Earnings Spotlight FinTech Platforms’ Progress in Speeding Banking’s Digital Shift

Legacy Systems and Banking’s ‘Innovation as a Luxury’ Syndrome

Digital transformation holds promise for banks, but it could also give them pause.

The traditional route, upgrading legacy systems and on-premise technology — going it alone, so to speak — is rife with friction and heavy upfront investment. There’s a long runway in tailoring online and mobile options that satisfy the demand for always-on financial services.

Reports and commentary during earnings season detailed the ways that partnerships, and platforms providing a wealth of risk management, payment options and connectivity to real-time rails, are helping cement banking’s digital shift.

Fiserv and Fidelity National Information Services (FIS) stand out here, having reported third-quarter earnings results that showed financial institution clients moving to sharpen their engagement not just with retail customers but with corporates.

The PYMNTS Intelligence report “How the World Does Digital” found that across 11 countries, about 47% of consumers engaged with mobile banking offerings at least weekly.

Fiserv’s Digital Ecosystem

Fiserv CEO Frank Bisignano said on the company’s earnings call with analysts Oct. 22 that “we continue to migrate clients to Experience Digital, or XD, our new digital banking solution, as we integrate additional solutions into this unique digital ecosystem, including CashFlow Central, real-time payments, Clover and more.”

Experience Digital is a digital platform that helps client financial institutions ease account openings and payments functionalities.

“We expect to see a multiplying effect on the average revenue per XD user over time,” Bisignano said.

With a nod to financial institutions’ focus on commercial customers, he said later during the call that “we continue to see demand from clients for digital payments products such as FedNow® and RTP® integrations. CashFlow Central, our integrated AR/AP solution for SMBs, continues to see high interest from financial institutions.”

The company’s earnings supplementals showed that Fiserv’s Financial Solutions adjusted revenues, as a segment, were up 4% year over year to $2.4 billion. Digital payments-related revenues surged 5% to $987 million; banking revenues gained 5% to $636 million.

Separately, Bisignano said, “merchant-related services from Fiserv are back as an opportunity for financial institutions” via its SMB bundle, which he said “gives FIs a deeper view into an SMB’s full financial position … so [FIs] can better grow and retain SMB clients and generate deposit and non-interest fees.”

FIS’s ‘Modern’ Banking Platform

During FIS’s earnings call Monday (Nov. 4), management highlighted core banking services.

Digital banking (which helps financial institutions launch digital subsidiaries and broaden business models) also showed momentum, where management said that year-to-date sales have doubled versus 2023’s first three quarters.

Banking solutions revenue growth was 3%, to $2.5 billion, with 6% recurring revenue growth. CEO Stephanie Ferris said on the call that banks have been gravitating toward the company’s Modern Banking Platform. In one example, Commerce Bank, a regional bank based in the Midwest, chose FIS to “provide it with an end-to-end loyalty management platform.”

Later during the call, Ferris said in terms of overall market and platform focus, “we span the large FI market and then the community banks. We don’t really go below the $2 billion mark … We’re focusing where we think our sweet spot is. We were pleased with selling cores in all three of our strategic core Modern banking platform, IBS and Horizon.”

The Modern Banking Platform (tied to account servicing, payments and remote deposit capture, among other features) offered what she said is a “large operating platform” for regional and super-regional banks that has “the largest amount of bank account transactions going across it. We are very focused in various stages of implementation with several large super-regionals.”