Flagstar builds proprietary platform around regulated banking AI

Flagstar Bank is pursuing proprietary rights over its technology modernization platform and generative AI system, a move chief information and operations officer Chris Higgins said gives the lender greater optionality. The $87 billion-asset bank has applied for a branding trademark for the Flagstar S2 Platform, described as standing for “simple and sophisticated,” after replacing Flagstar and New York Community Bank infrastructures with a single modern foundation.

StarIQ, the bank’s proprietary generative AI system, is part of the S2 platform and has a provisional patent application titled “Techniques for Secure Enterprise Generative Artificial Intelligence Orchestration.” Flagstar said the system “was built specifically for regulated financial services environments,” with security and compliance as priorities. It uses multiple large language models, including Anthropic’s Claude, Meta’s Llama and Mistral.

Higgins declined to say whether Flagstar may license S2 to other lenders, but said his role is “to create optionality.” Mike Kirk of Klaros Group said smaller banks could be candidates for such technology if they lack resources to build comparable platforms. Major banks are also expanding AI intellectual property efforts, with patents filed by major banks rising 78% over the past 10 years, according to Evident AI.

Flagstar did not disclose its total investment in S2 and StarIQ, though Higgins called it significant for a company of its size. The bank’s first-quarter software expense rose 12% year over year, to $47 million, as Higgins said he recruited technology talent to rebuild the bank from the ground up.