Really happy to have everyone here. Thanks for being with us this afternoon at the Wolfe Tech Forum. Look, really happy to have Jack Henry with us, David Foss with us, from CEO of the company, who honestly you've always been a pleasure to have in the many years you've been with us. Thank you for joining us once again. Especially in light of all the turmoil going on in the market, it'd be great to hear your perspective. Before we go too far down the path of specifically Jack Henry, I'd love to hear more about what you're seeing in the market, what it means for your company, what it means for your customers, if you don't mind.
Yeah. Obviously everybody's been paying attention the last few days here, with a keen interest, including us. In talking to our customers, and I haven't talked to a lot of them because I've been here, yesterday, I got here yesterday, and then of course, been in meetings all day today. Haven't talked to a lot of them. The ones I've talked to and the ones that I've received messages from, you know, they're feeling very positive about their franchise and about their ability to continue to compete.
They're frustrated, I would say, because they're having to message to all kinds of consumers who don't understand what's happening in the broader ecosystem, and they're calling and asking, you know, "Are you gonna be okay?" As I've said in many of these settings for the past couple of years now, you know, coming out of the Great Recession several years ago, banks really were much more financially healthy than they had been before.
Yeah.
Well-capitalized and really running good solid franchises in general with good lending practices in place, and that's certainly what we see with our customer base. Today, this, you know, this conflation of capitalization versus liquidity, you know, there's all this confusion out there among the average consumer confusing liquidity with are they well capitalized or not.
Yeah.
The fact of the matter is most banks today are really well capitalized. Might they have a liquidity challenge? Sure. you know, if there's a run on the bank, any bank could have that challenge at any time ever in our history. you know, what's going on right now is a really unique situation. I feel strongly that the moves the Fed and the FDIC with, you know, with their messaging around the insurance fund-
Maxed out. Yeah
... and then, with the Treasury, with their moves to make sure that liquidity is available to people even though they have investments in some of the long-term bonds, I think those moves are really, really terrific and really send a great message. Our customers, I know, are using that to try and educate their customers on what the environment looks like. Today, I would say our customers are as strong as ever.
There's not any great risk to our customers that I can see. It's a challenging, frustrating time for them right now because there's so much confusion out there. A lot of it, of course, is fueled by social media and this kinda hysteria about, oh, the banking system is gonna go down the drain. That's just not the position that we're in, or at least that's not what we're seeing with our customers.
You know, on one hand, it seems like you're gonna end up seeing more DDA accounts. People are gonna start spreading their deposits around to other banks, which probably is not bad for your business model.
That is great news for our business if that happens. You know, that's one of the things that we've been talking about is if people really start to spread deposits around, first off, you know, who would do that? People with greater than $250,000 on the books at a particular bank. If they start spreading deposits around, that is potentially really good news for us because we get paid on number of accounts, number of active users, number of transactions. All of those things increase.
Yeah.
You know, if you decide to open up new accounts in another bank, but leave the account you already have, all those things are, those numbers go up, and that's what we get paid on. We don't get paid on assets. We get paid on number of accounts processed and that kind of thing. Potentially, that's really good news for our company, but we'll just have to see what really transpires.
Right. Unless the deposits move to the multi, you know-
If they do
... large money centers.
Right. You know, if people are trying to get out from under the $250,000 threshold,
That's true.
... they have the same threshold...
It's almost the last they could do anyway. Yeah
... yeah, they have the same threshold at BofA that they have with, you know, First State Bank or wherever. it's not a really logical thing for people to do if they're trying to avoid exposure because of the $250,000 threshold.
How do you see, you know, the manner in which your customers handle cyclicality and tech spending? What I mean by that is obviously they're gonna worry about preserving capital a little bit more now and watch their budgets a bit more, right? What does that mean?
Yeah. It's interesting, you know, years ago, I've been doing this for a long time, as you know, years ago, there used to be a lot more cyclicality and a lot more discretion in spending among financial institutions when it came to technology. Today, most financial institutions, I think, view technology as their path forward to really be competitive. They depend on technology. They don't just stop spending because there's a challenge in the overall environment. Oftentimes, they will spend more because they're looking for what are those opportunities that can help us manage risk. As an example, I've had people already today talking about, well, is treasury management technology going to be more appropriate and needed among our customers for their customers as a result of this? That's a very real possibility.
Have questions about fraud management technology. We have those things. Those tools that help a bank with budgeting and forecasting and ALM, you know, Asset Liability Management, those types of tools, all those things come into play in a situation like this. Bankers tend to look at technology as the, as the spend that they need to do in order to continue to run the bank. It's not, it's not viewed as the, as discretionary oftentimes today, and we're in that business of providing those key technologies that they have to have in order to run the bank. I don't anticipate that because of what's happening right now, there's gonna be some-
Dramatic change
you know, dramatic change in spending. Yeah.
Listen, I mean, it sounds all pretty good. I mean, your stock obviously took a pretty big hit on this news not specific to Jack Henry, but around the entire market. Maybe that was a bit of an overreaction, it seems like.
Yeah, for sure. There seems to be this perception that we have this great exposure to what's happened with banks like Silicon Valley, and we don't. You know, we're broadly diversified. We have thousands of customers. Most of our customers on the core side are in that, you know, $500 million to, say, $50 billion space. Those customers are not doing the types of things that, you know, we read about with Signature and Silicon Valley and a couple others. They're not serving the crypto market. They're not in the business of providing the investment opportunity for people that are investing in Fintechs. You know, that's just not their business. Our customers, by and large, are supporting Main Street.
Yeah.
You know, there's small, medium businesses on Main Street in their communities. That's who their customers are primarily. Of course, they have their retail customer base. As far as their commercial customers, they're regular businesses running on Main Street in towns all over the United States. We've been lumped in for some reason, and there's this perception that we have a greater risk even than some other companies, and it's just not true. You know, our customers are not that susceptible to what's happening right now with these other financial institutions.
All right, let's take it a step back and go into the recent trends. I mean, you know, your business model's obviously known and continues to be one of the greater performers in terms of top-line growth profiles within all of core processing and fintech, I guess, in general, at least in the public company space, right?
Yeah. Yeah.
How has that been trending and then, you know, really what's driving that trend?
Yeah. We've been on a really nice run now for several years. It's probably been 6 or 7 years. On the core side of our business, we tend to book about 50 to 55 new core logos a year. I always phrase that as 1 a week, think in terms of 1 a week, although it's very lumpy, and that's well ahead of anybody else in the industry. Nobody close to Jack Henry as far as taking new logos and booking new core customers. Beyond core, we have this very broad suite of technology solutions, around 300 different technology solutions. We have several that have been really performing well. One that gets a lot of attention is our digital banking solution we branded as Banno.
Yep.
Banno is taking the industry by storm, and really for a couple of reasons. Number one, it has been measured and it's not opinion, it's fact, by far the fastest digital banking application in the industry. Secondly, the feature function look and feel of our solution is truly differentiated. We're gaining share when it comes to digital banking...
Okay.
Even though we haven't had the commercial side in market. The commercial side of that platform rolls out next quarter, which we believe will provide another lift for that solution. That one's been getting a lot of attention. I mentioned treasury just a moment ago. We rolled out the first ground up brand new treasury management solution in the industry in 15 years at least. We rolled out about three, four years ago now. So that's getting a lot of attention. Our new payments platform, you know, we've added a whole bunch of new debit customers in the past few years since we completed the transition to our new debit platform. We are now in the credit issuing business. We're not a major player in the credit issuing business, but it's a nice addition for our customers.
We just recently announced a new fraud solution. We see a real hole in the market as far as financial fraud and the opportunity to address financial fraud. We've been in that space for many, many years, but there hasn't been any brand-new technology in a long time. We created a new platform, public cloud native, that we are rolling out here next quarter as well. We see a real opportunity for that. You know, there's other solutions, but those are kind of the highlights, the things that are getting a lot of attention right now, and they're really driving the sales pipeline that we have. I will emphasize, and I said it on the earnings call, we set an all-time sales record in the December quarter at Jack Henry, followed it up.
By the time I got on the earnings call in February, the team had not only replenished what they had just sold, but they set an all-time pipeline record.
Wow.
The pipeline is bigger today than it's ever been in the history of our company. Just a lot of interest in Jack Henry technology and moving to Jack Henry as a key technology partner.
Is that primarily the Banno side or the digital side as well?
No, it's across the board. Yeah, it's across the board. That's, that's the overall pipeline of all deals larger than it's ever been in the history of the company. Core is driving a lot of that business because Jack Henry is recognized as having industry-leading core solutions on the bank side and the credit union side. When you buy a core, you tend to buy a whole bunch of other solutions at the same time, oftentimes 30 or 40 different Jack Henry products at the same time. Because of all the core activity and because of the great reception of Banno and the wraparound opportunities for other products with Banno, that is driving this huge pipeline that we have today.
The reality is core, you don't usually see a lot of change, right? I mean, banks generally stick with who they have for a long time.
Yeah. Yes. The reason for that is because it is, it's the most painful decision, the most difficult decision that.
Right.
CEO will ever make, is to change out their core system. It is, you know, heart and lung surgery for the bank or credit union. They really have to be dissatisfied with whatever they have for whatever reason in order to make that decision. We have many customers making that decision to come to Jack Henry because they see a much better operating environment when they move to our platform.
I guess when we think about the driving forces of that change, I think you talked about 7% growth in digital banking technology, broadly speaking this year.
Yeah.
You know, how sustainable is that? I mean, is it
We've been operating in the 5%-10% range as far as the industry for several years now. 5%-10% in the industry. Jack Henry has been seeing 7%-8% top-line growth. You know, the 5%-10% includes things that are not direct spending on technology. People, for example, are included in that when they figure out the bank increase in tech spending, that includes people. We, of course, are not providing people, but we're seeing 7%-8% top-line growth. We've been in that mode now for a couple three years. We see that as sustainable for our company, given the demand for the products that we that we have.
You know, I can't project long term, but I can tell you for the near term, we're very comfortable with that top line of 7%-8%, which is significantly above our major competitors, as far as their top-line growth rate in the financial services space.
The commercial launch around Banno that's supposed to be going on this year?
Next quarter.
Next quarter?
Yep.
I think you already had a few hundred customers under contract for it, right?
We had 303 on the earnings call. Today, I don't have an exact number today, but it's in the 320 range today that have signed for that solution, even though it's not in market today. We have 18 financial institutions in beta. I'm getting regular updates from the beta, and they're just raving about that solution. We're really excited to get it going.
Just as an example, can you give us an example of how a customer would utilize that differently from a consumer side?
Yeah. Traditional Banno is designed for the consumer. It's think about your personal banking that you do through whatever presentation layer you use today. It's moving money, it's checking your account, it's checking transactions, that kind of thing. That's what we have had in market now for about three years. The commercial side is for a small medium business, so it's not cash management. We have cash management for large commercial customers, but for a small, medium business that wants to, you know, manage their money, the CFO is using this tool to do cash management, manage their money effectively. They're doing the same things you do on the personal side, but they're also doing the more complex functions that are required in a cash management application. That's included in Banno Business.
It'll be targeted at small, medium business customers of our customers. We don't go direct to those customers.
Is that something that's not very available in the marketplace?
It is. It is available, but the technology is all pretty old, including technology we have out there. We're already a provider in that space, but our technology is pretty old and most of the technology for that is old. One of the really unique things about Banno is we have this function in Banno that's called Banno Conversations, which is one of the things that really excites bankers when they see this technology. We've had it on the retail side. Banno Conversations, one of the key applications is Let's say you've got that moment of need.
You're looking at something, you're looking at a transaction on your phone, and you say, "Hey, I don't think that's my transaction." You click on that, and it immediately creates a link, a secure link to you and somebody in the call center at the financial institution, and you can now ask questions about that transaction through a secure connection.
Yep.
You can talk PII information. You know, we're not talking about texting or chat. It's this secure connection where the call center agent can see what you're looking at. We're also deploying that on the business side, but we've expanded it significantly on the business side. As an example, let's say you have the CEO and the controller of a medium-sized business, and the CEO is looking at something and wants the controller to look at the same thing. They can access that information and communicate with each other in the application. They're both looking at the same information in the application. One's on their phone in their office, one's on their phone at home, but they're in that same shared experience, that same transaction. Nobody is doing this in the industry.
That's one of the things that we're getting a really great response from, our beta customers on. We're very excited about the opportunity this presents for Jack Henry.
Is it needle-moving in terms of potential revenue opportunities?
It will be needle-moving just like Banno Retail has been. You know, it's not gonna be tomorrow, you know, that you'll see a great big spike in revenue. These are all long-term contracts, so customer signs a contract generally for five years on these products. Core is generally 7-10. These are normally five year contracts. Then they register users. We get paid on registered users. So just like Banno Retail has been a needle mover for us over time, we think Banno Business will do the same kind of thing.
You add somewhere around, I think, 50 new logos per year. I think you added around 12 last quarter, you talked about.
Mm-hmm.
Maybe just remind us your go-to-market strategy and what's really driving that?
We are known in our space as a premier provider of core technology bank and credit unions, so we're in both spaces. By the way, on the credit union side, more than 50% of the credit unions over $1 billion in assets use Jack Henry as their core technology provider. We're the dominant player on the credit union side among large credit unions. On the banking side, we're, you know, 28% market share or something like that. We choose not to market to the little tiny financial institutions, banks or credit unions, so that's not our market. We also choose not to market to the tier one institutions, so the top 10 banks in the country, let's say. By strategy, we choose not to be in that space.
If you look at that middle tier, that's where we're really good. And we've been really competitive for several years. That's really the market that we go after. We've been continuing to grow upstream on the banking side. As, again, we're already the dominant player on the credit union side, but on the banking side, we're continuing to grow upmarket. It's common today for us to be called into an RFP by a $20 billion bank, for example, whereas even five years ago, that wouldn't happen. I think there's this real change that's happening in our space as far as the perception of Jack Henry to deliver great technology and great service. When we do work with the prospect, I mean, we are known as a premier provider of customer service.
That's our niche in the industry, where everybody talks about it, that Jack Henry has the best service reputation of anybody else in the industry. Have great technology, including all these innovative things that we've been rolling out here lately. Another thing that's key in the decision for a lot of people to move their business to Jack Henry is this reputation we have as a great partner. We are very focused on serving banks and credit unions in the United States, again, a key part of our strategy. We have this reputation as being a great partner, really invested in their success and working with our customers to ensure their success.
When you kind of roll all those things together, that's kind of the story we go to market with, and it resonates because people are looking for a provider that fits that profile, especially these days. You know, there's been a lot of turmoil even before last week. A lot of turmoil in our space among the technology providers. Jack Henry has this reputation of being kind of the steady provider who, you know what you get, and you get what you think you're gonna get when you do business with us.
I mean, you're talking about going upmarket, about $20 billion sized banks now. I mean, are you going head to head more with Fiserv or what's the competitive landscape like now?
We've always... You know, there's this misperception that Fiserv has bigger customers than we do. By and large, they don't. You know, we go head to head with them all the time. FIS has been kind of the dominant player among the super regionals. Although you get below super regional, we go head to head with FIS a lot as well, so have been for a long time. We're definitely moving upmarket. I don't think it changes who we compete with 'cause we're competing against them-
Correct.
With both of them all the time already.
Uh-huh. Yeah.
It's just that those banks view Jack Henry as a viable provider of technology, where, like I say, five, 10 years ago, we weren't in the considered set for those decisions. Part of that is being driven by the tech modernization initiative that I've.
Right.
Talked about here in the past year. Part of it is just, like I say, there's just been a lot of turmoil in the industry, and Jack Henry has that reputation of being kind of the steady provider, that's focused on them.
How has the progress been on the tech monetization strategy?
Yeah, it's been, it's been good. You know, it was a year ago February that I went on the earnings call and talked about what we were doing, and I really emphasized at that time that this was a strategy announcement, not a product announcement. I was trying to describe for customers and prospects and investors, here's where we're going as a company as far as technology is concerned. Here's how we're going to move everything we do to the public cloud.
I tried to lay out a strategy and make sure people could understand what it is we were doing, and then particularly for prospective customers, if they were trying to figure out who do I wanna be my next technology partner, they could listen to this and kinda understand what we're doing and decide if our strategy fit their needs. You know, shortly after the announcement, it was, you know, it was a little nerve-wracking 'cause most people were confused about what we were doing. You know, within six months after that, I've been on, did a lot of public speaking, a lot of different venues, and now people are really getting it and are really excited about what we're doing.
It's a truly differentiated strategy from anybody else in our space, to the point that I think that is driving some of this interest among these larger banks now. They've been trying to figure out how do they get their business to the public cloud. Nobody out there, in their opinion, had a viable strategy that they could adopt. They're looking at what Jack Henry is doing, and really are intrigued, I think, with what we're doing. As you know, Darrin, you know, we're rolling out modules over time. Again, strategy, not a product announcement. We have a lot of work to do to kinda prove the model and make sure that people are comfortable with what we're doing, but so far, so good. We have customers, a number of customers in beta with a few of the modules.
We'll go live with the first module next quarter. The next one is during the summer. We have one more at the end of the year. You'll see that cadence now for the next couple of years as we continue to roll out more modules on the public cloud that customers can start to consume.
Can we touch on in addition to the core obviously and digital, now you're doing more on issuer processing too, right? I mean, debit issuer, but now even I think credit.
Credit, yeah. We historically have been a large, debit issuer, and, about five years ago now, I guess it was six years ago, we launched a major initiative to transition from our old platforms to a new environment. Since we completed that transition now two years ago, we've added a whole bunch more debit issuing customers. We were not in the credit issuing space before, that transition. One of the reasons we made the transition was because it gave us the opportunity to also offer credit. There's a misconception, I think, among a lot of people that every bank and credit union issues both debit and credit, and that's just not true.
Right.
Everybody issues debit. Lot of banks don't issue credit. It was because many of them view that as risky. They don't feel like they can manage the credit risk effectively. What we've done now is we've created this opportunity for customers who want debit and credit from a single provider, Jack Henry. They can get that from us. We also have this relationship with TIB, where if they want to, if our customers wanna take advantage of an agent program, meaning outsource the management of their credit issuing business, they can do that to TIB, one of the largest credit issuers in the country. They can outsource the management of their program, but they pay Jack Henry as the processor for their credit business.
As, as I said, you know, for the last several years, credit is not gonna be a fast-growing business for Jack Henry. Debit continues to grow nicely, but credit is kind of a slow grower for us, and sure enough, that's what's playing out.
That's great. I mean, it's a natural cross-sell obviously.
It is.
I mean, is it almost all of them...
If they have an interest in credit.
Well, even on the debit side though, I mean, the progress you've been making there has been strong too, right? I mean.
It's been great, yeah. Since we've finished the transition to the new platform, we've added somewhere around 190 or so customers on the debit side. We have about 60 credit customers live.
Wow.
Yeah, we're continuing to grow really nicely on the debit side. Of course, that's distinguished from merchant acquiring. You know, you've heard me say in many settings, merchant acquiring was a decision. We made a very conscious decision three, four years ago not to get into merchant acquiring. The reasons are many, but one of the key reasons was when you're in that space, you know, you're not serving the bank or credit union. You're serving the non-bank or credit union.
Yeah.
You know, I was quizzed a lot at the time, that people thought we were missing a great opportunity. Now I think we, maybe our strategy has been-
Going into merchant acquiring could be good.
Justified.
Could be a risky proposition if you don't.
Yeah.
Don't do it right. One other area that I know is of great interest to the entire community is also FedNow.
Yeah.
Which is an area that I know you were. I think you're supposed to be rolling out with about 30 institutions over the course of the next maybe year or so. Maybe just touch on the dynamics around that for a minute.
FedNow, we are the first technology provider to go live with FedNow. The Fed is planning to go into beta in May, they're hoping. We're at their beck and call. They're hoping for May. It may be June at the latest. Sometime this summer, the Fed will start to put FedNow into production. Jack Henry is the first provider to go into beta with them. We have 16 banks in our class. We call it a class, the group that's going to go into beta, banks and credit unions that'll go into beta with the Fed here this summer. We'll go 90 to 120 days or so in the beta testing process. Assuming that all goes well-
Yeah.
We'll start to go live later in the calendar year. The Fed is very excited about this program. I mean, very excited. Just before Lael Brainard transitioned out of her vice chair role over to the White House, she and I did a call and she wanted to make sure that all was good at Jack Henry for them to go live because we're the first. Now I'm going in a couple of weeks to do a meeting with the Fed governors to make sure that they know what we're doing.
I'll be in Washington in a couple of weeks talking about that. I mean, they are so committed to this program.
Really?
The Fed is really a believer that this is a great opportunity for not only for the Fed but for their customers. We're there, fully to support, that initiative, and we believe we have a terrific offering for our customers, of Fed, of FedNow. That'll be live later this year.
Just to be clear, I mean, the FedNow is really a good solution on RTP for banks that are probably not the largest clearing house member banks. Am I right?
For sure. Yeah, yeah. It's a better model.
'Cause otherwise, I mean, there's already RTP, right?
There is. There is.
This is just providing an extended reach.
There is. 'Cause essentially every bank has a relationship with the Fed, right?
Yeah
... have those relationships in place. It's a better model for the Fed for some of the other things that they do with their customers. Yeah, it's an opportunity for the Fed to really offer a competitive solution priced, I believe, better.
Significantly I thought.
Yeah.
Maybe better. Okay. The timeline from your perspective is probably the next couple of quarters.
This summer.
It seems like.
Yeah, this summer.
It's gonna be fascinating to watch. Again, they do sound like they're committed to it.
They are. They are absolutely committed to it, yeah.
Maybe just one more for me, just thinking about the balance between growth and profitability, which is a question we've really been asking more and more around the whole conference. For you guys, not as, not as dire of a question given your position. With all that being said, I mean, you know, I know you've stated to aim to be a little bit more cognizant of expenses just going forward. When you think about areas you're gonna look to streamline a little bit, is it hiring? Is it, you know, pulling back on discretionary operating expenses? Maybe you could elaborate a little further on expense management philosophy, Dave, and just, especially in the context of this environment, touch on how it ties with your investment framework.
We have definitely put some changes in place here just in the past couple of months. You know, if you think about the year-over-year, travel had come back almost 100%. That made for a tough comp when we had almost no travel last year, this year travel is up and we're trying to do business as normal. We have already put measures in place to make sure that we're not taking trips that aren't necessary. You know, discretionary travel has been on the table. From a hiring point of view, we have not stopped hiring. You know, we continue to grow. We continue to have demand, we haven't stopped hiring. We're really zero-basing every single position.
Whether it's a replacement or a new, ask for a hire, we zero base that position and make sure that the hiring manager explains why they need that position, what revenue is this gonna drive. You know, it's a real basic but necessary, model, I think. By the way, for every single new hire, that we do, I approve those personally.
Wow.
That's something that I'm absolutely, I'm pretty passionate about, that we don't wanna get ahead of our skis when it comes to hiring. The one way that I can make sure we don't is I'm gonna be the approver, and you have to submit an explanation as to why you need that person. I don't, you know, withhold approval unnecessarily. I understand we're running a business here, but it's real easy for people to just get, you know, exuberant and say, "Oh, I have to have X number of people." Okay, do you really have to, and how do you justify that? It forces the manager to really think about what they're, what they're trying to do with their business.
Then, beyond that, as we continue to run the business, we're always looking for, you know, where are those opportunities to improve efficiency. We a few years ago, put in place a continuous process improvement program. We have a number of Lean Six Sigma black belts and green belts on staff now who are analyzing processes all across the company, looking for those opportunities to do it better, whatever it is. You know, let's get in and make sure we understand our process and do process re-engineering. That's been going on for some time now.
It's a, you know, it's a I think, a pretty broad view that we take to making sure that we're managing our investors' money appropriately and not spending where we don't need to spend, but not being too frugal where you don't need to be frugal because we wanna make sure that we continue to grow the company and serve our customers.
Understood. Understood. Guys, I think we have time for maybe one or two quick questions if there are any. I have one more for Dave in the meantime, but I see one over here actually.
Can you talk a little bit about the integration of Payrailz since you closed the acquisition and maybe the sort of cross sell incremental outcome after you did that?
Sure, yeah. Payrailz, we closed in September, if I remember correctly. Just to level set everybody, the reason we pursued Payrailz is it's a payments platform. Payrailz offered bill pay technology, but it also offered account to account transfer, P2P, person to person money movement, and B2B payments, business to business payments. The business is fully integrated now into our existing payments area. The sales organization is fully integrated on the sales side. Now it's a matter of us, you know, getting the sales engine really rolling and starting to onboard customers. Several reasons why we did that acquisition. Number 1, it provided a public cloud native payments platform.
As I mentioned earlier, we're in this big push to move everything we do to the public cloud. This platform is already public cloud native. It offered us growth opportunities because beyond bill pay, P2P. It has a unique model in that the sender and the receiver don't have to be in network in order to send money back and forth. With Zelle, for example, if you're gonna send me money, both your bank and my bank have to be on Zelle. With Payrailz, that's not the case. Only one bank has to be on the Payrailz application. It's a differentiator for us in that space to really grow the P2P business. Account to account transfer, same model.
Then business to business payments, electronic business to business payments. This provides the platform for us to build a business. It's really. There really is no business today on the Payrailz platform, but the technology is there that allows us to build essentially a whole new business within Jack Henry to do B2B payments. There were a number of things that were appealing about that business. Like I say, it's fully integrated now. Sales is out there selling, now we just have to start generating revenue.
I think you have one in the back. Yep.
Given the kind of decade-long journey into out-migration and within client base, I'm just kinda curious where you sit?
Yes. We're about 68% now hosted versus 32% in-house or on-prem. We're doing about 50-60 per year. We have, you know, 600 or so. We still have several years of that runway yet for us to grow. It's about a 2x revenue uplift. People will say, "Well, why would somebody pay you so much more?" Well, because when you outsource to Jack Henry, to our private cloud environment, you get to eliminate a whole bunch of expense. You don't have to buy hardware anymore. You don't have to have the security infrastructure. You know, there's potentially people that you don't need at the bank.
It's a significant revenue uplift, but of course not a significant expense uplift because we already have the infrastructure in place. We use the same customer service teams to support those customers once they make the move. It's a pretty efficient model for us, but we have many years left of that move that's gonna continue to happen.
David, do you think we're gonna see bank consolidation pick up some steam?
Yeah, that's the $64,000 question right now. I spoke at this conference in January, called... It's actually called Acquire or Be Acquired, right? About 1,700 bank CEOs out there in January, and they're looking to acquire or sell their franchise. It was interesting this year because the majority, the vast majority of the attendees were looking to acquire. Lots of demand out there, lots of bankers looking to acquire other banks, but there was nothing for sale.
Wow.
You know, bank valuations have taken a hit here with stock. Prices have taken a hit. This is before last week, you know, last several months. Bankers that were looking to buy didn't feel like they had a currency, and bankers that were looking to sell didn't feel like their franchise was worth what they thought it should be worth. There is a ton of demand out there in the M&A environment, and most of the acquirers are looking to acquire deposits because they have a lot of loan demand-
Yeah
... particularly commercial loan demand, and they need those deposits in order to fund that loan demand. They're looking for especially smaller banks that have a lot of deposits and not a whole lot of credits on the books. Those are prime targets for these guys, but they wanna be able to do it at a valuation that's or the seller wants a valuation that's reasonable.
Sure.
Yeah.
All right, guys, unless there's other questions, why don't we stop there? David, thank you very much.
You bet. Thank you.
Good to have you with us.