FIS to help stand up digital-only banks within 90 days

Fintech provider FIS aims to help financial institutions lacking the in-house firepower to launch their own direct-to-consumer digital-only banks to do so in just 90 days.

The Jacksonville, Fla.-based company’s Core on Demand service, unveiled today, is built on a cloud-native core processing platform and offers online account opening as well as consumer online and mobile banking. The service appears to have the potential to change banks’ calculus on whether they should go digital-only.

Rob Lee, EVP, Digital and Banking Solutions at FIS, told Bank Innovation that financial institutions of all sizes are interested in bringing digital-only offerings to market in order to attract new customers and deposits. The types of digital-savvy consumers flocking to digital-only offerings are driven more by higher deposit interest rates than personal service or customer experience, he said.

John Rosenfeld, President of Citizens Access, the digital-only arm of Citizens Financial Group, previously told Bank Innovation that the bank targeted a group of affluent, web-savvy customers, called “optimizers,” who search online for the best deals. Launched in July 2018, Citizens Access already grew to about $4 billion in deposits, mostly from customers outside the bank’s traditional footprint, as of last month.

Almost half (49%) of respondents to a survey by payments processing startup Marqeta, released in February, said that they would consider switching their banking business to a digital-only bank, while 44% said they would consider switching to a Google, Amazon or Apple bank, should they enter the market.

Citibank recently said in a report that incumbent banks face up to a 30% revenue hit thanks to competition from digital-first challenger banks and big tech players. The solution, Citi said, was for traditional banks to launch their own digital brands.

But that’s easier said than done for most banks.

Core on Demand, Lee said, is geared toward community and regional financial institutions that don’t have the necessary in-house capabilities at the ready to stand up a digital-only offering.

“There is a lot of work that goes into developing a digital-only bank, from the technology to the many business strategy considerations,” he said. “Banks need to think about brand positioning, product and pricing strategy, target customer segments, target operating model for the digital-only bank, and much more.”

Core on Demand, Lee said, was designed with fast implementation in mind, meaning the various technology components are pre-integrated and don’t need to tie into a bank’s existing ecosystem.

“Banks need to respond to client and market needs very quickly via a digital-only channel, and they need to be able to bring new features and capabilities to market very rapidly,” he said.

Cloud-native technologies, artificial intelligence, data analytics, and open API infrastructures are critical technological components for a digital-only bank, he said, and they can be quite costly for smaller institutions to build up and maintain.

There are compromises to be made in adopting the cost-efficient, quick-to-launch approach, however. Lee said Core on Demand is “all about speed to market, so we put less emphasis on customization for the product itself and more focus on delivering technology that can be implemented smoothly and quickly.”

Lee declined to share any current clients.

FIS joins other fintech providers giving banks a hand, to various degrees, in standing up digital-only arms. In 2016, Temenos‘ RetailSuite helped Canada’s Equitable Bank implement a new technology platform, design the processes, hire the team and launch a new digital bank, EQ Bank, in 18 months. RetailSuite offers the bank realtime customer information, predictive analytical capabilities for understanding customer behavior as well as “openness and integration to deliver instant customer fulfillment at scale,” Temenos said in a release at the time.