Banking-as-a-service model extends hunt for deposits to fresh markets

Branches don't pay off like they used to for building deposits and loans, so why keep sinking more money into them? Using application program interfaces, built on new technology instead of old core, can put banks and credit unions into new geographies without new bricks.

While strong demand for loans continues, banks and credit unions have been struggling to raise the necessary deposits in their local markets. For many institutions, growing deposits remains tied to the diminishing returns of maintaining or building more branches as the primary means of attracting depositors.

Falling traffic means that branches are no longer the revenue generators they used to be. Only about 25% of account holders visited a branch in 2018 to open a new deposit account, while only 19% visited to apply for a loan, according to Market Force. The vast majority of in-branch interactions today are confined to troubleshooting and transactions. This gives financial institutions with limited out-of-market digital capabilities little recourse in growing deposits to fuel lending activity.

But there are solutions. A key one for community banks and credit unions, which may not see enough ROI in building more physical branches, can be found instead in the more intensive adoption of banking-as-a-service solutions and models. This approach brings banking services like checking, savings and payments to other markets using APIs (application program interfaces).


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