Temenos, the Geneva-based banking technology company, has announced it will acquire Kony, a digital banking company based in Austin, Texas for $559 million and an earn-out of $21 million.

The acquisition highlights the rapid change afoot within banking software as a result of customer demand for digital innovation.

‘The Real War is Being Won or Lost on That Digital Edge’

Kony builds digital applications that use pre-built links to operate on top of commonly used banking systems from the “Big Three” — FIS, Fiserv, and Jack Henry — with a reduced need for programming. It aims to improve the user’s “Digital Banking Experience,” which it has branded as Kony DBX, and includes support for conversational interfaces, artificial intelligence, augmented reality, and wearable technologies.  

“We are acquiring a digital front office product that has already been successful in the U.S. market and is connected to most third-party cores,” said Max Chuard, CEO of Temenos.

Tom Hogan, the CEO of Kony, will become the CEO of Temenos North America. He said the front office market for digital transformation is about $9 billion. Customers don’t care what the banking core technology is, but they do want a front end that makes it easy for them to conduct business with their bank at the time of their choosing, and on the channel they choose, without having to re-enter their personal information.

“The real war is being won or lost on that digital edge,” he said.

Temenos several years ago divided its operations into a core platform, T24, and a front end, Infinity. Hogan said the Kony and Temenos offerings will be integrated over the next 18 to 24 months, and they will also be available in modular units, “so customers can select what works for them.’”

Banking Associations Sponsor New Software

At Money20/20 last year, Hogan said bankers are almost universally disdainful of the “Big Three” legacy providers, a point echoed by the Independent Community Bankers of America and the American Bankers Association, which have each sponsored new banking software companies.

The legacy providers just don’t get digital, Hogan said.

“The legacy core vendors are not world class at digital. They all tried to be, because they realized the importance of the front office, but none of them have done it successfully. It is DNA — the core providers are good at transaction engines with high performance and reliability,  but that’s a different game from operating in the digital world. We are bringing Temenos not just our IP but 1,500 people who are digital.”

Shaking Hands Across the Pond

In addition, Kony’s experience with the American market — whose complexity has led to European fintech stumbles in the past — is attractive for Temenos.

“It is clear one of their priorities is to leverage Kony’s brand, people, and presence as an Austin-oriented company to help accelerate Temenos’ growth trajectory,” said Hogan, leaving the desire for good South by Southwest (SXSW) tickets go unstated.

The American market is growing even more competitive, he added. Threats are not just from companies like N26 and de novo banks, but also from nontraditional players like Amazon and Apple.