Finastra Move Brings Value to CUs
Taking a closer look at Finastra's acquisition of Malauzai and what it means for credit unions.
The deal, according to Finastra, reflects its commitment to the U.S. retail and business banking sectors by further enabling digital transformation for community banks and credit unions.
“Credit unions and community banks are the fabric of American financial services. We strive to help them realize the benefits of digital transformation – including being able to deliver outstanding experiences right across their consumer and business customer lifecycles,” Simon Paris, CEO of Finastra, said. “Together, our two companies deliver a fully integrated open core platform for payments, lending and digital, across Finastra’s 4,500-strong U.S.-based community market customers and Malauzai’s non-core U.S.-based customers. We value Malauzai’s market leadership and its open approach, which is in perfect alignment with our open platform vision.”
The acquisition builds on an already successful and proven partnership between Finastra and Malauzai, which saw the latter company’s digital solution integrated into Finastra’s Fusion Phoenix core banking system. Since 2015, the two companies have amassed more than 130 joint customers.
Tom Shen, CEO of Malauzai said, “We’re extremely excited for the next chapter of our story with Finastra. Together we have a deep understanding of the community banking space. By combining a best-in-class core experience, backed by leading innovative mobile and internet banking capabilities and our mobile-only design approach, community financial institutions win. The acquisition creates a compelling proposition for our existing customer base and enables Finastra’s customers to deliver a seamless banking experience with a robust breadth of services, via a single provider.”
Mike Dionne, SVP, community markets, Americas for Finastra and Robb Gaynor, chief product officer for Malauzai, provided insight into how this acquisition should affect credit unions.
“What used to be done in the form of paper checks or in a branch is now done via digital channels,” Dionne said. That electronic evolution now increasingly encompasses mobile banking as well. “Malauzai is at the forefront of that and will continue to stay at the forefront of that. A digital asset like that represented by Malauzai is an important part of a financial portfolio.”
Dionne addressed apprehensions that came about following the March 2017 news that Vista Equity Partners acquired the Canada-based D+H, and merged it with the U.K.-based Misys, creating Finastra, a diversified fintech leader with a global footprint and about $2.2 billion in revenue. D+H’s portfolio included a broad set of financial software solutions. Misys specialized in software for retail and corporate banking, lending, treasury and capital markets, investment management and enterprise risk. The privately-held combined organization created a diversified fintech market leader, with a broad set of financial software solutions, and around 10,000 employees and 9,000-plus customers across 130 countries, including 48 of the top 50 banks.
The concerns centered on how much Finastra would be committed to the key North American markets and community financial institution markets in general, as well as the credit union space. “I think there’s been some questions in terms of where Misys came from when Finastra was created – whether or not Finastra would be committed to the community markets. We’re hopeful that this is a very large demonstration of our commitment to the credit union space here in the U.S.,” Dionne stated.
Gaynor said, “That commitment to the markets means that we’ve now become part of what is the first 100% open core that has the best fully integrated digital capability.” Gaynor indicated it allows Malauzai to expand its digital footprint. “We’ve done well independently but the resources we’ll get from Finastra as a combined entity allow us to be better and bigger and more challenging to the traditional digital players.”
He added, “So, every way you look at it, community banking wins and the underlying consumers win.”
Dionne explained the new relationship is set up so that current credit union clients already using one of Finastra’s core products, Fusion Phoenix or Fusion UltraData, will continue to work with their present contact. If they are a legacy Malauzai client without that core relationship, they should continue to work with their current contact to resolve issues. The Finastra SVP also said he does not think the acquisition of Malauzai represents a change for any of its existing credit union customers. “We really view this as an expansion of our capabilities and our effectiveness in servicing the credit union market and in turn their members.”
Dionne noted that Finastra aims to allow Malauzai – which brings on board some 350 community financial institutions, about one-third of which are credit unions – to continue operating with some of the autonomy that allowed them to be innovative and agile.
“That said, we believe at Finastra, we’ve got some practices and some resources that can accelerate the growth of Malauzai’s digital platform in the credit union space in the U.S.,” Dionne pointed out. “It’s a marriage taking the best parts of both organizations, innovation and agility, [which are] reflective of Malauzai, as well as the breadth of a resource that Finastra represents and some best practices that we’ll introduce over time to the legacy Malauzai organization.”
A big part of Finastra’s plan globally is establishing the Finastra FusionFabric.cloud platform, which allows the creation and deployment of groundbreaking apps as a service. “We’ve come to recognize that innovation is occurring at such an accelerated pace that at Finasta alone can’t think of everything,” Dionne admitted. By opening its capabilities through a PaaS solution, the company is inviting fintechs, customers or universities to innovate.
“So, what ends up happening is people end up developing capabilities that are really close adjacencies to many of our core competencies,” Dionne suggested. He added Finastra also opened capabilities they have done well for quite a while using REST APIs. REST or RESTful API design (Representational State Transfer) benefits from existing protocols.
“Then philosophically by allowing or asking that community to be part of our ecosystem we can keep on pace or ahead of the innovation curve,” Dionne said. “When we were sorting out whether or not this marriage was going to work, that message is one that Malauzai bought into significantly and was a large part of the reason that we’re having this conversation today.”
Gaynor pointed out consumers are seeking more innovative solutions than Malauzai can provide to its credit union clients and this open strategy based on FusionFabric.cloud is one of the keys to making that happen. “We can find practical ways to better the lives of the members of the credit unions and that’s what this synergy is going to get.”
Both Dionne and Gaynor said by the end of the year they will have tangible results of this open ecosystem of financial technology providers all focused on solving customer needs. “I mean, that would be a great world to be living in,” Gaynor said.
Finastra plans to maintain its North American administrative headquarters in Toronto, Canada as well as keep a significant presence in several U.S. locations including a digital center of excellence in Austin, Texas and centers of excellence in New York City on Madison Ave., Lake Mary, Fla., Mequon, Wis., and Portland, Ore. “Those places in the U.S. are the ones that really matter to a U.S. credit union,” Dionne said.