Focus Keyword: Small business banking 

Secondary Keywords: Best bank for small business, digital banking for small business,, small business banking tips, future of small business banking 

Hero Description: Mike Butler, Chief Executive Officer of Grasshopper Bank, has spent decades watching small businesses navigate a banking system that wasn’t built with them in mind. On a recent episode of the 21 Hats podcast, he shared what that experience revealed about what business owners actually need, not just what they’re sold, where traditional banking falls short, and what the future of small business banking looks like.

Most small business owners didn’t choose their bank. They defaulted to it — a familiar name, a nearby branch, whatever their accountant suggested when they were just getting started. And then they stayed, even as the business grew, even as the friction mounted, even as better options emerged.

That inertia has a cost. Not always a visible one — but a real one, measured in time spent on unnecessary processes, in loan decisions that took weeks when they should have taken hours, and in a banking relationship that was designed around the institution’s convenience rather than the business owner’s.

Mike Butler has watched this pattern repeat across decades in banking: first at large institutions, then at the community bank level, and now as CEO of Grasshopper, a federally chartered, FDIC-insured digital bank built to serve the businesses and the innovation economy. His perspective on what’s broken in small business banking — and what genuinely works — offer us a useful lens whether you’re evaluating your first business bank account or reassessing one you’ve had for years.

Want to hear it straight from the source? Listen to the full conversation with Loren Feldman and Mike Butler on the 21 Hats podcast.

The Core Problem: Small Business Owners Don’t Have Time

Mike Butler shaped his entire approach to leading Grasshopper around a deceptively simple insight. Small businesses don’t have a chief financial officer (CFO). They don’t have a chief marketing officer (CMO) or a chief technology officer (CTO). The owner does everything, and time is the one resource they can never get back.

Traditional banking wasn’t designed with that reality in mind. Branch hours that assume you can leave your business mid-afternoon. Loan applications that ask you to gather documents you’ve already submitted elsewhere. Account opening processes that take a week when they should take minutes. Support lines that put you on hold for twenty minutes to answer a question that should take two. Every one of those friction points extracts time from a business owner who has none to spare, and it compounds across every interaction, every month, for as long as you stay at that bank.

Grasshopper’s response to that reality was to rebuild the experience from scratch, not to digitize the traditional banking process, but to replace it with something designed around how small businesses actually operate. The result is an account opening experience that takes as little as five minutes from any device, no paper or branch visit required. That’s not a minor convenience improvement. For a business owner who has been told to come back next week, it’s a pivotal moment where banking starts to feel aligned with how they actually run their business.

What this means for your business: If your current banking experience regularly asks you to wait — for approvals, for support, for answers — that wait has a dollar value. Time spent on banking administration is time not spent on the business. The right banking partner eliminates that trade-off rather than normalizing it.

The Approach: What “Client First” Actually Means in Practice

Branch banking operates on a specific logic: the bank sets the hours, the bank sets the process, and the client fits around it. Come in between 9 and 3. Wait in the queue. Fill out the paperwork. Call back if you have questions. Butler describes that model plainly as business first, not client.

Client first means the bank adapts to how you work, not the other way around. It means answers come quickly, because a business owner who needs to know whether they qualify for a loan shouldn’t have to wait a month to hear no. It means support is available through the channel that works for you — phone, chat, email, secure message — not just during branch hours. It means the technology works well enough that banking stops being something you have to think about and becomes infrastructure that runs quietly in the background while you focus on the business.

The practical test Butler suggests is straightforward: when you go to a bank’s website, does it prominently address small businesses? Are there real digital tools available, or is the digital presence a veneer over a branch-dependent process? Does the bank communicate that it understands time is your most limited resource — or does it ask you to wait in line, call back later, or come in next week?

Those signals show up early. And more often than not, they tell you exactly what kind of banking relationship you’re stepping into.

What this means for your business: Before your next account review, spend ten minutes on your bank’s website as if you were a new customer. If the experience doesn’t clearly demonstrate that small businesses are a priority — in the tools offered, the language used, and the processes described — that’s a meaningful signal it may be time to reconsider your banking relationship..

The Reality of Loan Applications And What’s Actually Possible

The loan application process at traditional banks is one of the most consistent frustrations small business owners have. Not just that it’s slow, but that the slowness feels dishonest. Business owners often suspect the bank knew early in the process whether the loan would be approved, but kept them waiting through weeks of paperwork and follow-up requests anyway.

That frustration is legitimate, and the root cause is structural. Traditional lending processes were built around paper documentation: tax returns, bank statements, financial projections assembled manually and reviewed sequentially. The process takes as long as it does not because the credit decision is genuinely complex, but because the infrastructure for making it efficiently was never built.

Digital data changes that equation entirely. Grasshopper uses modern data sources and AI-driven scorecards to make credit decisions with significantly less friction,  understanding what business a client is in, assessing their financial position, and evaluating creditworthiness without requiring them to manually supply information that already exists. The result is a lending experience that answers the question most business owners actually want answered, “Can I get this loan or not?” in 5-10x faster than standard industry, approval timelines.

SBA loans, which have historically been among the most document-intensive lending processes available, have been rebuilt at Grasshopper to work the same way. As an SBA preferred lender, the guidelines and credit standards remain the same, but the experience is fundamentally different:  a streamlined, front-end application designed to gather the right information upfront and move qualified borrowers through the process as quickly as possible.

What this means for your business: If you’re anticipating a capital need in the next 6 to 12 months, start exploring financing now when your finances are strong and you have time to evaluate your options rather than accepting whatever is available under deadline pressure. Ask your bank specifically: how quickly can I get a clear yes or no and  what would prevent me from getting a decision quickly?

Knowing When to Take a Loan and When Not to

Access to capital is more available today than at any point in the past due to the emergence of digital lenders, AI-driven underwriting, and non-bank financing options has meaningfully expanded what’s accessible to small businesses. Butler sees that as unambiguously good for the market.

But expanded access comes with a responsibility that ultimately rests with the borrower. Butler is direct about this: a lender can provide good information and useful tools, but the decision to borrow belongs to the business owner. Taking on debt that doesn’t make financial sense for the business — regardless of how accessible or quickly approved it is — is a borrower decision, not a lender one.

The question worth asking before any borrowing decision is straightforward: will the use of these funds generate a return that justifies the cost of the capital? A short-term loan that finances inventory leading to a profitable sale is a good deal even if the reported APR may seem high  because the business gained more than it paid. A loan taken under financial stress to cover obligations that the business can’t sustain creates a spiral that faster approval only accelerates.

Small businesses should look out for lenders that provide tools on its website to educate and help business owners make an informed decision. Lenders that invest in resources like a blog, help center or similar channels that help a potential customer evaluate whether borrowing is the right move and support a decision not to borrow demonstrates what client-first actually looks like in practice.

What this means for your business: Before applying for any loan, run a simple test: map the specific use of funds to a specific financial outcome, and estimate whether the return on that outcome exceeds the cost of the capital. If the economics are favorable, it’s likely a good decision. If it depends on optimistic projections to justify the cost, it’s worth waiting for the right conditions.

What You Actually Lose When You Leave a Traditional Bank

One of the most common pieces of advice given to small business owners is to build a personal relationship with a local banker, especially if they expect to need financing. The implicit assumption is that a human relationship, built over time, is what makes a bank willing to work with you when things get complicated.

Butler doesn’t dismiss that value. He reframes it.

The local banker relationship has a well-documented failure mode: change. The bank gets acquired. Leadership or priorities shift. The relationship you spent years building evaporates overnight, and you’re starting over with someone who doesn’t know your business and doesn’t owe you anything. Butler has watched this happen repeatedly across decades in the industry.It’s not the existence of change, but a reflection of how often continuity is lost when it happens..

What Grasshopper offers instead is a data-informed relationship: one where the bank knows your business not because you’ve had lunch together, but because it has genuine visibility into how you transact, how you manage cash, and how your business performs over time. That visibility is, in practice, more durable than a personal relationship with an individual who might not be there next year.

For business owners who do want human contact — and about 15% of new Grasshopper clients request it — that option exists. After account opening, clients are offered the choice to speak with an onboarding specialist, get a walkthrough of the platform, and ask questions. It’s an offer, not a requirement. Human support is available when it’s needed, not gated behind a branch visit or a hold queueWhat this means for your business: If your current banking relationship depends primarily on a specific person rather than on the institution’s systems, tools, and processes, assess what would happen if that person left. If the answer is that you’d be starting over, that relationship is less durable than it appears.

Grasshopper’s Approach to AI 

Our approach to AI is deliberate and grounded. Butler describes it as starting from the inside out: first building a culture where every employee knows how to use AI in their daily work, then extending those capabilities toward client-facing tools.

The internal metric he tracks: 90% of Grasshopper employees use AI daily. That’s not a technology adoption statistic — it’s a culture indicator. It means the tools that improve speed, reduce errors, and surface better information are embedded in how the bank actually operates, not just available in theory. The practical result for clients is a bank that moves faster, makes fewer errors, and improves continuously rather than requiring periodic manual upgrades to legacy processes.

The most recent client-facing expression of that culture is the launch of our MCP-based AI connector,allowing business banking clients to leverage AI safely and securely and at scale by asking natural language questions about their finances. Who are my largest accounts payable? Have I received a payment from this vendor? What transactions hit the account last week? Questions that used to require scrolling through and exporting statements can now be answered in seconds through a conversational interface connected directly to the account.

The implications for business owners are practical and immediate. Financial visibility that previously required a bookkeeper, an accountant, or significant manual effort is now accessible on demand. The business owner who wants to quickly understand their cash position, identify their largest outstanding payables, or verify that a specific payment was received can do so in seconds through an integrated AI experience, without switching between systems.

The near-term extension of this capability is in lending,  using AI to reduce turnaround times on larger, more complex loan applications that take longer to process. For loans in the $3 to $4 million range, the documentation and review process is significantly more complex than smaller term loans. Applying the same AI-driven efficiency that has shortened small loan decisions to larger transactions is the next frontier we are actively building toward.

Butler’s framing for AI adoption is worth taking seriously beyond the banking context: AI won’t take your job, but someone who knows how to use AI will. That’s not a warning. It’s a practical shift that’s already underway and one that applies as directly to small business owners as it does to banks.

What this means for your business: If you’re not yet using AI tools in your daily operations — for financial visibility, administrative work, or decision support — the gap between your productivity and that of a competitor will widen over time. The same principle that Butler applies internally at Grasshopper applies to every small business: start using the tools, overcome the learning curve, and let the efficiency compound.

The Future of Small Business Banking

Butler is measured about predictions. Five years is a long time in a technology environment moving as fast as this one,but the direction he sees is clear. More companies will build the way Grasshopper has built, embracing digital infrastructure, leveraging AI in client-facing products, and competing on the quality of the experience rather than the density of their branch network. That’s good for small businesses because it expands choices and raises the standard that every banking institution has to meet.

Credit decisions will get faster and extend to larger transaction sizes. The AI-driven efficiency that currently applies to smaller term loans will reach larger, more complex applications, reducing the friction that has historically made big financing decisions slow regardless of how strong the borrower’s profile was. Customer service will be transformed by AI in ways that make it more useful rather than less human. The ability to have a conversation with a support system that has complete, real-time knowledge of your account — and can answer specific questions about your specific transactions — is a fundamentally better experience than the current model of hold queues and generalist representatives who may or may not have access to your account history.

The thread running through all of it is the same principle Butler has applied at Grasshopper from the start: the client’s time is the scarce resource, and every product, process, and technology decision should be evaluated against whether it respects that reality or ignores it.

Questions to Ask Your Bank Right Now

Based on Butler’s perspective, here are the questions every small business owner should be able to answer about their current banking relationship:

On time and friction:

• How long does it take to get a loan decision — and will you tell me no quickly if the answer is no?
• Can I complete every routine banking task from my phone without a branch visit or phone call?
• When I have a problem, how quickly does it get resolved, and through what channels?

On technology and integration:

• Does my bank account connect directly with my accounting software and payroll platform in real time?
• Does my bank use AI tools that give me better visibility into my own account and finances?
• Is the bank’s technology built for how businesses operate today, or retrofitted onto infrastructure from decades ago?

On the relationship:

• Does my bank understand my industry and my business model?
• If my primary contact left tomorrow, would the relationship survive?
• Does my bank have the data visibility into my business to advocate for me when I need financing?

On lending:

• Does my bank originate its own loans, and does my account history factor into credit decisions?
• What are the actual rates on the lending products available to me — and how do they compare to bank-rate alternatives?
• Are there tools available to help me evaluate whether a specific borrowing decision makes financial sense?

If the answers to more than a few of these questions are unclear, incomplete, or unsatisfying, that’s meaningful information about whether your current banking relationship is actually working for your business.

The Bottom Line

Small business banking is changing. The version that asked you to rearrange your schedule around branch hours, wait weeks for a loan decision, and manage your finances through manual exports and paper statements is giving way to something faster, more transparent, and more genuinely useful.

That change doesn’t happen by accident. It happens when a bank decides that client first isn’t a tagline — it’s the operating principle that every product, process, and technology decision gets measured against.

The right banking partner for a small business isn’t necessarily the biggest one, the most familiar one, or the one with the most branches. It’s the one that was built to serve the way you actually work with the tools, the culture, and the technology to prove it.

If your bank isn’t built for how you run your business, it’s worth finding one that is. Leap on over to Grasshopper.

Listen to the full conversation with  Mike Butler and Loren Feldman on the 21 Hats Podcast.

The post A Better Blueprint for Small Business Banking From Grasshopper’s CEO appeared first on Grasshopper.

Product & Technology Updates

• AI Connector: We became the first U.S. bank to launch an MCP server, in partnership with Narmi, transforming how startups and small businesses access, interact with, and act on their own financial data. Our MCP-based AI connector lets clients ask natural language questions about their finances through platforms like Claude or Chat GPT and receive instant answers in real time, giving them unprecedented visibility, control, and insights into their financial operations.
• Innovator Term Loan: We rolled out a new unsecured loan offering, enabling small business clients to obtain a term loan ranging from $10,000–$200,000 through a digital, frictionless application process, with approved funds deposited into their Grasshopper business account as quickly as the same business day. 
• SBA Scorecard Automation: We further automated pre-approval decisioning for SBA 7(a) loans and standardized the scorecard across all our channels, enabling faster, smarter decision-making and greater access to capital for small businesses nationwide. 
• Account Funding & User Experience: We increased account funding limits, introduced activity-based segmentation, sped up exception processing, clarified mobile check deposit guidance, relaxed check endorsement requirements, and simplified workflows, helping clients get the most out of their business bank accounts.
• ACH Origination: Clients can now initiate ACH payments to third-parties directly through our business banking platform, making it easier to handle payroll, vendor payments, bill payments, loan payments, and other recurring transactions with speed, reliability, and greater visibility. 
• Fintech Self-Serve Portal: Our new self-serve portal centralizes everything our fintech partners need to manage their embedded finance programs in one secure, password-protected location, making it easier than ever to access release notes, API documentation, and associated account information to stay fully informed.
• Affiliate Application API: We released an API that makes it easy for our affiliate partners to start loan and deposit applications, programmatically pre-fill fields, and streamline the applicant experience.
• Real-Time Transaction Monitoring: We enhanced visibility into account activity to improve security, support faster fraud detection, and better protect our clients if their account is compromised.

Awards & Recognition

• Banking Tech of the Year: In what the organizers called their most competitive year yet, we were honored at the US Fintech Awards for our card management suite, highlighting our digital-first approach, potential to scale, clever use of technology, and clear focus on meeting clients’ needs in a rapidly evolving market.
• Nimble Award: We received the “Nimble Award” presented in the Smarter Bank category at Cornerstone Advisors’ annual GonzoBanker Awards, celebrating our MCP server deployment, agility, and forward-thinking solutions.
• Best Digital Bank & Best BaaS Provider: We were shortlisted in two categories at the 2025 Finovate Awards, reflecting our commitment to delivering innovative digital solutions and continuing to be a leader in embedded finance. 
• Nerdwallet 5-Star Rating: Our flagship Innovator Business Checking account received a 5/5 star rating, one of only two business bank accounts to be recognized in Nerdwallet’s 2026 review.

What’s Next

As we move into the next phase of growth, we’re focused on building modern digital tools and experiences that empower clients and partners even further:

Product Roadmap

• Redesigned User Interface: We’re simplifying how clients interact with their accounts, adding functionality so they can find what they need and complete tasks faster, without friction.
• Dynamic Segmentation: We’re developing a more automated process to place clients into segments based on relationship, business profile, and activity-based needs, so the right features, limits, and funding speed are tailored to them. 
• Instant Transfers & Payments: Instant transfers and payments powered by the FedNow® service are on the way, giving clients access to faster, more reliable movement of funds.
• Treasury Management Offering: We’re preparing to launch a dedicated treasury management product designed to help clients optimize returns through smarter cash positioning while also delivering greater visibility and control over their finances.
• Stablecoin Exploration: We’re actively exploring stablecoin capabilities to support faster settlement, modern payment experiences, and future-ready digital asset use cases for our clients.

Aspirations & Ambitions

• Push the Boundaries: Continue to redefine what’s possible in banking, empowering SMBs, startups and fintechs with smarter, faster, and more intuitive digital tools. 
• Expand Our Reach: Extend our impact to new client and customer segments, using affinity banking and strategic partnerships to deliver tailored, meaningful financial solutions. 
• Lead the Industry: Maintain our position as an industry leader in secure, efficient, and client-focused digital banking technology.

H2 showed us what’s possible when innovation meets client-focused design, but it also reminds us there’s always more to achieve. As we look ahead, our focus is clear: empower businesses, remove friction from banking, and give our clients the tools they need to move faster, make smarter decisions, and scale without limits.

The road forward is full of opportunity: new products, smarter automation, faster payments, and a digital banking experience that continues to push the industry forward. H2 laid the foundation, but the next chapter will be even bigger, bolder, faster, and more impactful for the businesses and fintechs we serve. Innovation isn’t just what we do—it’s who we are. And we can’t wait to show you what’s next.

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The post Delivering Breakthrough Digital Banking Innovation in H2 2025 appeared first on Grasshopper.

What were the biggest takeaways from the banking industry in 2025, and how can the industry leverage these learnings going into the new year?

• I would highlight two key takeaways. First, AI is real. You need a clear strategy, and data will be critical. “Make it, don’t fake it.” Use it. Second, regulatory relief is real, but it requires discipline. Be smart and remember that what the government gives, it can also take away. Self-policing will be essential. — Mike Butler, President & CEO
• In 2025, the banking industry continued its focus on digital transformation, but a key takeaway is that the industry as a whole has struggled to meaningfully adopt AI. While implementing AI to streamline operations and reduce costs has been a strategic priority, many have found it challenging to move from theory to impactful practice. Beyond the AI story, other key developments included the growing importance of Banking-as-a-Service (BaaS) and a concentrated focus on reducing fraud and operational losses. — Pete Chapman, Chief Technology Officer
•  The biggest takeaway from 2025 was the industry’s realization that innovation and compliance are two sides of the same coin. The lesson specifically for embedded finance and BaaS was the necessity of truly integrated governance and risk management. Going into 2026, the primary leverage point will be using technology to enhance regulatory compliance management. Banks that invested in robust ReghTech, AI governance, and automated oversight in recent years are now positioned to scale with a compliance infrastructure ready for growth, gaining a significant competitive edge over those still playing catch-up. — Jason Boova, Chief Compliance Officer
• Reduced regulation and increased AI – both of which will take some time to reveal their true impact. — Steve Kerr, Chief Credit Officer
• In 2025, the industry moved from theoretical hype to operational reality. The “growth-at-all-costs” mindset in startups died, replaced by a focus on unit economics. In banking, the regulatory crackdown on “loose” Banking-as-a-Service (BaaS) models proved that speed without compliance is a liability. In 2026, the winners will use the efficiency gains from 2025 (AI, automation) to attack the market while others are still defensive. For Grasshopper, this means leveraging tech not just to cut costs but to strengthen compliance oversight & fraud detection, accelerate new loan originations and deposit gathering strategies, improve portfolio management with an eye towards robust trend analyses and leveraging our modern data lake to continuously improve. — Barbara Flemming, Head of Fund & Sponsor Banking
• The banking industry generally refocused on fundamentals, moving past liquidity concerns to strive for deposit and loan growth. The key takeaway, however, is the accelerating power of digital technologies, particularly AI, to revolutionize customer service. Tech-forward banks invested in and implemented AI across their organizations, discovering its incredible potential to deepen customer connections and enable more intelligent service delivery. — Dawn Gillette, Head of Digital Lending
• One key trend in banking across 2025 was the ongoing integration of AI, particularly in expansive, agentic uses. While AI chatbots have been common in the industry for years, 2025 saw AI embraced in new, more comprehensive ways. One example that hits close to home: At Grasshopper Bank, we’ve integrated Anthropic’s Claude with our business banking accounts, providing small business account holders with an entirely new way to interface with–and extract value from–their bank accounts. Additionally, the Trump administration’s ongoing deregulation efforts will continue to shape banking in 2026, as will lenders’ potentially increasing stringency in the face of challenging economic conditions (outside of the AI boom). — Brennan Quenneville, Head of SBA Lending
• The industry learned that “lazy deposits” are extinct; corporate treasurers now aggressively move idle cash in response to yield variances. To leverage this in 2026, banks must learn to treat deposit yield as a utility, not a perk. Banks should build products that provide more options for customers to increase yield on operating cash and high-yield treasury instruments (like MMFs) to prevent attrition to fintechs. — Luther Liang, SVP & Head of Product
• In 2025, AI ceased being just a back-office tool focused on cost reduction and fraud detection. The real game-changer was its evolution into a front-office intelligence layer. Our competitive advantage now hinges not on simply possessing AI capabilities, but on how effectively we use that intelligence to deliver truly hyper-personalized and proactive advice directly into the hands of our small business clients. Small business owners have grown frustrated with silo’d systems and outdated technologies. Banking products even more than ever need to deliver truly seamless digital experiences and frictionless integrations. The gap for digital experience is widening and will become even more apparent with AI-powered integrations. The rise of Embedded Finance and Banking-as-a-Service (BaaS) confirms a non-negotiable truth: our bank must evolve from an external vendor to an integrated partner. Banking services must be delivered directly within the small business’s operational flow—their accounting software, their payroll providers, and their vertical-specific platforms. This is how we maintain primacy of the relationship and ensure our products are available at the precise moment of need, not when they remember to log into our separate portal. — Danielle Kane, SVP & Head of Small Business Banking

What trends do you expect will most significantly impact the banking industry in 2026, and which might have the most staying power beyond next year?

• Stablecoin for payments is a potential game changer. — Mike Butler, President & CEO
• The most significant trend for 2026—and the one with the most staying power—will be the activation of data. This goes far beyond just customer-facing features. The real revolution will happen inside the bank. We’ll see a major push to empower employees with AI-driven tools, like our internal Hopper (Gemini Enterprise), to make them faster and more effective. Furthermore, the ability to develop and deploy homegrown automation agents on the back end will separate the leaders from the laggards. While others are still figuring out their data, we’ll be using ours to drive massive operational efficiencies from within. — Pete Chapman, Chief Technology Officer
• In 2026, the two most significant trends will be the rise of Agentic AI and the mainstream adoption of Real-Time Payments (RTP) infrastructure. Agentic AI will move beyond chatbots and basic prompts to autonomous systems that perform complex tasks, like preemptively rebalancing a client’s portfolio or executing tailored, real-time fraud defense. Agentic AI will help drive hyper-personalization and compliance effectiveness at scale. The shift toward tokenization and programmable money will have the most lasting impact. As we move closer to a financial system where payments, compliance, and even treasury functions can be executed instantly and programmatically via blockchain or stablecoin rails, the value chain of banking will be fundamentally rewritten for decades to come. — Jason Boova, Chief Compliance Officer
• Reduced regulation and increased AI – 2025 was just the start. — Steve Kerr, Chief Credit Officer
• The rise of agentic AI. We are moving past “chatbots” that answer questions to “AI Agents” that do work. In 2026, banks won’t just use AI to write emails; they will use it to autonomously reconcile complex ledgers, pre-underwrite Fund, SBA & other types of loans by reading PPMs, financials & tax returns instantly, and detect fraud in real-time payments. Agentic AI is the new industrial revolution for services; it is permanent. Following the regulatory crackdown of 2024–2025, compliance is no longer a back-office burden—it is a competitive product feature. Fintechs will flock to banks that can prove their regulatory “plumbing” is bulletproof. Compliance-as-a-Product will define the next decade. The era of “move fast and break things” in finance is over; the future belongs to those who “move fast and prove things.” — Barbara Flemming, Head of Fund & Sponsor Banking
• Interest rates are expected to decline in 2026. The extent of this decline and its impact on longer-term rates remains uncertain, including the possibility of a resurgence of 1990s-era “bond vigilantes.” The banking landscape will likely change dramatically in 2026 due to the speed and openness of regulators to transactions. We anticipate new firms entering the banking space through banking partners (embedded finance), de novo full bank and Industrial Loan Corporation (ILC) charters, and M&A activity. This could lead to significant changes as smaller regional and community banks are acquired by mega-banks, and non-traditional bankers enter the scene. The economy will likely remain K-shaped, with strong AI-related spending offsetting weaknesses elsewhere. The increasing economic dependence on AI spending should be a consideration. 2026 will be defined by AI moving from a buzzword to a core component of banking operations. AI-powered agents will handle transaction processing and reconciliation. AI will also be used to write credit memos and assess risk. Truly customer-focused banks will deliver the power of AI directly to customers, empowering them to use their bank statements as powerful financial tools. Thoughtfully implemented AI enables banks to deliver better, faster, and more efficient services. – Dawn Gillette, Head of Digital Lending
• Three factors seem set to have a big impact on 2026: Decreasing interest rates, tariff volatility, and broader economic uncertainty. There’s a chance that rates and tariffs find some kind of stability in 2026, but it seems likely that economic uncertainty will carry beyond the next twelve months. — Brennan Quenneville, Head of SBA Lending
• The dominant trend for 2026 is the shift from “Generative AI” to “Agentic AI.” While 2025 was about chatbots summarising text, 2026 will be about AI agents that can autonomously execute workflows (e.g., “reclassify these expenses” or “initiate a wire transfer”). The trend with the most staying power is the institutionalization of digital assets via the GENIUS Act. With a clear federal framework for payment stablecoins expected by mid-2026, the integration of 24/7 blockchain-based settlement rails into commercial banking will become permanent infrastructure, being a strong competitor with the potential to displace legacy rails for cross-border corporate payments. — Luther Liang, SVP & Head of Product
• Agentic AI and hyper-personalization will drive faster lending decisions by relying on real-time operational data, such as QuickBooks and Stripe integrations, rather than traditional, backward-looking tax returns. Proactive service will become the norm, with AI-driven agents managing routine tasks for business owners and surfacing timely recommendations, like suggesting a line of credit in response to sudden inventory needs. At the same time, lending will shift toward micro-lending and more flexible options, moving away from large working capital loans and toward smaller, purpose-driven financing in the $10K–$50K range to support specific needs, such as inventory restocks or targeted marketing sprints. — Danielle Kane, SVP & Head of Small Business Banking

How do you expect macroeconomic factors – such as inflation, interest rate adjustments, or potential shifts in monetary policy – to influence the lending and deposit landscape in 2026?

• Inflation, even if masked as “affordability”, will continue through 2026 even as interest rates may decline but the lending and deposits landscape will not be materially impacted. — Steve Kerr, Chief Credit Officer

As economic uncertainty persists, how do you see customer behavior changing in areas such as business lending, deposit allocation, or cash management?

• Demand will shift from “growth capital” (funding expansion) to “efficiency capital” (funding automation/streamlining). Borrowers will be more conservative, seeking partners who understand unit economics rather than just vanity growth metrics. They want banks that act like consultants, helping them structure debt to preserve cash flow. Clients are no longer just chasing the highest rate (which proved risky in 2023/24). In 2026, they will prioritize diversification and integration. They will split deposits for safety but demand APIs that allow them to view all that cash in one dashboard. “Idle cash” is the enemy. Businesses will expect their bank to automatically sweep excess operational funds into higher-yielding accounts (like Money Markets) without manual intervention. They want their bank to act as an automated Treasurer. — Barbara Flemming, Head of Fund & Sponsor Banking
• The acceleration of digital adoption will continue as customers shift more activity from in-person interactions to mobile and online channels, increasingly favoring digital banks. In this environment, institutions that deliver seamless, customer-friendly digital experiences will win, while the traditional value of “core” deposits continues to erode. As demonstrated in 2023, deposit loyalty can evaporate quickly. Bank runs can now be triggered and executed in minutes, requiring banks to continually earn their customers’ trust and engagement. At the same time, new capabilities are becoming table stakes, such as early deposit crediting for ACH transactions, which was once novel but is now essential for competing effectively. Business lending will also become nearly fully digitized and increasingly powered by AI in 2026, with leading banks using these tools to deliver smarter loans, better insights, and more effective tools that strengthen and retain business relationships.— Dawn Gillette, Head of Digital Lending
• In times of economic uncertainty, business owners often pursue conservative strategies in managing their operations. That can mean borrowing less so as to conserve projected cash flows, as well as accumulating excess cash reserves to protect against potential revenue shortfalls. 2026 is not guaranteed to be a poor economic year and, even if it were, these types of solutions are not necessarily appropriate for all businesses, but I would expect to this type of activity to increase across the American economy overall. — Brennan Quenneville, Head of SBA Lending
• In deposit allocation and cash management, corporate treasurers are permanently shifting funds between bank deposits and Money Market Funds whenever spreads widen, with this behavior becoming increasingly elastic and automated. Businesses now expect “Treasury-as-a-Service,” where yield generation is embedded directly into their operating accounts rather than managed through separate, manual workflows. On the lending side, selective equity markets are pushing startups and SMBs to prioritize non-dilutive capital, driving increased demand for venture debt and revenue-based financing as founders look to extend runway without accepting flat or down equity rounds. At the same time, expectations for cash management support are evolving toward natural language interfaces, with CFOs preferring to query their banking data directly through AI, asking questions like “What was our marketing spend in Q3 versus Q2?” instead of downloading and analyzing CSV files. — Luther Liang, SVP & Head of Product
• Lending demand for large, long-term debt is expected to stabilize, prompting a shift toward flexible, on-demand capital solutions, specifically robust Lines of Credit and specialized micro-loan products designed to meet the immediate needs of small businesses. Small business clients are increasingly comfortable sharing real-time, non-traditional operational data from platforms like QuickBooks and Stripe when there is a clear value exchange, allowing banks to provide faster approvals, competitive rates, and higher certainty of funding. In deposits, winning and retaining small business relationships will no longer rely solely on high interest rates. Success will depend on delivering a superior, bundled suite of services, including secure data and money management, advanced fraud prevention, seamless workflow integrations, low-cost payment processing, and other tangible operational benefits. Loyalty is built on the overall value of the relationship, not just yield. For cash management, integration is now table stakes. Clients expect their tools to connect directly with accounting platforms, providing a single, real-time view of their financial health and eliminating the inefficiencies of manual reconciliation. Going forward, deep integration with platforms like QuickBooks is no longer an industry-leading feature. It is an essential requirement to remain competitive. — Danielle Kane, SVP & Head of Small Business Banking

AI, RegTech & Emerging Technologies

How will AI, regtech, and other emerging technologies impact compliance and risk management for banks in 2026?

• This is where our strategic work on our data infrastructure really comes to life. In 2026, AI’s impact on compliance will be defined by its ability to automate and empower. Our advanced data lake, combined with the intelligence of Hopper, allows us to move from reactive sampling to proactive, continuous monitoring. More importantly, we expect to deploy our own specialized agents to automate routine compliance checks and risk assessments. This frees up our human experts to focus on complex analysis and strategic risk management, turning our compliance function into a competitive advantage. — Pete Chapman, Chief Technology Officer
• AI, RegTech, and emerging technologies will fundamentally transform compliance from a necessary cost center into an accelerator for safe growth. This moves compliance from a reactive posture to one that is more proactive with risk management. We will see the adoption of Agentic AI systems that autonomously monitor, flag, and even resolve low-risk compliance issues in real-time. AI algorithms will establish dynamic risk profiles for every customer and partner, drastically reducing false positives and freeing up human compliance officers to focus less on gathering data and information and more on complex, high-risk issues and decision making. RegTech solutions will embed compliance directly into the bank’s core operational infrastructure. This ‘compliance-as-code’ model uses API calls and automated logic to ensure that every new product, every partner integration, and every transaction is inherently compliant with all relevant rules before it goes live. — Jason Boova, Chief Compliance Officer
• Lots more talk and discovery, but minimal impact in 2026. — Steve Kerr, Chief Credit Officer

What emerging technologies and major changes should we look forward to in 2026?

• We are witnessing the convergence of Agentic AI with finance, specifically stablecoins, moving toward Programmatic Money where autonomous agents don’t just chat but actually negotiate and transact instantly using traditional finance and stablecoin infrastructure. This evolution is driving agentic commerce, with AI agents becoming a mainstream reality next year, and everyday people interacting with them as part of their normal routines. As this adoption accelerates, the fintech industry will begin learning not only how to engage with these agents, but also how people choose to use them. — Luther Liang, SVP & Head of Product

Bank-Fintech Partnerships

What role will partnerships between banks and fintechs play in driving innovation in digital banking this upcoming year?

• While the increase in fintech applications for bank charters has obviously increased, the partnership model is still the primary way for fintech’s to access banking activities. This is simple, banks know (should know) how to operate in a regulated environment, and fintech’s know how to develop tech forward products and services. Hence the partnership. Clients should benefit. — Mike Butler, President & CEO 
• Our partnership philosophy is about leveraging the best in the ecosystem to build a powerful, intelligent core. Our foundational work on our data and AI infrastructure serves as the engine for everything we do. This stable, scalable platform allows us to pursue a two-pronged innovation strategy: we rapidly develop and deploy our own internal automation agents for efficiency, while simultaneously partnering with best-in-class fintechs to accelerate the delivery of cutting-edge products to our customers. It’s a model where a strong core empowers a dynamic ecosystem. — Pete Chapman, Chief Technology Officer 
• Partnerships are evolving from transactional relationships to strategic integration of specialized expertise.  Fintechs provide the agile, technology driven components, from modern loan origination to best-in-class treasury management portals, while banks provide the chartered license along with governance and regulatory oversight. This allows banks to unbundle and re-bundle financial services faster and more affordably than building everything in-house. — Jason Boova, Chief Compliance Officer
• The “Middleware” BaaS model is being transitioned out in favor of Direct Partnerships. Following regulatory enforcement actions in 2024-2025, banks are moving away from third-party aggregators to manage compliance directly. Innovation will concentrate on Embedded Lending. Rather than generic business loans, banks will partner with vertical SaaS platforms (e.g., construction software, logistics apps), affiliate partners, digital brokers, and more to offer contextual credit. Underwriting will be based on proprietary platform data (like invoice volume or project contracts) rather than just credit scores. —  Luther Liang, SVP & Head of Product

Do you anticipate regulators providing more clarity around fintech partnerships in 2026, and how could that affect collaboration or competition?

• I anticipate regulators focusing on the ‘principles’ of third-party risk, safety, and soundness, rather than writing thousands of pages of law. This affects collaboration by raising the barrier to entry, making regulated banks more selective about their partners, favoring established fintechs with demonstrable compliance histories and robust control environments.  The winners won’t be the fastest to launch, but the safest. Competition will shift from a feature race to a ‘trust and resilience’ race. Banks that can offer the most compliant, secure, and resilient platform will attract the best fintech partners and ultimately win market share. — Jason Boova, Chief Compliance Officer

How will/should banks balance innovation with regulatory scrutiny as BaaS and embedded finance continue to grow? Do you anticipate regulators providing more clarity around fintech partnerships in 2026?

• Innovation and good risk management are not distinct. It’s about culture and the quality of your team. Also, if you’re going to engage, be fully committed. Half committed to anything is dangerous. — Mike Butler, President & CEO
• The balance is achieved through operational maturity, as BaaS and embedded finance grow to a projected $7 trillion market by 2026, banks can’t outsource the risk even if they could. The key is creating a regulatory control layer that is separate from the growth and marketing layer. This in turn helps create automated oversight, using API-level controls and real-time monitoring to ensure partners comply with KYC/AML before a transaction is executed, and clear lines of responsibility, implementing iron-clad contracts (Service Level Agreements) and clear termination clauses that delineate responsibilities, especially for customer complaints, data security, and fraud response. — Jason Boova, Chief Compliance Officer

Macro Trends & Competitive Landscape

How do you see the ongoing deposit competition evolving in 2026 between traditional, digital, and neobanks? 

• Consumer and business trends keep accelerating towards digital, acquiring clients and/or deposits without a digital strategy is becoming almost impossible. — Mike Butler, President & CEO
• In 2025, everyone competed on rate. In 2026, as rates likely stabilize or soften, the competition moves to utility. Traditional banks will struggle with clunky legacy tech that can’t “talk” to modern accounting software. Neobanks will struggle to prove they are safe and sustainable long-term partners. The “Hybrid” model wins. The bank that offers the safety of a charter but the connectivity of a fintech. You win deposits in 2026 by being the bank that connects directly to the client’s ERP/Accounting software (QuickBooks, NetSuite), making you impossible to leave because you power their daily operations, not just store their money. — Barbara Flemming, Head of Fund & Sponsor Banking

How will digital banks impact PE/VC banking in 2026?

• Large money-center banks are often too slow for the pace of modern venture capital and private equity deal-making. They take weeks to open accounts or approve capital call lines. Digital banks will disrupt this by using data (API connectivity) to underwrite funds faster. New fund capital call lines and GP term loans can be established with the speed of a fintech, while a growing loan portfolio can be efficiently monitored using AI tools and analytics. This validates Grasshopper Bank’s strategy of serving the entire ecosystem: the VC/PE Firm (Funds, Manco & GP), the Startup (PortCo), and the Business Owner (Sponsor Finance). — Barbara Flemming, Head of Fund & Sponsor Banking
• Digital banks have replaced the monolithic “Silicon Valley Bank” model with a fragmented, specialized ecosystem. Platforms like Mercury, Brex, and Rho are aggressively entering the Venture Debt space, utilizing real-time cash flow data to underwrite loans faster than traditional incumbents. Crucially, digital banks are now banking the funds themselves, not just the portfolio companies. They are offering automated capital call lines of credit and high-yield accounts for undeployed “dry powder,” effectively competing with major investment banks for GP relationships. —  Luther Liang, SVP & Head of Product

What do both startups and small businesses need from their banking partners in 2026 to stay competitive? Do you anticipate new products or services to emerge to address any changing needs?

• Startups and small businesses need banking partners who deliver the power of AI to them, empowering them to leverage their financial data. AI, thoughtfully implemented, enables banks to deliver better and more intelligent services to customers of all types. We will continue rolling out Grasshopper’s first-in-the-nation AI Connector through 2026, working with our customers to leverage this power. — Dawn Gillette, Head of Digital Lending 
• It should go without saying that running a business is a demanding challenge, and one filled with frequent twists and turns. Rather than introducing new products, to continue serving small business and startup clients, banks will need to provide speed and ease of access to capital. Businesses often need capital in a hurry–Congrats on signing that new contract! Now, how are you going to buy the required inventory?–so the ability of banks to increase capital access speed will be key, whether that’s access to existing deposits or new loan proceeds. Additionally, business owners have their hands full running their own businesses; they don’t have the time or resources to also become experts in commercial lending. It’s incumbent upon banks to make the often cumbersome process of commercial borrowing as easy and frictionless as possible for business owners. — Brennan Quenneville, Head of SBA Lending
• In 2026, businesses will prioritize efficiency and yield over traditional perks. Their needs include automated yield, such as access to returns greater than 4% on idle cash without requiring manual transfers; support for global operations, enabling payments to international contractors and vendors in local currencies to avoid FX fees; and speed, with instant onboarding and immediate access to funds, as “business days” are no longer acceptable delays. New products will also be essential, including natural language banking interfaces that allow users to query their financial data using AI, granular access controls for enterprise-grade permissioning, such as giving an accountant “view-only” access or a marketing lead a specific card limit, and the use of stablecoins for FX, with banks piloting stablecoin payments for cross-border transactions. — Luther Liang, SVP & Head of Product
• Small businesses will increasingly expect seamless operational integration, with banking features not merely linked but embedded directly into their core business software, including accounting systems, ERP platforms, and POS tools. Predictive cash flow intelligence will provide real-time visibility into future surpluses or shortfalls, paired with instant, pre-approved funding options to address those needs. An AI-powered CFO copilot will sit atop their business accounts, proactively monitoring activity and recommending optimizations, services, and funding options tailored to each business’s requirements. Additionally, specialized capital solutions will offer access to micro-loans and flexible funding options designed to better meet the specific needs of small businesses. — Danielle Kane, SVP & Head of Small Business Banking

Strategic Outlook

What will be a few key focus areas for Grasshopper in 2026?

• Rounding out our digital platform with more focus on digital lending, embracing AI and how we can make it work for our clients, and staying disciplined to our “risk management” as a compromise advantage strategy. — Mike Butler, President & CEO 
• Our key focus for 2026 is simple: activating our data. We’ve built the engine with our advanced data lake and put a powerful driver in the seat with Hopper (Gemini Enterprise). Now, we are pointing this capability at our biggest opportunities, both internally and externally. First, we are empowering our own people. By putting AI-driven insights directly into the hands of our employees through tools like Hopper, we’re not just making them more productive; we’re enabling them to make smarter, faster, data-informed decisions every day. Second, we are aggressively pursuing automation. We expect to develop and deploy dozens of home-grown agents across our backend systems. This initiative is designed to automate complex workflows, drive significant operational efficiencies, and free up our team to focus on high-value strategic work rather than repetitive tasks. Finally, all of this internal enhancement translates directly into a superior customer experience. By leveraging this intelligent infrastructure, we will deliver a truly proactive and personalized banking experience that anticipates our clients’ needs.— Pete Chapman, Chief Technology Officer 
• We will continue our own journey with AI discovery as we grow both a consumer and a commercial portfolio. — Steve Kerr, Chief Credit Officer
• At Grasshopper, our primary focus in 2026 will be our small business clients. We will continue to invest in AI and leading digital technology to empower our ability to deliver better, faster, and more intelligent service for our clients and partners. — Dawn Gillette, Head of Digital Lending
• In 2026, Grasshopper’s SBA team will be focused on deepening our relationships with our existing customers and partners, as well as building new relationships with clients and vendors. We’ll also be continuing our work of developing effective technologies and processes, so that we can serve our customers as quickly and efficiently as possible. — Brennan Quenneville, Head of SBA Lending
• Grasshopper’s focus for 2026 includes scaling our consumer business, building on last year’s acquisition that granted access to 13 million AAA members in the Auto Club Group. We also plan to expand our stablecoin capabilities, launching FX payments and additional functionality for our customers, reflecting our belief that cryptocurrency is here to stay. In AI, Grasshopper is pioneering functionality for business customers through our Model Context Protocol (MCP), becoming the first bank to allow clients to securely connect their own AI agents, like Claude, to the bank’s data API with read/write capabilities. We will continue enhancing AI across treasury management and agentic finance throughout 2026. In lending, we will maintain a strong focus on SBA 7(a) loans, leveraging automation to capture high-margin, government-guaranteed opportunities, while also enhancing our broader small business lending capabilities beyond term loans. — Luther Liang, SVP & Head of Product

Taken together, these perspectives point to a defining shift for banking in 2026 and beyond. The winners won’t be those who adopt the loudest technologies or chase the fastest growth, but those who activate their data, embed intelligence directly into customer workflows, and treat compliance, trust, and security as products—not obstacles. AI will reward the banks that use it, not merely reference it. Regulatory relief will favor institutions that self-police with vigilance. And customers will gravitate toward partners who deliver real utility at the moment of need. The next chapter of banking belongs to institutions that can move fast and prove it, building smarter, safer, and more integrated financial experiences that endure long after the headlines fade.

Explore how we’re turning these insights into action, leveraging AI, embedded finance, and intelligent data strategies to deliver smarter, faster, and more seamless experiences for our clients. The future of banking is here! Partner with us to lead it.

The post 2026 Banking Trends: How Data, Security, and Trust Will Define the Next Era appeared first on Grasshopper.

Product & Technology Updates

• Innovator Term Loan: We launched the Innovator Term Loan, exclusively available to existing small business clients. This new financing option is designed to help small businesses scale with flexible terms, competitive rates, and a streamlined digital application process—ensuring faster access to the capital they need to grow.
• Bank Verification Letter & Wire Instructions: To make banking even more convenient, we’ve introduced a new feature in our Business Banking platform that allows small businesses and startups to instantly generate and download Bank Verification Letters and Wire Instructions directly from online banking. No more waiting or manual requests—just quick, secure access to essential banking documents when you need them.
• Real-Time Payments: We have officially gone live with RTP® from The Clearing House, a real-time payments platform built for the For Benefit Of (FBO) account model, enabling Banking-as-a-Service (BaaS) programs powered by Increase to send and receive real-time payments in seconds. By leveraging RTP within the FBO framework, our partners can facilitate instant transactions, improving cash flow, reducing settlement times, and enhancing the overall payment experience for their end users.

Innovation and efficiency are at the core of these latest enhancements, making banking faster, simpler, and more accessible. As we continue to expand our offerings and refine our digital platform, our focus remains on delivering seamless financial solutions that empower our clients to grow with confidence. Even more exciting updates are on the horizon—stay tuned!

The post Simpler, Faster Solutions: Our Latest Updates for Q1 appeared first on Grasshopper.

The evolving federal policies underscore the importance of a proactive approach to diversity, equity, and inclusion (DEI). While regulations may change, the benefits of inclusive environments remain clear: they lead to better business outcomes and stronger communities. When we create a workplace where all voices are heard, we not only fuel our company’s success but also contribute to a more equitable economy for all.

Now is the time to reaffirm our commitment to DEI. It’s not simply the right thing to do, it’s essential for our business. Let’s continue building a workplace where diverse perspectives thrive, innovation flourishes, and opportunities are available to everyone.

The post Unique Perspectives, Stronger Solutions: Our Commitment to Diversity, Equity, & Inclusion appeared first on Grasshopper.

Topics: General Market Conditions | AI, RegTech & Emerging Technologies | Embedded Finance | Partnerships | Business Banking

General Market Conditions

What were the biggest takeaways from the banking industry in 2024, and how can the industry leverage these learnings going into the new year?

• In 2024, the banking industry accelerated its adoption of AI-driven technologies to enhance efficiency, customer experience, and compliance amidst economic challenges and evolving regulations. Going into 2025, AI is poised to play an even greater role, changing operations through intelligent automation, predictive analytics, and potentially personalized customer interactions. – Pete Chapman, Chief Technology Officer
• In 2024, the rise of AI-driven cyberattacks and increasing reliance on third-party integrations highlighted the need for proactive cybersecurity measures in banking. Moving forward, banks will focus on leveraging advanced technologies, strengthening vendor oversight, and ensuring robust data protection. – Vincent Maglione, Chief Information Security Officer
• In 2024, one of the key takeaways for the banking industry was the critical importance of building strong risk and compliance infrastructures to keep pace with rapid technological advancements, particularly in BaaS and embedded finance. We saw that banks offering BaaS must navigate intricate regulatory landscapes while managing digital fraud risks and staying compliant with increasingly complex regulations. The growth of digital products in response to business customer demands highlighted a need for continuous investment in cybersecurity and fraud prevention technologies, as well as an ability to scale risk management practices effectively. Going into 2025, banks can leverage these learnings by focusing on regulatory technology solutions that streamline compliance, ensuring they can adapt swiftly to new regulations while supporting secure growth. – Chris Mastrangelo, Chief Risk Officer
• The banking industry’s biggest takeaway from 2024 is that the “Fintech Winter” is over, ushering in a new era of innovation and funding opportunities as tech IPOs gain momentum. – Lauren McCollom, SVP, Head of Embedded Finance
• Fintechs saw significant popularity in 2024, driven by demand for enhanced functionality and streamlined user experiences. Consumers want more functionality, and are less willing to accept slow and clunky user experience. However, these innovations come with inherent risks that banks must carefully consider. To remain competitive, banks should prioritize adapting to provide seamless, efficient services that meet evolving consumer expectations, while upholding robust security measures to keep their money safe. – Rob Burnett, Director of Startup Banking
• Instant payments are on a slow roll to launch, as we were expecting. Most banks are still playing wait-and-see on send for FedNow, and we didn’t see significant growth in adoption across the industry. Consolidation in the BaaS/Embedded Finance space continues; more banks are leaving the space which is causing a lot of pressure on fintechs. The technology provider ecosystem is also consolidating. – Luther Liang, Director of Product

What trends do you expect will impact the banking industry in 2025?

• Emerging trends like open banking (especially CFPB rule 1033) and embedded finance will further integrate AI to create seamless, personalized financial services. Partnerships with fintechs will be key in driving this AI innovation, enabling banks to rapidly adopt cutting-edge solutions and stay competitive. I think more banks will partner for AI than trying to develop their own LLMs. Automation efficiency will drastically accelerate due to tools like AI and RPA, and I think you will see gaps grow in different Banks capabilities based on this. Similar to what we’ve seen happen with the adoption of digital in the last 20 years. We could look back in 5 years and see old school community banks left even further behind. – Pete Chapman, Chief Technology Officer
• AI will be the leader in technology impact in 2025. Predictive analytics will help anticipate and mitigate risks by analyzing data trends, improving fraud detection, credit scoring, and operational efficiency. In the security world, I anticipate biometric authentication processes will see broader adoptions as passwords are becoming less and less effective. – Vincent Maglione, Chief Information Security Officer
• In 2025, we anticipate an increased emphasis on AI and automation within compliance and fraud detection frameworks, with regulatory bodies providing more structured guidance on their use. Digital fraud is also likely to evolve, requiring more sophisticated fraud prevention measures. Another key trend will be the continued expansion of BaaS, necessitating comprehensive risk assessment and monitoring practices that not only address regulatory mandates but also uphold the security and soundness of financial transactions. – Chris Mastrangelo, Chief Risk Officer
• In 2025, heightened regulatory scrutiny will remain a dominant trend, with consent orders and enforcement actions surfacing past missteps and reshaping compliance priorities. Banks will need to proactively address legacy issues while investing in advanced regtech solutions to ensure agility and transparency. This focus on accountability will drive industry-wide innovation in risk management and reinforce trust with customers and regulators alike. – Lauren McCollom, SVP, Head of Embedded Finance
• The anticipated de-regulation of cryptocurrency is poised to significantly impact the financial markets. Banks will need to navigate the complexities of engaging with Web3 companies and their offerings. As fintechs may lose some favor, banks should be prepared to step forward with innovative products and enhanced user experiences. Additionally, lower interest rates may reduce the appeal of holding cash in money market funds, potentially leading to decreased deposit balances. – Rob Burnett, Director of Startup Banking
• Given the changes in 2024 and guidance from regulators, a “bank direct” model will gain prominence in 2025 in BaaS/Embedded Finance. Real time payments are poised for increased adoption next year, building on the groundwork that was laid by many institutions and fintechs this year. – Luther Liang, Director of Product

How do you see the ongoing deposit competition evolving in 2025 for digital and neobanks?

• Startups will continue to face challenges in finding strong sponsor banking partnerships to launch new embedded finance programs. – Lauren McCollom, SVP, Head of Embedded Finance

AI, RegTech & Emerging Technologies

How will AI, RegTech, and other emerging technologies impact compliance and risk management for banks in 2025?

• Banks will adopt RegTech tools to streamline compliance with complex regulations, reducing manual tasks and ensuring real-time regulatory adherence.
  RegTech powered by AI will streamline compliance processes (like what we do with Greenlite), reduce costs, and improve risk management accuracy, while advancements in AI-based fraud detection could minimize fraud. – Pete Chapman, Chief Technology Officer
• AI will continue to be at the forefront of growth within the banking industry. Efficiency gains have been prominent throughout 2024, with 2025 pointing towards ways to better utilize AI for risk management, fraud detection and increasing customer service capabilities. – Vincent Maglione, Chief Information Security Officer
• AI and RegTech are set to revolutionize compliance and risk management by enabling banks to process large volumes of data for real-time monitoring and anomaly detection, enhancing their ability to preempt and respond to potential threats. Machine learning can identify patterns in transaction data that signify fraud or compliance risks, while automation in regulatory reporting can help institutions keep pace with the complex and ever-evolving regulatory landscape. RegTech solutions will empower banks to be more agile in adapting to regulatory changes, enhancing overall risk management and compliance efficiency. With the growth of BaaS, these technologies will become essential for ensuring partner compliance and maintaining consistent oversight across all digital touchpoints. – Chris Mastrangelo, Chief Risk Officer

Embedded Finance

How will/should banks balance innovation with regulatory scrutiny as BaaS and embedded finance continue to grow?

• Balancing innovation with regulatory scrutiny in the expanding BaaS and embedded finance ecosystem requires a forward-thinking approach that prioritizes risk and compliance from the outset. Banks must establish robust, adaptable frameworks that allow for secure innovation while staying responsive to regulatory expectations. This includes designing compliance controls specific to the digital products offered, as well as implementing continuous risk monitoring that can adapt to changing regulatory landscapes. By investing in regulatory technology and fostering a culture of compliance, banks can support safe growth in their BaaS programs, meeting both customer demands for digital products and the regulatory mandates that safeguard the broader financial ecosystem. – Chris Mastrangelo, Chief Risk Officer
• As BaaS and embedded finance expand in 2025, middleware providers aiming to own compliance and program management for fintechs will continue to face stiff headwinds, reinforcing the need for banks to retain ultimate accountability. A collaborative approach, combining robust in-house governance with agile third-party support, will be key to navigating this complex landscape. – Lauren McCollom, SVP, Head of Embedded Finance

Partnerships

What role will partnerships between banks and fintechs play in driving innovation in digital banking this upcoming year?

• Partnerships between banks and fintechs will remain pivotal in driving innovation in digital banking, as collaboration allows banks to expand capabilities while fintechs access scale and regulatory expertise. With no new brokered deposit rules, these alliances will gain further traction, enabling creative deposit solutions and seamless embedded finance offerings. – Lauren McCollom, SVP, Head of Embedded Finance
• Given a push towards a “bank direct” model, we expect partnerships to grow closer than ever in 2025. Conversations around redundancy, shared outcomes, and long term business plans are gaining increased prominence. – Luther Liang, Director of Product

Business Banking

What do small businesses need from their banking partners in 2025 to stay competitive? Do you anticipate new products or services to emerge to address any changing needs?

• I don’t believe that there will be any significant changes in most SMBs needs in 2025 – getting paid, access to affordable capital/funding, earning strong yield on their cash, and managing cash flow remains top of mind for most. – Luther Liang, Director of Product

What do startups need from their banking partners in 2025 to stay competitive? Do you anticipate new products or services to emerge to address any changing needs?

• Low fees, competitive interest rates, and robust bookkeeping/accounting support are essential. Expanding solutions for seamless payments will be crucial. As interest rates decline, finding innovative ways to maximize yields on cash holdings will remain a priority for startups. – Rob Burnett, Director of Startup Banking

What will be a few key focus areas for Grasshopper in 2025?

• We will be focused on growing our direct banking offerings, our embedded finance platform, and expanding into affinity banking. – Luther Liang, Director of Product

The post 2025 Financial Trends: What’s Next for Business Banking appeared first on Grasshopper.

Product & Technology Updates

• Transactional SMS Alerts: We introduced SMS alerts to deliver real-time notifications about account security, transactions, and important updates directly to our clients’ phones, allowing them to stay informed, stay secure, and stay connected with critical information at their fingertips, wherever they are.
• Help Center: We revamped our Help Center, which now features a modern, fresh design that reflects the Grasshopper brand. The updated interface offers user-friendly navigation, making it easier than ever for clients to find the information they need.
• Commercial Roadmap: As a premier digital bank, we are focused on delivering high-quality online banking to our clients, including those with complex needs. We have launched a variety of improvements from aggregation of multiple businesses under one user to improved user management, all with the goal of creating a best in class platform that can serve large commercial enterprises.

Partnership & Marketplace Updates

• Sky Systemz – We teamed up with Sky Systemz, a leading payment processing provider, to empower small businesses, startups and commercial enterprises with merchant services, allowing them to accept credit cards and other forms of electronic payments in-person or online. Through this partnership, Grasshopper clients receive exclusive benefits, including a lifetime 10% discount on processing fees. ➜
• EnFi – We’ve partnered with EnFi, an AI-driven risk management decisioning and monitoring platform for the private credit and lending space, to develop advanced credit analysis and risk monitoring solutions to boost our operational efficiency and allow us to focus even more on delivering forward-thinking digital banking solutions for our clients. ➜
• AAA – We announced that we entered into a definitive merger agreement to acquire Auto Club Trust, a federally chartered savings bank and subsidiary of The Auto Club Group (“ACG”) – the second largest AAA Club in North America. Once the transaction is finalized, Grasshopper will be the exclusive bank powering depository and certain lending offerings to more than 13 million AAA members in ACG’s 14 state-territory. ➜

Looking ahead, we’re committed to progress and energized by the opportunities that lie ahead. At Grasshopper, innovation is at the heart of everything we do, and we look forward to continuing to evolve, enhance and expand our offerings and capabilities to better serve our clients.

The post Empowering Growth: New Payment Solutions, Help Center Revamp & More appeared first on Grasshopper.

Product & Technology Updates

• FedNow Service: In partnership with Narmi, we officially went live on the Federal Reserve’s new instant payment rail, the FedNow Service, enabling our clients to receive payments in real-time and marking the first step in our instant payments strategy.  Currently available to our On-Core fintech clients, we will be expanding receive capabilities for For the Benefit Of (FBO) accounts and rolling out the ability to send money instantly via the FedNow Service to all clients in the coming months.
• Transaction Monitoring: We integrated Alloy’s real-time transaction monitoring into our Business Banking platform to enhance our risk mitigation strategies by providing an additional layer of fraud prevention at the transaction level, allowing us to detect and prevent suspicious activity more effectively and ensure that we maintain the top-notch security that our clients expect.
• Commercial Banking App: We released an updated version of our Commercial Banking app for both iOS and Android devices, which included several enhancements such as smoother check processing, Positive Pay functionality, and easier navigation.
• Account Management: Now, small business and startup clients can manage all of their banking across multiple business entities with one login, simplifying financial operations. 

Partnership & Marketplace Updates

• Gusto – To help small businesses and startups streamline their operations, we partnered with Gusto, an industry-leading HR platform, allowing clients to automate their payroll, stay compliant, and focus on growing their business without the hassle of managing HR tasks manually. Through this partnership, Grasshopper clients get two months of free payroll, plus an integrated HR solution.
• Payvus – We partnered with Payvus, a credit card and capital platform, to help make credit more accessible for small business owners without personal risk so they start building business credit and increase their buying power. 

Thank you for taking the time to explore our latest product and technology update. As we continue to innovate and refine our offerings, we invite you to stay connected with us. Sign up for our quarterly newsletter to receive exclusive updates directly in your inbox or check back regularly for new announcements. We’re committed to delivering cutting-edge solutions that help our clients stay ahead of the curve, and we look forward to sharing even more exciting announcements and resources with you next quarter!

The post Staying Ahead: Our Latest Product & Tech Advancements in Q3 appeared first on Grasshopper.