KeyCorp in Cleveland has bought a fintech company to streamline its commercial payments business.
The $187 billion-asset Key said Monday that it had acquired XUP, a software developer that builds digital infrastructure for business-to-business payments. Key did not disclose the price it paid for XUP.
The deal should support Key’s bid to cross-sell more services to its small-business and smaller middle-market clients, said Ken Gavrity, head of enterprise payments and analytics. Key wants to win payments business from account holders and borrowers, and XUP’s technology makes it easier for those businesses to enroll in various treasury, merchant or other services.
“When you start to think about how we’re getting payments [business from clients], it’s really this complex ecosystem you’re trying to deliver,” Gavrity said.
Key’s deal for XUP was the latest of several nonbank deals by banks looking to beef up fee income or diversify their products and services.
U.S. Bancorp in Minneapolis, for example, last week said it would buy the fintech firm TravelBank, which automates corporate clients’ employee expense-reporting processes. The $567 billion-asset U.S. Bancorp first partnered with TravelBank in 2020 on a new virtual corporate card offering and said it expected the deal to buy the fintech would close by the end of this year. In the past year JPMorgan Chase bought several fintechs including 55 ip, a company specializing in automated tools to help financial advisors reduce their investors’ tax liability.
Key also has a history of buying and integrating fintech companies. In 2019, it bought Laurel Road, then a digital student loan refinance firm, and has since built that into a niche digital bank targeted towards doctors and dentists.
During the company’s third-quarter earnings call in October, Chairman and CEO Chris Gorman reiterated Key’s preference for niche nonbank deals over whole-bank M&A.
“We’re always out there talking to people, particularly in the nonbank space. We have a pretty good track record of buying entrepreneurial businesses and integrating them,” he said. “We’ll continue to be very, very active around sort of niche businesses” in investment banking or other specialties.
XUP relies on a mix of cloud computing and application programming interfaces to automate and streamline enrollment in commercial payments services. The basic idea is to avoid forcing a customer to input the same information over and over again when enrolling in different payments-related services and for those different services to look similar from the customer’s point of view.
Key first partnered with XUP 18 months ago to overhaul its merchant-onboarding process. Key then took an equity stake in XUP in February before deciding to buy the fintech firm.
“We had this really clumsy merchant onboarding process, and we wanted to be able to digitize this end to end,” Gavrity said.
Chris May, XUP’s president, will join Key as part of the deal, along with XUP’s 50 or so employees, and Key expects to also recruit more talent to that division. May will be based in Charlotte, N.C., where XUP is headquartered, and Key will also retain XUP’s other hub in Atlanta. Gavrity said XUP’s locations in two banking and fintech hotbeds was another attractive aspect of the deal.
“Chris and his team are really plugged into the talent into those areas, so we’ll also use that as a beachhead to go after talent and pretty aggressively,” Gavrity said.
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