Temenos will buy digital banking software vendor Kony

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Temenos, a core-banking software provider in Geneva, has agreed to buy the digital banking software firm Kony for $559 million.

As part of the deal, which was announced this week, Thomas E. Hogan, chairman and CEO of Kony, will become president of Temenos North America.

“The U.S. is the largest market for banking software," Temenos CEO Max Chuard said. "We’ve been building our capability, and with this acquisition we are strengthening our presence in the U.S.”

Temenos has sold its T24 Transact core-banking software to 30 U.S. financial institutions.

Chuard also said he hopes that owning Kony will strengthen Temenos in the digital banking market, which is $9 billion in the U.S. and $23 billion globally.

“This is where we’ve been focusing the past few years,” Chuard said.

Kony has 700 employees in the U.S. and 1,500 employees globally.

Chuard said the two companies' technologies are complementary. "Banks are looking for solutions that improve their digital experience," he said. "Customers today are used to dealing with Uber and Amazon, and they don't get that experience with banks. That's why in the last few years you've seen fintechs coming up, challenger banks, because with modern technology, they're able to capture a significant part of the market."

Chuard said that the challenger bank Varo Money uses Temenos' T24 core banking software, as does PayPal. "Joining forces with Kony will allow us to access and capture even more of that market," he said.

Temenos plans to invest heavily in support and development of the Kony product, Chuard said.

"We believe in innovation, we are passionate about products," he said. "We want to build the best product."

Kony also owns an interesting piece of technology that was developed by Umpqua Bank and its Pivotus subsidiary. Umpqua calls the software Go-To, and it lets customers choose a personal banker to respond to their text messages. Kony calls the software Engage.

“This is a very exciting product that provides human-to-human interaction,” Chuard said. “With digital banks, everything is online. Sometimes customers do want to have access to a banker. They've created this application which is a way to match the customer to someone with whom they can interact. It's like a dating app to get the best match for your interactions with the bank.”

Engage will become part of Temenos' core platform in the future, he said.

The Kony deal is subject to regulatory approval and is expected to be completed in four to six weeks.

This is Temenos' second M&A deal in less than a year. In December it acquired Avoka Technologies, a provider of customer-onboarding software, for $245 million.

All these technologies will be interwoven over time, first by using application program interfaces and later with full integration into one platform, Chuard said.

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Core systems Core conversions Digital banking Digital banking Mobile banking Mobile technology Temenos Umpqua Bank