An Interview with Neocova’s Sultan Meghji

Five years ago, Neocova Co-Founder and CEO Sultan Meghji worked on an aid mission in Africa.

At the time, he worked to improve financial services on the continent and in other emerging markets.

In this region, branch banking was not a valid option. He focused on creating peer-to-peer banking solutions in underserved areas alongside fintech firms and central banks.

This successful mission offered these services to hundreds of thousands of people in Africa and in central Asia.

He then returned to the United States, excited about the possibilities of using this technology. He described it in an interview last week.

“I came back to the US incredibly excited about banking. Wow look at all this great innovation, look at all these things we can really do,” Mr. Meghji said. “I joke now and say, I did a Wile E. Coyote right into the wall. When I dealt with the existing technology providers and the ecosystem, I discovered there were three structural problems in this market that nobody has solved yet. The first was the technology in banking, especially for community banks. It’s just atrocious, some of the worst technology I’ve ever seen.”

Business Models, Regulations, and Other Woes

The second problem was the outdated and frankly horrible business models the major technology providers were using. He compared the existing banking technology companies to car dealers who force customers to buy an old car with a high-interest rate. Customers don’t realize they can buy a luxury car for the price they were paying.

The third is that community banks are under pressure on all sides from unregulated lenders, the big banks and the regulators, and the technology the legacy providers are delivering does nothing to help the community banks with the problems they are facing, according to Mr. Meghji.

He saw an opportunity to go for a new approach to banking and technology and founded Neocova.

“For four years now, we’ve been very quietly building Neocova and developing a company that answers all three of those,” he said. “We’ve built an AI and cloud-first native banking core, we sell it on one-year contracts with no termination fees, and none of the crazy handcuffs and 150-page MSAs that our competitors do. For the last four years, we’ve been talking to bankers, regulators investors and banking and the entire ecosystem. We have been building products and services that are exactly what our customers are asking for. Because of that, we’ve just taken off commercially so much better than I thought we could.”

Defining Company Products

He further explained the products and services that his company offers.

“The first product is our banking core,” he said. “That’s a full-service banking platform, it’s client management, deposit product, loan product management, all through an integrated general ledger wrapped in an identity management layer, and then that’s wrapped in an API (application programming interface). We also have lightweight web client and mobile client services built-in, as well, so as we go into market over the next year, what that means is if you’re a community bank, and you want a soup to nuts solution to run the back office of your bank and provide mobile and web-based client access to your system you can get that from us.”

He added, “The second product is the underlying technology platform we used to build all of this. There are banks that are maybe a little more complicated, or they want to do something that isn’t exactly like what our core offers, maybe they want to offer a custom real estate product or a custom HSA  product or something like that, they can use our technology platform at very low cost very rapidly, to build that solution set themselves or they can pay us to do it.”

The third product is Neocova’s artificial intelligence tools.

“Over the next year, we’re rolling out a series of different products in that space,” Mr. Meghji says.

The first being a fully automated AML and BSA tool. The second is around “Know Your Customer” and analytic programs and tools.

What Keeps Banks Up at Night

If you speak to bankers, ask them what keeps them up at night.

Cybersecurity usually sits at the top of the list.

Since Neocova is cloud-based, Mr. Meghji must address these critical concerns.

“There are a couple of things we’ve done that are a little different than our competitors,” he said. “That makes this a question that I love getting to because first off, we put the right people in place. Our chief information security officer used to be Deputy Director at the CIA for enterprise security, and he helped build their cybersecurity platform when they decided to go to the cloud. One of our board members is the former Head of Technology at CIA. Our entire ecosystem of cybersecurity professionals, both inside as well as partners we work with are the best of the best. We went to the best cloud security groups in the world and said: “What’s the best thing to do?” That’s what we spent four years building.”

He added, “My second comment is we have very specifically worked with and only worked with organizations that understand cybersecurity better than most. What that means is when you look at the cloud infrastructure, some cloud infrastructures are very secure, very easy to manage, and they’re used by organizations like the CIA. These are the ones we have worked with. Finally, we’ve built this in the cloud to be secure. We are the only group in this space that’s done that instead of using legacy technology and doing what’s called a ‘lift and shift.’ That is an expression you’ll hear in enterprise technology where you basically take something that’s not in the cloud, and then you lift it and shift it into the cloud. That’s a recipe for disaster.”

Meghji added: “I just want highlight, very briefly, is we’ve also been what we call ‘regulatory forward.’ We believe that early and ongoing engagement with the regulatory community is critical and we’re very happy and frankly energized by our conversations with various regulators, it’s been a real enabler for us to ensure that we’re building this in the most secure way possible.”

Mobile Offerings at Neocova

Mobile banking is in high demand from consumers today. Many smaller local banks can’t offer digital and mobile products to compete with JP Morgan or Bank of America. These megabanks can and do spend billions on technology, and clearly, the Small-Town bank and Trust cannot. According to Mr. Meghji, Neocova can help smaller banks compete. Neocova allows them to gain access to the Zelle payment network without hiring additional staff. They can also assist these banks in lowering the costs of processing Automated Clearing House payments.

He specifically addressed serving the smaller banks.

“Any technology conversation in that part of the market, in that kind of five towns, three towns, 5-10 branch kind of market is not about technology. I find that if you’re talking to them about technology, you’re missing the mark. Talk to them about how you can enable them to be better bankers, and run more efficient, more effective organizations.”

Mr. Meghji says that when he speaks to Bank executives, they don’t speak much about technology. Instead, he focuses on value and how it impacts the cost of capital, benefits their efficiency ratios, and enables them to manage their internal headcount management.

“I walked all the way down the path of using banker metrics so that we can solve their problems in a way they understand,” he said. “Because if I were to sit down and talk about different algorithmic opportunities, it’s meaningless. They don’t want to hear how the sausage is made. They just want to know it’s a really nice sausage.”

Neocova: Beyond Traditional Tech

Sultan Meghji and Neocova view themselves more as a banking services company that a technology company.

“We aren’t organized like a traditional tech company; we have a Technology Division, basically, and we have what we call banking services. Every single person who works in banking services has had a senior role in a bank or a regulator. It doesn’t matter if it’s been at one of the major accounting firms or they’ve been a state banking commissioner or they’ve been a bank CEO. We are very explicitly making this a company of bankers for bankers, and so we are not trying to change them. We are not trying to put our view of the world on them, we’re not trying to be some crazy Bay Area tech thing to tell them that they’re all going to disappear.”

He added, “We are absolutely 100% committed to the banking industry.”

It has been a long time since anyone made significant inroads against the legacy bank technology providers.

Sultan Meghji and his team at Neocova could make serious progress in this industry.

Interview by Tim Melvin