Credit unions and small banks need modern technology to compete with fintechs. If they don’t move fast, they could lose younger and business customers to neobanks and challenger banks with fancy apps and colorful debit cards. But upgrading a bank’s transaction processing software is a major project. If a bank decides to move its accounts over from a mainframe to the cloud, this process could take a few years, require heavy IT costs, and present a critical risk for the bank in case of a failure. After talking to Arcady Lapiro at Agora, I learned about other ways for banks and credit unions to launch modern digital banking services.
An Alternative to a Core Upgrade
Agora Services provides an alternative to an expensive and complicated core upgrade. With its banking software platform, a bank or credit union can keep using its old mainframe while offering modern digital banking services at the same time. Agora offers more than one way for a bank to do this. Its platform provides several digital banking features through APIs so a customer can design a custom banking app. And the company can also help a bank launch a white label digital bank in the cloud that’s separate from its old mainframe.
I was recently researching digital banks and saw a document that claimed that nearly all traditional banks planned to launch a digital bank in the next five years. The figure was high, like 96 percent. So, I asked Arcady about that. He didn’t expect to see that level of adoption. He believes indeed that COVID-19 will accelerate digital journeys for banks and credit unions, but he did not expect lots of banks and credit unions to launch their own complete digital banks. He indeed sees some players launching a digital bank in a box to facilitate this transition, but these solutions seem too limited to compete effectively with the challenger banks and megabanks.
Customized Digital Bank Platform
Credit unions and banks that pick Agora’s challenger bank platform have several choices. If a bank wants to launch digital services quickly, it can choose between a preconfigured digital bank for teenagers or a digital bank for small businesses. Arcady explained that the digital banks for teenagers and businesses could be set up and launched in a month. The platform can also support fully customized digital banks, but setting those up could take a few months..
He also shared a YouTube video about Agora’s white label bank for teens. The service allows parents to open an account in less than three minutes for their children. It also comes with parental controls and financial education resources, as well as biometric authentication with a fingerprint login. Agora’s teen account seems more advanced than that of the leader Greenlight and its competitors, as Agora’s solution allows co-parental controls, an embedded virtual card, sub accounts at will, savings accounts, rewards with a marketplace, and much more.
The fintech startup also offers several popular services through APIs for banks that want to customize their digital services. Customers can share access to a single account. They can use personal financial management software to manage their budgets and protect themselves from overdrafts. They can use mobile devices to set up card controls. And they can create a money pool to save up for specific goals or projects.
Foreign Banks Need Help Too
The digital bank for teens reminded me of another neobank, Mozper, that was offering a similar service for children in Latin America. It was established to help children become familiar with online banking. With cash being phased out globally, many parents won’t be handing out allowances in cash anymore so their children will need to become familiar with banking apps.
I asked Arcady about that topic too. It turns out that Agora is a member of MasterCard’s Start Path program, and he’s already met some Latin American fintech founders through that program. So, Agora could help small banks and credit unions in Mexico and other Latin American countries that are facing challenges from neobanks. They’ll be able to add features that the neobanks aren’t offering if they use Agora’s platform.
Background of the Founder
Arcady has a lot of experience in online banking. He was part of the founding and management team of the French challenger bank Fortuneo in 2000. This is a very successful bank with EUR 27 billion in assets and over 800,000 active customers in Europe. It also achieved profitability in 2004. I was surprised that a successful challenger bank was founded so long ago, but Arcady then explained that challenger banks used to use other terms to describe themselves. In the 1990s, for example, these startups called themselves Web banks. And in the 2000s they called themselves digital banks. So, operating online without a branch network and / or bank license isn’t a new business model.
Agora Services isn’t a challenger bank itself although its technology was completely built from scratch to serve the needs of a challenger bank. Its platform helps credit unions and small banks set up and launch their own challenger banks. It can also help these financial institutions add features to their current apps if they don’t want to set up a separate online banksince not every bank plans to do that. Launching a digital bank is also a major project, but with Agora’s help it could be a lot easier for a bank to do that.