We just let us know when we're good to start, or are we good now? Okay. We'll go ahead and kick it off. Good afternoon, everybody. Thanks for being here. We're excited to be speaking with FinWise Bancorp this afternoon. Traveled to be with us from Salt Lake City, Utah. With us up here from management today, we've got Kent Landvatter, closest to me, CEO, and then Bob Wahlman, Chief Financial Officer to his right. We've also got Juan Arias, Head of Investor Relations, in the crowd with us today, who will make sure, I'm sure, to keep us in check. But guys, thank you all for being here. We appreciate it. Just throughout the meeting today, I've got several questions teed up for these guys that we'd like to talk about.
But just at any point in time, if you guys have questions in the audience, feel free to. I'll pause throughout, but feel free to chime in. So just for kind of those less familiar with FinWise, the company IPO'd in late 2021, early 2022, runs a relatively unique business model versus many of the traditional community or regional banks in the country. Their main focus has been on partner banking. It's a business they've done an excellent job in scaling over the years, and they're working to diversify it further today. So I'd like to spend some of the time, Kent, today kind of talking about the how you got here, where you're at today, and then we'll shift over and talk about some of what's to come from here.
I guess just with that, starting off, lending as a service has been a big tenet of the company and something you've scaled tremendously over the years. Maybe let's just start there. How you got into that business originally, where you saw the opportunity set, and then kind of the partners you've added to date, the success you've seen there.
Sure, sure. Thank you, Andrew, and thanks for hosting us. We really started the lending as a service business about eight years ago. It's something that I'd kept my eyes on for many years. I'd actually done something similar with another bank that I ran, with Sony and Dell Computers. And so we found a lot of success in that model. And I'd been following the electronic delivery of products for many years through banks facilitated by fintechs. And so for us, it was always part of the plan when I took over the bank in 2010 to add this. And so in 2016, we stood up our first lending as a service program. We did something a little unique at that time, though, that I think too some of the other banks were out there.
We started by building a compliance management system to make certain that we had everything on a regulatory front covered, and so that same compliance management system has matured over the last eight years and is very significant in helping us avoid some of the problems that some of the other BaaS banks have had. The other thing we did is we started at that time to build an IT infrastructure to support the business so we could not only scale it, but so we could make certain consistency in underwriting and so forth was happening in accordance with what the board had approved as far as our fintech partners go, so it was something we'd had on the radar for a long time and kicked it off eight years ago. It seems like yesterday, but it's been a good run for us.
Great. Maybe just to dive a little bit further into one of those points, it's really a hot-button issue among the BaaS or partner banks, the regulatory oversight, or in some cases across the industry, kind of lack thereof. Maybe can you just expand a little bit more on the point of kind of what you started in 2016, how you've developed specifically that risk management infrastructure that's helped you avoid some of the pitfalls that we've seen kind of across the industry?
Right, right. Absolutely. I think the first step was perspective. If you look at these as a product that someone else is managing for you and you're just hooking up and they say they'll do everything, that wasn't what we wanted to do. We looked at these products as if they were our products. And so we built the management system, the compliance management system to support that. So in other words, we put in compliance professionals, we put in risk assessment professionals, we put in testing professionals, BSA professionals, and IT professionals pretty much from the outset. Right now, that actually has. It's interesting with some of the blowback you're seeing in the regulatory industry against BaaS banks over the last couple of years. This has been a tailwind for us.
When you look at some of the problems that you've seen elsewhere, it makes a fintech really cautious about who they want to partner with. And we've actually seen more fintechs coming to us, not only more, but a better quality, a higher volume, or larger, more established fintechs coming to us because of the problems that some of the other banks are having. So it's actually been a good tailwind for us.
Yeah, absolutely. It seems like you guys are really starting to leverage kind of a tailwind at this point in time, and I wanted to maybe pivot over a little bit. Just as you've scaled kind of the infrastructure for your business on the lending side, you're also looking at payments, BIN sponsorship, as other potential verticals, and you've made some good progress on those this year. Maybe just talk about where we're at in terms of rolling out those products and those partnerships?
Sure. First, let me talk about the inception of that a little bit because that's important. When we went into the lending service business, that is arguably the most difficult compliance lift you have in a bank, is all the consumer compliance and so forth, and so we started actually with the most difficult of the products, and so when we decided to add the BIN sponsorship or the card programs and payments hub, it was, number one, first, something that our fintech customers really wanted. They were looking for different ways to expand what they could do. Payments and card were natural progressions for them, so it was at a request, but it's also something that we didn't have to build from scratch. We'd already built the infrastructure, the IT, everything is API scalable on our side. We'd already built the foundation.
So it wasn't a huge lift from zero to 10. It was from 0.8 to 10 because it was, for us, something that was incremental versus starting from scratch. So going back to your original question is we've been working on it a lot during 2024. We've run those expenses through the P&L. We haven't shown the revenue yet because we're in pilot stage, but we're planning on having the payment hub, which we call MoneyRails, operational by the end of this year. We're doing some external testing on it to make sure of its veracity and so forth. And the cards, we're piloting that now with one of our partners. And so we both are piloting the payments with a partner. We announced earlier this year cards with a partner and still in beta.
And so we fully expect those to be operational and start adding to the revenue next year in 2025.
Okay, great. As we think about the opportunity set in both the payments and the BIN sponsorship business, can you help us think about we've talked throughout time of your kind of partner pipeline that's been heavily skewed towards the lending side. Is the revenue, the real kind of revenue lift, similar in the payments and BIN sponsorship space where you have to get new incremental partners, or is there, you think, a cross-sell opportunity with the current kind of fintech partner base that's currently focused on lending, but you're not?
Yeah, definitely. We call the latter, which you spoke of with our current fintech base, we call that the low-hanging fruit because absolutely there is that need. When you think about it, what we do is we approve the loans through our API system, and then we fund the loans at the bank. Generally, those are sold back within a few days of having funded those, either to the fintech or to an SPV or what have you. But then we, other than with a couple of customers, that's where we usually stop. But if you think of the payments that come in on these, some are 12-month loans, some are 60-month loans.
And if you think of the payments that come in and how those compound, we think, for example, the payment side of this is going to be really a good revenue driver for us, but also something that creates a stickier relationship. But for the first time, when we envision this, we had line of sight on this is we'll be able to track new partners that needed everything or wanted everything. And we've actually signed our first one. It's a significant partner, and that partner will evolve into basically the entire product offering that we have.
Okay. I think I was reading through the presentation just to refresh myself earlier. You've signed four new lending partners this year. You've signed a payments partner, a credit card partner, and then a credit enhanced balance sheet partner this year as well. You've been very busy, obviously. Can you just help us think about the pipeline as it stands today for incremental partners? You mentioned at the start just some of the disruption in the space has given you more opportunity today. Do you see that pipeline for new partners continuing to increase across the spectrum of those different offerings?
Absolutely. Robert Kyle, our Chief Fintech Officer, says this is the first time in his career where he hasn't had anywhere near the outbound calls as he has the inbound calls. So there is a problem actually that we have. There's a huge addressable market, we believe, in this space. And if you think of the handful, a very small handful of banks that do it all, there's a lot of business to go around. In fact, if we were to, we have to be more and more selective now about the fintechs that we're onboarding. If you think about what would have cleared a hurdle a few years ago, may not clear the hurdle. So we're just being more selective to make certain that we are addressing the need, but also realizing there's a lot that's falling away just because the pipeline is so big.
Yeah, okay. And just on that same kind of point, we faced a period back in late 2022, early 2023, where we saw originations kind of compressing sequentially. You guys hit a nice point of inflection there. I think in the first quarter of this year, you saw a modest lift in the second quarter, a nice sizable lift in originations, I think $1.4 billion in the third quarter. And I think some of that was the result of new partners, but can you talk about just the outlook for originations you're seeing from here? Are you seeing those new partners maturing, starting to contribute more? I know you've seen diversification within the origination base, but can you just talk about your outlook for overall originations?
Yeah. So we saw a good lift throughout this year, but especially in Q3. I want to hasten to mention that that is a seasonal aspect in some part to one of our partners who's a student lender. But we do anticipate more and more to be happening in the origination space, especially when you consider, for example, we've launched PowerPay and most recently Albert, and those are going to be big contributors, but not this year. And so a lot of what you'll see there usually takes a quarter or two before you really see one of the new fintechs that we've launched start to add meaningfully to the balance sheet and to the P&L. So it'll probably be early next year that you'll start seeing some of that lift. But remember, Andrew, that we also, this is just an ongoing business for us.
So the more lending partners we add, we've built the ability to scale it and to do it without fracturing the foundation. And so for us, this just continues to be the business. We always plan to launch two to three, maybe four lending partners per year.
I'll pause there for just a minute and see if anyone from the group has any questions right now.
Yeah. Obviously, the competitive landscape has changed a lot. It's great to be able to cherry-pick your way through potential partnerships. How have, over the last couple of years, your partnership agreements or the economics or pricing or anything else around these partnerships changed?
That's really a good question. You would think that with more demand, we could raise the prices. What's actually happening is on certain partners, we can, but on other partners, we're attracting a higher quality partner that is used to a little lower fee and so forth. But the volume that they bring up, we think, is actually very interesting, and we'd rather have a few more of those than a higher margin, smaller ones that are less predictable. It's a good question.
Can we maybe spend some time? We talk a lot about lending as a service, payments, BIN sponsorship. Something that I feel like has been maybe brushed under the rug a little bit is the credit enhanced partner you guys launched this year. Just maybe I think a helpful place to start for the folks in the room would be just an explanation of what's meant by credit enhanced. We don't have to get into specific mechanics and the accounting of it because it can get confusing pretty quickly, but just the philosophy behind it, both structure-wise and then what it kind of incrementally offers FinWise to structure relationships in that manner.
Yeah, let me actually wind it back a step before that, and then you'll kind of understand why we're thinking about this and some other products. If you think of, and you'd mentioned it in 2022, 2023 when interest rates went up and some of the partners, it was becoming more expensive for them to raise capital and so forth. Triggers may have been being hit in some of the securitizations, and so they kind of clamped down, they tightened some of their credit criteria, what have you, but the capital markets had a dramatic effect on the originations. Now, our business model is resilient, and we came through that fine, but we didn't like the peaks and valleys, well, we liked the peaks, but we didn't like so much the valleys.
And so when you think of how do I smooth that, you look for other types of revenue that come into the bank. And one of those, of course, comes from credit cards. It's a very different model than originations. Another one comes from payments, which is once again a very different model than the origination. But then going to the credit enhanced balance sheet, to us, that sounded very interesting because if you think about it, this year, we're on pace to maybe do $5 billion of originations on our balance sheet. The vast majority of those are sold off. And we have deep data on these. We track all the cohorts. We're very thoughtful about grabbing that data. But there are some opportunities when you think of that much crossing your balance sheet to keep it on your balance sheet.
But we didn't want to take the full risk of the losses with those. And so the credit enhanced balance sheet, for lack of a better term, is where we've worked out an arrangement with the fintech partner. And let's say the coupon, you split the coupon some way with the partner, and then you have a waterfall that's created. We'll get the full coupon and then send back coupon to them. But out of that coupon that we send back to them, we top off our loss reserve. So it's kind of like an excess interest spread on a traditional securitization. But what we're doing is topping off our losses. So if there's X amount lost, we'll top that off every month. And so it's worked out in the pilot extremely well for us. The thing about this, though, is we're not opening it to everybody.
We would open it to those where we have deep data on the performance of the cohorts and how it looks over time, but also with a partner that, if the waterfall was a little tight, I'm not worrying about just that. I've got a corporate backer of that guarantee or that guarantee to cover the losses. And so we'd be very selective about it. But if you think about the same problems that impacted our originations during 2022 and 2023, our fintech partners were feeling that really bad at that time. And if they had another way to look at balance sheeting their credit rather than just through capital markets, this is something we think is very attractive. And we're in discussions with some of our existing right now to start taking on more credit enhanced.
Yeah. If I could add just a couple of points to that, just to clarify that credit reserve, when a loan goes, when a loan is charged off, we recover from that credit reserve the entire amount of the principal balance and all accrued interest. And then that credit reserve, if you think about it as if it were an upside-down securitization or a securitization that goes down, the residual interest is at the bottom that absorbs losses. Here in the waterfall, everything comes to us and goes into this reserve account to absorb those losses. And so that's really a, so really you have the ability to grow the balance sheet with very little credit risk. And when we talk about credit risk, we do view this two different ways.
First of all, we study the cash flows and we scale out the cash flows and make sure that even in a stress condition where it's 100% greater than what we'd expect those losses to be, what those tapes would show that the cash flow is more than adequate to cover losses at a 100% stress test. And let's see. And secondly, as Kent also noted, we do an underwriting of the counterparty to make sure that if for some reason that cash flow is shortcoming in there, the counterparty is contractually obligated to fill that hole. And we want to make sure they have resources to fill it. So it really gives us a great growth tool with, I don't ever want to say no credit risk because that would be wrong, but with as limited a credit risk as you can possibly imagine.
Yeah, so a lot more limited credit risk, very limited credit risk, but you're mainly focused on counterparty risk at that point in time, so it kind of fits with the theme of you maybe working up cap with some larger partners. We should expect more of the incremental credit enhanced growth to come from those larger partners.
100%.
Okay. I wanted to ask just a question around your business model as a whole. It's kind of a topic we've talked about for a couple of years now. Just from a diversification standpoint, you're obviously going down a path of diversifying the business into several different avenues. Just when you think about from a long-term perspective, how do you see the business, the revenue side of the house kind of structured percentage-wise from would you like 25% payments, 25% lending, 25% cards, 25% SBA? How do you envision the revenue contribution from these various businesses over time?
So we don't provide specific guidance, but I can give you kind of a ballpark of the way we think. Right now, the strategic partnership revenues are roughly 60%, not quite 60% of our revenues. SBA is like 28% or so forth. But if you think of the characteristics of traditional, like we've got a commercial leasing program, traditional SBA and so forth, those are more organically driven. And so where your real growth is, is when you're signing partners that have this kind of volume running through them, that we think is going to be more and more of a contributor. Now, the breakdown between BIN sponsorship and payments and originations of credit, we haven't disclosed any of that.
If you think of the foundational transaction of a card, for example, by the way, most of our focus will be on commercial cards, not consumer cards, though we would look at certain programs. If you think of the traditional focus of a card is you would issue cards out, and that base takes some time to get up to speed to using that card more and more. For example, we may do a fleet card, and as they expand their driver base or what have you, those cards go up. If you add another program on top of that, you start having this effect where the growth isn't linear. It becomes exponential over time. The way we're kind of looking at it is those two products, the BIN and the payments, could have an exponential aspect to them.
Okay. I'll pause there and see if there are any questions from the group before we move on. Maybe shifting gears. Just as I think about what you guys have done the past several years in terms of hiring for IT infrastructure, BSA, AML, and just broadly risk, and especially late last year, early into this year, we've been talking about the inflection point from a operating leverage perspective. Can you just talk about as you continue to add incremental partners from here over time, how much of the infrastructure for these businesses do you feel like is currently in place today? Are we at a point of inflection on the operating leverage this quarter? And just talk about what's the incremental lift on expenses you need to see as you continue onboarding partners and growing the business.
I think, Bob, you can take that, but I do want to just mention one thing is what we've said in guidance prior is that most of our spend for building the infrastructure itself is behind us. Everything else would be a spend related to the production. So if you sign a partner, you bring on the people, right? The one thing to think about, though, is when you're bringing on a partner, we've said before that you'll have two to three quarters before they're up to speed, but I've got to have the people in place. So that is a leading expense, but it's still production related. And so with that, Bob, I don't know if you want to add anything.
I think that was the most important point to make, but as it relates to the third quarter, we had said that the incremental expense, because we had invested so much in the infrastructure and the operating environment that we need to have to support these businesses from the third quarter of 2023 to the second quarter of 2024, we saw that slowing down, and we did see that slowing down then in the third quarter. It was about half the run rate of what was the increase that we had experienced in the second quarter, and we did see about that same 50% increase in the fourth quarter over the third quarter, but the one thing that we do have to keep in mind is that when we do bring these new partners on, that there is. It's related to production.
We are onboarding them, but it takes a quarter to six months to onboard them, and then it takes a while to build the pipeline. So there will be, as we move out there, there will be some costs related to the production. But of course, we do hope that the credit enhanced balance sheet growth will more than offset those costs.
Long term, that's a two to three quarter catch-up. The revenue comes in pretty meaningfully after that, so.
Yeah. Yeah. Understood. Can you just talk about maybe a little bit? We're speaking now about the credit enhanced balance sheet. This past quarter, you did see a lift in the partner originated credit that you're retaining on your balance sheet, HFI-wise. They kind of bucked the trend we've seen in the past couple of years where that mix had kind of dropped down over time. Can you talk about just how you envision balance sheet growth driven by partner originated credit versus SBA for a while? There's some CRE growth. Are we at a point now because of the credit enhanced balance sheet, you're shifting away from retention of SBA, retention of CRE, more towards just the credit enhanced?
Yeah. That's a really good question. We have grown a lot over the past couple of years in SBA guaranteed balances. In fact, if you look at the guaranteed balances coupled with the held for sale strategic partners, it's over 40% of our balance sheet. But the SBA, if you can decouple that from the growth, actually, the SBA, the reason we started doing that, retaining a couple of years ago rather than selling, is because the interest rates have gone up, the premiums have gone down on the sale because of prepayments and so forth. Things are starting to flip back to a little more normal. So I wouldn't say that it's necessarily tied to growing the balance sheet on other assets. It's more tied to the economics of the SBA program.
But going to the credit-enhanced and wider, yeah, that's one thing that I think you will see. And the nice thing about it, this is one thing we've always driven to do in the bank is be able to manage the balance sheet. We call it pivot. Basically, to be able to pivot away or to an asset class. And with the credit-enhanced, you have so much more control because you just take a little bit of what's going across your balance sheet to the point you feel comfortable. A lot of times we would work with the partner where if there is a securitization that we're part of that, or we at our option could be part of that takeout and everything, but it's really just the idea of managing control over the balance sheet.
Yes, you will see credit enhanced and other things driving the balance sheet, but the nice thing is we feel that it's a very controlled growth.
Yeah. Okay. And you kind of already answered where I was going to go next with that was around SBA. That's been a business that has struggled with higher rates. I guess the basic question is, is 75 basis points of rate cuts enough to influence that business at all in terms of the difference between retention versus the premium you get for selling? What have you seen underlying that business in the past quarter or so?
I would say we haven't seen relief yet because of the 75 basis point drop. I think it would probably need to go down another 100 basis points, 125 basis points before you see that, but definitely there is relief there. If you think a lot of these borrowers have sizable loans and their payments doubled in a two-year period, and so there's stress in the portfolio, but we believe that it's getting better. Generally speaking, for the customers, I mean, we've got to believe that, but I don't think you'll see a meaningful movement at 75 basis points because that's still so much higher, and a lot of them still may be catching up from just everything over the last couple of years.
Yeah. I want to add one thing to that. One thing that we are seeing is that when the interest rates were higher, the premium on that guaranteed portion had compressed some, and as interest rates go down, we're seeing that premium expand a bit, and that could affect decisions as well.
Right. Right.
The good news around that is we have an incremental 125 basis points of rate cuts in our FinWise model, so it looks like we could be there by next year.
Yeah. Just talk to whoever keeps running the Fed, right?
Yeah. I'll call him after this. If I could pivot over just a little bit too in kind of the same vein of balance sheet growth, your capital is in a very strong position today, 20%, give or take, on the leverage ratio. I think following the IPO and capital raise, it was similar around 25%. Just comfortability with capital where it's at. You guys always run a higher capital position. Your business, balance sheet-wise, because of the origination flow, can be a little more volatile, so it makes sense. But can you just talk about floor from a leverage standpoint? What's in your mind? It's different than other banks. Where's the level you don't want to go below from a leverage standpoint? Just as we're thinking about incremental balance sheet growth, it can be on the come in the next few years.
Yeah. Yeah. Go ahead.
So we spend quite a bit of time discussing and studying this and talking internally and with others. I think considering the risk profile of our institution, what we're looking to do and the growth rate, I think that we and other parties that have a significant interest in us would be comfortable with probably 15% as being the floor. And I think that we've said that in the past. And if you think about it and you think about the expected growth that we would have in earnings, you can see us not really needing capital until we exceed $1 billion in assets. I think that's.
Yeah. Okay. I'll pause there again just to see if any questions from the group quickly.
[audio distortion] I want to come to the fire. Anyone? I'm John, but maybe do y'all see any regulation? [audio distortion] card guys or mortgage guys [audio distortion]
I'm sorry, with the trade-off, you're at the end of that.
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Who?
I would say there's a couple of things out there that we're hopeful on, right? If you take a look at the way that we're funded, we're funded currently with about 50% broker deposits and 20%, 25% capital, and the rest, we have about 10% local deposits. And certainly, a broker deposit number, as it continues to grow, can attract regulatory scrutiny. And they had the proposed rule out there to expand the definition of what is a broker deposit. So I'd expect that that's not going to happen in a new administration. And that would probably be helpful from our perspective not to expand that definition as it relates to just the negatives of growth and broker deposits. You have to manage your liquidity anyway, so it gives you a little bit more flexibility. There's also lots of talk out there.
I don't know that it's as directly relevant to our business and business model of growing our business, though. But there's always the expectations that barriers to acquisitions, barriers to fintechs, the fintech business, that those will be easy. So overall, I think on balance, we expect it to be a more favorable regulatory environment for banks than it is than what it would have been in a different administration than it is currently.
By the way, the train was going by when you asked us. Did you the interchange fees? I don't know if that was part of it. Yeah.
Maybe that had some relevance.
For us, not really. It may for the fintechs, but we've based our model on we give any interchange there is, we would give that back to the fintech. And so it doesn't impact us as much. We're settlement-based.
Perfect. Thank you, Bob.
Yeah.
On the theme of deregulation, we've obviously seen a huge rally in the bank group as a whole post the election, a lot of which I think has been discussion around maybe an easier regulatory environment. Any other facets of your business that you feel like could use some regulatory alleviation or any other potential benefits this could provide?
You know, I call it the tone at the top or the winds from Washington or whatever. Sometimes examiners may dig really deeply, not because of specific regulations, but because of the tone at the top saying, "Really scrutinize." We don't look necessarily at that as a bad thing because we think our regulatory moat is a barrier to entry. And so we do comply. Some of the things, I think, we would look to for is less in the regulatory space, but just maybe, like Bob said, more clarity that BaaS is an acceptable, actually a sought-after model. It was in the prior to Biden. But the thing I keep thinking of is how much market share there is out there, how much need there is for this. And there's only a few banks that are doing it now without consent orders.
And so there's just a lot of opportunity and painting the industry with a different brush than what we've seen in the last few years would be helpful.
Yeah. Understood. Just on the point around it being maybe an easier environment for fintechs to operate within, do you feel like, I mean, that naturally kind of would lead me to think there are more banks that come in to fill that need for our partner bank. Do you feel like that would be the outcome in this situation? We see a continued host of banks trying to get into the space. That can be a good or a bad thing. It can make it more competitive. Other banks could see regulatory pitfalls if they get into the space without investing the way that you have. How do you see that if fintechs really, if it does become an easier environment for fintechs, is that a detriment? Does it make the space more competitive or?
It could eventually, but right now there is so much demand. And if you think about it, one of the things that I thought was real interesting is I'd listened to some of the CEOs of banks that got into trouble and they were talking about, one said, "Well, you know I'd hired 13 people to just oversee this." And I was thinking, at that time, we had 75 in a smaller bank. And I was thinking, "If you can't just curate all the people, you can't just create the CMS, the Compliance Management System overnight. You can't just build the IT." I mean, we've been working on it for eight years. And so there are some banks that I think will have a natural advantage. And for the other banks that come in, I think they'll have probably a clearer playing field of what they need to do.
But when I've talked to other CEOs of banks thinking of getting in the space, and I kind of talk a little bit about what the commitment has to be, and a lot of times I think they back away.
Yeah. It makes sense. 75 folks versus 13 is a big difference.
Yeah.
Maybe just shifting gears, a kind of bigger picture question. When you compare FinWise to most of the other banks in the country, I think one thing that's very attractive is the tangible book value accretion is driven by your pretty robust profitability profile north of a 2% ROA today, even after some compression. On a long-term basis, is 2% + kind of the level you think about as what you need to generate from a profitability perspective?
That is one of the numbers we toss around. The thing we're always looking at is, is it alpha to the other banks? We've always got to preserve the alpha there. So relative to other banks, we're an attractive investment and good for the shareholders. But that would be something we would look at.
Okay.
That's not exactly the number, but we've actually talked about stuff. What would be a hurdle?
Fair. Okay. That's most of the topics I had that I wanted to cover. I do just want to ask predictions over the next year for the overall BaaS space. There's always a plethora of headlines out there. What do you think will be interesting to come that we see in the coming year?
Before we jump off from that, I do want to mention one other thing, though, with regard to what you'd mentioned is with one of the things that our BaaS payments and card sponsorship, I think, brings to FinWise. Bob talked about 50% brokered CDs. If we can reduce that amount, but also if you think of the costs on that versus a brokered deposit, you can be 100 basis points, 200 basis points difference. And so we think that's an incredible multiplier for us. But going back to your broader question, you're seeing the, and this wasn't unexpected. In 2023 and 2024, you saw the pace of orders, of regulatory orders increasing. I don't think you've seen the same pace. And maybe it's just because they haven't hit the headlines yet.
But we're not hearing. We still are hearing some rumblings, but we're not hearing as much as I would say we heard eight months ago, 12 months ago about impending deals coming out. So I think the BaaS space maybe is figuring it out. I think we've had a few good case studies like with Synapse and so forth, but on how to do things appropriately and bullets that we need to dodge. But I think to me, when I think of BaaS, it's the evolution of the banking system. Traditional banks, of course, will always be there, but people are so used to transacting on their phone and transacting on the go. And as far as I'm, we think of it within the bank is you can't stuff that genie back in the bottle. It's going to do nothing but grow.
Very good. Juan, any topics we didn't hit on that we should?
No, that's good. That's usually what we can ask.
Great.
I would like to add one comment just to riff off of what Kent had just said there, and we're looking at the payments and the BIN to provide funding that will allow us to lower our reliance on brokered deposits. We see that growing over time, but so you talked to Kent and talked about the spread that it could enhance, and that would also lower our brokered deposit dependency.
Right. 100%. Okay.
Okay.
Great. Well, Kent, Bob, thank you guys both so much. Appreciate you being here.
Thank you. Thank you for hosting us. We appreciate it.
Thank you.