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Finastra’s CEO, Chris Walters, was quoted in June saying that the sale of Universal Banking “allows us to sharpen our focus on payments and lending…”
I hope that’s just marketing. Finastra has two distinct sets of lending products that belong apart. They are the last chapter in the Finastra story, about a glossy rollup of rollups that didn’t work.
Finastra…combines two companies with substantially different customer bases…different operating models, and product lines that have relatively little direct overlap.
Bill Streeter was half-right. Finastra was an awkward fit; but it breaks up into more companies than two.
If you don’t know Finastra’s background, read the section titled “Finastra’s History” for context. Reply to me if you’d like a hi-res copy of the graphic.
In Finastra’s future:
Global corporate banking is the crown jewel: A self-contained, nearly impossible to dislodge collection of Misys businesses.
Payments is the potential growth story, with the evolution of global payments schemes and settlement mechanisms, including stablecoins for international money movement.
US lending is a cash-generating business with a large installed base, but the addressable base of regional and community banks is shrinking. It sells. And four Finastra businesses are already gone or on their way out.
Vista has sold or publicly announced the sale of the business now known as Teciem, US midmarket banking, Universal Banking, and Filogix. US lending and Canada check printing are prime targets. (Source: Finastra, Fintech Notebook research)
The carveoffs already show the fault lines:
Teciem (for a rumored ~$2B), a treasury and capital markets business selling mostly to large financial institutions.
Mid-market banking, which sells core and digital banking software for community and regional banks.
Universal Banking, the brand for the Misys-era international Essence core, which is popular among retail banks outside the US.
Filogix, the Canadian mortgage broker and lender workflow platform attached to the legacy D+H check printing business.
What’s left of Finastra is marketed under two segments but breaks into three operating businesses, plus Canada.
Four Finastra businesses are gone or on their way out.
The fault lines date back a decade or more, through customer relationships, product histories, and architecture:
US lending
Global banking
Payments
And the Canadian check printing and payment processing business that just shed Filogix, a mortgage broker-lender platform, for C$58.5M.
What’s left of Finastra is marketed under two segments but breaks into three operating businesses, plus Canada.
US lending: Mortgage origination plus commercial, consumer, and mortgage loan documentation and compliance.
They come from the HFS and D+H rollup: Mortgagebot and LaserPro have been sold alongside one another for more than a decade to the same general bank buyer. They are entrenched in the US banking industry for mortgage point of sale, loan origination, and loan documentation and closing.
US lending has little strategic overlap with the global-bank franchise Finastra is building around corporate banking and payments.
US lending has little strategic overlap with the franchise Finastra is building around corporate banking and payments.
Global corporate banking: Syndicated lending and trade finance software sell into global banks' corporate banking divisions and private credit. They are legacy Misys businesses tied tightly together at the channel layer:
Trade Innovation: Trade finance and supply chain financing, including buyer and seller loans, letters of credit, guarantees, collections, and supply chain finance.
Loan IQ: The dominant syndicated-loan servicing platform, used by 21 of the top 25 syndicated lenders.
Corporate Channels: The front end for Trade Innovation and Loan IQ in addition to cash and liquidity management.
They are legacy Misys businesses tied tightly together at the channel layer.
Payments, strategically and architecturally, is a harder call. Payments To Go is built on Global PAYplus. PAYplus is the enterprise payment hub; Payments To Go is a SaaS version for regional and community banks.
The products are largely D+H lineage:
Financial Messaging: Global payments messaging software for organizations connecting to SWIFT and miscellaneous domestic and regional payment schemes.
Global PAYplus: Enterprise payment hub for tier 1 and tier 2 banks with on-premise, managed, and hybrid deployment options.
Payments to Go: SaaS product derived from PAYplus architecture sold to regional and community banks.
This unit shouldn’t be broken in two.
Finastra was never one business. Not even two. Nine years after Vista put Misys and D+H together, the pieces are coming apart roughly along the lines where they started.
📓 Finastra’s History
Finastra’s history dates back to at least the 1960s, when the primary businesses of predecessor companies JH Harland and Davis and Henderson were printing checks. (Source: Fintech Notebook research). → Reply to this email if you’d like a hi-res version of the graphic. ←
Finastra’s back story is colored by a 20-year saga spanning the decline of the check, the second generation of core banking, and the rise of software for syndicated lending.
Misys grew to dominate the back office at global banks and capital markets firms within corporate treasury management, institutional trading, and risk management. In the 1990s it acquired Summit Systems, Opics, and Carma. It later acquired the Essence core, LoanIQ, and Sophis.
Vista Equity Partners took it private in 2012. Then Vista acquired Turaz (the Thomson Reuters treasury and risk business behind Kondor) and merged it into Misys.
In the early 2000s, the check printer JH Harland assembled mid-market bank software, including Phoenix, LaserPro, and Active:View. It created a portfolio covering core banking, mortgage, business analytics, and document management.
The Canadian check printer Davis and Henderson rebranded as D+H in the late 2000s, and in the early 2010s acquired Mortgagebot, Avista Solutions, and JH Harland’s technology unit. With HFS it acquired the community banking book, including LaserPro, and in 2015 it acquired Fundtech.
Vista Equity Partners took D+H private in 2017.
Vista created Finastra out of D+H and Misys in 2017. In 2018 it bought Malauzai, completing the community digital banking stack.
And here we are. Finastra is being disassembled before our eyes.
And here we are. Finastra is being disassembled before our eyes.
Selected Resources
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