A banking software company that was developed under the umbrella of a regional bank is now its own entity.
On Tuesday, Redmond, Washington-based Archway announced that it had raised $15 million in Series A funding from venture capital firm Madrona and
The goal for Archway is to bring the same kind of solutions it developed for WaFd to other community and regional banks, most notably the ability to integrate their existing core systems with other technologies.
"WaFd was struggling to own its digital destiny," said Dustin Hubbard, formerly chief technology officer at WaFd Bank and Pike Street Labs and now president of Archway. The bank hired Hubbard three and a half years ago to figure out its next steps, but "as a software person by training, I approached this not as a WaFd problem, but how to address [their issues] industry-wide. I always built the architecture with that in mind."
The California Reinvestment Coalition is one of the groups asking the Federal Deposit Insurance Corp. to withhold its approval unless substantial conditions are imposed. The merger would create a $29 billion-asset bank with locations in nine states.
Archway's base platform is an abstraction layer that integrates third-party providers, such as banking cores and aggregators including Plaid, through an application programming interface that ties together data from these disparate systems. Archway has also built its own digital banking and other applications on top of its base platform. For example, Customer 360 is a way for bank employees to gain one holistic view of their customers drawn from data on different systems, from the length of time they have been with the bank (symbolized by a tree at various stages of growth) to the equity in their home to the customer's responses from surveys. The cloud-based contact center voice bot and chatbot that integrates software from Talkdesk and Amazon Web Services,
Banks can pick and choose which products they will license, but they all run on the same base platform. They can also build their own solutions on top of the Archway base, for instance by extending Archway's chatbot application to complete more sophisticated tasks. Archway built some of its apps through low-code development platform Mendix, which lets banks more easily enhance Archway's products themselves.
"Archway seeks to enter a crowded application space [i.e. digital banking] with well-established and funded competitors with similar value propositions," said Bob Meara, principal analyst at Celent. "The promise [from Archway's website] of 'connect[ing] any banking platform to third-party [financial] software providers with pre-assembled integrations' always comes with pragmatic limitations. Directionally, however, most digital banking platform vendors are well on their way. It will be interesting to see how Archway delivers its bold promise."
WaFd did not originally intend to spin out Archway, when it was Pike Street Labs, into a separate company.
"It happened more serendipitously," said Hubbard.
His team, along with Medrona and WaFd, started evaluating the possibility of spinning Archway out into a separate company in the spring of 2022 and completed the process in the fall. The target audience is banks and credit unions that range from $10 billion to $200 billion of assets.
For the largest banks in the U.S., "there is an astounding amount of money being put into technology," said Hubbard. "Meanwhile, the neobanks have the latest and greatest technology but no physical footprint." The company felt that community, regional and even superregional banks were stuck in the middle.
"Archway is targeted to help those banks succeed and do what they do better than big banks or neobanks, which is community investment and getting to know their customers," said Hubbard. "But they need technology to get on an even footing."
The company has also come full circle with WaFd, transitioning from a cost center of the bank to an investment. Now WaFd is its first customer, licensing the platform back from its former subsidiary. Archway is starting conversations with other potential clients and expects to onboard more banks this year. Hubbard said the company's goal is to integrate new customers within four to eight weeks.
Sunil Sachdev, general manager of community bank and fintech at Fiserv, points out that there are several providers, including Prelim, Portx and Mulesoft, that provide low-code, self-service software financial institutions can use to integrate traditional banking technology with modern banking applications.
"The open question for many of these providers is how they handle scale," he said via email. "Every financial institution is looking to differentiate their customer experience and there are hundreds of modern financial applications that could potentially enable use cases that are important for a particular financial institution."
On the data side, he says that many financial institutions are aggregating data and using machine learning and artificial intelligence to gain insights about their customers. But, "while many financial institutions have access to large data sets today, there is a need for expertise to mine the data to deliver insights financial institutions can monetize," he said.
Overall, "companies that can enable greater speed to market and differentiation for financial institutions without requiring a complete tech stack overhaul will play an important role in enabling more modern banking experiences," Sachdev said.
