ModernFi Raises $18.7 Million to Expand Deposit Management Tools

ModernFi has secured $18.7 million in funding to bring its deposit management tools to financial institutions of all sizes.

With the banking sector experiencing higher interest rates and increased stress, community and regional banks are facing challenges in attracting and retaining deposits, ModernFi said in a Tuesday (Jan. 23) announcement.

ModernFi aims to help these institutions thrive in a competitive landscape by offering innovative solutions that can compete with larger banking institutions and prevent clients from exiting the sector, according to the announcement.

The company operates a deposit network that enables banks and credit unions to effectively grow, retain and manage their deposit base, the announcement said.

By sweeping funds, sourcing deposits and providing extended insurance to depositors, ModernFi’s solutions help financial institutions attract and retain large-value depositors, thereby driving growth and increasing balance sheet stability, per the announcement.

ModernFi said it offers streamlined onboarding and operations, enhancing the usability and reach of sweep and reciprocal products.

The latest investment in the company was led by Canapi Ventures and supported by Andreessen Horowitz, Remarkable Ventures and three banks: Huntington National Bank, First Horizon and Regions, the announcement said.

Unlike existing networks that rely on manual processes, ModernFi’s deposit network is built on a modern tech stack, eliminating friction for depositors and operational burdens for financial institutions, per the announcement.

“The industry needs a next-generation solution for reciprocal deposits that is seamlessly integrated into online banking, built both API-first and cloud-native,” Neil Underwood, co-founder and general partner at Canapi Ventures, said in the announcement. “ModernFi has built exactly that, at the exact right time and place.”

In the weeks after last March’s banking crisis, customers pulled $109 billion in deposits from smaller banks. During the same time period, larger banks saw a $120 billion influx, Bloomberg News reported March 27, citing data from Moody’s.

Deposits also left the banking system, moving to money market mutual funds, according to that report. During that period, U.S. bank deposits declined by $53 billion, while money market mutual fund balances increased by $121 billion.