First Internet Bancorp (INBK): 5 FORCES Analysis [Nov-2025 Updated]

You're trying to size up First Internet Bancorp's position right now, and frankly, the view from late 2025 is complex. We see a digital-first model facing intense pressure: customers hold high power because they can shop rates instantly, and rising funding costs are clearly biting, shown by the \$41.6 million net loss in Q3 2025 and a small market capitalization of about \$162.54 million. Still, the high regulatory bar protects them somewhat from new chartered banks, even as FinTech substitutes and powerful partners in their Banking-as-a-Service ecosystem chip away at the edges. Dive in below to see how these five forces map the immediate risks and opportunities for this \$5.9 billion asset bank.

First Internet Bancorp (INBK) - Porter's Five Forces: Bargaining power of suppliers

When you look at First Internet Bancorp (INBK), the suppliers aren't traditional vendors; they are the sources of funding-primarily depositors and, increasingly, fintech partners. Because First Internet Bank pioneered the branchless delivery of banking services, the dynamic with depositors is unique, giving them significant leverage.

Depositors have high power due to low switching costs in a branchless model. Honestly, if a customer is only managing their money online or via an app, moving their funds to another digital-first bank is incredibly simple. There's no branch to visit or relationship manager to placate; it's just a few clicks. This ease of movement means First Internet Bancorp must constantly compete on rate and service to keep that money parked with them.

High interest rates increase competition for deposits, raising the cost of funds. When the broader rate environment is high, the pressure on First Internet Bancorp to pay more for deposits intensifies, directly impacting the net interest margin. We saw the cost of interest-bearing liabilities decline slightly to 3.90% in the third quarter of 2025 from 3.96% in the linked quarter, but this small dip doesn't erase the underlying pressure to remain competitive against other high-yield options. You have to pay up to keep the money flowing in.

The composition of the funding base really shows where the power lies. Here's the quick math on their deposit mix as of September 30, 2025:

Fintech partners hold leverage within the Banking-as-a-Service (BaaS) ecosystem. These partners aren't just customers; they are conduits for significant funding. With fintech deposits making up 17% of the total, First Internet Bancorp is tied to the success and stability of those platform relationships. If a major fintech partner decides to shift its deposit relationship, that's a substantial, immediate funding gap to fill.

Brokered deposits represent 4% of total deposits, indicating reliance on rate-sensitive funding. While this is a smaller slice than the fintech segment, brokered deposits are inherently transactional and highly sensitive to prevailing market rates. They are a quick source of funds, but they can leave just as fast when better short-term rates appear elsewhere. This reliance, even at 4%, means a portion of the funding base is always shopping for the best deal.

The key supplier segments and their power drivers are clear:

• Depositors: High power due to branchless, low-friction switching.
• Fintech Partners: Significant leverage due to the 17% deposit share.
• Brokered Deposits: Rate-sensitive funding source at 4% of total.
• Cost of Funds: Directly pressured by the competitive rate environment.

Finance: draft Q4 2025 funding strategy stress test by next Tuesday.

First Internet Bancorp (INBK) - Porter's Five Forces: Bargaining power of customers

For First Internet Bancorp (INBK), the bargaining power of customers is a dynamic force, heavily influenced by the digital nature of its operations and the specific segments it serves.

Retail customers possess high power; they can easily compare rates online. As a branchless bank, First Internet Bank competes directly on digital platforms where rate transparency is immediate. This is evident in their aggressive deposit pricing strategy to attract and retain retail funds. For instance, as of October 30, 2025, their Money Market Savings account offered 3.25% APY for balances up to $100,000, which was approximately 6x the national average Money Market Savings APY of 0.59% published by the FDIC.

The power of these retail customers is further illustrated by the competitive structure of their high-yield offerings, which forces First Internet Bancorp to price deposits aggressively to maintain funding levels. You see this pressure reflected in their deposit mix, where fintech deposits make up 17% of total deposits, suggesting reliance on digitally-native funding sources that are highly rate-sensitive.

Commercial borrowers have moderate power due to specialized niche lending (e.g., SBA, franchise finance). First Internet Bancorp provides services nationally, including SBA financing and franchise finance, alongside regional commercial real estate, construction, and commercial and industrial loans. While the bank has been strategically cleaning up credit in areas like franchise finance, seeing delinquencies drop by approximately 79% quarter-over-quarter in that segment by Q3 2025, the specialized nature of these loans can grant borrowers some leverage, as the bank has specific expertise and pipeline focus in these areas.

The bank's loan-to-deposit ratio of 73.9% (Q3 2025) suggests good liquidity, but customers still dictate deposit price. This ratio, down from 82.3% in Q2 2025 following a strategic loan sale, indicates the bank has ample capacity to fund growth without immediately needing to aggressively compete for every deposit dollar, yet the need to manage funding costs remains paramount. Cash and unused borrowing capacity stood at $2.9 billion as of September 30, 2025, providing a liquidity buffer.

Low customer switching costs for basic digital banking services is a key factor. Being a pioneer in branchless banking means the friction for a customer to move their basic checking or savings account to a competitor offering a slightly better rate or feature set is minimal. The bank's ability to attract high-yield deposits shows they must constantly meet or beat market expectations for savings products.

Here's a quick look at how First Internet Bank's deposit pricing stacks up against the broader market as of late 2025, which directly impacts customer retention:

The bank's deposit composition shows that noninterest-bearing deposits make up 43% of total deposits, which is a very stable, low-cost funding base, but this segment is also highly susceptible to digital migration if competitors offer compelling treasury management tools or better liquidity management services.

The power of the customer base can be summarized by the following key deposit metrics:

• Noninterest-bearing deposits: 43% of total deposits as of Q3 2025.
• Fintech deposits: 17% of total deposits.
• Cost of interest-bearing deposits declined 5 basis points in Q3 2025.
• New CD originations in Q1 2025 had a cost of funds 99 bps lower than maturing CDs.

Finance: draft 13-week cash view by Friday.

First Internet Bancorp (INBK) - Porter's Five Forces: Competitive rivalry

You're looking at First Internet Bancorp (INBK) in a market packed with competitors, so rivalry is definitely a major force here. You're facing off against established large national banks and a growing swarm of digital-only banks, all fighting for the same deposit and loan dollars. It's a tough spot to be in, honestly.

The scale difference really highlights this rivalry pressure. As of late November 2025, First Internet Bancorp's market capitalization hovered around $168.03 million as of November 23, 2025, which positions it as a much smaller player compared to the giants in the sector. This size disparity means less capital to deploy for aggressive pricing or large-scale marketing pushes.

Here's a quick look at some numbers that frame the competitive environment for First Internet Bancorp as of Q3 2025:

The operating environment is clearly difficult. That headline Q3 2025 net loss of $41.6 million really tells the story of the pressure, even when you adjust for the $37.8 million pre-tax loss from the strategic sale of single tenant lease financing loans. The bank is actively trying to clean up its balance sheet, which is an action often taken when facing intense market scrutiny or preparing for a more competitive lending cycle.

First Internet Bancorp is trying to carve out space by focusing on specific areas, which is how smaller banks fight back against bigger ones. Differentiation isn't broad; it's targeted:

• Niche commercial lending focus areas include construction and investor commercial real estate at 16% of the portfolio.
• Public Finance makes up 13% of the loan book.
• Residential Mortgage is also 13% of the portfolio.
• The formerly concentrated single tenant lease financing segment is now only 5% of total loans.
• The BaaS model drives liquidity, with management noting significant fintech deposit growth.

So, you have a smaller institution, which posted a $41.6 million loss in Q3 2025, trying to compete by being specialized in commercial lending and by using its BaaS platform to secure deposits, which helps keep the loans-to-deposits ratio at 73.9%. That specialization is the key lever against rivals who compete on scale or broad consumer offerings.

First Internet Bancorp (INBK) - Porter's Five Forces: Threat of substitutes

You're looking at how external options chip away at First Internet Bancorp's core business-deposits and lending. The threat of substitutes is real, driven by technology making non-bank options more accessible and competitive on price and convenience. Honestly, for a digital-first bank like First Internet Bancorp, this force is particularly sharp.

Non-bank FinTechs and payment processors substitute core banking services

FinTechs are not just nibbling at the edges; they are capturing revenue growth at a much faster clip than the established financial sector. Global revenues for fintech companies jumped by 21% in 2024, which was three times faster than the financial sector as a whole. Furthermore, 69% of publicly listed fintechs were profitable in 2024, with average EBITDA margins rising to 16%. This profitability fuels further innovation that directly competes with First Internet Bancorp's services. For First Internet Bancorp, its own deposit mix shows the integration of this threat: as of September 30, 2025, fintech deposits made up 17% of its total funding base, a segment management noted saw 'strong growth.'

The competitive landscape for payments and core services is maturing, with the top ten fintech lending providers collectively holding 47% of the global market share. This indicates that substitutes are consolidating power, making them more formidable rivals to First Internet Bancorp's digital offerings.

Direct lending platforms for commercial real estate and small business loans bypass the bank entirely

Direct lending platforms are increasingly cutting out the middleman for both consumer and business credit. In 2025, more than 60% of U.S. personal loan originations were completed online, and over half of small-business loans in developed regions were sourced via fintech platforms. This directly challenges the commercial and small business loan segments that First Internet Bancorp services. To be fair, First Internet Bancorp is actively managing its portfolio risk, evidenced by the strategic sale of $836.9 million in single tenant lease financing loans in Q3 2025, which provided balance sheet flexibility, but the underlying market shift remains a substitute threat.

• Digital lending accounts for 63% of U.S. personal loan originations in 2025.
• Fintech platforms source over 50% of SME loans in developed markets.
• Global Fintech Lending Market size was valued at $589.64 billion in 2025.

Capital markets offer alternatives for large-scale commercial financing

For larger corporate financing needs, capital markets provide an immediate substitute for traditional bank lending, especially when banks tighten credit or increase pricing. While First Internet Bancorp's total assets were $6.1 billion as of June 30, 2025, its commercial segment, which made up 43% of its deposits, is often the first to look to capital markets for funding rather than relying solely on bank credit lines. The very act of First Internet Bancorp selling $836.9 million in loans suggests that securitization or direct placement in capital markets is a viable exit strategy for assets that might otherwise be held on the balance sheet, illustrating the market's depth.

Digital wallets and money market funds are easy, liquid substitutes for deposits

For customers managing cash-the lifeblood of First Internet Bancorp's funding-digital wallets and Money Market Funds (MMFs) offer highly liquid, yield-seeking alternatives. MMFs and bank deposits are viewed as substitutes because they are both safe, cash-like assets. As of 2025, the combined assets of these two sectors exceeded $20 trillion. In the U.S., MMF assets reached $7 trillion in 2024, driven by attractive yields relative to traditional bank accounts during periods of rising rates. The historical data shows a clear competition: from 1995 to 2025, a one-percentage-point increase in bank deposits was associated with a 0.2-percentage-point decline in MMF assets on average. This means that when First Internet Bancorp lags on deposit rates, funds flow out.

Here's a quick look at the competitive dynamic between these two cash management vehicles:

The pressure is evident in the overall deposit outlook; total deposit growth for private depository institutions was projected to be lackluster through 2025, perhaps in the 4 to 4.5 percent range, which is significantly below the 8 to 17 percent pace seen in previous easing cycles. First Internet Bancorp's loans-to-deposits ratio stood at 73.9% as of September 30, 2025, indicating they maintain strong liquidity, but the cost to keep those deposits is the key variable here.

First Internet Bancorp (INBK) - Porter's Five Forces: Threat of new entrants

You're looking at the threat of new entrants for First Internet Bancorp (INBK), and honestly, the picture is mixed. It's a classic case where one force pushes entry barriers way up, while another force is actively pushing them down.

Regulatory and capital requirements for a chartered bank are defintely high barriers to entry. Starting a traditional bank from scratch means navigating a maze of federal and state regulations. For instance, while the minimum Common Equity Tier 1 (CET1) capital ratio requirement for a bank is 4.5 percent, that's just the floor. Large banks also face a Stress Capital Buffer (SCB) requirement of at least 2.5 percent, plus a G-SIB surcharge of at least 1.0 percent if applicable. These figures represent the capital cushion required to withstand severe economic stress, a massive upfront hurdle for any newcomer wanting to operate with the same safety profile as an established player like First Internet Bancorp.

The BaaS model, however, lowers entry barriers for new FinTechs offering banking services via partners. First Internet Bank itself is an industry pioneer in the branchless delivery of banking services, having opened in 1999. This digital-first approach means new FinTechs don't need to build physical infrastructure; they can plug into an existing charter. To show you the scale of this partnership ecosystem, as of the third quarter of 2025, First Internet Bancorp's fintech deposits made up 17% of its total deposit mix. That level of reliance on the BaaS channel shows how accessible this partnership route is for new entrants.

First Internet Bancorp's total assets of $5.9 billion as of March 31, 2025, demonstrate the required scale to be a significant player in the digital space. While this size is a barrier to a tiny startup, it's not insurmountable for a well-funded FinTech looking to acquire or partner with a smaller institution. Here's a quick look at how First Internet Bancorp's capital position stood at the end of Q3 2025, which is the benchmark for stability:

New entrants can easily access national markets due to the branchless, digital structure. Because First Internet Bank provides services nationally, a new digital competitor doesn't face geographic limitations that a traditional brick-and-mortar bank would. They can target customers across all fifty states from day one, using the same digital channels First Internet Bancorp pioneered. This lack of geographic constraint means the competitive set is national, not regional.

Still, the regulatory hurdles remain substantial for those seeking a full charter. New entrants must consider:

• Securing initial charter approval from state and federal bodies.
• Meeting initial minimum capital thresholds for a new bank.
• Establishing robust compliance and cybersecurity frameworks.
• Building the technology stack to support national operations.

If onboarding takes 14+ days for a new digital account, churn risk rises, which is a hurdle every new entrant must clear quickly.

Finance: draft 13-week cash view by Friday.