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Finwise Bancorp in Murray, Utah, has spent the past two years developing a suite of products aimed at boosting its appeal among current and potential fintech partners, seeking to buttress a business model that generates nearly two-thirds of its annual revenue.
Finwise has been active in embedded banking — also known as banking as a service — since 2016. For most of that time, its strategy has been to quickly offload most third-party loans, selling them to fintech partners or investors.
While the $746 million-asset company originated more than $5 billion of loans in 2024 — the lion’s share through fintech partners — its held-for-investment loan portfolio totaled only $465 million at Dec. 31.
In 2025, Finwise plans to focus primarily on a new initiative, credit-enhanced strategic lending, under which its bank subsidiary will hold more loans made through fintech partnerships on its balance sheet.
Finwise reported holding about $110,000 of credit-enhanced strategic loans on its balance sheet at the end of 2024. It believes it can add $50 million to $100 million to its portfolio in 2025 via the program. The credit enhancement comes from its plan to retain a slice of interest income the loans generate to pay for credit losses. Finwise will split the remaining interest income with the fintech partners involved in origination.
BRITTANY PALMER
“We would look for a rate that’s somewhat less than coupon,” Finwise CEO Kent Landvatter said Thursday during a presentation at the Under the Radar Virtual Bank Conference. “That excess interest spread covers any losses that come to the bank. The rest goes to the fintech for their profit.”
For high-volume fintechs, the Finwise program offers a means to stretch funding capacity and hold onto a portion of the spread income produced by the loans the bank holds on its books.
Finwise, for its part, believes the initiative, along with two new products it plans to roll out in the second half of 2025, makes it more attractive to current and potential partners, supporting its goal of adding two to three new fintech partners per year. That’s a crucial consideration for a company that derived about 60% of its $81.4 million of revenue in 2024 from embedded banking.
Landvatter envisions credit-enhanced strategic lending as a means to boost lending and income. Meanwhile, the two additional new products — a payments vehicle and a card sponsorship program — should drive deposit volume higher, he said. “We think we’ll be able to, over the next couple years or so, see some significant reduction in our cost of funds,” Landvatter said.
Finwise spent the past two years designing and testing its lending, payments and cards products. The same period was marked by a sharp increase in regulatory scrutiny of so-called banking-as-a-service programs, including a bevy of consent orders. The harsher spotlight led a number of institutions to abandon embedded banking.
Finwise has avoided those types of negative outcomes, according to Landvatter, due in large part to robust infrastructure and staffing investments. A total of 74 employees, nearly 40% of Finwise’s entire headcount, are focused on overseeing its fintech partnerships.
“That’s a significant number for a bank our size,” the CEO said.
New product development added to the company’s existing cost base in 2024, leading to an elevated efficiency ratio of 64.9%, though the trend should reverse this year, Chief Financial Officer Robert Wahlman said Thursday during the Under the Radar presentation.
“You’ll see that efficiency ratio continue to drop down,” Wahlman said. “Because of that, because of the increased revenues and the control over our expenses, you’ll see our profitability continue to increase.”
Finwise unveiled its plans around the same time that another prominent banking-as-a-service bank, the $4.1 billion-asset Coastal Financial Corp. in Everett, Washington, has disclosed new or expanded relationships with several fintech partners, including T-Mobile, Upbound and, most recently, the neobank
Brett Rabatin, an analyst at Hovde, believes that similar growth opportunities are available to other banks in the BaaS market.
“We think select, highly successful, profitability enhancing BaaS banks will have higher valuations over the next year as investors get a better idea of the clear winners in the space,” Rabatin wrote last month in a research note.
