Startup Banks are in the Hot Seat

We’re three weeks past the start of a once-in-a-generation banking crisis that saw the demise of a core startup institution, Silicon Valley Bank. Neobanks are feeling bullish: They picked up billions in new deposits in what’s been their biggest-ever period of growth. As a result, investor interest in their businesses is picking up again. 

The winners included credit card and cash management startup Brex, banking startup Mercury and even smaller cash management providers like Rho, all of which got a rare opportunity to pounce on an incumbent’s accounts. Since then, though, some of those fickle customers have already ditched them for big banks like JPMorgan Chase. That raises a question: How many of these neobanks’ new customers will actually stick around? 

Time will tell. Software glitches, customer service teams too small to handle the sudden uptick in accounts and broader headwinds in fintech could challenge their ability to retain the new customers.