How Banks Like JPMorgan Plan to Fight Fintechs with Versana Lending Platform
- Four banks have launched Versana, a technology platform that will centralize the $5 trillion lending market.
- Versana aims to advance in the most archaic banking markets that rely on fragmentary technology and spreadsheets.
- Fintech whippersnappers are permeating the banking market, but Versana shows that lenders are fighting back.
Wall Street’s battle against fintechs has just taken an unexpected turn in an archaic corner of corporate banking – the $5 trillion syndicated loan market.
JPMorgan, Citi, Bank of America and Credit Suisse this week launched Versana, a cloud-based platform where banks and investors can view up-to-the-minute transaction information live.
The new software is the latest alternative for bankers and investors looking to share loan pricing and business information. They currently rely on capital markets financial technologies such as Finastra, FIS and IHS Markit, in addition to outdated technologies such as spreadsheets and fax machines.
The four banks’ investment – and equal ownership – in Versana allows them to oversee the construction of the project in a space that is currently open space, including for start-up fintechs, Cynthia Sachs, chief executive of Versana, told Insider in an interview.
“You see the banks coming together, not just outsourcing all the time or letting these whippersnappers in,” Sachs said. “The bank is old school, so they couldn’t see the forest through the trees. But I think they woke up.”
Sachs would know. She spent 17 years on Wall Street, including as a leveraged finance banker at Bank of America before joining Bloomberg in 2010 to be its global head of fixed income valuations. There, Sachs led a team of 120 people to create a pricing product for fixed income securities like bonds and loans.
Bankers plying their trade in the business loan market still rely heavily on archaic internal systems that prohibit users from sharing information beyond their own domain.
Investors, meanwhile, are switching between phone calls and emails to communicate with lenders about interest payments on loans they’ve taken out or to figure out how much they’ve been allocated in a new ready.
Firms like FIS and Finastra both provide software for lending and capital markets, while IHS Markit’s Debt Domain allows users to view transaction documents like lender presentations. But there is no other fintech that houses the whole process.
Versana gives users visibility into all the transactions the founding banks make in the lending market.
“The existing infrastructure in place doesn’t really match the needs of our market,” Alex Naboicheck, head of U.S. leveraged loan trading at Bank of America, told Insider. “At the end of the day, banks have all this information, which lenders and customers are entitled to, but the way this information is communicated is not clear and effective.”
Banks want to ‘reset the playing field’
Fintechs have created fierce competition for Wall Street banks, especially in
: payment platforms such as PayPal, Stripe and Klarna; digital banks like Chime; and investment platforms Robinhood and Betterment let big companies catch up.
Executives like JPMorgan’s Jamie Dimon have admitted that banks have lost the war on fintechs, but in the long run they plan to win.
Versana is one way they try to do that. By joining forces – each founding bank is a co-owner and sits on the board – and focusing their collective energy on disrupting the syndicated loan market, Wall Street firms hope they have found in Versana a winning formula to emerge far ahead. fintechs.
Similar to DirectBooks, formed by nine banks to streamline bond transactions in 2019, Versana is the latest example of lenders coming together to not only tackle inefficient procedures, but also tackle booming fintech startups.
Whether it’s retail or business banking, lenders are urged to provide immediate information to customers, said Moshe Katri, equity research analyst specializing in fintech for Wedbush Securities.
“The mindset is that traditional banking is under competitive pressure. They’re looking for ways to reset the rules of the game, and it’s been difficult for them,” Katri told Insider, adding that banks either need to build or buy existing technological capacities.
Versana will start with the $1.3 trillion leveraged loan market, but Sachs eventually wants to expand the platform to other areas of the $5 trillion asset class, like global loans from superior quality. The innovation is big — and long in coming, Sachs said.
“I think this market has probably been the worst culprit for always resisting change, but we’re just at a different time,” she said. “In order for this market to continue to grow, they finally realized they had to change markets.”
Versana was launched with CEO Sachs, Ariel Elkayam as its chief product officer, and Bruce Manson as chief operating officer. Elkayam, which previously helped launch loan products for FIS, said Versana was looking to hire a team of engineers and continue to expand.
Other lenders are also in talks to join the platform, Elkayam said.
“We have a lot of other banks that are interested,” Elkayam said, adding that banks in the “top 10” for leveraged loans may soon join them. (Apart from the four founders, others in the top 10 include Goldman Sachs, Barclays and Truist, according to Refinitiv data.)
But starting with four of the six largest leveraged finance banks in the United States certainly helps.
JPMorgan, Bank of America, Citi and Credit Suisse led nearly 31% of leveraged loan deals in the United States last year, according to Refinitiv data. It’s a big part of the lending business already under the Versana platform.
“The only way, quite frankly, for this to happen is for these four banks to come together to do this,” Sachs said. “If any other combination of banks had tried, it probably wouldn’t have succeeded.”