CASE STUDY
OMB + Backpack 529
A pioneering payments platform, Backpack 529 is dedicated to building an infrastructure that offers student families digital, simple and cost-effective ways to manage education expenses. Specializing in complex payment flows like payments from 529 plans, outside scholarships and third-party billing, Backpack provides a comprehensive solution. Additionally, they offer a for-purpose 529 Spending Account to assist families in tracking expenses, storing receipts, meeting tax requirements and ensuring IRS audit protection and eligibility guarantees for certain products and services.
The realm of education payments, particularly 529 payments, is highly intricate due to the state-administered model of the 529 concept. With more than 100 different 529 plans, both advisor-sold and direct-sold, offered by the majority of U.S. states, the lack of a centralized payment infrastructure has been a significant issue.
As payment volumes from these 529s surged, Backpack recognized the urgent need for a centralized payment infrastructure.
To address this, Backpack needed to accept funds from all 100+ 529 plans from day one. The solution involved creating a 529 Spending Account in the name of either the 529 plan account owner and/or beneficiary, enabling direct withdrawals into the users' Backpack accounts for subsequent payment orchestration to accredited universities or other qualified education expense providers. This ambitious plan necessitated a Bank Sponsor that understood the need for flexibility and focus on execution to deliver for their customers.
Backpack engaged with several potential bank partners during the selection process. The criteria were straightforward: Finding a team that could build a tight relationship fostering creativity and ideation as core aspects of the partnership. Additionally, the partner needed to embed compliance and security into every aspect of their programs, especially given the current regulatory climate.
OMB Bank emerged as the ideal partner, meeting all of Backpack's criteria both technically and relationally. The collaboration with OMB, particularly with Steve Bishop and the broader embedded finance team, felt like a true partnership from the outset, even during the diligence and negotiation phases.
This rare and valuable synergy allowed Backpack to move from the initial meeting to contract signing and program launch within just a few months. The commitment to creative solutions and compliance ensured that any issues were quickly resolved, leading to a smooth execution.
OMB has been amazing in working with us on any and all asks. We trust that if the OMB embedded finance team proposes a new solution or suggests a different approach, it is the right path forward. They are truly an amazing partner and we would not be where we are today without them.
The partnership with OMB Bank has been transformative for Backpack. Key outcomes include:
Rapid market entry: From initial meeting to program launch in a matter of months.
Operational efficiency: Significant reduction in time and cost for student families managing 529 payments.
Enhanced offerings: New value propositions for partner universities, adding unexpected value.
Backpack's successful pivot and rapid market entry, facilitated by OMB Bank's embedded finance solution, highlight the power of strategic partnerships. By choosing a partner committed to creativity, compliance and execution, Backpack has been able to revolutionize the education payments landscape, providing invaluable benefits to student families and educational institutions alike.
Moreover, OMB's commitment and support has allowed Backpack to offer new value propositions to partner universities, exceeding initial expectations.
This case study underscores the importance of selecting the right partner to achieve swift and effective market entry, offering a compelling example for other companies seeking to navigate similar challenges.