Digital banks have experienced growth in deposits and customer base since the fall of Silicon Valley Bank as startups look to digital banks for forward-thinking communities that prioritize technology.

San Francisco-based digital banks Arc, Brex and Mercury all posted increases in new clients and deposit growth since SVB failed in March.

Arc, for one, saw “hundreds of millions of dollars of inflows over the last couple of weeks,” Arc co-founder and Chief Executive Don Muir told Bank Automation News. “Our pipeline is 10 times larger than it’s ever been.”

Additionally, after the collapse of SVB, Brex clients opened 4,000 accounts and Mercury saw roughly $2 billion in deposits and “thousands of new customers following the SVB situation,” a Mercury spokesperson told BAN.

Grasshopper Bank, too, saw deposit growth, a Grasshopper spokesperson told BAN without mentioning specific figures.

The growth of digital banks is an “evolving story,” Andrea White-Kjoss, managing director at Long Beach Accelerator, previously told BAN. “In this environment, where I suspect there’s going to be a chilling effect on the fundraising environment, how do the neobanks step in?”

“There’s been a lot of volatility over the last couple of weeks, and now there’s a new baseline where adoption is meaningfully higher in the digital banking space than it was three weeks ago,” Arc’s Muir said.

Streamlined onboarding

Startups quickly had to decide where to move their accounts, and digital banks were strong contenders based on their offerings, and, more specifically, onboarding, Brex Chief Financial and Chief Operating Officer Michael Tannenbaum told BAN.

For example, at Brex, clients can be onboarded essentially instantly depending on what a client uploads at the start of the process, Tannenbaum said. Speed is “one of the things [startups] value, so it would make sense that they would value that in a provider.”

At Arc, onboarding can take just 10 minutes, Muir said, noting, “Not because we’re light on diligence, it’s because we leverage technology to complete automated know-your-customer and anti-money laundering processes,” he said.

The digital bank uses APIs to ingest raw financial data and integrates with QuickBooks and Xero, something that could take an offline bank weeks to analyze, he added.

Startup community

As important as technology is to startups, community also stands out at digital banks, Brex’s Tannenbaum said. “It’s very natural that people would look to Brex when there was a problem with SVB, because we were one of the few players in the market that was perceived as having a strong role in the startup ecosystem.”

Startups value the community that digital banks bring, he said. He said Brex clients have access to startup advice, connections to other startups and an ecosystem around the technology space.

“There’s a big community element of what Brex does,” Tannenbaum added.

Mercury, too, offers learning opportunities for its clients through its Startup Guides, according to the Mercury website.

Demand for diversification

As startups value community, there is also a newfound demand for diversification, Muir said. At Arc, “we can diversify customer cash across dozens of offline financial institutions. … The market didn’t necessarily appreciate how important that is until the last two weeks.”

“So almost overnight, our core value prop of technology-driven diversification of bank deposits suddenly resonated with every startup founder and CFO in the valley,” he said.