North America has a newcomer in core banking — Technisys, originally from Argentina. It is implementing a digital first system at Alberta’s ATB in a new subsidiary bank called Brightside, and it recently raised a $50 million Series C investment round from Riverwood, a Silicon Valley fund.
Co-founders Miguel Santos, CEO and co-founder Adrián Iglesias, COO both came out of IBM Argentina while a third co-founder German Pugliese Bassi, CMO & Alliances is a well-known entrepreneur in Latin America. The company now makes its headquarters in Miami.
Santos said the company will use the new round of funding to pursue business worldwide disrupting the market in financial services.
“We are helping banks transform to digital and powering new challenger banks.”
He thinks the funding shows two major trends — continued growth in technology and continued expansion into North America.
North American banks are so dissatisfied with the big three core providers — FIS, Fiserv, and Jack Henry — that the American Banking Association (ABA) and the Independent Community Bankers of America (ICBA) are each backing new vendors.
The ICBA is investing in, and supporting through an incubator, Agora which provides real-time banking that sits in front of legacy core banking platforms and provides such features as mobile accounts, shared accounts, children/parent accounts, advanced real time card controls, budgeting and saving tools and money pooling.
Meanwhile the ABA is in a consortium behind Finxact, developed by fintech industry veteran Frank Sanchez. It has announced $30 million in equity financing from the ABA, Accenture Ventures, SunTrust Bank, and Finxact’s existing investors, including Live Oak Ventures, First Data, Woodforest National Bank, and T.N. Incorporation Ltd (TNI) of Thailand.
Rob Nichols who has been CEO of the American Bankers Association for three years, said in his travels around talking to banks, the core banking systems were a common source of dissatisfaction.
“Early on I learned that outside public priorities, their chief desire is to have a nimble and agile core offering. We saw this (Finxact) as an opportunity to invest in an innovation which could push the whole core processing dialogue in an interesting direction.”
So Technisys is well-positioned for a market that is unhappy with incumbents.
In addition to ATB in Canada, Technisys has non-disclosed clients in the U.S. and is dealing with mid-size American banks, Santos said.
“We are seeing many small and medium banks tied to FIS, Fiserv and Jack Henry, which are old technologies. We have a lot to offer Tier 2 and Tier 3 banks that want to differentiate.”
Technisys has projects in more than 15 countries including U.S, Canada, Brazil, Colombia, Argentina, Chile, Mexico, Perú and Ecuador.
One challenge for non-American banking vendors is the complexity of the U.S. regulation, including state regulations. Some firms have been reluctant to invest without a bank committed to buying their technology, and banks don’t want to contract for a system that hasn’t been developed yet.
Santos said the Technisys platform has been readied to meet U.S. financial regulatory requirements.
Technisys offers a modern fully digital core and a digital front end for a 100% customizable customer interface and a layer for Open APIs to plug into, giving flexibility to the banks to offer their clients a superior experience while being able to innovate. The core and digital platform can be installed separately or implemented together. The digital platform provides the opportunity for banks to differentiate and emphasize their brand or create special services or new financial products.
“We can actually install the digital platform into a customer’s operations and interact with their existing core banking system, and make them free to create new experiences and differentiate from the competition, which is going to be harder and harder,” Santos said.
“The value proposition on the digital banking platform, we are convinced, is differentiation for not only banks, but technology firms going into finance. Having a platform that lets you create, that allows you to differentiate is key. More than key, it will be mandatory.”
Banking And Walter Bagehot — Smart Lessons From A Leading Victorian
Bagehot — The Life and Times of the Greatest Victorian. By James Grant. 334 pages. $29.95
What a match-up: James Grant, financial journalist and in modern terminology a public intellectual, writing on Walter Bagehot, who might qualify for that nomenclature today but was “just” a banker, editor of The Economist, and advisor to some of the leading statesmen of 19th century England.
Grant is suitably impressed by Bagehot’s stunning productivity — 5,000 words a week for The Economist, plus essays on luminaries ranging from Gibbon to Shelby. However, Bagehot might not get awards for work/life balance. In Bagehot’s writing after the Panic of 1857, Grant cites a longish passage and notes that ”Few better observations of the cycle of bankerly feast and famine have ever been written.” But, he adds, this was in a love letter.
The 19th century was a period of great change and a shift of power from the landed aristocracy to the merchant and industrial classes. Bagehot wrote about the reform of 1832 where some in Parliament actually voted to eliminate the infamous pocket boroughs, even at the price of putting themselves out of office. The reforms were overdue — cities like Manchester and Birmingham with growing populations didn’t have any representation. But the reforms had another consequence…those boroughs were sometimes home to a class of elevated statesman who were spared the ordeal of having to face the voters and at least a few contributed wisdom to the debates of the day, Bagehot wrote. The reform destroyed some intellectual constituencies.
The radical Irish journalist E.D.J. Wilson wrote in his obit of Bagehot: “His friends used to say of him, and there was a little exaggeration in the saying, that for a dozen years at least he was an unofficial member of every Cabinet, Conservative as well as Liberal, which has governed these kingdoms. Successive Chancellors of the Exchequer and Secretaries of the Treasury called him into their counsels as a matter of course. And the most illustrious of the statesman who thus consulted a journalist without a place in Parliament or any strength of party connection, would be the first to acknowledge how much they owed to the ‘white light’ of his pure and clear intelligence.”
Ironic then the Bagehot’s Stuckey’s bank sold to what eventually became part of National Westminster Bank, which was acquired by The Royal Bank of Scotland (RBS) which failed — at a cost to taxpayers of approximately £45.5 billion.
Grant notes the Bagehot’s world was one of institutionalized discipline while today’s world — one of paper currencies, floating exchange rates, enormous budget deficits and government policies to protect both investors and depositors against the consequences of banks’ mismanagement — is largely one of institutionalized indiscipline.
In financial journalism, “Bagehot was a superior commentator, thought a middling seer — for every financial writer must squint into the future… HIs attitude was perhaps too cautionary in the short term, and much too complacent for the long term. He worried too much about the single gold reserve and not enough about the distant adverse consequences of government control in banking and credit.”
Grant draws some broad historical comparisons:
“The interplay between money and credit was the source of the recurrent cycles of boom and bust that bedeviled the nineteenth century and continues to plague and mystify the 21st.”
And in some cases Grant makes his commentary just by direct quotation:
“In all customary societies, bigotry is the ruling principle. In rude places to this day, anyone who says anything new is looked on with suspicion…one of the the greatest pains to human nature is the pain of a new idea.”
Sound familiar?