HFS Highlight: IBM’s seemingly innocuous acquisition of cloud payments fintech, Expertus Technologies, heralds in the next chapter of B2B payments innovation

2020 was the year enterprises realized digital is not optional. The financial services version of this statement is that digital was recognized as more than slick consumer interaction services like online banking, digital loan applications, or robo wealth advisory. Digital front-ends need to be married with modernized core systems to drive optimal bottom and topline impact.

While financial services firms are certainly having a much better global crisis this time around, some of their industry-specific pain during the pandemic stemmed from the realization that digital payments are not a millennial fad. The pandemic forced a massive global embrace of digital payments with the need to support cashless transactions involving credit cards, virtual cards, apps, wire transfers, AFTs, cross-border payments, mobile payments, even cryptocurrencies. Firms with neglected payment modernization efforts were forced to confront their lack and rapidly prioritize their digital and cloud-based payment agendas.

Meanwhile in Canada…

Ever a core cog in the global core banking and payments ecosystem, IBM announced its acquisition of Expertus Technologies, a Montreal-based fintech and existing partner in December 2020. At first blush, Expertus looks like an interesting but perhaps regionalized cloud native payments platform. Upon further inspection, it actually has helped round out IBM’s payments platform capabilities enabling cross-border SWIFT transactions and greatly enhancing wire transfer capabilities.

While the acquisition was neatly tucked into the final month of 2020, it initially began with a partnership back in 2017 born out of IBM’s realization that payments modernization was an unmet need for a lot of companies. IBM began to build out its IBM Payments Center capability, a cloud-based platform and array of modernization services designed to enable digital, cloud-based B2B payments. The initial Payment Center was created in Canada and its efforts culminated in a massive payments modernization deal with 75 Canadian credit unions inked in May 2020. With a win of this size and the opportunity to create a significant B2B payments ecosystem, IBM opted to convert its Expertus relationship from partner to part of the family.

Expertus brings IP and talent that IBM could not afford to lose to a competitor. IBM acted proactively to acquire Expertus rather than risk being shut out if a competitor did. Expertus’ skills and customers bring meat to IBM’s Cloud for Financial Services as it can now use them to advance their global efforts in shifting workloads from mainframes to cloud solutions in this heavily regulated industry.

Behold – a cross-IBM offering with teeth

What HFS finds most interesting about the acquisition and the strategy it nests into is that this is actually a services-led initiative. As stated in the press release “Expertus is now part of IBM Global Business Services, following its previous successful alliance with IBM Payments Center Canada. IBM will consolidate Expertus’ Payments Platform as a Service offering and build on SWIFT processing services and capabilities, which enable a global network of 11,000 financial institutions in more than 200 countries to send and receive information about financial transactions.”

This is one of those perhaps too infrequent market contributions from IBM that literally brings together the best of IBM – cloud, software, AI, and services as a utility-based as-a-Service model. In the case of the big credit union deal, the Canadian Payments Center essentially serves as a payments hub utility inclusive of all products and services, and participants are onboarded and can begin leveraging the cloud-based end-to-end payment capabilities baked therein. With this proven deployment, IBM can support institutions, similar hubs, and regulators with IP and best practices. This will help their customers compete more effectively with the growing number of financial services from vendors like Apple and Google, as well as app-centric players like PayPal, AliPay, Venmo, and more.

With Canada serving as a very effective test bed for this Payments as a Service vision, IBM plans to roll out five more regional Payment Center hubs around the globe in 2021 and beyond.

The Bottom Line. The power of the “new” IBM post-spin-off sits with cross-firm opportunities driven by innovation and representing the best of IBM. They just need to remember to talk about them.

Payments innovation was already a massive global need, and the global pandemic bumped it to the top of many priority lists. IBM is uniquely qualified to drive innovation and modernization efforts here and has developed something genuinely compelling and globally valuable, delivered in a unique and very accessible way. As-a-Service approaches are raging back into favor as a creative commercial response to urgent modernization and digital transformation needs. IBM needs to trumpet what it’s achieved with its Canada-led Payments-as-a-Service initiative and get moving globally. Ecosystems require participation and collaboration!