Vertical ERPs Solve Direct Deposit Bottleneck
Matt Brown, Co-Founder of Bonsai, on the rise of vertical ERPs
Chime and Dave proved that a consumer bank could be rebuilt as a distribution business first, not a balance sheet business first. The key insight was that better design, no overdraft fees, and early paycheck access could win millions of users without owning a bank charter, because sponsor banks and BaaS infrastructure handled the regulated plumbing underneath. That success then attracted a wave of copycats, but also exposed the weak point of the model, which is that getting someone to move direct deposit is much harder than getting them to download an app.
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The first wave worked because debit interchange could fund growth. Chime and peers used small bank partners to earn uncapped debit economics, then split that revenue across the bank, network, and fintech. That made a free checking account economically viable as long as card spend and direct deposit followed.
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What looked like product differentiation was often mostly packaging and customer acquisition. Chime, Dave, Varo, and others offered similar core accounts, and the real edge was brand, channel mix, and who could persuade paycheck to paycheck users to make that account their financial home.
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Vertical ERPs attack the exact bottleneck that hurt horizontal neobanks. If payroll, invoicing, expenses, or contractor payouts already run inside the software a business uses every day, the platform can route money into its own account or card by default, instead of asking the user to manually switch where money lands.
The next phase of neobanking moves away from pure segment based consumer acquisition and toward products that control both workflow and funds flow. The winners will look less like a prettier checking account, and more like software that already sits where money is earned, routed, spent, and borrowed.