America’s ecosystem of over 4,500 banks is an anomaly in the global landscape. Other countries’ banking numbers barely reach 500. However, banking has been going through a shift, and in 2023, the threat to smaller banks is increasing. 

In the 2023 Cornerstone Advisors “What’s Going On in Banking” survey, threats were registered from all sides. While the perception of danger from challenger banks has decreased, big tech, fintechs, and “megabanks” make up an ever-present danger in the minds of bank executives. 

Deposit declines have been seen since mid-2022 and heightened drastically by the March banking crisis. Scooped up by the megabanks, small institutions have been left with an urgent need to change their approach. Cornerstone found that banks’ greatest priority in 2023 had shifted significantly to growing their deposits. A digital account opening strategy is becoming a critical component. 

Stated to have “better economics and business models,” fintechs have the agility to focus on digital development. Unbounded by many of the restrictions posed by banking license compliance, they can respond quickly to the rapid evolution of consumer demands and tech.  

The partnership between fintechs and banks could therefore be powerful to boost deposits.

Not just a one-way relationship

With around 272 million accounts, “mega fintechs” now service nearly every adult American under 55 with a smartphone. Fifteen million of these consumers now consider the fintechs their primary spending or checking account provider. 

Not to be confused with neobanks or “challenger” banks – they do not hold a banking license and often partner with banks for services to complement their offering. In return for digital agility, fintechs, in their partnership with banks (be it a singular bank or a network), are provided with a regulated custodian of customer funds.

This can be particularly powerful for payments and financing providers, providing them with a banking infrastructure back end that is fully compliant with regulations and insured by the FDIC. Meanwhile, fintechs can work on developing innovative solutions that respond to customer needs. 

RELATED: USA 2023: Why fintechs shouldn’t become banks

However, according to Treasury Prime, an embedded banking platform that connects banks and fintechs, “Finding a single bank that perfectly aligns with the requirements of a growing business can be challenging…Engaging with multiple banks grants organizations the freedom to choose from diverse options that best suit their evolving needs.”

The need to partner with multiple banks may have also been compounded by the March banking crisis. Employing diversification through partnering with numerous banks covers fintechs for possible disruption in banks’ service. 

“It’s extremely important to create bank redundancies to avoid any potential outages that could impact your business operations,” said Treasury Prime CEO Chris Dean. The company explained that while none of Silicon Valley Bank’s client deposits were lost, the bank’s failure had significantly disrupted the operations of fintechs that used them. 

Treasury Prime partners with Academy Bank

Treasury Prime has worked to facilitate the partnership between fintechs and banks, creating an ecosystem to boost innovation. Today, July 31, the company has announced its collaboration with Acadamy Bank.

“Academy Bank’s ability to service deposit customers in a highly personalized manner… forms a strong foundation for our partnership,” said Jeff Nowicki, VP of Banking at Treasury Prime. 

In the announcement, it was stated that the partnership with the bank “will empower businesses to rapidly launch and scale their payment and deposit products, driving strong customer engagement and retention.”

Academy Bank’s collaboration with Treasury Prime allows the institution to power increased innovation with their deposits. The bank will open out its deposit services to fintechs on the platform, allowing them to offer FDIC-insured accounts to their customers. 

“This collaboration aligns perfectly with our commitment to innovation and focus on the fintech industry,” said David Robinson, Director of Fintech Partnerships at Academy Bank. “By leveraging Treasury Prime’s technology, we can enhance our offerings and provide our fintech partners with the tools they need to accelerate their growth and deliver innovative financial services.”