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Based in Malvern, Pennsylvania Today, Savana, a business that creates financial software products for established banks, announced that it had raised $45 million. $10 million of the capital was borrowed, with the remaining amount coming from a Series A equity tranche led by Georgian Capital Partners.
According to Savana's CEO Michael Sanchez, the funds will be used to support the company's go-to-market and product development initiatives as well as general growth.
Sanchez, who formerly held the position of president of FIS's international division, founded Savana in 2009. He founded Sanchez Computer Associates, a provider of core banking systems, before FIS.
According to Sanchez, Savana addresses an architectural issue. He vehemently asserts that despite banks' efforts at digital transformation, many have not made the transition successfully.
In support of his claim, a survey conducted in 2022 revealed that, among banks and credit unions that believe they have completed at least three-quarters of the transition to digital, less than 25% have seen a significant increase in revenue. Furthermore, according to Deloitte, only 11% of finance executives say their company has modernized systems to the point where they can easily integrate new digital technologies.
Consumers of today favor digital-only banking. The COVID-19 shutdowns, which encouraged consumers to carry out routine tasks like grocery shopping, check depositing, and bill management online, hastened this shift in consumer behavior that has been taking place for a number of years, according to Sanchez. "“Despite appearances that banks have all made the transformation to digital, the majority of banks are not ready for this major change in consumer behavior … This is a major problem for banks trying to stay competitive in an environment with tons of fintech pressure."
Through a combination of templates, APIs, and integrations designed to automate back-office and core banking processes, Savana claims to be able to solve this issue. The business' platform offers a "process architecture" for service spanning various banking and customer channels, ostensibly reducing the time it takes for products to reach the market and guaranteeing that service requests are promptly answered.
Savana specifically aims to decouple third-party components from banking systems and abstract those components into APIs that include not only the components but also the rules, workflows, automations, and integrations needed to carry out business tasks. The Savana enterprise content management system, a repository of a bank's content related to customers and accounts, complements and serves as an extension of the APIs as a library of reusable customer and account servicing functions. Additionally, Savana provides a low-code UI framework for creating internal and client-facing apps that connect to the aforementioned APIs.
Sanchez added, "Through pre-configured processes and integrations, [bankers using Savana] gain a real-time, holistic view of all customer accounts, cards, communications, and more, while customers benefit from better, more personalized service. It eliminates process silos by automating processes between systems and people and eliminates the need for multiple, siloed vendors. [The] turnkey, end-to-end platform is pre-configured with hundreds of APIs enabled."
Of course, Savana is not the only provider of tools for banking modernization. Amount recently raised $99 million at a valuation of over $1 billion for its suite of products intended to help banks more effectively compete with fintech firms. In addition, two startups, MANTL and Bankjoy, are working on technology that will make it simpler for customers to open accounts online at community banks and credit unions. The London-based fintech 10x Future Technologies, which assists larger, more established banks in developing both new services and tools to make their existing services more effective, is one that competes almost directly with Savana.
As economic headwinds intensify to gale force, the competition is likely to become more intense. Fintech investment decreased to $52.9 billion in H1 2022, down from $69.6 billion in H1 2021, according to a report released last week by Deloitte. The first half of 2022 saw a 14 percent decline in business for bank technology vendors compared to the same period in 2021.
Despite Savana's relatively small customer base of about 10 client banks and fintechs, Sanchez is unconcerned. Between now and the end of 2022, "a number of entities," according to Sanchez, will begin using Savana, but he would not specify how many or what to anticipate in terms of revenue.
The bold statement made by Sanchez was that "Savana's digital delivery platform is the first and only technology solution to help banks overcome the operational challenges of meeting evolving customer expectations. The banking industry is going through incredible transformation. Digital banking is quickly evolving from just being defined by a consumer mobile banking app, to an end-to-end digitally enabled enterprise. Getting all the right pieces in place from the core to the customer is the new imperative for banks aspiring to be digital banking enterprises."
No matter how robust Savana's platform is, it will still have to deal with the obstacles banks face when implementing new technologies, just like any other vendor. The Monetary Authority of Singapore found that it takes a bank six to eight months to investigate, evaluate, and develop a prototype with a fintech. The upfront cost of technology can represent 10% of a bank's annual spending, according to Forbes, making it one of the biggest barriers keeping banks back.
Savana, according to Sanchez, has an advantage because of its background developing digital systems for banks and other financial institutions. Mike Wolfel, the company's president and CTO, for example, previously served as a consultant and led the design of process automation systems across mortgage origination and serving, corporate administration, and finance.
Financial professionals can be found among the ranks of many Savana's rivals as well. However, Sanchez's point might have some merit in general. One survey of financial services executives revealed that the biggest obstacle to a new digital initiative within their organization, according to 70% of respondents, is a lack of skills or inadequate training. Therefore, outsourcing is still desirable.
Nearly 50% of today's consumers prefer digital-only banking, according to the Digital-First Banking Tracker, Sanchez said. In order to meet changing expectations, banks will need to upgrade their technology infrastructure. The ability to provide a frictionless customer experience will make the difference between banks that succeed and those that fail.
Savana has so far raised $54.2 million in funding. (The company closed two rounds before the Series A, a small venture round in February 2020 and a seed round in April 2010). It currently has 200 employees, but Sanchez predicts that number to increase to close to 400 by the end of the year.
By fLEXI tEAM