How Sponsor Banks Are Monetizing Fintech Beyond Deposit Growth

According to PYMNTS.com, sponsor banks are beginning to treat fintech relationships as more than a race to accumulate deposits. First Internet Bancorp increased its banking-as-a-service fee revenue by 172% year over year while moving approximately $2.4 billion in fintech deposits off its balance sheet through a deposit network. For customers, the shift matters because the bank behind an app may be earning from payments, lending, compliance, or card infrastructure even when it is no longer holding every associated deposit itself.

Deposits are becoming a managed resource

The traditional BaaS model bundled several jobs together: the sponsor bank issued accounts, held deposits, processed payments, supported lending, and provided the regulated framework for a fintech product. That arrangement made deposits central to the relationship.

First Internet continued growing its fintech relationships while distributing deposits through a network and reducing its reliance on higher-cost funding, including brokered deposits and certificates of deposit. The bank could retain the operating relationship—and the fees attached to it—without keeping all of the deposits on its own balance sheet.

That distinction is easy to miss in the user journey. We see an app, a card, or a checking account; behind it, several institutions may be handling different parts of the product. The deposit may sit elsewhere, while the original sponsor bank continues to provide program management, payments processing, card or BIN sponsorship, settlement services, compliance, and lending.

In other words, “where the app comes from” and “where the money is held” do not necessarily have to be the same question.

The fee mix is becoming the business

The Bancorp is described as pursuing a related strategy through a different operating model. Its growth focus includes fintech solutions, sponsored lending, embedded finance, payments, and other higher-margin activities. Fintech loans reached 18% of average loans, while fintech fee income represented nearly 30% of total revenue.

The distinction between the two banks is important. First Internet’s example shows that deposits can be moved through a network while the sponsor bank keeps the broader fintech relationship. The Bancorp’s approach emphasizes making the balance sheet itself more profitable by shifting toward payments, sponsored lending, and fee-generating fintech activity. The common thread is that deposit growth is no longer the only measure of success.

For fintech companies, that could create more room to design products around specialized banking partners rather than a single institution doing everything. For sponsor banks, it may reduce the pressure to absorb every deposit while still monetizing the infrastructure around it.

But flexibility also increases cognitive load for users. If deposits, payments, lending, and compliance are spread across different entities, the product can feel seamless until something goes wrong. Then the questions become less theoretical: who is responsible for the account, who processes the transaction, and which institution is actually holding the funds?

What to watch before choosing a fintech product

The immediate lesson is not that distributed deposits are inherently good or bad. It is that deposit growth alone tells us less about the underlying relationship than it once did. A bank can be earning meaningful fintech revenue from activity surrounding deposits that it does not keep on its own balance sheet.

When assessing a fintech account, users should therefore look beyond the app’s interface and ask which institutions provide the banking services, where deposits are held, and whether the product relies on a deposit network. Those details may not change the everyday experience—until a transfer is delayed, a service is interrupted, or responsibility becomes difficult to locate.

The broader shift is toward banking assembled from separate components: accounts here, payments there, lending somewhere else. That can make fintech programs more capital-efficient and commercially attractive. It also makes clear explanations more valuable. Long-term trust will depend less on how frictionless the front end feels and more on whether the underlying arrangement remains understandable when users need answers.