Andreessen Horowitz backs ModernFi’s deposit marketplace for banks
Summary
Banks arent letting fintechs have all the fun when it comes to using technology, providing an opening for startups to show them what they got.In the same vein as companies like Flourish Fi, Treasury Prime, Savana and Amount offering software for banks, ModernFi is providing a marketplace for banks to exchange deposits on demand.Banks typically use deposits to make loans, which puts them into one of two situations: either they have too many deposits and not enough lending or investment opportunities, or they dont have enough deposits to meet the loan demand, explained Paolo Bertolotti, co-founder and CEO of ModernFi.For banks that need additional deposits, some of the go-to solutions are to open up a new branch, hire more relationship managers or increase marketing spend.However, Bertolotti, whose background is in financial engineering operations research, said a trend emerged over the past 20 years of banks purchasing deposits directly from other institutions through the wholesale funding market, which has grown into a $2.3 trillion market.Its an over-the-counter market, meaning theres no marketplace or exchange and the market is very antiquated and opaque, he added. It also helps the banks manage balance sheet size and earn potential revenue. You need a healthy interbank market to smooth out the edges, and thats really how we see ourselves fitting in.ModernFi doesnt charge transaction, account or setup fees, but does take some of the yield that banks pay on the deposits. Andreessen Horowitz led the round and was joined by executives and founders from JPMorgan Chase, AWS, Coinbase, Q2 and BlackRock.Commenting on the raise, David Haber, general partner at Andreessen Horowitz, said in a written statement, After over a decade of being relatively staid, this market has become increasingly dynamic, laying a strong foundation for ModernFis business. Theres quite a lot to do on the analytic side, as well as help banks manage their balance sheets.