',
segregation: 'by payment source',
reporting: 'integrated with practice systems'
},
kyc: {
professional: 'license verification',
entity: 'practice structure validation',
ongoing: 'license renewal monitoring'
},
compliance: {
banking: 'federal banking regulations',
healthcare: 'HIPAA, state professional boards',
industry: 'insurance network requirements'
}
}This complexity extends development timelines and increases ongoing maintenance costs significantly.
The Partnership Landscape for Healthcare
Healthcare banking partnerships aren't as simple as integrating with Stripe or Plaid. Most BaaS providers focus on consumer or generic B2B use cases.
Generic BaaS Provider Limitations
Compliance gaps: Providers like Synapse, Column, or Unit don't understand healthcare professional license requirements.
Account structure limitations: Consumer-focused providers can't handle segregated professional accounts or trust accounting requirements.
KYC mismatches: Generic identity verification doesn't include professional license verification or ongoing compliance monitoring.
Settlement timing: Optimized for consumer paycheck cycles, not healthcare practice cash flow patterns.
Healthcare-Focused Banking Partners
The healthcare banking landscape includes specialized providers, but with significant limitations:
Traditional healthcare banks: Institutions like PNC Healthcare Banking or Fifth Third Healthcare understand the market but lack modern API infrastructure.
Credit union partnerships: Some healthcare-focused credit unions provide specialized services but with limited technical integration capabilities.
Emerging healthcare BaaS: New providers targeting healthcare verticals, but with limited track records and feature sets.
Star Bank Partnership Analysis
During our partner evaluation, Star Bank (name changed) emerged as a potential healthcare-focused banking partner. Their proposal offered:
Healthcare expertise: Existing relationships with medical practices, understanding of professional banking needs.
Compliance capabilities: Established processes for healthcare professional KYC/KYB verification.
API infrastructure: Modern integration capabilities with practice management systems.
Regulatory relationship: Strong relationships with healthcare industry regulators and compliance expertise.
The Partnership Negotiation
Star Bank's initial proposal looked promising:
- 6-month integration timeline vs 18+ months building
- $150k setup cost vs $2M+ to build internally
- Established compliance processes vs learning healthcare regulations
- Immediate FDIC insurance and banking charter access
However, the negotiation revealed limitations:
Limited customization: Their platform supported common healthcare banking needs but couldn't accommodate practice-specific features we wanted to build.
Revenue sharing: 60/40 split on interchange fees and account fees significantly impacted our unit economics.
Integration constraints: Their APIs supported basic functionality but lacked deep practice management system integration.
Growth limitations: Their infrastructure could support hundreds of practices but wasn't designed for thousands.
The Decision Framework
Evaluating build vs partner for healthcare banking required analyzing multiple dimensions:
Time to Market Analysis
Building timeline: 18-24 months minimum development, 6-12 months regulatory approval, 24-36 months total.
Partnership timeline: 6-9 months integration and testing, 3-6 months regulatory approval, 12-18 months total.
Market window: Healthcare practice consolidation accelerating, independent practices needed solutions immediately.
Competitive landscape: Other fintech companies evaluating similar opportunities, first-mover advantage significant.
Cost Analysis
Build option costs:
- Development team: $150k/month for 24 months = $3.6M
- Compliance and legal: $500k setup + $100k/month ongoing
- Insurance and bonding: $200k annually
- Regulatory fees and audits: $150k annually
- Total: $4.5M+ before serving first customer
Partnership option costs:
- Setup fees: $150k one-time
- Revenue sharing: 40% of gross revenue
- Monthly platform fees: $5k-15k depending on volume
- Integration development: $200k internal costs
- Total: $350k setup + ongoing revenue sharing
Risk Analysis
Build option risks:
- Regulatory approval uncertainty
- Technical development delays
- Compliance expertise gaps
- Capital requirements exceeding fundraising capacity
Partnership option risks:
- Limited customization capabilities
- Revenue sharing impact on unit economics
- Dependency on partner technical capabilities
- Partner business model changes affecting our platform
Strategic Control Analysis
Build option control:
- Complete product feature control
- Direct regulatory relationships
- Proprietary technology stack
- Independent scaling decisions
Partnership option control:
- Limited to partner platform capabilities
- Shared regulatory oversight
- Dependent on partner technical roadmap
- Partner approval required for major changes
Why We Chose Partnership
After evaluating both options, we chose partnership despite the control limitations:
Capital efficiency: Partnership required $350k vs $4.5M+ to build, allowing us to focus capital on customer acquisition and product development.
Time to market: 12-18 months to launch vs 24-36 months to build gave us significant competitive advantage. This decision aligns with Reid Hoffman's Blitzscaling principles—prioritizing speed over efficiency when capturing market opportunity, even if it means accepting less control and higher unit costs initially.
Risk mitigation: Partner's existing compliance expertise and regulatory relationships reduced execution risk.
Learning opportunity: Partnership allowed us to learn healthcare banking operations before potentially building proprietary infrastructure later.
The Partnership That Didn't Happen
Despite months of negotiation, the Star Bank partnership ultimately fell through. Their platform limitations became clear during technical due diligence:
Integration complexity: Their APIs required custom middleware development that eliminated the time-to-market advantage.
Feature gaps: Critical healthcare-specific features would require custom development on their platform.
Revenue sharing terms: The 60/40 split made our unit economics unworkable at the volumes we projected.
Growth constraints: Their infrastructure couldn't support our 5-year growth projections without significant additional investment.
The Pivot Decision
The partnership evaluation process revealed an insight: healthcare practices didn't need better banking infrastructure—they needed better financial decision-making tools.
Every partnership discussion focused on holding money, moving money, and tracking money. But our 777 survey responses showed practices struggling with understanding money—cash flow forecasting, financial planning, operational decision-making.
This insight led us to pivot from CLIN neobank infrastructure to Dentplicity decision intelligence platform. Instead of building banking infrastructure, we built decision-making tools that integrate with practices' existing banking relationships.
Post-Pivot Validation
The pivot decision proved correct:
- Faster time to market: 6 months to launch vs 12-18 months for banking partnership
- Lower capital requirements: $200k to build decision intelligence vs $350k+ for banking setup
- Better product-market fit: Practices immediately understood decision intelligence value
- Simpler partnerships: Integrating with existing banks vs becoming alternative bank
Lessons for Healthcare Entrepreneurs
The build vs partner decision for healthcare infrastructure carries unique considerations:
Domain expertise requirements: Healthcare regulations require specialized knowledge that generic BaaS providers don't offer.
Partnership landscape limitations: Healthcare-specific partners offer expertise but often lack modern technical capabilities.
Customer needs vs founder assumptions: Deep customer development may reveal that customers need different solutions than originally assumed.
Pivot timing: The decision-making process for partnerships can reveal market insights that change your entire approach.
Next: Part 3 analyzes why the unit economics of healthcare banking favor vertical-specific solutions over traditional banking approaches.
-AM
arvindmurthy at gmail
Data sources: CLIN partnership evaluation documentation (2024-2025), Star Bank partnership analysis, healthcare BaaS provider research, build vs buy cost analysis