Q2 Holdings Stock

Q2 Holdings, Inc. (Q2) operates as a provider of digital banking and lending solutions to financial institutions, financial technology companies, or FinTechs, and alternative finance companies, or Alt-FIs, wanting to incorporate banking into their customer engagement and servicing strategies.

The company’s solutions transform the ways in which financial institutions and other financial services providers engage with account holders and end users, or End Users. The company’s solutions include a broad and deep portfolio of digital banking solutions; digital lending and relationship pricing solutions; an open technology platform, the Q2 Innovation Studio, which is a portfolio of technologies and programs which can be leveraged to design, develop, and distribute innovative products, services, features, and integrations by enabling a partnership ecosystem on Q2's digital banking platform; and Helix, a comprehensive banking as a service, or BaaS, solution, which also serves as a cloud-native core, both of which enable innovative companies and financial institutions to integrate unique banking products and services into their offerings.

The company purpose-builds its platforms and solutions to enable success for its customers and technology partners by allowing them to digitize their operations and offerings, differentiate their digital brands, integrate traditional and emerging financial services, and ultimately, enhance their End-User acquisition, engagement and retention and improve their operational efficiencies and profitability.

The company has deep domain expertise in developing and delivering advanced digital solutions designed to help the company’s customers and technology partners compete in the complex and heavily regulated financial services industry. Q2 is providing digital banking solutions to regional and community financial institutions, or RCFIs. The company has rapidly grown since then through a combination of broad market acceptance of the company’s solutions and relentless innovation, investment and acquisitions. The company’s collection of solutions now spans digital banking, digital lending and relationship pricing, digital account opening, regulatory and compliance, account switching, data-driven sales enablement, spending insights and portfolio management. The company serves account holders and borrowers across retail, small to medium business, or SMB, and commercial segments, in addition to the company’s open platform solutions and BaaS offerings.

As of December 31, 2023, the company had more than 1,300 financial institution customers using one or more of the company’s solutions, including more than 40% of the top 100 U.S. Banks and more than 40% of the top 100 U.S. Credit Unions, based on total assets. As of December 31, 2023, the company had 450 installed digital banking platform customers, and those customers had approximately 22.0 million account holders registered on the company’s digital banking platform. During 2023, End Users logged into the company’s digital banking platform over 5 billion times. While the company remains focused on its founding mission of building stronger and more diverse communities by strengthening their financial institutions and continue to generate a substantial majority of the company’s revenue from sales of its digital banking platform, the company intends to draw on its broad product portfolio and deep domain expertise to both further penetrate the digital banking market and drive meaningful expansion activity within the company’s robust customer base across financial services.

The company has developed a comprehensive suite of solutions to accelerate and optimize this convergence, ranging from digitizing entire banks to facilitating partnerships between financial institutions, FinTechs, and Alt-FIs.

The company’s integrated, end-to-end collection of solutions includes retail, SMB and commercial banking, regulatory and compliance, digital lending and relationship pricing, open platform solutions, BaaS, digital account opening, account switching and data-driven sales enablement, spending insights and portfolio management solutions among others.

The company’s solutions utilize a software-as-a-service, or SaaS, delivery model, designed to scale with the company’s customers as they grow their business, add End Users on the company’s solutions and expand the breadth of digital services and solutions they offer.

The company provides digital solutions that are designed to be highly configurable, scalable and adaptable to the specific needs of the company’s customers. The company designs and develops its solutions with an open platform approach intended to provide comprehensive integration among the company’s solution offerings and its customers' internal and third-party systems. This integrated approach allows the company’s customers to deliver unified and robust financial experiences across digital channels. The company’s solutions provide its customers the flexibility to configure their digital services in a manner that is consistent with each customer's specific offerings, workflows, processes and controls. The company’s solutions also allow its customers to personalize the digital experiences they deliver to their End Users by extending their individual services and brand requirements across digital channels. The company’s solutions are designed to comply with the stringent security and technical regulations applicable to financial institutions and financial services providers and to safeguard the company’s customers' data and that of their End Users.

The company primarily sells its solutions through its direct sales organization and the related revenues are recognized over the terms of the company’s customer agreements.

Solutions

The company is a leading provider of digital banking and lending solutions that transform the ways in which financial institutions and other financial services providers engage with account holders and End Users. The company offers its solutions to financial institutions, FinTechs and Alt-FIs wishing to incorporate banking into their customer engagement and servicing strategies. The company’s integrated, end-to-end collection of solutions and services are designed to enable End Users and customers to engage with and manage financial experiences anytime, anywhere, and from any device, across all devices. The company purpose-builds its platforms and solutions to enable success for the company’s customers and technology partners by allowing them to digitize their operations and offerings, differentiate their digital brands, integrate traditional and emerging financial services, and ultimately, enhance their End-User acquisition, engagement and retention and improve their operational efficiencies and profitability.

Key Solution Offerings

The company’s portfolio of digital solutions includes the following key offerings:

Digital Banking Platform: The company’s end-to-end digital banking platform supports the company’s financial institution customers in their delivery of retail, SMB and commercial functionalities across digital channels through a single technology platform. The company’s open digital banking platform now spans onboarding, banking and a vast set of integrations to third-party financial services across the retail, SMB and commercial segments; and provides the company’s financial institution customers with the tools, knowledge, and access necessary to: monitor and optimize End-User acquisition, engagement and retention; and customize and extend the platform. In addition, the company offers a suite of risk and fraud solutions designed to assist the company’s customers in their effort to safeguard the financial service offerings against fraudulent activities. The company’s risk and fraud solutions include a streamlined dispute management solution, assisting customers with Regulation E compliance, and including optional fraud alerts functionality for enhanced security. The company’s risk and fraud solutions also include fraud monitoring and risk reporting capabilities, including real-time validation features to help mitigate fraud. The company’s risk and fraud solutions serve a critical function in assisting its customers with fraud detection and mitigation and underscore the company’s commitment to delivering innovative technologies that prioritize security and integrity in financial operations. The company offers some of the solutions included in its digital banking platform on a standalone basis to financial institutions, as well as Alt-FIs and FinTechs.

Q2 Innovation Studio: The company’s application program interface, or API, based and software development kit, or SDK, based open technology platform allows the company’s financial institution customers and other technology partners to develop unique extensions of and integrations to the company’s digital banking platform, allowing financial institutions to quickly and easily deploy customized experiences and the latest financial services expected by End Users.

Lending and Relationship Pricing: The company’s end-to-end digital lending and relationship pricing portfolio allows the company’s financial institution, FinTech and Alt-FI customers to simplify the End-User experiences of borrowers, accelerate loan decisioning, and reduce operational inefficiencies through digitization and automation of the traditional loan application and underwriting process. The company’s digital lending and relationship pricing portfolio also provides commercial relationship managers with actionable data-driven insights into an individual commercial End User's entire portfolio, assessing the overall portfolio and individual relationships, highlighting potential concerns and identifying opportunities, and ultimately helping the relationship manager to more effectively price, negotiate and close both commercial loans and depository relationships.

Helix: The company’s cloud-native, real-time core processing platform combines the services and functionality necessary for companies and financial institutions to incorporate unique banking services into their digital offerings. The company’s BaaS Helix solutions allow FinTech and Alt-FI customers to easily and efficiently incorporate highly personalized financial experiences within their digital offerings without having to independently meet the stringent regulatory and technical requirements applicable to financial institutions and their banking services. As a core, Helix allows financial institutions to launch unique and personalized digital banking services.

Growth Strategy

The company is pursuing the following growth strategies: further penetrating the company’s large market opportunity; expanding the company’s relationships with existing customers; relentlessly innovating to expand its solutions offerings and enhance the company’s platform; and selectively pursuing acquisitions and strategic investments.

The Q2 Solutions

The company designs and develops its solutions with a platform approach intended to provide comprehensive integration between the company’s solution offerings and its customers' internal and third-party systems. This integrated approach allows the company’s customers to deliver a unified and robust financial experience across digital channels. The company leverages the benefits of its open platform to provide the company’s customers the following solutions:

Digital Banking Platform

The company’s digital banking platform allows financial institutions to offer a comprehensive suite of retail, SMB and commercial digital banking services to their End Users through a single technology platform. The company’s open platform architecture, deep integration with other systems and the multi-tenant aspects of its infrastructure, enable the company to develop digital banking solutions that allow the company’s customers to harness the power of the information within their other systems to gain greater insights and to improve the overall security of their End Users and themselves. To date, a substantial majority of the company’s revenues continue to result from sales of its digital banking platform to RCFIs.

The company’s digital banking platform provides the company’s customers with the following benefits: single-login and multi-layered security across channels and devices; deep integration with numerous other internal and third-party systems; single interface to an FI's core transaction processing and other systems of record; unified End-User experience and consistent workflows, languages and data; rapid configurability, development and deployment of new features and functionality; comprehensive view of End-User activity across channels and devices; platform wide operational, administrative and customer experience/success reporting; and flexible, predictive branding and personalization.

The company provides the following digital banking platform solutions:

Q2 Consumer Banking: Features include browser-based digital banking solution, unified and robust financial experience across digital channels, comprehensive financial institution-branded digital banking capabilities such as account access, check balancing, funds transfers, bill pay, recurring payments processing, statement viewing and new products and service applications, and management functionality such as end-user enrollment, password management, permissions, rights management, reports, integrated security as well as feature assignment for digital banking.

Q2 SMB and Commercial: Features include business account opening, onboarding workflow solution supporting SMB through corporate customers with new and existing commercial customer sales; full suite of commercial digital banking services to support smb through corporate customers inclusive of reporting, payment and data security services; digital banking support for single and batch ACH processing, payroll, state and federal tax payments and domestic and international wires; advanced digital banking solutions to deliver a flexible, efficient, and positive experience for all types of business users, from sole proprietors to enterprise-level account holders; allows business end users to more efficiently manage and execute higher volume and more complex transactions by restricting transactions based on accounts, subsidiaries, approval levels, end-user roles, date and time as well as geographic location; and allows advanced reporting designed to help financial institutions deliver key business information to commercial end users.

Centrix Dispute Tracking System: Features include electronic transaction dispute management solution; Assists in the administration of disputed electronic transactions (debit card, ATM, ACH and remittance transfers) for the purpose of compliance with Regulation E of the Electronic Fund Transfer Act; and includes an optional Fraud Alerts module, which allows customers to quickly and accurately measure the financial impact of card payments fraud.

Centrix Payments I.Q. System: Features include ACH file monitoring and risk reporting solution; and Simple and intuitive analytical reporting of both originated and inbound ACH activity, including measures designed to safeguard against ACH fraud with calendaring and real-time validation of originated files.

Centrix Exact/Transaction Management System: Features include Tool designed to help financial institutions prevent fraud, focused on the transaction management needs of commercial End Users; and encompasses check positive pay with payee match, ACH positive pay and full account reconciliation.

Q2mobile Remote Deposit Capture: Features include partnered solution that allows remote check deposit capture utilizing End Users' camera-ready mobile and tablet devices.

Q2 Sentinel: Features include Real-time security analytics solution designed to help financial institutions detect and block suspect transactions; Behavioral analytics and policy-based decision prompts for financial institution administrators; and Continuous learning of End-User behaviors while providing an analysis of transaction activity via easy-to-use case management tools supporting either the authorization or interruption of transactions.

Q2 Patrol: Features include event-driven validation product designed to mitigate certain high-risk, non-transactional fraudulent activity; behavioral machine learning designed to identify fraudulent digital banking sessions; analyzes past login behavior and device details, including IP addresses, geolocation, device type, time stamps and more to create a digital footprint for each end user; enhances security by requiring end users to further authenticate a digital banking session if that session is deemed suspect based on abnormal behavioral login and device detail; supplies session details in the end-user interface to better involve end users in their own account safety; and reporting for regulatory compliance and risk reduction.

Q2 SMART: Features include targeting and messaging platform that allows financial institutions to analyze End-User data utilizing machine learning and statistical analysis designed to identify opportunities to grow their End-User relationships with targeted offerings based on specific End-User behavior; multi-channel approach to identify traits across a broad range of End-User behavioral patterns to help financial institutions create new End-User campaigns, conversations and offers based on specific End-User behaviors; recommendation engine to determine which products an End User is most likely to adopt; and summarizes End User behavioral data using clear and easily understood metrics, graphs and charts that are updated daily and presented through an intuitive End-User interface.

Q2 Contextual Personal Financial Management (PFM): Allows End Users to easily add external accounts and view them together with internal accounts on their digital banking home page; allows financial institutions the ability to offer end users simplified transaction descriptions and automatic categorization across their internally and externally held accounts; enables financial institutions to better understand end users' consumer financial data, analytics, and behaviors; and allow end users to view their personal data in a variety of ways, such as budgets, spending, net worth, debt, and trends.

Q2 Goals: Enables End Users to establish and save towards specific savings goals; allows End Users to easily track their progress and activity towards achieving their savings goals; and provides financial institutions visibility into End Users' savings goals enabling them to assess additional opportunities to offer additional financial services to assist such End Users.

Q2 CardSwap: Allows financial institutions who issue debit or credit cards to enable End Users receiving newly issued cards to automatically change their payment information with existing subscription and digital point-of-sale services, which have previously been set up for payment with a different card; and assists End Users with compromised card replacement.

Q2 Gro: Features include digital account opening and digital sales and marketing platform that drives customer acquisition growth across digital channels; enables financial institutions to make personalized recommendations and cross-sell banking products, such as deposit accounts and loans, to both retail and business End Users; and combines advanced, multichannel account opening with targeted marketing capabilities, as well as a shopping cart experience.

Q2 Innovation Studio: Features include the following:

Consists of a portfolio of technologies that financial institutions can use to design, develop and distribute innovative products, services and features through the company’s digital banking platform, including the: Customer Program; Partner Developer Program; Partner Accelerator; and Q2 Partner Marketplace.

Customer Program: Utilizing Q2 Caliper SDK, financial institutions are provided with the tools, knowledge and access necessary to extend the company’s digital banking platform by developing custom features and integrations through open APIs.

Partner Developer Program: Allows the same custom development as the Customer Program, but allowing financial institutions to partner with Q2-certified development partners introduced by Q2.

Partner Accelerator: Leveraging a growing ecosystem of third-party integrations of Fintech and other digital solutions to the Q2 digital banking platform, financial institutions can choose to partner with such providers by purchasing access to and rapidly deploying their integrated solutions.

Q2 Partner Marketplace: Online marketplace of pre-integrated third-party applications financial institutions can offer to their End Users and for which they can receive a revenue share from the End-User fees.

ClickSWITCH: Allows financial institutions, upon the direction of an End User, to switch the End User's direct deposits to the End User's account with the financial institution.

Q2 Spend Manager: Features include spend management solution that allows SMB End Users to automate and streamline expense management, resolving cumbersome expense tracking while enabling them to better manage their financial activity; allows financial institutions to collect and analyze product-level End User purchase data, enabling the creation of highly differentiated user profiles utilizing AI and machine learning; and allows financial institutions to present highly targeted behavioral purchase insights to the End User.

Digital Lending and Relationship Pricing Solutions

PrecisionLender Solutions

The company’s PrecisionLender platform is a cloud-based, data-driven sales enablement, relationship pricing and portfolio management solution that allows financial institutions globally to structure and negotiate commercial lending, deposits and fee-based business transactions more effectively. During the negotiation process, the PrecisionLender platform analyzes a financial institution's entire commercial portfolio, and individual relationships, in addition to other external market information, to assess the performance of the portfolio and relationships. Based on such analysis, PrecisionLender provides commercial bankers with actionable insights by highlighting potential concerns and identifying potential opportunities, ultimately allowing them to more efficiently and effectively price, negotiate and close commercial loans, secure deposits and process treasury services. The PrecisionLender platform user experience is enhanced by Andi, a banking copilot powered by AI and machine learning and one of the industry's largest commercial banking data sets. The PrecisionLender platform includes the following distinct solutions:

PrecisionLender Platform: Features include cloud-based loan pricing and negotiation functionality that provides commercial and SMB relationship managers with actionable insights based on analysis of their commercial and SMB account holder portfolios to efficiently and effectively price and structure commercial loans, deposits and other fee-based banking services.

Premium Treasury Pricing: Features include optional advanced module to the PrecisionLender Platform that enables commercial and SMB relationship managers and treasury management officers to collaborate on pricing and structuring fee-based banking services, including the modeling of pro forma revenue and expenses.

Data Studio: Features include managed and configured data environment that provides in depth analysis and reporting of a financial institution's commercial and SMB account portfolios; Enables commercial and SMB managers to assess performance trends, as well as identify cross-sales and other opportunities for improvement.

Andi: Features include configurable banking copilot powered by AI and machine learning which accompanies the relationship manager throughout the commercial and SMB loan structuring, negotiating and pricing process; Provides recommendations along the way leveraging the real-time analysis being performed by the PrecisionLender Platform and one of the industry's largest commercial banking data sets.

Cloud Lending Solutions

The company’s Q2 CL digital lending platform is a cloud-based, end-to-end lending solution that allows financial institutions, FinTechs and Alt-FIs to automate and digitize their lending activities, supporting digital lending applications, scoring, underwriting, servicing and collections for multiple assets classes. The CL digital lending platform allows financial institutions, FinTechs and Alt-FIs to originate and service a wide range of loan types including consumer, commercial, SMB and marketplace, or peer-to-peer. The CL digital lending platform utilizes the Force.com platform and includes the following distinct solutions, which financial institutions, FinTechs and Alt-FIs can use as a complete package or individually to supplement existing operations:

Q2 CL Portal: Features include configurable front-end portal that provides a differentiated borrowing experience for consumer, commercial and SMB loans for borrowers, investors and stakeholders.

Q2 CL Originate: Features include customer-centric, agile loan origination and underwriting solution; Designed to meet the needs of consumer, commercial, SMB, marketplace, or peer-to-peer, and lending; Manages the entire origination and underwriting process including loan file management, workflows, auto-decisioning, parties management, credit memo, credit analysis, approvals and covenants.

Q2 CL Loan: Features include loan servicing application that automates loan billing, payments, collections, and accounting within one robust and flexible platform; Manages portfolios, increases transaction volume, and rapidly brings new products to market.

Q2 CL Marketplace: Features include cloud-based marketplace application designed to handle the complexities of managing the entire online marketplace, or peer-to-peer, loan cycle, including online origination, loan fractionalization, servicing and managing multiple investor portfolios.

Q2 CL Collections: Features include customer-centric collections application that enables lenders to define and automate collection strategies, optimize customer interaction across channels, lower risk, and reduce technical and operational costs; Allows lenders to track customer interactions, set priorities and optimize workloads.

Q2 Innovation Studio

The Q2 Innovation Studio is a portfolio of technologies and solutions that financial institution customers, FinTechs and other digital solutions providers can leverage to design, develop, and distribute innovative products, services, features, and integrations through Q2's digital banking platform. Q2 Innovation Studio includes an API-based and SDK-based open technology platform that allows the company’s financial institution customers, FinTechs and other digital solution providers to develop unique extensions of and integrations to the company’s digital banking platform. Financial institution customers wishing to customize or supplement the company’s digital banking platform solutions may subscribe to the Q2 Innovation Studio and deploy their own development resources, or utilize certified partners, to develop customized services or unique integrations, allowing them to innovate more quickly and to differentiate their digital brands leveraging the company’s digital banking platform. Additionally, FinTechs and other digital solution providers can use the Q2 Innovation Studio to develop integrations of their financial services offerings to the company’s digital banking platform, allowing the company’s broad set of digital banking platform customers to select from a substantial and growing catalogue of pre-integrated technology partners to quickly and easily deploy the latest financial and other services solutions expected by End Users. Q2 Innovation Studio can significantly reduce the time and cost it takes to bring new offerings to market and create new opportunities for customer and End User engagement and retention. Q2 Innovation Studio facilitates a mutually beneficial ecosystem of financial institutions, FinTechs and other digital solution providers, allowing them to partner, generate new revenue opportunities, and enhance End User engagement.

Helix

Helix allows FinTechs, Alt-FIs and financial institutions to incorporate unique banking services into their digital offerings, allowing them to easily and efficiently incorporate highly personalized financial experiences within their digital offerings and meet the stringent regulatory and technical requirements applicable to financial institutions and their banking services. Helix combines a cloud-native, real-time core processing platform with the services necessary to support it, including integrated issuer processing, identity verification technologies and the banking services of one of Q2's financial institution partners. These financial institution partners provide the highly-regulated banking services which FinTechs and Alt-FIs cannot offer on their own without a bank charter, including issuing accounts and cards, holding and insuring deposits and moving money on the FinTech's or Alt-FI's behalf.

Implementation Services, Professional Services and Customer Support

The company seeks to deepen and grow its customer relationships by providing consistent, high-quality implementation services, professional services, advisory services and customer support, which drive higher customer retention and incremental sales opportunities within the company’s existing customer base. The company structures its implementation teams to effectively collaborate with the management and technology teams of the company’s customers ensuring the rapid deployment and effective utilization of the company’s solutions. The company offers customized professional services to assist its customers with their efforts to extend the company’s offerings and differentiate their digital brands. In certain cases, the company engages with customers for more tailored, premium professional services, or Premier Services, with select established customers resulting in a deeper and ongoing level of engagement with them. Under certain circumstances for the company’s CL digital lending solutions, the company also partners with third-party professional system integrators to support its customers in the installation and configuration process. These implementation teams develop and execute a coordinated implementation plan for the company’s customers centered around five standard phases of IT transformation projects: initiation, configuration, application testing, limited production and production.

The company’s customer support personnel serve the comprehensive support-related needs of its customers. Due to the highly-regulated and complex nature of the financial services industry, the company’s implementation and customer support teams, including any third-party professional system integrators with which the company partner, must be knowledgeable about the company’s solutions and the regulatory environment in which the company’s customers are required to operate.

Partner Offerings

In addition to the company’s Q2 Innovation Studio offerings, the company’s customers are reliant on an ever-growing ecosystem of third-party digital solutions to complement their financial services offerings, and the company provides a broad range of tools to help its customers efficiently bring them to market. The flexible nature of the company’s solutions, along with its proprietary, highly flexible set of integration tools, allows the company to build rapid integrations with its customers' internal and third-party systems to support End-User activities and customer processes. These integration tools connect with a wide variety of third-party applications, allowing the company to seamlessly integrate with its customers' internal and third-party systems such as account services, payments and imaging. The company’s ability to integrate with these systems enables its customers to offer a comprehensive set of consumer and commercial functionality to their End Users.

Sales and Marketing

The company’s sales and marketing organization is responsible for growing the company’s customer base and maintaining and expanding relationships with the company’s existing customers. The company sells its solutions primarily through its direct sales organization but also through partnerships for select solutions and global regions. The company’s direct sales organization consists of experienced sales professionals who are organized by geography, account size, type of market and whether a prospect is a new or existing customer. Customers are assigned a dedicated representative to provide ongoing assistance in the execution of the customer's digital strategy to meet the needs of its End Users. The company’s sales representatives are supported by its solutions consulting and sales operations teams.

The company’s marketing programs primarily target digital transformation, technology, finance, operations and marketing executives as well as senior business leaders.

Technology and Operations

Due to the highly regulated nature of the financial services industry, the company’s digital banking platform combines both multi-tenant and single instance aspects. The company’s solutions utilize a multi-tiered architecture that allows for scalability, operational simplicity, security and disaster recovery. The company has also developed an internal operations and analytics platform that aggregates and leverages customer instance and End-User experience captured within the company’s solutions to drive future innovation and scale.

The company serves its digital banking platform customers from a distributed cloud which combines multiple public cloud vendors and a private cloud consisting of active-active globally-adopted ANSI/TIA-942 Telecommunications Infrastructure Standard data centers managed by a co-location partner. The company’s digital lending and relationship pricing, Helix and some of its digital banking platform solutions are hosted by cloud-based hosting services. All of the company’s hosting environments are under its security posture and compliance stance. The company integrates various solutions together so that it is a seamless experience to the company’s End-Users, minimizing the impact and relevance of any one component on the company’s combined distributed cloud hosting environment.

The company utilizes prevailing industry configurations to minimize service interruptions, and regularly consider and implement improvements to enhance the resiliency of the company’s services, including the company’s improvements to actively distribute services across both data centers. As a result of these improvements, the company’s network infrastructure is fully redundant within each of the company’s data centers, including network teaming to provide network redundancy that includes multiple upstream Internet connections. The company has also purchased a private block of IP address space to simplify and expedite the company’s disaster recovery management operations for the company’s digital banking platform customers.

The company’s digital banking platform has had average uptime in excess of 99.9% since January 2013. The company actively monitors its infrastructure 24x7 for any sign of vulnerability. The company’s hosting environments employ advanced measures to enhance integrity and security, from layers of zero-trust network access, design-to-fail architecture, anomaly behavior detection of technical assets, to privileged credential access control. The company also uses strong endpoint hardening and monitoring to mitigate risk posed by the devices used by the company’s globally distributed workforce.

The company’s solutions are designed to enforce that End Users are authenticated, authorized and validated before they are granted access, requiring at a minimum, a valid user ID and associated password. Many of the company’s customers also employ other authentication methods such as out-of-band, one-time password delivery to log on to the company’s solutions and hardware cryptographic tokens to authorize transactions. The company’s layered security model is designed to allow different groups of End Users to have different levels of access to the company’s solutions. The company’s software development practices require code to be peer-reviewed multiple times before being deployed into production and that the company’s solutions' vulnerability is tested using internal tools prior to release. A Q2 penetration testing team, supported by an independent third party, performs penetration and vulnerability tests on the company’s solutions periodically.

Intellectual Property

As of December 31, 2023, the company had seven patent applications pending and 13 patents issued in the U.S. and other countries, with expiration dates ranging from October 2027 to October 2040.

Competition

With respect to the company’s digital banking platform, the company has several point solution competitors, including NCR Voyix Corporation, or NCR Voyix, Alkami Technology, Inc. and Apiture in the online, consumer and SMB banking space and Finastra, ACI Worldwide, Inc. and Bottomline Technologies (de), Inc. in the commercial banking space. The company also competes with core processing vendors that provide systems and services such as Fiserv, Inc., Jack Henry and Associates, Inc. and Fidelity National Information Services, Inc., or FIS.

With respect to the company’s digital lending and relationship pricing solutions, the company competes against several point system competitors, including Abrigo, Baker Hill Solutions, LLC, nCino, Inc., Finastra, Brilliance Financial Technology, Temenos AG, and core processing vendors, including FIS and Fiserv.

With respect to the company’s Helix solution, the company primarily competes with Galileo Financial Technologies, LLC, Marqeta, Inc. and Green Dot Corporation in the BaaS and embedded finance markets; and the company competes with Finxact, a Fiserv company, Nymbus, Inc. and Thought Machine Group Limited in the cloud-core markets.

Research and Development

The company’s research and development expenses were $137.3 million for the year ended December 31, 2023.

Government Regulation

The company’s solutions must enable its customers to comply with applicable requirements such as the following: the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act; the Electronic Funds Transfer Act; Mobile Banking Guidance; the Electronic Signatures in Global and National Commerce Act; federal, state and other usury laws; the Gramm-Leach-Bliley Act, or GLBA; the Fair Credit Reporting Act; the Americans with Disabilities Act, or ADA; the EU General Data Protection Regulation, or GDPR; laws against unfair, deceptive, or abusive acts or practices; the Privacy of Consumer Financial Information regulations; the Bank Secrecy Act and the USA PATRIOT Act of 2001; the Guidance on Supervision of Technology Services Providers promulgated by the Federal Financial Institutions Examination Council, or FFIEC; third-party risk management regulations; the NCUA's Guidelines for Safekeeping of Member Information; the Guidance on Outsourcing Technology Services promulgated by the FFIEC; and other federal, state and international laws and regulations.

The company is subject to periodic examination by regulators under the authority of the FFIEC under its Guidance on the Supervision of Technology Services Providers and the Gramm-Leach-Bliley Act of 1999, and federal, state and other laws that apply to technology service providers as a result of the services the company provides to the institutions and entities they regulate.

The Dodd-Frank Act granted the Consumer Financial Protection Bureau, or CFPB, authority to promulgate rules and interpret certain federal consumer financial protection laws, some of which apply to the solutions the company offers.

In the ordinary course of the company’s business, the company and its customers using its solutions access and transmit certain types of data, which subjects the company and its customers to certain privacy and information security laws in the United States and internationally, including for example, GLBA, CCPA, CPRA and GDPR, and other federal, state, and other international data privacy, security, and protection laws and regulations designed to regulate consumer information and mitigate identity theft. The company is also subject to privacy laws of various states.

History

The company was founded in 2004. It was incorporated in 2005 in the state of Delaware under the name CBG Holdings, Inc. and changed its name to Q2 Holdings, Inc. in 2013.