Daily Deposit 2.16.2023

GM. This is the Daily Deposit. The newsletter that helps bankers get better, not worse, everyday

Tech in banks? How a bank makes money? You know we got you like a Giga Chad…

Today’s Rant

Why do banks need technologists?

Well, straight up, not having technologists in banking has been a major factor in the rise of the FinTech! Techies are the ones who help banks evolve from the slow, lumbering megafauna of the financial world to the agile, nimble creatures required to keep pace with the everchanging digital world we live in.

Banks MUST develop new digital products and services to provide customers with the seamless and convenient banking experience they expect. Mobile banking apps, online bill pay, virtual assistants, and a UI to die for. Mix in some data-driven AI/ML decision-making, and we’ll be caught up with everyone else in 2023…

Digital Innovators and Product Managers are becoming a must-have for any bank trying to provide what customers actually want. Even if the software development needs to happen through a 3rd party, the bank needs to understand what products it needs to offer and how they fit into the overall tech stack.

Not to mention, techbros play a huge role in ensuring the security and stability of financial systems. With the rise of cyber threats, banks gotta have a strong tech infrastructure who can identify and mitigate these massive risks. Bring in the boyz!

Banking 101

How do banks actually make money?

There’s 2 main ways banks bring in income, and no it’s not the coin deposits from your 2% cap rate laundromat…

Interest income: it can come from lending customer deposits for mortgages, commercial/personal loans, and securities. This works because banks will pay a low interest rate out to depositors, like 1%, and loan out deposits at a higher interest rate, like the juicy 7% 30-yr mortgages that are floating around nowadays. This is the core activity of traditional banks.

Another way to earn interest is a sweep program. A bank can set a level of deposits they’re willing to hold onto and sweep any amount over that amount. The swept money enters a network of banks that want to gobble up more deposits and will pay interest for those deposits. The excess interest from passing along deposits to the network are paid out to the bank in the form of fees.

Non-interest income: this can come from a variety of places; late payment fees, credit card charges, penalties, etc. These fees and penalties are common place at your smaller mom and pop community banks, but they’re going away fast. Digital banking dropped operating costs to the point that these banks don’t have to rely on these low-blow income sources.

Where non-interest gets interesting is BaaS, banking-as-a-service. With the right tech, banks can white-label banking products and services. Who’s interested in that? fintechs. With BaaS, banks can benefit from interchange fees, card processing, Fraud monitoring, KYC, and remote deposit capture just to name a few…

LULZ

1% Better

“If you get one percent better each day for one year, you’ll end up thirty-seven times better by the time you’re done.” -James Clear

Do the most important thing first each day. It’s simple, but boy does this work. Keep your priorities a priority and work on the most important tasks first.

Trouble sticking to it? Bonus tip: wake up 1 hour earlier. Do this and you’ll have no choice but to grow!

reply with a Cold Stone bowl score… did you:

a) like it

b) love it

c) gotta have it