Can Jack Henry Help Community Banks and Credit Unions Win? | The Public Ledger

Hello, Fintech Friends!

It’s no secret that payment companies and fintechs are increasingly turning to financial services to strengthen their bond with customers and drive incremental revenue and profits.

What started out as a relationship built on payment processing, a point-of-sale system,  expense management software, or free P2P payments, has turned into a quest for a full-fledged financial relationship, complete with holding deposits, issuing cards, and making loans to both small businesses (SMBs) and consumers, all backed by a fully-digital user experience supercharged by AI.

While some fintechs wish to become a bank themselves (see Chime, and others), the rest, through specialized partner fintech banks, desire to enable any business, large or small, to offer financial services to their customers.

All this has had a profound impact on traditional financial institutions. While the largest banks have budgets to build competing technology and the distribution to attract leading fintechs as partners, protecting or increasing their market share, community banks and credit unions lack similar resources resulting in lost accounts and deposits to both large banks and fintechs, especially among the all-important younger generation and SMBs.

Enter Jack Henry…or so it hopes. Based out of Monett, MO, Jack Henry has delivered technology solutions to community banks and credit unions for 50 years. While the company’s historical focus has been providing core processing systems and other complementary products like card issuing, bill pay, and digital banking, table stakes for any financial institution, its recent development efforts attempt to address areas of weakness exploited by payments companies and fintechs.

About a year ago, in partnership with Moov, Jack Henry launched Tap2Local, a smartphone-powered merchant acquiring service for community banks and credit unions to attract SMBs and their deposits. At its recent investor day, held September 15, Jack Henry announced two additional products: an expense management platform and a real-time P2P payment solution, with eligibility for the 90% of Americans that have a debit card. One area where Jack Henry and its clients may still be lacking is in short-term consumer lending. In contrast, in January, Jack Henry’s competitor, Fiserv, announced it was partnering with Affirm to bring BNPL capabilities to the debit programs of Fiserv’s bank and credit union customers.

A favored motto of Jack Henry is that it’s in business to make their clients successful (not themselves). But will these efforts be enough to stop the slow-moving exodus of accounts and deposits from community banks and credit unions? Unlikely. Large product and technology gaps still exist. The go-to-market motion for community banks and credit unions will need to be developed and refined. Fintechs will continue to innovate. But this appears to be an opening salvo by Jack Henry with a promise of more to come. Even if community banks and credit unions don’t start winning right away, Jack Henry may be successful after all if their willingness to help in the fight attracts more community banks and credit unions to their corner.

Bob Hammel

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