Q2’s Software Helps Community Banks Digitize Customer Operations

6/20/14Follow @angelashah

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colleague, Joao-Pierre Ruth, Xconomy’s New York editor. For example, earlier this year, Quovo announced it had begun a private beta of its portfolio management software after having raised $1.4 million in a Series A funding round. The New York-based startup particularly targets smaller financial advisors and foundations that don’t have the IT resources of bigger firms.

Another New York startup, EquaMetrics, has developed software called Rizm that gives individual traders an automated platform similar to those used by hedge funds and other large institutions. EquaMetrics was started in 2011 and has so far raised $4.5 million in venture capital.

Flake points out that Q2’s customers of small banks and credit unions are ripe targets for the company’s services, “since most of the technology that they use is from the late ’90s that didn’t contemplate modern design or devices.”

The old technology also did not provide these institutions with the ability to analyze customer behavior and then tailor services to meet those needs, he says. Such scrutiny helps banks keep an eye on unauthorized traffic. “The technology to monitor traffic is more sophisticated than it was even 7 or 8 years ago,” Flake says. “It takes all the behavior that occurs on all devices and sees the patterns—that you typically log on from the same device, do the same things, interact with the system in the same way. We monitor all of those behaviors.”

Clients using Q2’s system have stopped $12 million worth of fraud, he adds.

Flake admits that the transition to an increasingly digital experience takes some acclimatizing—for both the banks and their customers. “There is a cultural issue with people not used to it; bankers are used to delivering things in person,” he says. “We think the digital experience can be just as rewarding as a personal experience.”

And Q2 does have competitors in this space. Flake points to Digital Insight, a systems provider that was purchased by Duluth, GA-based NCR (NYSE: NCR) for $1.65 billion earlier this year, and First Data, an Atlanta-based payments processing company.

Flake says Q2’s advantage is that the company has developed e-banking software from the beginning and has that business as its only focus. “There was no legacy technology to hold us back and no customers that we had to address,” he adds. “We were able to start with a clean slate.”

Angela Shah is the editor of Xconomy Texas. She can be reached at ashah@xconomy.com or (214) 793-5763. Follow @angelashah

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