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Scott Orn

Scott Orn, CFA

Bryan Harper of IntraFi discusses banking deposit networks and expanded FDIC insurance

Posted on: 08/13/2023

Bryan Harper

Bryan Harper

Managing Director - InfraFi


Bryan Harper of InfraFi - Podcast Summary

Bryan Harper of IntraFi discusses banking deposit networks, and how IntraFi’s network of over 3,000 banks provides expanded FDIC insurance to businesses with large deposits.

Bryan Harper of InfraFi - Podcast Transcript

Singer: (Singing). It’s Kruze Consulting. Founders and friends with your host, Scotty Orn.
Scott: Welcome to Founders of Friends podcast with Scott Orn at Kruze Consulting. And today my very special guest is Bryan Harper of IntraFi. Welcome, Bryan.
Bryan: Thanks, Scott. Good to be here. Appreciate it.
Scott: We’ve been looking forward to this. You folks make a very in demand, crucial product for the banking sector, and especially in light of SVB and First Republic. God rests their souls, the companies. And by the way, amazing people at both those firms. But you guys do something very important, so we’re excited to have you on. But maybe start off just by retracing your career a little bit and telling us what got you excited about IntraFi and why do you wanted to be part of the team?
Bryan: Sure. So when I graduated from college, I actually started my career at an internet startup. That was the cool thing to do back in ‘99. Great opportunity in front of me, but things just didn’t work out. And there was a recession that followed. I decided that I just wanted to get into what I thought was probably one of the most stable industries out there, which is banking. At that time I started with Wells Fargo, I eventually moved on to Fifth Third Bank and then worked for a credit union for a short period of time, then back to Wells Fargo. IntraFi came calling, and this opportunity just seemed like a great way to expand my knowledge of the industry. So I’ve learned a lot about balance sheets, obviously working directly with banks as my clients and transitioning from working for banks. It was a lot of fun. And so I cover a 10 state territory. I cover Oregon, Washington, the whole mountain time zone, and then Nevada and Arizona. Work with lots of banks. Large banks, small banks. I really feel like this is one of those situations with IntraFi and the services we provide. We’re everybody wins, and so it makes it a lot of fun. We definitely appreciate the opportunity to do this podcast with you and get the word out for those depositors, especially in the startup community, that are all of a sudden more concerned about being uninsured. And so our services are obviously ones that can be leveraged for any depositor that has that concern. And I’ll explain, I’m sure more of that as we go here.
Scott: I love it. Because you are right, it’s a very crucial product for the banking sector right now. And startups, our client base, have a ton of cash. They raise a lot of money. Our clients raised, I think $2 billion last year. That money’s all sitting in their bank accounts or money market funds or places, treasuries. But when you keep that money in the bank, it’s important that it’s insured. And maybe you can explain what IntraFi does, the actual service you provide.
Bryan: Sure. So for depositors, the main value is that you’re getting expanded FDIC insurance. And the way I always explain it is really, all our services do is automate through technology what a depositor could do on their own. So if you have $10 million, you could open 40 different bank accounts of 250,000 each. I don’t know if anyone’s doing that at that scale. And I’ve been in banking two decades, there’s lots of depositors diversifying their banking relationships for the purpose of safety. And so what we do is we take in this example, $10 million, we divide it into amounts below 250,000, and we place those funds with as many destination institutions, which is what we call them, as it takes to make the entire deposit eligible for FDIC insurance. The nice thing about it though is if you were to do that manually, obviously that’s a huge time suck, but also you have to share your information with 40 different firms, you get 40 different statements, 40 different rates. It’s just not practical. When you use IntraFi’s deposit products through the relationship bank of your choice, all of your confidential information stays with that bank. You get one rate and it’s up to the relationship institution to determine what that rate’s going to be. You get one statement. So it gives you the advantages of working with a number of banks, but the benefits and the convenience of working with one.
Scott: It makes so much sense. I’ve been calling it a virtual network of deposits and banks. You have your money with the firm that you love at the startup bank that you love, but the money can be networked out or syndicated out and it’s safe. And the $250,000 threshold for FDIC insurance is multiplied. Because the thing I always remind people is startup founders, you’re a fiduciary. You have to protect the company’s money. You’re a fiduciary for the company. The venture capitalists on the board are fiduciaries for both the company but also their funds. They have limited partners who invest in them. And so everyone has this responsibility, obligation. And this is a product that makes so much sense. And it is so funny that I actually didn’t know very much about it until the SVB crisis, and then it became something that I was talking about 15 times a day in my speed dials to all the founders, just catching them up on stuff. So this is a really exciting opportunity for you folks at IntraFi.
Bryan: Yeah. It’s nice to be able to step up to the plate when your clients need you. I know a lot of banks did that during PPP, where they just we’re working day and night. I’m not saying that I’m doing that, but this is our moment to step up and really be a stabilizing force for the entire industry. And we’ve been able to do that. We work with about 3000 financial institutions. Over 50% of FDIC member banks are part of the IntraFi network. To your point, we’re not necessarily marketing our services to depositors. We’re wholesalers, where the only way a dollar gets into our products is if a bank and a depositor are having this discussion. We do a lot to support our banks, and it seems like more and more I’m helping banks have these discussions. But a lot of times it’s the first time that the depositor has ever heard of this concept of deposit networks and receiving expanded FDIC insurance through a single bank relationship. So it’s a real differentiator for those banks that have offered us for the last 20 years, we’ve been doing this for a long time. But also a lot of new banks that, to your point, really haven’t had the need because there hasn’t been this focus of being uninsured from their large customers. We’ve really been able to help some of these banks retain their clients and even in many cases, bring in new depositors from some of the larger banks. So it’s been a great few months for us being able to help out and again, just be a stabilizing force.
Scott: And because you guys are a wholesaler, but it feels like IntraFi, what was the history of the company? Wasn’t it started by a former SEC person or something like that, or it was this person who worked in the government, understood how this stuff is structured and why it needs to be safe, and then they went in a private business. What’s the story of the company?
Bryan: I’ll give you some of the history. We were founded by a former comptroller of the currency. And our current CEO served as a chief of staff at the FDIC and at the Fed. A renowned economist, just some really, really bright people, about 20 years ago, invented reciprocal deposits. We’re first to market with this concept of having a deposit network. And really what it allows banks to do, pretty simply, is just provide expanded FDIC insurance by leveraging each other and the network. Another really cool thing is that I mentioned reciprocal deposits, which IntraFi invented. It also allows banks to keep these deposits on their books and they’re treated just like any other core deposit by regulators. And so for the startup community, to be able to have your deposits be deployed right back into the local community via the critical lending that these banks do, I think that should really resonate. That’s a benefit over treasuries, money market mutual funds, some of these other alternatives out there. Your deposits are really being put to work right back into the community. And that really resonates for a lot of these clients.
Scott: It’s a huge point. And in another way, you’re talking historically, banks did a lot of local lending. I’m in the East Bay, so banks out here would fund small businesses and things like that. But in our world, in the startup world, it’s a similar function, but it’s to other startups, it’s not a geographical right focus. It is-
Bryan: Community nonetheless, right?
Scott: Yeah, that’s a great way of saying that because the money gets recycled back into loans to other startups, those deposits, and it fuels the next wave. And by having that capital, they can build those strong relationships with the up and coming startups like that we work with. And by the way, they also have the relationship with the VCs. And so there’s a lot of synergy there. And so being able to lend that money out, have it count on the bank’s balance sheet is actually really, really valuable for everybody, for the whole community.
Bryan: And as someone just personally who’s pretty passionate about banking, it really is a huge benefit for the industry as well to be able to serve these large depositors, give them the ultimate form of safety and the convenience of doing that just with FDIC insurance and just a plain old deposit account, nothing exotic, and then being able to put those deposits right to work. In this case, banks that are taking deposits from the startup community, I’m sure for the most part are also the ones most active lending to the startup community.
Scott: Yeah. I love it, man. And then how does the revenue model work or cost structure? Does the bank pay? Does the client pay? Because this is a valuable service. Everyone’s got to charge something, right? Kruze wouldn’t exist if we weren’t charging what we are worth so we could hire and train and all that kind of stuff and do a great job. How does the cost structure work for the clients?
Bryan: So it’s really up to the relationship institution, which is what we call the bank that the client’s working directly with. We’re not really involved in what interest rates are being paid on these types of accounts, what fees may or may not be charged by these banks offering the service to the client. But clients should know that, of course, their relationship institution is paying us to provide the service. And so there are some cases where these are such large relationships that typically, it’s going to be a higher level relationship manager and there might be pricing authority with that relationship manager or through the organization to set custom rates on these accounts based on the relationship. There’s also banks that just have standard rates that they offer on our ICS and Cedars programs. It really does vary by bank, but ultimately that’s just more empowering to the depositor to find the bank that they know, that they trust, that perhaps gives them the best yield. It’s really up to the depositor to find the right relationship institution. I mentioned the majority of banks are working with IntraFi at this point, but there are still banks out there that don’t. And so we’ve got our website available to end depositors where they can navigate out to intrafi.com, click on solutions, they’ll find something that says depositors and then we have what’s called a bank locator. And they can find what banks are active with us, they can do some shopping/ or they can just ask the banks that they already have relationships with. And in most cases, those banks will be working with us, especially given the nature of the types of banks, I think that serve your mutual clients. But if not, they’re also able to reach out to us and we can direct them to a bank. They can select a bank essentially and say, “Hey, I’m interested in ICS and Cedars. This is the bank that I’m interested in talking to.” That information will be passed along to us, and then we can help ensure that the bank reaches out to that client and gives them the information, which again, is going to be specific to that particular bank.
Scott: So this is almost like a store locator for finding partner banks and they’re all IntraFi certified and actually use the service.
Bryan: Exactly. And we also are required by law to list all of the banks that are part of the IntraFi network. That’s not the best way to find a bank because it’s a long list. As I mentioned earlier, it’s about 3000 financial institutions. So the bank locator’s a great tool for someone who is interested and they have a bank or a handful of banks that they’d like to talk to. And then those banks will eventually receive that contact information of the depositor and be able to reach out and have those discussions.
Scott: So post SVB, there had to have been a major influx of deposits. Are there stats or what are you seeing out there in the marketplace?
Bryan: Yeah. Demand for our services certainly elevated and a lot of what we’re spending time doing these days is helping banks refine their processes. I’ve been a part of a lot of end depositor conversations, so part of my role is not only working with banks, setting strategy, doing technology integrations so that there’s a great client experience, but a lot of it is still representing the program and just explaining how the service works in conjunction with a bank and a customer. And so I’ve had a lot more of those types of discussions. I’ve been with the firm now for about four and a half years. I’ve had a lot more of those types of discussions. Because again, for some of these banks, they really haven’t utilized us. But given the large bank failures over the past few months, they’ve all of a sudden got a lot more demand. And so we’re here to help our banks, but ultimately we just are here to help the customer or the client understand how the service works, have those discussions along with our banks.
Scott: What maybe from you guys were selling to now it’s a pool model where everyone’s like, “I got to have IntraFi if I’m going to retain my own deposits.” Is that what happening?
Bryan: Yeah. So there’s a lot of defense being played where the loyal customer and the bank’s healthy, so maybe they still have a great story to tell about their own balance sheet. But that’s not good enough anymore. So the depositors’ board or ownership or whatever the case might be, is all of a sudden saying, “Hey, we’re concerned about being uninsured.” And so these clients are reaching out to their banks and saying, £Hey, this is my concern.” And for many, the best way to address that concern is by leaning on us. Honestly, it’s a fun time to work for IntraFi, because to your point, as a salesperson myself, a lot of my efforts are trying to get to the C level, talk to whoever’s running the bank, articulate that value proposition. Whereas now it’s really just a matter of trying to be as responsive as we possibly can, to work with our existing banks. Maybe they already have a really good grasp on the services and how to create a great client experience, but this particular employee has never sold these products and so they’re reaching out to me for help. Or it’s a bank that historically has not returned our calls and maybe now all of a sudden, demand is such that they really feel like they need to finally get on board. There are other services like ours out there. I know you’ve mentioned some of the others out there as well. I’m sure we’re all experiencing the same thing. Again, it’s our moment to step up and to help our bank clients retain as many of their large depositors as possible. And perhaps the new normal is that they’re going to be less about playing defense and only offering these services when someone raises their hand and says, I’m concerned. And it may be a tool that some of these banks leverage more going forward from a proactive standpoint to go out and win business from these large depositors. So that has been a positive development for us and other companies like us.
Scott: I love it. And you guys have the brand, you guys have the founder story with IntraFi, is really cool too. Because there’s something about having those deep roots and seeing how the banking sector works from the regulator side, and then creating a private service or product in response to that, I think really resonates with people too. So you folks are doing great. Well, it’s amazing to have you on the podcast maybe before we wrap up here, can you tell everyone how to reach out if they want to work with you? They email you the website, how do they get in touch?
Bryan: Really, the best way to approach getting access to expanded FDIC insurance through our services is to work with your banker. And I think the vast majority of your clients or the folks that are probably listening in to this podcast, they probably have very competent banking relationship managers already. And in many cases, if you ask about IntraFi, your banker’s going to say, “Yes, we have access to the ICS and Cedars programs.” And they’re going to be very well equipped to have that conversation. If your bank doesn’t offer IntraFi services, you can go out to our website and use the bank locator tool and find out what banks are offering these programs. And certainly those banks can reach out to you as well. If you’d like to come directly to IntraFi with questions, we’re happy to answer those for you. Contactus@inify.com is the best way to do that. Again, we’re really responsive as a firm, so don’t expect it to take weeks to hear back. And so we’ll get back in touch with the end depositor. Ultimately, we want to answer whatever questions they have for us and direct them right back to a relationship institution that they can work with to access the programs.
Scott: I love it. I love it. Bryan, thank you so much for coming by. I really appreciate it.
Bryan: We appreciate the opportunity. Thank you, Scott.
Scott: And this is such a great product. It’s something we talk about on the phone with our clients all the time. And this is one of those cool things where the moment is now for you folks. You’ve been working hard all these years to be in this position, so I’m very excited for you and looking forward to just doing more work between Kruze and IntraFi, but congratulations, you’re in a great place.
Bryan: Thank you. And best wishes to you guys too. I love your podcast. It’s really an honor to be a part of one.
Scott: Thanks, Bryan. I really appreciate it, man. All right buddy. I’ll catch you soon.
Bryan: Take care. See ya.
Singer: (Singing). It’s Kruze Consulting. Founders and friends with your host, Scotty Orn.

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