John San Filippo
Apiture’s Matt Ellis Talks Business Banking
Part of Our Money20/20 Interview Series
By John San Filippo
Money20/20 USA, the fintech mega-conference, was once again held in Las Vegas, this year from Oct. 23-26. And once again, Finopotamus was onsite talking with industry leaders about a wide range of topics. These interviews are captured in this series of articles.
Finopotamus spoke with Apiture’s Chief Revenue Officer Matt Ellis about opportunities for credit unions to better serve the businesses in their communities.
Finopotamus: Just to level set, please tell our readers about Apiture.
Ellis: We are a digital banking company. We provide digital banking software to banks and credit unions. In the United States, we have about 300 customers. We support consumer banking and business banking for those financial institutions. We are connected to 40 cores and we have over 200 fintech partners. One of the things that makes us different today is that banks and credit unions often buy digital from their core. And digital is typically an afterthought with cores; it's not their primary business.
Finopotamus: What challenges do credit unions face in serving business members?
Ellis: Historically, credit unions have been very consumer focused and have excellent solutions to serve their members. That is their core competency. But what's happened is, as credit unions are looking for growth, they're trying to serve businesses. However, what they're finding is serving businesses is not the same as serving consumers. This is an area where historically Apiture has been focused and has done a lot of work with banks. We have built our business banking functionality through our relationships with banks.
There are a lot of things that businesses expect, like the ability to have multiple logins so that I can see my personal accounts and business accounts, but my accountant can just see the business account; or setting privileges so that one employee can create a wire transfer, but can't release it. These things are native in our digital banking platform today. Because we have single platform that supports consumers and businesses, we have a product that allows credit unions to serve consumers and businesses well.
Finopotamus: Does a credit union’s choice of core platform have any impact on its ability to provide these services?
Ellis: It’s generally not a challenge with the core. However, the credit union may need to establish a relationship with a correspondent bank to settle business transactions. To the degree that a business wants to reimburse employees through ACH (Automated Clearing House), or pay vendors through ACH, or needs to send wire transfers to their suppliers – if that credit union is not connected to those networks, they're going to have to establish a correspondent relationship to process those transactions.
Finopotamus: How does a credit union that’s new to business services get started?
Ellis: We offer the ability for the credit union to turn services on discreetly. So they could easily offer business checking and business savings and business CD (Certificate of deposit) accounts. They could display those accounts in our digital banking application and they could limit access to those accounts to the right people in the business who should be able to see those. Just from a depositing and transaction processing standpoint, they could be in production very quickly.
Finopotamus: What about from an expertise standpoint, e.g., making sure call center employees can speak with authority about business accounts?
Ellis: You do have to train for that. Credit unions have to be prepared to train for serving business customers.
Finopotamus: From a technology perspective, where does business lending fit?
Ellis: We are primarily on the deposit side of the organization. We do have relationships with partners so we can do loan origination through the platform. It's not our loan origination. For example, one of our investors is BHG, which is Bankers Healthcare Group. They do unsecured business loan origination. We have a relationship with them. After the loan is originated, we have the ability to natively display that loan on the dashboard and allow the accountholder to make payments against that loan and to see payments and interest accruing against that.
Finopotamus: It seems like a huge opportunity for credit unions if they do it right. Do you agree?
Ellis: Especially in today's environment, businesses tend to leave much higher dollar deposits on hand. And once you get that business's operating account, they tend not to be particularly sensitive to the interest rate that you pay on that deposit. There's more fee income, and there's also lower cost deposits at scale. We think there's a tremendous untapped opportunity for credit unions to serve businesses and we think we're uniquely positioned to help them do it.
Finopotamus: What are your thoughts on launching a niche brand using a digital banking platform?
Ellis: We support that today. I'll give you an example. First Horizon Bank has a virtual bank. It's actually called Virtual Bank. First Horizon is running on the Hogan core. They have a branch on that core that is discreetly for a separate brand called Virtual Bank. It’s on the bank’s legacy core, but it runs Apiture’s digital banking solution. The financial services are provided by First Horizon, but Virtual Bank is entirely digital.
Finopotamus: Given credit unions’ historical focus on the consumer market, would it make sense for a credit union to establish a niche brand to serve its business members as a way to establish itself as a financial provider for the business community?
Ellis: It's certainly a neat concept. And if they're worried about tarnishing their historic, consumer-centric brand as they enter business, that's great way to insulate the legacy brand as they get their feet under them in the business space. I think that's a neat idea.
[Tomorrow: Finopotamus covers new research from Apiture and Aite-Novarica Group on how credit unions and other community financial institutions must innovate to win small business customers.]