Q2 is a leading provider of secure, cloud-based digital banking solutions.
We enable regional and community financial institutions, or RCFIs, to deliver
a robust suite of integrated digital banking services to more effectively engage
with their consumer and commercial account holders who expect to bank anytime,
anywhere and on any device. Our solutions are often the most frequent point
of interaction between our RCFI customers and their account holders. As such,
we purpose build our solutions to deliver a compelling, consistent user experience
across digital channels and drive the success of our customers by extending
their local brands, enabling improved account holder retention and creating
incremental sales opportunities.
Our founding team has provided software solutions to the RCFI market for over
25 years, and they started Q2 with the mission of using technology to help RCFIs
succeed and strengthen the communities they serve. We leverage our deep domain
expertise to develop highly-secure digital banking solutions designed to help
our customers compete in the complex and heavily-regulated financial services
industry. We internally design and develop our solutions around a common platform
that tightly integrates our solutions with each other and with our customers
internal and third-party systems. This integrated approach delivers to account
holders a unified and robust digital banking experience across online, mobile
and voice channels and allows for close, lasting relationships. We design our
solutions and data center infrastructure to comply with the stringent security
and technical regulations applicable to financial institutions and safeguard
our customers and their account holders.
The RCFI market includes approximately 11,500 banks and credit unions that compete
to provide financial services in the U.S. RCFIs have historically sought to
differentiate themselves and create account holder loyalty by providing localized,
in-branch banking services and serving as centers of commerce and influence
in their communities. However, account holders increasingly engage with their
financial services providers across digital channels rather than in physical
branches, making it easier for account holders to access competitive financial
services and more difficult for RCFIs to maintain account holder loyalty. Innovation
in financial services technologies, the proliferation of mobile and tablet devices
and evolving consumer expectations for new financial services and modern and
intuitive user experiences are pressuring RCFIs to deliver advanced digital
banking and other financial services to successfully compete and grow. RCFIs
are increasingly considering new ways to complement their digital banking services
with innovative financial services, including developing their own applications
integrated with their digital banking services and partnering with financial
technology companies.
RCFIs, unlike larger national banks, typically operate without all of the resources
and personnel required to effectively deploy, manage and enhance their own internally-developed
digital banking offerings. In addition, RCFIs are required to spend increasing
amounts of time and money complying with rapidly changing federal and state
rules and regulations and frequent examinations by regulatory agencies. As a
result, RCFIs are challenged to satisfy account holder expectations and compete
effectively in what has become a complex and dynamic environment. These challenges
often cause RCFIs to rely on disparate, third-party and internally-developed
point solutions to deliver digital banking services. However, many of these
solutions provide limited features and functionality or can be expensive and
time-intensive to implement, maintain and upgrade.
Based on our current prices and digital banking solutions, we believe that the
RCFI market is greater than $3.5 billion annually. Our current Q2 platform customers
represent approximately 3% of the 11,420 federally-insured RCFIs in the U.S.
with less than $50 billion in assets. We believe we can capture an increasing
portion of the IT spend among RCFIs as we continue to grow our customer base
and introduce new solutions.
Our software-as-a-service, or SaaS, delivery model is designed to scale with
our RCFI customers as they add account holders on our solutions and expand the
breadth of digital banking services they offer. Our SaaS delivery model is also
designed to reduce the cost and complexity of implementing, maintaining and
enhancing the digital banking services our RCFI customers provide to their account
holders. Our solutions allow RCFIs the flexibility to configure the solutions
to function in a manner that is consistent with their specific workflows, processes
and controls and personalize the experiences they deliver to their account holders
by extending the services and local character of their branches across digital
channels.
We primarily sell subscriptions to our cloud-based solutions through our direct
sales organization and recognize the related revenues over the terms of our
customer agreements. The initial term of our Q2 platform customer agreements
averages over five years, although it varies by customer. Our revenues increase
as we add new customers and sell additional solutions to existing customers
and as our customers increase the number of account holders on our solutions.
We earn additional revenues based on the number of transactions that account
holders perform on our digital banking solutions. We support the efforts of
our sales organization through a network of key association partners, such as
the American Bankers Association, National Association for Federally Insured
Credit Unions, Texas Bankers Association and Western Bankers Association.
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