Commercial banking is an industry in the middle of a dramatic digital transformation.
For much of the 20th century, retail banking institutions seemed to lag behind trends aimed toward greater convenience and improved services. The industry clung to traditional banking hours and brochures. Aside from the introduction of the Docuteller — eventually known as the ATM — in the 1960s, user-experience improvements were slow, if not altogether stagnant, until the popularization of online banking in the 2000s.
In recent years, though, the intersection of innovations in both digital technology and financial services has produced a slew of opportunities for these institutions and their customers. Now, customers can cash checks on their phone, or transfer funds in real time via an app. Financial institutions and their customers now realize conveniences that previous generations would not have thought possible.
TRANSFORMING TO MEET CUSTOMERS’ NEEDS
In a recent analysis of the banking industry’s present conditions and opportunities for future growth, McKinsey & Company identified value creation opportunities of up to $20 trillion in “a future marked by fundamental restructuring.”
“In the next era, banks can realign to compete in new arenas, organized around distinct customer needs. These arenas will expand far beyond the current definition of financial services, and they will also be hotly contested by a wide range of tech giants, tech start-ups and others. But this daunting reorganization, or diversification, could also provide banks with a huge opportunity: higher margins, new revenue streams and loftier valuations.”
That’s where Q2 comes into this story. Founded in 2004, Q2 has been at the forefront of this digital transformation. Through its various products and services, Q2 helps banks, credit unions and other financial institutions transform their technologies, branding, customer relationships and businesses to meet the evolving expectations and opportunities associated with digital banking. If you’ve deposited a check digitally or checked your balance on your phone recently, there’s a good chance that you’ve interacted with Q2’s digital banking platform and the services they provide to your bank, credit union or other financial institution.
For Q2, this digital transformation presents an opportunity to advance its mission: to “make finance more human” and thus build stronger and more diverse communities by strengthening the financial institutions that serve them.
The company’s digital banking platform currently serves more than 20 million end users. Its recently launched Helix platform continues to expand upon earlier innovations and anticipate its customers’ needs.
In February of 2022, Q2 introduced Helix, the next generation of the company’s banking-as-a-service platform. A cloud-native product built for embedded finance, Helix empowers technology companies and consumer brands with the platform and financial partners needed to embed banking into their digital ecosystems.
Helix offers all the building blocks of a banking experience — accounts, cards, payments, data and controls, administrative tools and monetization solutions — in a single location, enabling Q2’s customers to offer products customized to serve the unique needs of their own customers while driving adoption, engagement, retention and profitability.
“With Helix, we are building on Q2’s expertise in digital banking and partnering with innovative companies to make finance human,” General Manager Ahon Sarkar said in a press release last year.
“We are building on Q2’s expertise in digital banking and partnering with innovative companies to make finance human.”
Helix’s focus on personalization, according to Sarkar, is the key difference between Q2’s product and preexisting large-scale digital banking platforms. Although Helix is also large in scale — serving more than 11 million users nationwide and processing over $20 billion in transactions each year — the platform can be personalized on a per-customer level. If it didn’t have this capability, customer experience would suffer, retention would wane, and Helix would be another cookie-cutter solution that failed to address the unique needs of its clients and their end users.
“With Helix, we ask the question regarding what is missing for people who are looking to offer these programs at scale,“ Sarkar told the audience at Wolfe Fintech Forum in April 2022. “And what we learned was that the biggest thing that was missing was personalization. What we’ve done with our platform is really take every facet of the product and allow you to configure those at the user level.”
‘MAKING FINANCE MORE HUMAN’
“For us, making finance human means three things.” Sarkar said. “It means, first, creating a world where the financial products that serve us are as unique as the people that use them; second, enabling companies to design their products around each person instead of forcing people to conform their needs to existing products; and third, creating a world where human-centric financial services are available for every person.”
Making Digital Finance Conversational
EVP and CTO Adam Blue creates and coordinates Q2’s technology strategy, supporting teams responsible for customer satisfaction and technology innovation. In a recent podcast with Provoke Media, Blue discussed the accelerating adoption of digital banking technologies and the ways Q2 has been successful in providing a streamlined experience for both financial institutions and the end users that bank with them.
“It boggles my mind that every single check in the U.S. doesn’t get deposited via mobile remote deposit capture, that there are reasons users are resistant,” Blue said. “And I don’t think they think mobile and remote deposit capture is bad; they’re resistant because of the cognitive workload of trying a new thing that may be tedious and not work out.”
Blue noted that in 2020, as the pandemic created impasses to traditional brick and mortar banking services, customers quickly embraced digital technologies they had been priorly reluctant to adopt.
“When people said ‘I can’t go to a branch, but I still need to perform these tasks,’ it eliminated the friction that they were willing to tolerate when they were trying to learn this new task for the first time,” Blue said. “And then they found out that this is actually a really convenient way to live and work.”
Products like Q2 SMART — an award-winning targeting and messaging platform for credit unions introduced in 2017 — are increasingly important for financial institutions as they transition from a brick-and-mortar-first experience to a digital one.
“The idea behind Q2 SMART is to take data that the credit union already has and use machine learning techniques to determine the best way to serve their members going forward,” Blue said in an interview with CUBroadcast.
Blue noted that Q2 has been in the business of applying machine learning to better service financial institutions since the late 2000s, employing an approach it had initially used for fraud prevention to a broader service-based target. “People used to come into the branch all the time, and you could have a relationship, but now people go to the digital channel. With more than 170 visits to the digital channel per year and maybe two to the branch, the information a credit union or bank needs to really help someone out is in the digital channel data.”
In the same sense that Netflix or Amazon employs user data to provide superior service to its customers, financial institutions can increasingly rely on Q2’s digital products to offer tailored financial services that better meet the needs of their customers.
“This model is about having a conversation in the digital channel,” Blue said.
Innovation, Customization and Cost Savings
Just a year before Helix was launched, Q2 launched a product to empower its client businesses to customize their own platforms: Q2 Innovation Studio.
“Our goal was to help financial institutions provide best-in-class financial experiences for consumers and businesses by providing a portfolio of technologies and programs that financial institutions and our fintech partners can leverage to design, develop and distribute innovative digital banking products, services and features.” Managing Director of Q2 Innovation Studio Johnny Ola said.
With this portfolio of technologies and programs, businesses could both rely on Q2’s digital banking platform and its efficiencies of scale and build out a customized experience tailored to the needs of their companies, employees and end users.
“It’s like getting a custom-designed platform without the cost or complication,” Ola said. “Q2 Innovation Studio provides a broad range of options financial institutions can personalize and pass on to their customers. They can build unique features and capabilities on top of the platform, leveraging our software development kit and suite of APIs.”
Like Helix, Q2 Innovation Studio represents a commitment on the part of Q2 to continue to leverage technology at scale to better serve the needs of individual customers and their end users. The two products are part of an increasingly comprehensive set of solutions, which also includes Q2’s Partner Accelerator program, a collection of pre-integrated solutions to improve financial institutions’ back-office operations, analytics, customer service, marketing and more; and the Q2 Marketplace, an “app store” for financial institutions’ users.
Q2’s slate of products ultimately works in service of a singular mission: building stronger and more diverse communities by strengthening their financial institutions. And these individual pieces represent ways in which the company is constantly innovating to advance that mission.