Grasshopper Bank

Grasshopper reduced manual reviews by 58% with Alloy

Alloy helps Grasshopper drive down the cost of fraud and expand into new markets while retaining a lean operation

At a glance

Industry
Business Banking
Company Size
100+
Established
2019
Headquartered
New York, NY

Assets
$733M

Grasshopper is a digital commercial bank serving small and medium businesses (SMBs), startups, financial technology (fintech) companies, and the venture capital and private equity community. Established in 2019, Grasshopper has brought diverse financial products and services such as small business banking, startup banking, banking-as-a-service (BaaS), SBA lending, commercial real estate financing, and more to clients across 50 states. They are known for their cutting-edge, solutions-driven products built for the business and innovation economy.


When the company’s CEO, Mike Butler, came aboard in 2021, Grasshopper underwent an organizational restructuring that shifted how the company approached growth. To keep fraud from inhibiting their forward movement, the Grasshopper team viewed Alloy as an integral part of their re-envisioned solution from day one.

800
new account openings per month
58%
reduction in manual reviews

The Challenge: Grasshopper was ready to grow, but their existing fraud processes proved unscalable

Grasshopper was poised for growth, but wasn’t scaling at the rate they wanted to. To scale fast, the nimble digital bank needed to streamline risk management across their platform, including in their primary area of focus: core deposits.

Because SMBs want the same CX as today’s consumers — an effortless digital experience — Grasshopper needed to create just the right amount of friction to keep fraudsters away, while maintaining a delightful, seamless experience for legitimate clients. To strike this balance, they would need to tackle fraud in the background.

Adding to Grasshopper’s challenge was the fact that manual application reviews intended to identify and prevent fraud are a lengthy process that occupies significant time and resources. At the time, as many as 20% of Grasshopper’s incoming applications required a manual review.

If a fraudulent identity ever did manage to get into the system, remediating the threat was a lengthy, resource-intensive process. Finding better ways to reject fraudulent applications upfront, before fraudsters even enter the platform, was imperative, but difficult because bad actors have become so sophisticated that fraudulent applications can sometimes appear even cleaner than regular identities.

“Historically, fraudsters would use a phone number or address that doesn't match, and it's clear from the application that it's not legitimate. Now, fraud is almost clean-cut. They assume a full identity, reflecting accurately on the application. So, of course, it's going to raise green flags across the board. Finding partners like Alloy that dig deeper into patterns and behaviors beyond phone number and address checks, is crucial."

Kaylee Sandberg, Fraud Manager

The Solution: Grasshopper implemented Alloy to cut fraud loss and keep manual intervention down

To stay ahead of fraud, Grasshopper needed an adaptable fraud risk management solution that would keep up with fraudsters’ increasingly sophisticated tactics by using non-traditional data sources, like biometrics and behavioral data, to create a cohesive digital narrative about applicants’ identities. Building a custom fraud solution from the ground up wasn’t an option because they needed to maintain their lean team and keep costs down as they grew their deposit portfolio.

In lieu of an in-house build, Grasshopper wanted a best-in-class fraud solution with a responsive customer service team. They needed a partner experienced in the specific needs of an all-digital bank and possessing the speed, agility, and client-first mentality to problem-solve with them. The ideal software provider would act as a strategic partner in innovation, working to build better fraud protection, compliance, and embedded finance products, while Grasshopper played to their own strengths.


“90% of what a community bank or digital bank provides is the same across us or any other competitor. By working with Alloy, we can focus almost all of our development efforts on building that 10% that differentiates us from our competitors. From quick access to virtual cards — which are sort of a rarity for a community bank — to international payments, we have a lot that other SMB checking products don't offer… at least not in as clean a way as we do.”

Teddy Gordon, Director of Data

With their differentiating products and services top-of-mind, Grasshopper decided that Alloy was the right choice for a scalable fraud solution that decreased manual reviews while lowering costs.

With Alloy, Grasshopper gets ample wiggle room to test their fraud decisioning workflows. Grasshopper has been able to iterate more effectively, with approximately 150 changes made to their flow in the last year. This “plug-and-play” approach to data decisioning helps the Grasshopper team align on the best practices for achieving the right level of friction to suit their client experience goals and ideal risk appetite.

The Outcome: As manual reviews fell from 20% to 8.5%, Grasshopper was able to grow its client base without adding new employees

Since implementing Alloy’s Identity Risk Solution, Grasshopper’s SMB onboarding process has become more efficient and effective. Today, Grasshopper opens over 1,000 net new SMB and startup relationships a month through its digital direct banking platform. Not only has Grasshopper onboarded more clients to their digital banking platform, but they were able to shrink their manual reviews to 8.5% with Alloy.

Fast-paced changes to the fraud realm can make it hard to trust traditional fraud indicators. With Alloy, it has become easier for Grasshopper to count on their tech stack to stop fraud before it enters their system. Alloy’s simplified, streamlined console gives Grasshopper’s fraud team a holistic view of client risk, creating operational efficiencies that have allowed their team to accomplish more in less time.

“Say we are looking at a fraud alert, and we need to access the account phone number. It's not practical for us to pull every single item of client info to verify in eight different tabs from eight different data systems. Having an interface where we can go in and see the green check mark for each item saves so much time. Alloy puts it in a nice, pretty, centrally accessible UI. The data is good, and we can use it as part of our reviews quickly.”

Kaylee Sandberg, Fraud Manager

With Alloy’s help, Grasshopper was able to cut down on expenses by auto-denying fraudulent applicants before they reached the point of costly checks and minimize account closures and losses due to fraud. As fewer fraudsters bypassed their detection systems, Grasshopper was able to effectively reduce the cost per account closing.

The digital bank was also able to scale its platform to serve new markets. In 2022, Grasshopper entered the embedded finance space througha partnership deal with Treasury Prime, another longtime customer of Alloy. Ultimately, Grasshopper is excited to tap into Alloy’s new embedded finance capabilities to optimize collaboration and streamline updates across their partner portfolio.


“Having the ability to modify the onboarding process for BaaS clients through the parent-child account structure is a game changer. My compliance team outlines the specific KYC requirements that we hold our clients to. Whenever they make changes, I can roll out version updates for every partner in our portfolio at once. This ensures compliance across the board, while allowing our clients to manage their own risk tolerance."

Teddy Gordon, Director of Data

Looking to the future, Grasshopper is leveraging their collaboration with Alloy to enhance their competitiveness as a top sponsor bank by providing scalable fraud oversight models. One of the ways they anticipate doing this is by offering drag-and-drop fraud decisioning workflows to their growing BaaS client base.

“We've worked with Alloy for a long time, and for a good reason. We share the same sort of idea of where the industry needs to go. We've had partners in the past who don't necessarily align with that. And we're very honest and upfront about what's going to work and what's not. We want to have partnerships that benefit both of us. If it's one-sided, eventually it's not going to work out.”

Teddy Gordon, Director of Data

With a strong emphasis on fostering mutual growth through transparent and collaborative partnerships, Grasshopper’s team is well-positioned to sustain their growth trajectory, continue expanding into new verticals, and deliver an exceptional CX, all while keeping a step ahead of fraud.

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