Banking

Live Oak completes conversion to cloud-based Finxact core system

The core conversion Live Oak Bank started a year ago has been completed on time, according to Chairman and CEO James “Chip” Mahan.

The $8.2 billion-asset bank, a unit of Live Oak Bancshares, now runs on cloud-based software from Finxact hosted on Amazon Web Services.

When it began migrating its 60,000 customers from a Fiserv core to Finxact, Live Oak was looking for the ability to easily work with fintech partners, feed existing customer data into new applications (such as loan applications), integrate with its small-business customers’ other apps like QuickBooks and offer a friendlier customer experience like Amazon and other tech companies.

“We are creating the community bank of the future,” Live Oak Chairman and CEO James “Chip” Mahan says in explaining how the bank’s new core system fits into his broader vision.

Events of the past year have only enhanced that plan, according to Mahan.

“What Frank [Sanchez, CEO of Finxact] has done is what he set out to do,” Mahan said. “He created a system that allows us to create interesting products to compete with fintech companies that are trying to take banks’ business away.”

Live Oak, in Wilmington, North Carolina, was started in 2007 and received its bank charter in 2008. It began as a lender to veterinarians. It has since broadened its base to serve small businesses in 35 industries and now wants to offer more products to those customers — including checking accounts, which it plans to launch in the next 90 days.

“How do I get veterinarians in all 50 states to move their checking accounts to Live Oak Bank?” Mahan said. “The only way you can really do that is to bring other enhancements to them as they try to run their business every day. “

Through application programming interfaces, the new core system will work with the programs veterinarians use in their jobs, such as practice management software, QuickBooks, financial forecasting and payroll applications.

“Any piece of software that they use, we can bring that together in a way that’s never been done before in a fully digitized fashion,” Mahan said. “You can’t do that at scale with the legacy systems that exist.”

The conversion was trouble-free, Mahan said. In addition to ending just ahead of schedule, customer accounts and balances were 100% accurate, call-waiting time for customers never went above 36 seconds, and the rate at which customers hang up on agents never exceeded 1.9%, he said.

“The old adage is a core conversion is like doing brain surgery and a heart transplant simultaneously,” Mahan said. “It was not that for us.” He acknowledged that Live Oak has been working with the Jacksonville, Florida-based Finxact team since 2016 to help develop this system and has supported it with funding.

“We spent the better part of five years trying to get this thing right,” Mahan said.

Sanchez said that any new bank core system has to not only support new features clients want, but handle all the existing tasks banks do, including payments.

“Banks love to talk about not wanting to do conversions,” Sanchez said. “It’s incumbent on us to make that process as risk-free as we possibly can.”

The Finxact core also works with software from 14 partners, including Apiture, Marqeta, LexisNexis, Savana, Payrailz and DefenseStorm.

Mahan pointed out that Live Oak has to compete with Chime, Affirm and many other well capitalized challenger banks and lenders.

“They’re winning and we can only stop them by fighting fire with fire, using the systems that they’re using that are infinitely scalable,” Mahan said. “We are creating the community bank of the future. We can create a bespoke bank for veterinarians, dentists, funeral directors, and give them everything that they need to digitally operate their business. Because they don’t think about their bank. They think about their practice management software. If we can use our core to integrate all that, that to me is a community bank of the future.”



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