By Roy Urrico
Austin-based Q2, which provides digital banking and lending solutions to financial service and fintech organizations, announced some major financial technology undertakings over the last year or so. They include a new partnership with Rocket Mortgage, formation of the Q2 Innovation Studio to accelerate financial institutions’ digital innovation strategy; and introduction of Helix, the evolution of Q2’s banking-as-a-service (BaaS) platform.
Finopotamus sat down with Q2’s Executive Vice President for Emerging Businesses, Corporate and Business Development Jonathan Price, and Q2’s Innovation Studio Vice President of Product and Development Greg Varnell, at FinovateFall 2022, held at the New York Marriott Marquis, to discuss some of Q2’s recent announcements.
Rocket Mortgage Partnership
This past August, Q2 announced a Rocket Mortgage partnership, under which Q2 will enable credit unions and community banks that previously did not offer residential mortgage services to offer Rocket Mortgage’s digital home loan application experience to their members and customers at no cost to the financial institution – including no implementation or subscription fees.
“We’re excited to add a premier brand like Rocket Mortgage to our Q2 Innovation Studio ecosystem,” said Q2 CEO Matt Flake in a press release. “This partnership, giving customers easy access to Rocket Mortgage’s best-in-class digital offerings, adds another marquee solution to the Q2 Innovation Studio and provides an important and timely new option for our bank and credit union customers.”
Rocket Mortgage takes care of everything related to the loan and servicing. The integration of Rocket Mortgage within Q2’s digital banking platform streamlines the mortgage process for account holders, who now have even more options within their local financial institution relationship, Varnell noted.
“What we do with our Q2 Innovation Studio is we have a software development kit (SDK) that we allow a fintech to utilize, to do the integration,” Varnell told Finopotamus. “It is ready to roll out, ready to go. (Rocket Mortgage) uses their APIs (application programming interfaces) and UI (user interface) inside of our framework.”
Price added “If you think of Q2’s digital banking platform, the core product of the company since it was founded in 2004, this is surfacing the ability to launch a mortgage. It is co-branded, powered by Rocket in the digital banking experience of a bank or credit union and launched inside of digital banking. Then (applicants) go into that workflow. So, it is part of the digital banking product, not our digital lending products, which are separate.”
Q2 Innovation Studio Serves as Rocket Launcher
A little over a year ago the Texas-based fintech launched Q2 Innovation Studio solution, a portfolio of technologies and programs that FIs and Q2 fintech partners can leverage to design, develop and distribute digital banking products and services. Built on Q2’s open digital banking platform, Innovation Studio employs Q2’s software development kit (SDK), which more than 400 banks and credit unions use to deliver thousands of differentiated experiences.
“The way the Q2 Innovation Studio works is the code is hosted at Q2,” explained Varnell. So, in the case of Rocket Mortgage, “The financial institution has a widget that sits on the landing page that provides the mortgage workflow. It is its own kind of standalone workflow that takes you through the Rocket integration. Obviously, Rocket [Mortgage] has one of the best mortgage workflows. It is simple, very straightforward.”
Q2 already announced Fourth Capital, a Nashville, Tenn.-based community bank, as the first financial institution to add Rocket Mortgage’s digital home loan application to its mobile and online banking app, but Q2 has 20-25 more financial institutions, including a number of credit unions, in the pipeline ready to launch.
“Credit unions have been very interested in this because it is a sidecar opportunity to go and create a mortgage experience that today is either immaterial or non-existent in their digital channel,” said Price. “Credit unions, because they have bigger retail user bases on average for every dollar of assets, have made a strategic decision that the mortgage portfolio is valuable to some subset of their users.”
Injecting Fintech Ecosystem into FI Development
Added Price, “The whole premise of Q2 Innovation Studio is to inject the fintech ecosystem, which is important for banks and credit unions to leverage as partners, but we are doing it in a way where (financial institutions) can get that innovation off the shelf quickly. We are doing it in ways like with Rocket [Mortgage], where we are sharing non-interest fee income back with the financial institution.”
Price also told Finopotamus, “It is good for the financial institution (FI), it's good for the partner because they get access behind our walls (20 million end users), and it's good for Q2, because we are able to facilitate this convergence of banks/credit unions and fintech, all on one platform.”
Varnell described the two Q2 Innovation Studio integration models. “We are trying to create a light partnership, not the deep partnerships that you historically see that take a lot of time and work to do the integrations and development in the more traditional relationship models.” Q2, he added, flips that model with the fintech and has already completed the integration into the Q2 Innovation Studio platform. “We have roughly 60-65 fintechs that are turnkey ready through that relationship.”
The other model is The Q2 Partner Marketplace, which created an app store-like experience that allows financial institutions to evaluate, select, and deploy from a catalog of pre-integrated third-party products. This model enables credit unions and banks to offer these products through an end-user purchase model, allowing financial institutions to generate non-interest income with no up-front investment. “The marketplace is a model in which a fintech either drives transactional revenue through a workflow or has a subscription type revenue,” said Price.
“In some cases, the fintechs (in Innovation Studio) are spending less than a week on development and are ready to go out to production to all 450 of our customers,” said Varnell.
Price maintained, “Our job is to fill the ecosystem with best-in-class vendors to provide the banks and credit unions with optionality.”
Helix in the Q2 Mix
In February, 2022, Q2 announced the introduction of Helix, the development of Q2’s BaaS platform. Helix allows cloud-native companies to offer differentiated personalized banking products.
Price suggested to think of Helix as the inverse of Q2’s main digital platform. While Q2’s digital banking platform focused on serving the needs of banks and credit unions, Helix empowers fintechs, technology companies and consumer brands with the platform and financial institution partners needed to embed banking into their ecosystems.
“It is the opportunity to allow fintech and other apps to ride our rails into the banks and credit unions, to bring them more innovation, more engagement, more opportunity for revenue,” said Price.