Webinar: OneKey to Help Banks Manage Concentration Risk and Drive New Deposit Growth
In March, Treasury Prime launched OneKey Banking, an interconnected multi-bank product designed to help embedded finance companies to manage business continuity and scale more easily. The benefits to such companies are multifaceted: They have access to more features, can establish redundancies and mitigate risk, all through a single technology layer.
That said, OneKey Banking offers many benefits to sponsor banks as well. Treasury Prime VP of Banking Jeff Nowicki breaks down how OneKey can help banks better manage their fintech relationships, diversify portfolios, focus on product specializations, and mitigate concentration risk.
Interested in learning more? Watch the webinar on-demand.
How does OneKey Banking benefit banks?
OneKey Banking yields various benefits to sponsor banks by creating true, seamless connections between banks which, in turn, enable client organizations to utilize the services of multiple bank partners.
For banks, OneKey benefits:
1. Focus on product specialization
With most banking-as-a-service setups, sponsor banks often feel pressure to offer services outside of their core competencies to attract customers. OneKey Banking, however, empowers sponsor banks to develop product specializations that tie into larger strategic goals.
How does this work? Let’s say our theoretical embedded banking client, ProcurEZ is building a wallet product and wants to offer clients both business checking and consumer checking accounts. Sponsor Bank 1 has historically always been focused on commercial accounts powering their local community. They have no expertise in the bank as it relates to consumer accounts and regs. Instead of feeling obligated to launch not only a new BaaS program but also stretch their core competencies to oversee a consumer program as well, Sponsor Bank 1 can instead stay within their comfort zone and provide support and sponsorship for the business checking account for ProcurNow while Treasury Prime introduces Sponsor Bank 2 who can provide its consumer specialty and sponsor the retail checking account product to ProcurEZ.
This applies to many product lines and specializations. Don’t want to sponsor debit BINs? Focused on transactional fees and not interested in high-yield deposits? With OneKey Banking your bank does not need to expand into new product areas or participate in areas you don’t want just to engage in a deal.
2. Diversifying the portfolio and managing concentration risk
Say you’re a $2 billion bank and you have the opportunity to bring in a $1 billion program. While that can be an impactful forum for growth, it has the potential to significantly increase your concentration risk. If you’re not a OneKey sponsor bank you may be forced to pass on the deal. A OneKey sponsor bank, however, can take on a portion of the program while other OneKey Banks take on the remainder of the program.
The preceding example is similar to what you may have experienced in loan participation where a small community bank with a legal lending limit of $30 million encounters a substantial $100 million commercial real estate deal. That bank wouldn’t prefer to pass on that opportunity or make that client find other banks on their own; instead, the bank works with a few other banks to make that loan. OneKey Banking operates similarly for embedded banking programs: banks can participate in large deposit opportunities without having to shoulder the burden of the entire deposit.
Another challenge sponsor banks must handle is the problem created by an embedded banking program that grows too quickly. You’re happy for your customer, but their success means their growth is bloating your portfolio and, again, creating concentration risk. Instead of offboarding the program, OneKey sponsor banks can share a portion of the program with other OneKey banks.
OneKey Banking thus acts as a pressure valve enabling sponsor banks more control over the size and composition of their embedded banking portfolio.
“That’s what we're trying to do here over the long run is help our banks get access and exposure to a number of programs, instead of just trying to get it all in one full shot,” says Nowicki.
3. Participate in more deals for deposit growth
Finally, the result of the two advantages above is that OneKey Banking enables sponsor banks to participate in more deals than they normally would were they not OneKey participants.
Sponsor banks can bring on programs even if they don’t fulfill all program needs. Banks can participate in meaningful deals and retain fast-growing clients. Banks can participate in a variety of deals tailored to the organization’s risk appetite thanks to the interconnected nature of OneKey Banking.
Simply put, OneKey Banking puts banks in charge of their embedded banking initiatives.
OneKey is NOT a deposit network
Although OneKey Banking enables embedded banking programs to distribute deposits among sponsor banks, OneKey Banking is not a deposit network and is separate and apart from optimizing FDIC insurance. While Treasury Prime is not in a position to offer legal advice, we help structure all programs to put the bank in the best position to classify deposits as core and not brokered.
Treasury Prime is an embedded banking operating system for banks. We make introductions between embedded banking programs and the appropriate sponsor bank. From there, the sponsor bank has a direct contract with the embedded banking program.
You can download the full webinar here.
Wondering how embedded banking could help your business? Contact Treasury Prime — we have a true multi-bank network, the deepest bank core integrations, and extensive compliance experience. Read more about our $40 million Series C Funding and why Tearsheet named us the Best Banking as a Service company two years in a row. Talk to the best embedded finance team in the industry.