ClickSwitch Holdings Inc., a Minneapolis financial-technology company that provided a simpler way for banks to sign new customers, will be sold to Q2 Holdings Inc., a publicly traded provider of technology and software for digital banking.

Executives said Thursday the two companies will continue to develop software and processes ClickSwitch pioneered for consumers to carry the automated processes they have at a bank — such as payroll direct deposits and bill payments — over to another bank.

Q2, which is based in Austin, Texas, will maintain ClickSwitch's office in Minneapolis, and ClickSwitch executives and employees will join the larger company. ClickSwitch founder and Chief Executive Cale Johnston will join the strategy office at Q2.

Terms of the deal were not disclosed, but it represents a payoff moment for Johnston, who started ClickSwitch in 2014 at age 26; the venture capitalists behind the company; and the firm's employees, who all had stock options.

"That was really important to me for everyone to feel they had ownership in the company," Johnston said in an interview on Thursday. "We announced it to them on Tuesday and it was very emotional, but at the same time everyone was excited to get on to the next phase."

Johnston was working at an Eden Prairie financial-services company when he heard bankers complain about the obstacle to signing new customers that was posed by the automatic bill-payment services so many people had come to rely on. He struck out to engineer a solution and initially tapped a group of programmers in Duluth to help before getting enough momentum to open an office and hire his own team.

Since taking its process to market in 2015, ClickSwitch has signed more than 450 banks as customers, including 47 in the fourth quarter of 2020.

Some banks use the ClickSwitch service chiefly on their websites, and others use it behind the scenes when a representative signs up a new customer in a branch. For banks, a simple migration of those automated actions, which most individuals build over time, can make the difference whether they can attract a new customer.

Q2, which offers a cloud-based digital-banking platform for banks of all sizes, has some overlapping services with ClickSwitch and approaches many of the same banking customers. Its revenue was just over $400 million in 2020, up 28% from 2019.

Johnston met executives from Q2 during a visit to Texas four years ago and began soliciting advice from them on managing ClickSwitch's growth.

"When we met four years ago, the central thesis of their business was just so sound," said Will Furrer, chief strategy officer for Q2. "Cale and his team were listening to how to you can capitalize on an opportunity. The primary account relationship is the lifeblood of so many banks for so many reasons."

ClickSwitch initially developed a process to migrate automatic bill payments for bank customers, but it attracted more banks after also developing a way to migrate direct-deposit paychecks. In April 2019, ClickSwitch landed T-Mobile's fee-free Money banking service as a customer. That deal raised the Minneapolis company's reputation with the emerging class of digital-only banks, sometimes known as neobanks or challenger banks.

"That really changed the entire landscape for ClickSwitch," Johnston said, noting the firm now works with the largest players in that space and also landed some Tier 1 banks.

Last year, as the pandemic curtailed branch operations at banks, new deal signings plunged for a few months at ClickSwitch. But by the end of the year, it was signing customers at a record pace.

Meanwhile, new competitors emerged, including Plaid, the San Francisco fintech that provides the infrastructure under financial apps such as Venmo. To keep ahead, ClickSwitch identified several new service areas to enter, including providing employment and income verification on behalf of borrowers to prospective lenders.

Johnston and some relatives provided the initial investment in ClickSwitch. He first turned to outside investors in 2018, raising $3.5 million in a Series A round led by Commerce Ventures of San Francisco. ClickSwitch raised another $13 million in 2019 in a Series B from a group led by Commerce Ventures and Point72 Ventures of New York.

The company was contemplating a third round of capital-raising when discussions began anew with Q2.

"My plan is to stay on with Q2," Johnston said. "I'm not done yet growing this."

Evan Ramstad • 612-673-4241