Grasshopper Bank leans on fintech partners to tackle economic downturn

Since joining New York City-based Grasshopper Bank in 2021, CEO Mike Butler has overhauled the bank’s technology stack to offer banking as a service and serve small business customers.

In 2022, under the former Radius Bank boss’s supervision, the rebuilt the bank with more than $600 million its technology platform to focus on fintech partnerships. Since the upgrade, the bank has secured agreements with Treasury Prime, FIS, Narmi, Alloy, Visa, Autobooks, Hummingbird and Fiverity.

Grasshopper’s partnership with FIS and Treasury Prime helped it become the first financial institution to tap into FIS’ built-in treasury services and act as the pilot bank in building out its BaaS and enterprise API platform, according to the firm.

In January, Grasshopper announced a partnership with Ramp, a leading corporate card and financial automation platform and co MANTLE, a provider of account creation solutions. The bank offers small and medium-sized business customers access to Ramp’s platform, including virtual and physical business cards based on referrals. The collaboration will give small businesses a holistic view of their finances in one place, the bank said.

Grasshopper on Wednesday reported a 262% increase in loans and a 124% increase in deposits, while total revenue exceeded $17 million – a 239% increase from year to year.

Grasshopper’s hiring has seen a 31% increase since the start of 2022.

“Despite some economic headwinds, the market for our digital solutions continues to grow rapidly and we will continue to work tirelessly to ensure our customers have the exceptional digital banking experience they deserve and demand,” Butler said in a statement. “To do so, we will continue to partner with industry-leading fintech companies that help expand our capabilities and develop lines of business that directly address the needs of small and medium-sized businesses.”

This interview has been edited for clarity and brevity.

Bank Dive: What obstacles are you facing during this economic downturn?

MIKE BUTLER: I think the #1 obstacle always motivates people. It’s a very big one

challenge, especially in a start-up where there is a lot of hard work and the pay is on the way.

[Second is] works with partners, and we are a partnership shop. So we don’t develop our own software. We are committed to embracing the world of fintech as companies that we believe are creating superior technology in a faster and more open architecture way. But working with partners to execute these strategies are also quite big hurdles for us.

And I think the last one is …. the regulations have become a bit strict. [T]the hat has become a challenge and we spend more time on it, but you have to make sure that it doesn’t become a distraction and that you operate within the regulators’ guidelines for safety and soundness.

What is your approach to fintech partnerships?

BUTLER: We feel that is one of our true strengths. We understand partnership. And the one thing I tell people is, when you try to refer to one of your fintech partners as a vendor, you’re in a bad place. We like to limit the number of partners we have to engage with and choose the best we can that are aligned with us.

We do a good deal of due diligence beforehand [with] our partners and understand their ability to work within our culture. Because it is important to us. You must be in line with our culture.

How many partners do you prefer to work with at any given time?

BUTLER: There are two parts to this. We use fintech for our platform, which creates the customer experience that we believe is critically important to serving the demands of the digital type of client. And then we also have our banking-as-a-service business where we deliver white label solutions to companies that can benefit from a banking product. On the platform side, we would say there are four to five partners [maximum] we have ever worked with. And on the banking-as-a-service side, we’d like to say that 15 to 20 fintechs is all we really want to work with.

How do you differentiate yourself from the rest in the market?

BUTLER: Our fintech partners deliver what we expect them to deliver, and it’s a customer experience that delights our customers. And we believe it is always a differentiating factor for customer acquisition.