All right. Good afternoon, everyone. Thank you for joining me. My name is Andrew Schmidt. I'm Citi's FinTech Research Team with a focus on FinTech software. It's my pleasure to host Q2 today. With us from Q2, we have Matt Flake, President and CEO, Jonathan Price, Head of Strategy and Emerging Businesses, and Josh Jankowski, Head of IR. Thanks, guys. Appreciate you joining me.
Thank you. Thanks for having us.
I think a lot of folks in the audience are familiar with Q2, but maybe we can just start with just levels of the business. Where's the focus today?
Yep. Q2 is celebrating our 20-year anniversary this year, founded really with the principle that we want to build strong and diverse communities by strengthening their financial institutions. Big, big, audacious goal. But how do you do that? You do it through technology. So we built a technology platform that helps community and regional banks compete and credit unions compete with the big guys. We have a platform that provides retail, small business, corporate banking, along with fraud and analytics to drive better experiences, to allow businesses and consumers to be more efficient. We have about 22 million users on the platform. They logged in about 5 billion times in 2023. We process $hundreds of billions of transactions that roll through the system. We also have a relationship pricing tool that helps banks price the relationship, whether it's a loan or a deposit.
We have $1.2 trillion of loans that we price on the platform and more than $1.3 trillion and $1.3 trillion of deposits. So it's the largest collection. It's the largest loan book in the world. We use that product to. It's the Bank of America prices every middle market loan around the world in that product. Last quarter, we signed another one of the four biggest banks in the country to use that platform. Seven of the top 15 banks in North America use that. And then we also have, from a revenue perspective, we have long-term contracts. Average term of the contract is 66 months. We have. We've converted. We've moved to profitable growth in August of 2022. We've shown more than 800 basis points of improvement in adjusted EBITDA since that period of time. We've talked about revenue acceleration in 2025 based on the bookings that we just came off of.
We had record bookings in the fourth quarter, the best bookings year in the history of the company. We signed 17 Tier 1 financial institutions, but also had many other financial institutions that are below $5 billion in assets that are customers of ours. Really strong year coming out of some really tough years during the pandemic. And then, Jonathan, do you want to talk about Innovation Studio and Helix and AltFi?
Yeah. So yeah, Helix is our—what we call our bank as a service business. Think of it as our cloud-based core. So while everything Matt talked about on the digital banking side is at the front end facing the experience, we also have a lightweight backend core. Historically, we've used that to power FinTechs and brands that wanted to enter banking but didn't have the infrastructure or the banking know-how to go do it. So we could do that on a lighter weight ledger that's much lower cost than the traditional core providers, open API, so you can innovate quickly on top of it. That's our Helix business. We just announced in the last quarter we're also exploring an opportunity to bring that closer to our financial institutions as FIs are in this mode right now of deposits being their top priority and how do they gather, retain, grow deposits.
The legacy infrastructure, unfortunately, comes at a high cost, and they have certain demographics within their customer base that are very expensive to house on that legacy infrastructure. We're giving them an alternative, and we're going to our existing customers to test that thesis. We're excited about that Helix pivot back closer to our core customers of banks and credit unions. Innovation Studio, think of it as really the opening of that digital banking platform, that front end. But also, it opens up the core because it brings more of the experiences that their end users use to the experience layer. Think of it as a partner ecosystem into digital banking. We plug in parts of the financial journey that partners would provide.
Think of credit monitoring or financial wellness, or if you're a small business, payments apps, AR/AP, accounting and finance software for these small businesses to help them run their business, all embedded within the banking experience they get through our digital banking platform. Very interesting development over the last couple of years. We scaled that from just a handful of partners when we went GA in 2021 to now over 160 today. We went from a couple, I call it was about 10, 15 of our banks as early adopters three years ago, to now almost 80% of our digital banking customers using that Innovation Studio marketplace. So we're excited about the impact that has. We're impacting net new wins over 90% of our wins in the year last year. Cited it as a key reason for choosing us.
It's having a huge impact on reducing digital banking churn and getting more retention and engagement from our customers as they adopt these partners and their end users are using more of these products, which make us stick here. And we're driving economic value for them as well because we're sharing in some of the revenue. We're delivering more products to them faster. So excited about Innovation Studio. And then the last piece, the AltFi business, came out of our original Cloud Lending acquisition five years ago. And think of that as our lending loan origination business for non-banks, primarily. About half that business is international and is typically serving non-bank—we call them AltFi—lenders that are capturing a certain part of the market in a certain geography.
Think mortgage in Australia or other, but a little, it's niche-y and where a bank isn't necessarily the leading market share provider of those types of loans.
Got it. Exciting stuff. Super helpful. Thank you. So I think the mission to empower banks and credit unions hasn't really changed, but there has been a lot of change in the last couple of years. Obviously, we went through the pandemic, and the demand cycles went with that. Most recently, the emergence of commercial and a real emergence of commercial and products at demand. Obviously, there's been technology platform evolution. But maybe at a higher level, Matt, how has the Q2 strategy focus or internal execution kind of changed throughout all that?
Well, we've remained focused on building technology that helps every bank compete and credit union compete. I think the market has changed probably the most. If you think about it, we built this business largely in a rate-declining environment. So banks were extremely focused on loans and deposits were easy to come by, whether it's the $5 trillion that got put in the system or the QE that occurred from 2010 to 2022. And so being as successful as we were doing that in that environment, when you have rates go up 500+ basis points in a year, and then you have, it puts pressure on deposits. And then you have March 10th with Signature Bank and Silicon Valley Bank, where you saw some deposits leave commercial customers to go to the Big Four for whatever reasons those were.
Our products—the vast majority of our products—are about deposit retention and growing deposits. And so what happened is, as you've seen, this demand environment ever since kind of the end of the third quarter of 2022, fourth quarter of 2022, and then 2023 with the record bookings has really been people want to use our products to retain and grow deposits. And the most coveted deposits at most financial institutions are the commercial deposits. They're the stickiest. They're the most profitable. They're the hardest to leave. And so that's where the demand environment really has come. And our first line of code in 2004 had ACHs, wires, entitlements, tax payments all built into the platform. But in 2012, we made a serious commitment to moving upmarket into commercial banking functionality. And that has paid off when you look at it.
We have 110 clients, bigger than $10 billion in assets, and we have probably the most coveted group of community and regional financial institutions customers in the United States.
Got it. Actually, I want to piggyback on the demand comment because demand has been very impressive the last couple of quarters. Maybe, and you talked a little bit about this on the earnings call, maybe heading into 2024 or 2024 to date, how is demand in the pipeline trend versus historical levels? Maybe you can just put that into context for us.
Yeah. So when you have a big year like that, the fourth quarter has always historically been a very large quarter for us. You come into Q1, you kind of expect a lull in the pipeline. The pipeline is greater today than it was a year ago. So that pipeline, it's different than what it was at the end of the year. It's more banks between 1 billion and credit unions between 1 billion and 15 billion. But that's always been the bread and butter of this business. They sign a contract. We get them live in 6-9 months. We have all the integrations. There's not a lot of heavy lifting to do on those projects, and they're great customers for hopefully 20 years.
Yep. Not asking you to predict bookings, but you do have a pretty solid pipeline, as you mentioned. Win rates, I think, are at or near record levels. How does the bookings environment set up for 2024 versus 2023 as we look out?
Yeah. I mean, I think, like I said, we have more of those banks and credit unions between $1 billion and $15 billion, which we like our positioning in there, especially on the commercial side. The pipeline looks good for the first half of the year. I don't want to prognosticate too much on the back half of the year, but I think you'll see it build. The fact that we have as many customers as we do above $5 billion, a lot of those customers buy one product, wait for it to go live, and then they buy another product. So they may be going live on retail. And if you do a good job and you take care of them, then they'll end up buying small business or commercial or relationship pricing. So the expansion opportunity outside of the net new is tremendous as well for us.
We'll continue to build the pipe through marketing, being in front of customers, conferences, and those types of things. I think you'll continue to see momentum in the pipeline based on the demand on deposits. It's the center of the. It's the center of the universe for them right now.
Got it. Before we jump into competition, well, this kind of ties into that. I do get a lot of questions around penetration levels overall, just from a digital banking perspective. In some extent, it may be a little less relevant because you were kind of moving up market. But maybe talk a little bit about that in terms of where just Q2 is in terms of penetration and where the additional opportunity is.
Yeah. So there's about 9,000 banks and credit unions in the United States. We have 450-ish that are our customers. So obviously, there's a lot of greenfield in that area. But also, like I just said, we did 19 Tier 1s in 2022, and we did 17 Tier 1s in 2023. They skewed a lot larger in 2023, but many of them bought one or two products, and we have multiple products to go sell them. So the opportunity to expand and with win rates where they are, with customer sat where it is, we think we're going to continue to see that grow in the marketplace.
Got it. Then just to go into the competition point, clearly, it seems like you guys are hitting your stride in Tier 1. I mean, larger deals than you've historically announced. But maybe to talk about Tier 1, Tier 2, Tier 3, how the competitive environment and win rates are trending. And I think part of this is also, we talked about before, look, still committed to those Tier Three clients, but there are probably some that don't make sense from a strategic perspective. Maybe talk about that mix-shift a little bit too.
Yeah. If you break it out and you think about Jack Henry, Fiserv, and FIS control about 90%+ of the back-office systems, but they also have a lot of the front-office legacy digital banking solutions. And so that's largely who we compete with. On the $5 billion and above, that's mostly Fiserv and FIS that have the majority of those customers. And also, you have players like Bottomline, which is a legacy commercial banking solution and a product that's spun out of ACI. So we compete favorably. Our win rates are higher upmarket, fewer opportunities, but we win more of them upmarket. If you move to the Tier Two, which is a billion to $5 billion as it was defined 10 years ago at IPO, there's those players, the legacy core providers, plus you have some legacy point solutions out there that we compete favorably against.
Our win rates are at historic levels right now there. And then Tier Three, to your point, we'll do business with any bank or credit union that wants to use technology as a weapon and not as a shield. So for me, it's about, does the bank, there could be a new ownership structure. It could be a bank says, "We want to use digital and minimize our physical footprint, begin to use the efficiencies we get and have better experiences, be able to use technology like some of the larger customers have because it's an ecosystem for us." So if Synovus is using this product, the $2 billion bank, the $500 million bank gets that same product. Now, whether they have the same customer set, it just depends on the bank. But we don't discriminate on banks or credit unions that are smaller because they're smaller.
We'll do business with any of them. Some of those customers have different financial pressure on some of the decisions they have to make, but we provide technology to the largest banks in the world as well as to some of the smaller ones.
Got it. Mr. Flake. So I think I want to dig into a product portfolio. And as you've articulated, you've made the right long-term investments. The commercial didn't just show up. You were ready when the demand hit. So maybe talk about where you're investing in sort of new product functionality, things like that. And maybe talk about digital banking, and then I'll bring in or wherever you want to go. Then bring in Jonathan and talk about Innovation Studio and Helix.
Yeah. I'll keep it pretty simple. So the user experience, how people feel when they use the technology. The brand of the bank or the credit union needs to be felt when they're using it. They built all these branches with mahogany and marble and the pillars and all that stuff to make you feel a certain way when you walked into a bank. Well, if they're not going to the banks anymore, they need to feel that way online. And so if they deposit a check, we want the credit union to get the credit for that, that feeling of, "I just got away with something. I didn't have to drive anywhere. I just deposited a check. It saved me time." So driving user experience that way. Commercial, it's a long journey, and we've come a long way, but there's still a long way for us to go.
We're going to continue to invest in that piece of it. With more demand on the products, there's more fraud. So we have the premier fraud, ACH, and check product out there in the marketplace right now that continues to grow for us. We're going to continue to invest in ways to keep our banks secure. And then data, whether it's AI or whether it's machine learning around fraud and behaviors to cross-sell products. And some of our initiatives around AI are around how to make a banker's life more efficient, more easy, so they can focus on selling products at the right price at the right time. We're investing in that area as well. So there's a lot going on, but those would be the high level. Then Jonathan can talk about Innovation Studio and Helix.
Yeah. On the Innovation Studio side, I would think of that as just an extension of the R&D leverage we get on the digital banking platform. So when you think about what I talked about earlier about opening up the platform and letting these partners in and embedding those products within digital banking, if you think about the segments of a financial journey of a retail customer or a business customer, let's take a business use case, whether it's their accounting needs, so accounting software, B2B payments, AR/AP, we're embedding this functionality into the platform where a small business can now go to their financial institution and actually help them run the business with apps that have very obvious value propositions by being integrated with digital banking, be it data, HR, payroll integrations, etc.
And so we're basically widening the innovation paradigm of Q2's Digital Banking Platform without having to go build it. And so there's a lot of benefits to that. One of that is R&D leverage because we just get a wider aperture of products. But it's also, as somebody that's responsible for corporate development, you get tremendous visibility into what products attach to the platform well, add value to the platform on behalf of our customers that they see, and not just what sells into the banks well, but also what their end customers end up adopting and using that make us stick here. And so seeing all that is also valuable in the context of long-term M&A strategy. So that's Innovation Studio.
On the Helix side, when I talked about earlier how we're pivoting this and bringing for the first time Helix as core into the financial institutions as part of sort of a longer arc of core modernization that we expect the FIs to undergo, we're not ripping and replacing FIS, Fiserv, and Jack. They've spent decades, 30, 40, 50 years building these cores out. What we're saying is there are lots of cohorts of their customers that don't make sense living on that legacy expensive infrastructure. And we have a product that we can go bring to them that's proven scale. We have over 15 million users on the Helix platform. And when we think about the innovation roadmap there, we'll go where those banks want to go within the context of that Fabric strategy.
So if they want to build out business accounts, if they want to build out right now, we don't do credit on that core. So there's a roadmap there where we can take when we think about innovation there. But what they need right now is the ability to go gather. Matt talked about attraction, retention, and growth of deposits. That's what these banks are all thinking about. And they can do it with the bank and their core customers, but they can also do it whether it's partnering on the sponsor bank side with Helix as a partner bank, whether it's launching. We signed a bank in Q4 that basically wanted to go launch their own bank-as-a-service initiative, but they needed a lightweight core to do it. They couldn't do it with the legacy infrastructure. So they use Helix for that.
Or, like we're talking about with Fabric, go launch their own digital brand, and we're going to go on that journey with them with that tech stack.
Got it. And we were going to talk about Innovation Studio a little bit, but might as well pull that forward now since we started talking about it. For FIs that have adopted Innovation Studio, what kind of uptake do you see in terms of number of third-party applications being used, and what are some more common areas? I would imagine kind of obviously, SMB is a very competitive area, so bringing SMB solutions in might be interesting in terms of retention there. But just curious what you see on that front.
Yeah. I mean, there's a lot of popular apps. I would say at the end of the day, what these banks are doing is consuming more product that they otherwise would have had to pay for, and they probably in a prior model with us would have had to wait a long time for us to go build that integration. Now these things are all available off the shelf. The implementation times, what used to take six, nine, 12 months to go build the integration, it's going to take somewhere between an hour and 30 days to get most of the stuff provisioned inside their digital banking application. So you're giving them a huge boost of their product width in a much shorter timeframe. But they're also adopting things that get them more engagement and growth with their customers.
So specific products that are interesting on the retail side, one of our most adopted products would be like Experian ID Notify. Their customers can go to Experian.com, log in, and get credit monitoring. But if you think about what you actually have to go through to sign up your financial life such that you get credit monitoring, there's a lot of inherent value in doing it through the financial institution when they already have all your data and they can set you up and do it in the context of your trusted financial institution. That's a big one. You mentioned the small business apps. Our most adopted customer would be over 10 apps right now that they have live in production. And those are apps where they're saving money. In some cases, they're getting the rev share that we share with them in our marketplace model.
$0.50 of every dollar we strike in rev share, we're sharing back with the FIs. So it sort of changes our fundamental relationship and starts to become a revenue generation engine for them. So yeah, we mentioned some of them. Autobooks is a very popular app that we have a lot. One of the apps that's done a great job with customers with in-app support. So you think about that, you're not going to go charge your end customer for better service in the digital channel. But if you want to differentiate your FI, you're going to need best-in-class digital support. And we've had dozens of FIs uptake on that partner. And so what we're trying to be in the Innovation Studio model is Switzerland.
What I mean by that is if we find a segment of the financial journey that the banks and their customers really want, like digital customer support in the app, our job is to go find the best vendors in the space, make sure they have some choices, two, three, four, five of them, and then let the FI choose what's the value proposition that's most compelling for their use case, not to pick winners and then force that upon them. And so that model's resonated really well. And that's why I think you've seen in just over two and a half years, we've gone from about 20 FIs that were early adopters to almost 400.
Yeah. We had a panel with ICBA and another tech vendor yesterday. One of the challenges is, I think, with FIs is there's so many options out there for third-party integrations. How do you know which one is good or vetted? And you kind of bring that to the FI.
We're not going to replace their due diligence efforts. They're banks. They're very risk-averse institutions. And many places, we'll supplement that, but they're going to want to do it. And don't take for granted you mentioned that when you think about all these third-party integrations, it's very hard for a bank to go do this one-to-one across dozens of third parties. And so having this all centralized and managed at the integration layer of their digital banking platform adds a lot of value for them just in the overall management of all these third-party relationships.
100%. That's a big pain point. Maybe just last question on the product front. So maybe it's just external, but it does seem like the pace of sort of product development velocity has picked up a little bit over the last couple of years. Maybe that's just external. But has anything changed in regards to the product development process, how you incubate products or roll out, or is it more business as usual?
Well, to some extent, we've been an innovation company since the very beginning. But one of the things that you begin to see is we put a lot of energy and effort into the products in 2020 and 2021. And then when you start selling a bunch of them, you start hearing about it. So it's been the cadence of the business forever. We still put 19%-20% into R&D. And we have a long ways to go. If you're trying to digitize everything you do in person at a bank or a credit union or an alt finance company, it's kind of, I don't know, if that's ever going to end. So it's really a matter of you see a lot more of it because of the demand environment right now.
Right. Makes a lot of sense. Maybe switch gears, just a couple of financial questions. So obviously, a bright spot last quarter was the longer-term sort of subscription revenue and EBITDA targets. On the revenue side, is that indicative of having more visibility, I guess, just with the pipeline and what you're seeing from a win-rate perspective, or just a function of getting out there and wanting to communicate more visibility to the market? I guess it's kind of the same question, but maybe you could talk about the visibility aspect towards achieving that target?
Yeah. So you're right, Andrew. A couple of things factored into laying out that three-year outlook was one. We had previously laid out this kind of Rule of 30 on a total revenue basis target for the second half of this year. And so one, as we're getting closer to eclipsing that, we wanted to make sure to provide a new outlook that was beyond the current quarter of Q2 2024. But you are right that increasingly, with each quarter, more and more of our revenue profile is mixing towards subscription revenue, which is the highest margin business we have, but it's also the highest level of visibility that we have into the business.
And so behind that fourth quarter of really strong bookings as well as the backlog growth that not only sets the stage for 2024, but 2025 and 2026 and beyond, that's what gives us a high level of conviction in being able to lay out just not just 2024, but all of these deals that are really starting to set the foundation for 2025 and then 2026 and beyond.
Got it. Thanks, Josh. And then a question I get a lot is, how do you square sort of the 14% subscription growth with the 19% ARR growth that you had? Because 90% isn't live. That should come to fruition at some point, let's call it, next 9, 12, maybe 16 months. So it seems like you might have visibility towards higher subscription growth. Obviously, you know what? You prove them when you set these expectations. But it's a way to reconcile those two things.
Yeah. So if you compare that 19% to the 14% of subs ARR that we had in the third quarter of 2023, right, it clearly implies that the bookings that we had in the fourth quarter would result in a subscription acceleration. And that's a great forward-looking metric for our subscription revenue growth. And that's what gives us confidence into that 14% over the next three years. The one thing that it doesn't contemplate is, right, the time-to-revenue mix that's associated with some of these deals. And we talked about not just in the fourth quarter, but for the full year of 2023, Matt talked about 4 of the 10 largest deals we've ever booked in company history. And then in the fourth quarter alone, we had the first and the second largest. And so those are going to have an elongated time to revenue.
You can look at that 19 as a perfect indicator of a period that's following after that. But yes, it is a good indicator that we see acceleration in subscription growth in 2025. We have room to that just last week on the call.
And if you look quarter-to-quarter, you see that ARR of subscription growth be a little variable throughout the year. I think a longer-term view of that throughout 2023, at least the back half of 2023, is a better forward representation because any one quarter, like in Q4, there were some favorable comp elements. It wasn't huge, but it's also relative to the prior year fourth quarter. And so 19% was a reflection of the strong bookings, but there's also some elements of, is it a favorable comp? Is it a tough comp? And so if you elongate that period, it's a better indicator of the forward view.
To some extent, I think that going back to what you're talking about with bookings earlier, I guess bookings environment will dictate sort of book something in late 2024, goes live in late 2025, that's more of a 2026 growth rate. So it'll inform 2026. So there's probably an element of that in there as well.
Absolutely. I mean, if you just look at the first quarter guide that we gave relative to the full year for 2024, you can see that we are implying some level of acceleration as you exit 2024. You're exactly right.
Got it. Makes a lot of sense. Maybe round out just the financial conversation with the EBITDA targets. I guess the 300-400 basis points on average expansion each year, what does that sort of if you could break that down in terms of scale versus OpEx savings, I know you have a lot of efficiencies going on. That'd be helpful.
So the biggest piece, one of the biggest pieces, right, is the increasing mix to that higher margin subscription revenue. And as we indicated on the non-subs line items, the trends that we've been seeing over the last 12-18 months, which are kind of flagged to slightly negative, we expect that trend to continue. And so you're going to see margin expansion just from that revenue mix alone. And then beyond that, David last week talked about of that 300 or 400 basis points of annual adjusted EBITDA margin expansion, about 40% of that is going to come from cost to sales, with 60% of that coming from OpEx.
We've done a lot of good work over full year 2023 where we just in that year alone showed 580 basis points of adjusted EBITDA margin expansion through things like leaning into the global workforce, growing in that optimization. But during that time, we've been focused on not a singular cost action to drive that margin expansion. It's always been a slow, methodical, multi-year expansion. So we'll continue to lean into that as well as just internal efficiencies to hit those targets.
Got it. Helpful. Maybe we'll switch back to Helix and talk about Fabric a little bit. Maybe talk about the use cases that are resonating in the market in terms of how FIs are using this as sort of a sidecar core. Deposit gathering is obviously an important part of this, but how are some FIs utilizing this?
Yeah. Some of the early discussions we're having are customers that, let's say, they bank in Georgia and they want to go national. They're going to do it in an all-digital. They're not going to go build branches all over the country. So they're going to do it digitally. They're an existing customer of ours on digital banking, which is where we're really targeting this Fabric strategy. We think we have a right to win and an existing strategic relationship with those customers. And so that's one example where a regional or a community institution wants to go national in a digital-only environment. They want to go quick. They want to go relatively inexpensively because they have a view of what the unit economics of that initiative will be, but they haven't actually seen it come to fruition.
And they want infrastructure that they can do it in a scalable way with. And so that's one example. Another one I can think of, I mentioned already, but a lot of these banks are actually saying, "What if I don't launch my own brand like that, but I want to play in this broader space of banking as a service?" And I know that's sort of under some regulatory scrutiny, which I think is part of where we differentiate actually being the core and the source of truth. But a lot of these banks, yeah, maybe now they're not going to go want to enter BaaS as a sponsor bank anymore, especially not with the middleware providers. But what they may want to do is own it themselves, go talk to their own fintechs, their own brands, their own prospects.
But to do that, they're also going to need a lighter-weight infrastructure that they can go move quickly on. And so that's where they would use Helix for. So those are a couple of the use cases. But I think just this general trend of if they over time want to modernize their backend, they are not going to ever rip out FIS, Fiserv, and Jack. They're going to have to prove over a multi-year, maybe even call it 5-10 years, what is the way that we can get a more profitable way to serve these customers? And they're going to start with retail. They're going to start with their lowest margin customers.
Maybe they don't start by converting any existing retail and just say, "No, I'm going to go target net new on this stack." Then when we go target net to retail and then prove the model and then go start converting customers. So it's going to be a long journey. We're excited about it. Again, we're not going and building a product from scratch. We have a core that has over 15 million accounts on it today, and we've proven it. And we have some FIs that have used it for a long time. And so this is just a place that the opportunity in the market has set us up for.
And when we think about just how the capabilities might evolve on the Q2 Fabric platform, could you over time, is there a plan to iterate to add more functionalities? And I guess the question I want to ask is, could it become comparable to a full-service core versus sidecar core over time?
I mean, the full-service cores have 30, 40, 50 years of innovation. Well, I won't call it innovation. That's a loose term, but certainly investment into them. And so what I would say is one of the value propositions we have with Fabric is we are wrapping Innovation Studio around that tech stack. And so one of the things, it sort of seems like you're cannibalizing your own value proposition, but we believe more of the value prop should be at the experience layer rather than the backend core. And so by putting Innovation Studio in there, we use the term hollowing out the core. So we're bringing more of the features and functions that their customers are going to want up to that experience layer.
So when you take the digital banking platform they're using, wrapped with this entire partner ecosystem plugged in, and then this lighter-weight ledger on the backend, it's not that we're not going to innovate and add products. I mean, we're already going live in 2024 with business accounts on that core, not in the Fabric context, but in the Helix context. And so we'll evolve what goes into that core. And they're going to want us to innovate and develop with them on that product. We just fundamentally believe it's good for them and it's good for us to have more of that value proposition in the top-end stack.
Got it. Maybe a product question on Q2 Catalyst, which is clearly gaining a lot of traction. So I think you talked about earlier just the differentiation, what's driving the win rates. Can we drill down in terms of what separates Catalyst versus some of these other solutions in the market from cash management or treasury?
Yeah. So the Catalyst is really a full solution that starts with pricing the relationship. So it incorporates multiple products into the experience, but it starts with pricing the relationship the right way, using the data we have so that the treasury salesperson goes and adds the person, or the relationship manager goes and adds the customer. And then one of the challenges, if you are banking with another bank and moving to a new one, is they sign a line of credit in 1 day, but it takes them 30-60 days to move all of their information, their payroll files, their receivables, their payables, their wire information, entitlements, all of that. And so then you move from pricing it, then you say, "Hey, we can take that process from 30 days to 3 days." So you get the deposits quicker, which is obviously top of mind.
And so you move from there to then you get on the commercial banking solution, and then you begin using the product where you're sending wires out and there's fees associated with that and ACH out with that. And so the timing is perfect for us to offer those solutions to our customers.
Right. And then maybe a higher-level product portfolio question. You've done a good job over time sort of adding things on and sort of being able to provide more things to customers. What's sort of the next leg for you? What do you think you need to add sort of supplement the product portfolio?
Yeah. I mean, it's kind of what we talked about earlier. You got to drive user experience. You got to drive more commercial functionality. That goes a long way. There's a lot of different places you can go with that. You can start to work with the commercial customers that maybe you've concentrated in property management. They could be real estate developers. There's certain systems that they use, so integrations into those systems to make it one pane of glass to look at to run your business. Then you work through the back of it. What are the fraud things that you're doing? There's a lot of stuff with machine learning that we're doing to make sure that we stop fraud and recognize the bad guys out there.
Obviously, the ability to go understand the 5 billion logins, the 22 million users, the $1.2 trillion loans, the $1 trillion of deposits. How do you take that data? And this moves into large language models and those things. How do you begin to take that data to provide knowledge-based vertical information to somebody that helps them do their job easier? You want to make the good ones better, identify who are the people that aren't performing, but making it to where they don't do as much administrative work and do the things where they need judgment and that type of stuff to make it a better experience for them. So we have several AI products that we're testing with people right now. And we're excited to talk about it as we get a little further along on that roadmap.
It's not like you went where it was going to go, which is AI, which is a big theme, obviously. I don't know. Maybe people haven't heard of it, but.
Yeah.
Yeah. But when you talk to just on that question, because obviously, it's a slower burn when it comes to financial services for regulatory and other reasons. But when you talk to bankers, is this something they're asking for? Obviously, there's a revenue component in terms of interacting with customers, helping them interact with customers. And then there's also a cost component too. So where are those conversations trending? Are bankers asking about it, and where are they asking?
Yeah. Jonathan said it earlier, and I said it as well: that this is the most conservative group of people, arguably, in the world. So a lot of the conversations are starting with the risk and compliance teams to understand what you're doing, where the data is coming from, how you're using it, what's happening with their data. You've got to start with that with our customers. But just like us, we're beginning to figure out how we're going to use Copilot and Microsoft to be more effective. We're thinking about Salesforce. How are we going to use it? So there's many different areas, whether it's just running your business or interacting with customers. Many of them are engaged in these conversations, and a lot of them are waiting to see what's going to happen.
But it's top of mind at board meetings and leadership meetings. They're reaching out to us because we are the most strategic provider in the financial institution for the technology. So we have to be out front with it. We have to be solutions-oriented, but we also need to think about risk and compliance and everything that goes along with that because that's how they live their life.
I know you've been working on AI for many years. There's not anything that's new, but obviously, Gen AI presents a different component, so. We're out of time. This has been a great conversation. Thank you, Matt. Thank you, Jonathan. Thanks, Josh. Really appreciate you being here.
Thank you. Thanks, Cindy.
Thanks, Evan, for joining.
Thank you.