KeyBank is adding to its presence in Charlotte with the acquisition of local financial-technology company, XUP Payments.
The deal closed on Nov. 19. Financial details were not disclosed.
KeyBank and XUP started a relationship about a year and a half ago, said Ken Gavrity, head of enterprise payments and analytics at KeyBank. Earlier this year, the bank led XUP's $3 million seed round with Naples Fintech Ventures. XUP spun off from Midtown Consulting Group last year and created a platform that allows merchants to manage acquiring transitions and accounts in a bank's online system.
KeyBank is looking to expand its capabilities within payments and create a better end-to-end experience for clients. It is open to third-party partnerships or full acquisitions. The bank likes to first start with a targeted project to get to know its partner company's executive team, Gavrity said.
"We recognized how powerful it could be, really as an asset at Key, as we start to think through the rest of our banking landscape," Gavrity said of the XUP platform. "Being able to tie all of those (payment experiences) together in a much more digital-first way is really what got us to this point today."
Chris May, president and co-founder of XUP Payments, said the transaction allows XUP to continue innovating, while also implementing those innovations at a large scale. KeyBank has about 3.5 million customers across 15 states. May started XUP with Craig Sobol and Kyle Bridges. He said the KeyBank partnership evolved into a full acquisition opportunity over time and noted the bank's work with other fintech companies.
Ohio-based KeyBank has been pursuing fintech partnerships for several years, including in Charlotte. In 2015, it announced a minority investment in AvidXchange, a local automated payments provider that went public this year. KeyBank acquired Laurel Road in 2019 and, this spring, launched a digital bank for physicians and dentists. Also this year, KeyBank acquired consulting firm AQN Strategies.
Banks' legacy infrastructure is slowing them down, Gavrity said. The XUP platform introduces more open-banking opportunities.
"It really is a pivot point of banks having to become much more like software companies. I think, initially, having an app available or having an online presence available was phase one. I think phase two that we're seeing unveil in front of us is, 'how do you make banking capabilities much more embedded in the types of platforms that our customers want to use?'" Gavrity said.
KeyBank will keep XUP's employees and allow operations to grow inside the bank's framework, Gavrity said. The intent is to build up capacity and hire talent here, he said. KeyBank already has a local fintech investment banking team.
May said XUP will aggressively build platforms for more niche services. The startup, with an office at The RailYard South End, is also looking for more space in the same area, he said.
