By John San Filippo
Finopotamus was onsite at Money20/20 USA in Las Vegas Oct. 24-27. Co-founder John San Filippo interviewed more than two dozen technology experts on a wide range of topics. The results of these interviews are presented in this series called “The Voices of Money20/20.”
On October 11, 2021, fintech giant Temenos and banking as a service (BaaS) provider Mbanq issued a joint press release announcing their Credit Union as a Service (CUaaS) offering. According to the press release, merging Mbanq’s BaaS technology with The Temenos Banking Cloud will create “a new end-to-end comprehensive service to help U.S. credit unions of any size accelerate their digital transformation and deliver innovative digital financial services and outstanding experiences to members.” The service is offered through Mbanq’s CUSO.
Finopotamus sat down with Jacqueline White, president-Americas at Temenos, and Vladimir Lounegov, CEO at Mbanq, to learn more about what this all really means.
Asked about the origins of the partnership, White said, “We have about 500 credit union customers in the U.S., so it’s a space we’re very committed to. We place an enormous value on our credit union ecosystem.” She said this includes seeking out strategic technology partners, of which Mbanq is the latest.
“Banking as a service fits a perfect niche in credit unions,” she added. But what exactly is BaaS?
“Right now, the industry cannot agree on the definition of banking as a service,” said Lounegov. “In our world, banking as a service means delivering financial products and services on top of a legacy core.” He said that the legacy core is necessary for operations like compliance and connectivity to the Fed, whereas BaaS is focused on innovative product delivery. He added that the BaaS layer allows financial institutions to deliver innovative, complex financial products and services that would be much more difficult, if not impossible, on a legacy core. The new CUSO will also manage certain services at scale that an individual credit union may not be able to afford on its own.
The CUaaS offering was created by seamlessly integrating the core processing platform from Temenos with the BaaS technology from Mbanq to deliver a complete, end-to-end solution to credit unions of all sizes. In other words, CUaaS competes directly against other core processors, but the two partners believe their BaaS layer provides a distinct competitive edge.
Lounegov said that CUaaS has appeal for even smaller credit unions because it can provide, for example, compliance as a service or fraud prevention as a service. He claims that the NCUA has seen a significant uptick in charter applications recently and that advanced technology like CUaaS makes these de novo credit unions more viable.
“The only way to be competitive in the post-Covid world is to deliver everything via digital channels,” said Lounegov. “Legacy cores were never designed to operate that way. That’s why credit unions need a capable core plus the services that sit on top.”
“Credit Union as a Service is really appropriate for credit unions across the whole spectrum,” added White. “We’re working with a couple of smaller credit unions right now, as well as one that has more than four million members.” She added that 100% cloud-based delivery makes the solution highly scalable.
Finopotamus then asked: Would it be an appropriate solution for a credit union wanting to launch a discreet digital brand where it would retain its legacy core for legacy business and deploy CUaaS to run its digital brand?
“We already have two cases of institutions doing this,” said White. “I think we’re going to see more and more of that. The market is changing very quickly and credit unions will need to modernize.”
“You can have the two systems running in parallel,” added Lounegov, “and the new business will cannibalize the legacy business over time. That could eliminate the need for a conversion because the old core could just die.”
“This all begs the question,” White continued, “does this make things easier and less expensive or more complicated and more expensive? Our goal is to deliver a high-value, sophisticated solution at a reasonable cost. As we say at Temenos, we’re open for growth.”
To learn more about CUaaS, including the Mbanq CUSO, click here.