HelloWallet Acquired by Morningstar in $52.5 Million Deal

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It’s been a week of exits for Finovate alums.

Earlier this week, we reported on the news that Check had been acquired by fintech giant, Intuit. Today we learn that HelloWallet, a Finovate alum from FinovateSpring 2011, has just been purchased by Morningstar.

The total value of the deal is $52.5 million. But because Morningstar already had invested in the PFM startup, the company will have to pay only an additional $39 million for HelloWallet.

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HelloWallet has been referred to as part of the Mint-like world of personal finance management solutions. The technology leverages artificial intelligence and behavioral analysis to better understand how we process financial information. This research is incorporated into HelloWallet with the goal of providing highly personalized, prospective financial guidance to American workers and employees.
“We show both the past as well as the future,” said HelloWallet CEO Matt Fellowes during his demonstration of the technology at Finovate.
The level of granular detail available is one of of the pluses of the HelloWallet platform. Matt suggested that in his experience as a consumer financial specialist, he has seen how missing the smaller expenses is often what undermines most people’s ability to plan for their financial future. HelloWallet responds to this not only with the amount of detail it provides, but also with 100s of personalizable recommendations ranging from budgetary suggestions to goal-setting to tactics for boosting income.
HelloWallet’s business model sets itself apart from its peers and rivals by focusing on businesses and their employees rather than on financial institutions and their customers. This approach appears to have paid off for HelloWallet, which says it has more than 350,000 subscriptions to its service, and claims to have provided guidance to more than one million American working families.
The synergies between Morningstar and HelloWallet lay in the potential to develop what they call “holistic” retirement solutions. Morningstar is a juggernaut in the world of equity and mutual fund information and analysis, and is the largest provider of managed retirement programs in the U.S.
In a blog post at HelloWallet, the company emphasized that the acquisition will help rather than hinder or complicate HelloWallet’s project. They wrote:
“Most important to know is that Morningstar is fiercely independent and committed to amplifying HelloWallet’s mission to democratize access to holistic financial guidance for American workers.”
HelloWallet has had a busy 2014. The company launched its Insights app in February, and has announced partnerships with Aon Hewitt and Vanguard to bring financial wellness solutions and better retirement planning to American workers.
Founded in 2008 and based in Washington, D.C., HelloWallet launched its technology in May 2011. See a video of the company’s FinovateSpring 2011 demo here.

Finovate Alumni News– May 30, 2014

  • Finovate-F-Logo.jpgThreatMetrix wins Judges Choice for Best Overall Fraud/Security Solution at 2014 CNP Awards.
  • HelloWallet acquired by Morningstar in $52.5 million deal.
  • PandoDaily takes a look at Venovate and its platform for enabling alternative investments.
  • Gonzobanker lists five ingredients in his Franken-banking product: all Finovate alums in Q2ebanking, Digital Insight, ACI Wordwide, and Alkami Technology, and Jwaala.
  • Fast Company profiles NICE Systems in a new feature on voice biometrics.
This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

FinovateSpring: Behind the Scenes with ChiaraMail, Dealstruck, and LendingRobot

In continuing our Behind the Scenes followup from FinovateSpring 2014 in San Jose, we’re taking a closer look at:

If you missed previous posts, you can check out previous Behind the Scenes with:

We’ll have further coverage next week, so stay tuned!



ChiaraMail

ChiaraMail

What they do
ChiaraMail makes email communication more secure and lightweight to enable financial institutions to communicate sensitive account details via email. It uses Envelope Content Splitting to send the subject of the email separately from the contents of the email. 
This separation, which stores the body of the email on a separate and secure server, also enables institutions to send large files, as well as lets them change the contents of the email after it has been sent.
For an extra layer of security, it uses an email plug-in that indicates the bank’s authenticity to the end user with a color-coded subject line.
Stats
    • Founded November 2012
    • Launched in April 2014 at FinovateSpring
The experience
ChiaraMail’s solution hinges on its Envelope Content Splitting (ECS) technology which allows two parties to communicate sensitive information directly in the body of the email. It can also communicate limited-time offers that the bank can update after the message is sent, and can send items that may be too large to send via email, such as a promotional video. 
The screenshot of the email below, which uses ECS, shows how a bank can communicate sensitive account information in the body of the email.
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For the customer to get started, they first must download the ChiaraMail Android extension or plug-in on their computer (the company is working on an iOS version). The extension requires a one-time username and password. After it is set up, there is no need for the user to sign in each time, since it is embedded into their email client.
ChiaraMail install screen Android
Once the extension is on their device, fraudulent emails are indicated with red text in the subject line, while secure emails appear with a green subject line. If a fraudulent email is selected, the user sees a customized error message.
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ChiaraMail can be useful for internal and external email communications. It is ideal for retail banks that want to ensure they are not being spoofed, and insurance brokers sending sensitive information back and forth with their customers. 

While ChiaraMail is currently focused on FIs, other potential uses include companies in healthcare, online retail, and medical verticals. Overall, it is ideal for any company that wants more control over their email communications, both internal and external.

Check out ChiaraMail’s live demo video here.


What they do
Dealstruck’s P2P lending platform is designed to progressively graduate small business borrowers who can’t qualify for a bank loan on to conventional financing sources. You can think of it as the step between predatory loans and a traditional loan for business financing. 
Dealstruck is unique because it pre-funds all of the deals on its platform; this practice allows the borrower to receive funding within four days. After the business receives funds, Dealstruck opens the investment for the crowd to fund it. 
Stats
    • 15 employees
    • For borrowers seeking $50,000 to $250,000 in financing
    • Offers 10% to 30% yields
    • Terms range from 12 to 36 months
The borrower experience
First, Dealstruck determines what amount the borrower qualifies for based on the information they supply about their funding goals, their company, personal information about the owners, and business financials.
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Next, the borrower is presented with potential loan options and are asked to verify their information and to provide financial documents and bank statements.
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Once the borrower supplies all the information, Dealstruck’s team of underwriters reviews
it in two business days, then calls the applicant to discuss their financing options. Financing is generally provided within four business days.
 
The investor experience
The investor dashboard shows the user how much money they have available to invest. They can view how their portfolio breaks down and can see details about their investments and their returns. 
The doughnut chart shows them how their investments are divided. The chart in the below screenshot divides the portfolio by industry. Investors can also toggle to view their investments by how many years the borrowers have been in business.
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Investors looking for additional opportunities can view all borrowers in a list. The slide bars on the left enable them to filter by the business’ annual revenue and by the number of years they’ve been in business.

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Dealstruck works to keep its process fast, flexible and transparent for all parties involved. Its new API that gives institutional investors access to all borrower data, and helps them tailor decision-making criteria, supports this goal. 
What they do
LendingRobot uses a proprietary algorithm to determine available and profitable P2P loans within one second and immediately invest on behalf of the user. Right now, it can invest users’ available balances in their existing Prosper and Lending Club accounts, and is working on supporting more platforms. 
LendingRobot serves as a middleman to reinvest users’ account balances so quickly that it is able to access loans that potentially have better returns than the ones users were previously accessing.
Stats
    • Charges a 0.45% per year fee
    • No minimum investment requirement
    • No setup fees
The experience
LendingRobot pulls details about loans listed on Prosper’s and Lending Club’s P2P lending platforms. To get started, the user links their Prosper or Lending Club account. In our case, we had to set up a separate API login password through Prosper before proceeding.
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Users can view a list of all loans on LendingClub and Prosper accounts, as seen below, but LendingRobot recommends using its automated investment tool, which selects the best investment opportunities within seconds.
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Those using the automated invest feature can select the types of loans they are interested in. For example, they can choose the amount, term, loan purpose, and expected return. 
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This automation massively simplifies the investment process, while aiming to get higher returns for users by helping them invest more quickly, thereby beating other investors to loans with potentially better returns.

Stay tuned later this week for more behind-the-scenes features.

Swipely Raises $20 Million in Series C Round Led by the Pritzker Group

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It was only a few weeks ago that we were reporting that Swipely had topped $2 billion in annual sales managed.

Today, we’re happy to add news that the payment marketing innovator has raised $20 million in funding.

The Series C round, led by the Pritzker Group, takes the company’s total capital to more than $40 million. Also participating were existing investors First Round Capital and Shasta Ventures. The new capital is slated to help the company accelerate growth, boost product expansion, and enhance marketing.
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Pritzker Group managing partner Chris Girgenti has credited Swipely for “help(ing) small business use big data to compete in the networked age” and for “bringing online technology to offline merchants.” Swipely specializes in helping small businesses use their credit and debit card transaction data to provide better and more relevant offers and rewards for their customers.
The company’s solution includes customer analytics, targeted campaign-building tools, and payment processing that is “baked into the core of Swipely’s platform,” according to Swipely CEO and founder Angus Davis. This last feature is what gives the technology the ability to tap into the Big Data buried in the local merchant’s payment network.
“Not every consumer will opt-in to a loyalty program,” Angus explained from the stage during Swipely’s Finovate demonstration. “And so that’s why we’re also bringing powerful tools to the merchant not just from the data we glean from opted-in loyalty members, but from every credit and debit transaction that passes through that merchant.”
Reporting from TechCrunch includes some interesting, SaaS-related KPIs that Angus uses to help explain how well positioned his company is in his industry. The upshot is that Swipely is managing to keep a very healthy ratio between revenues and the costs of acquiring new companies.
Swipely was founded in 2009, and has operations in more than 40 states and more than 50 cities in the United States. Based in Providence, Rhode Island, Swipely is an alum of the FinovateSpring 2012 show in San Francisco. See a demo of the company’s Marketing Management technology here.

Dwolla Launches Next Day Transfers for Small Businesses

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For alternative payments network Dwolla, life is about finding ways around the traditional, slow ACH system. In a new development today, the company announced that it is launching Next Day Transfers.

The new service aims to help SMBs replace paper checks, mitigating the estimated $13 billion spent annually on paper check operations. The Next Day Transfer service will reduce bank transfers in and out of the Dwolla network to as little as two business days.

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Here are the highlights:

    • Deposits to Dwolla are three times faster
      Qualifying business, nonprofit, and government accounts can receive transfers from a bank account to their Dwolla account three times faster than a typical ACH transfer.
    • Next-day bank withdrawals
      For all users, transfers from a Dwolla account to their financial institution may be transacted as soon as the next day.
    • Dwolla-to-Dwolla transfers are still instant.

To facilitate SMB’s conversion to digital money transfers, the Iowa-based payments startup is also providing a Business Payments Toolkit, which aims to offer a turnkey solution to help companies switch from paper checks to Dwolla’s API.

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To learn more about Dwolla, check out their latest live demo from FinovateSpring 2012.

If you’re interested in seeing more payment APIs, check out FinDEVr this fall.
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Finovate Alumni News– May 29, 2014

  • Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Finovate-F-Logo.jpgChina Loves Mambu: Microfinance Network Picks Cloud Banking Platform for SME Lending.
  • App Annie Acquires Distimo; raises $17 Million from Current Investors.
  • SumUp launches its own chip and PIN reader, PIN+, in Poland and Switzerland.
  • Credit Sesame launches mortgage rate marketplace.
  • DemystData brings in $5 Million for its Big Data API for financial institutions.
  • NHS Shared Business Services selects Tradeshift platform to enhance supply chain.
  • Actiance announces general availability of Alcatraz, a cloud-based, Context-Aware archive for email, social, and other communications.
This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

The Rise (finally) of Online Specialty Lenders

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One thing that always struck me as odd about the financial services startups of the late ’90s and early 2000s was their obsession with deposits. I can understand the appeal of having people send you money; it’s a rock-solid, low-risk part of the banking business model. But it also contains massively entrenched players who already have the consumers’ trust, along with a vast branch network to back it up. And it’s a commodity.

The much bigger opportunity for newcomers, to my thinking, is to go after the loan side. Consumer trust is almost a non-issue since you are handing them the money. And loan underwriting is both an art and a science with thousands of variables to innovate on. 

But it’s a dicey area for investors. The economic downturn of 2000-2002 spooked the VCs as dotcom-darling NextCard went belly up (as did other non-online, sub-prime lenders). Then the big hit in 2007/2008 killed whatever business plans had been drawn up in the post-2002 period. And there will always be concerns about where to find more funds to lend out, especially in the post-securitization world.

Fast-forward seven years. We are finally seeing an explosion of consumer and small business lending online (with mobile coming on). This newfound activity is being led by the so-called crowdfunders and P2P lenders tapping institutional money along with accredited investors (and VCs) to deliver capital using a mix of debt and equity terms.

Another specialty lending area exploding online is secondary educational financing (note 1). For example, Sofi started by targeting graduates of elite U.S. universities. CommonBond is focusing on graduate students. ProdigyFinance lends to international MBA students.

The latest entrant in the educational space is CoderLoan (screenshot below). The NYC-based startup is working with employers and educational institutions to help finance participants in coding bootcamps, where tuition can run $10,000 for a summer-long program. Employer sponsors can repay the CoderLoan after a set amount of time on the job. Or the graduates themselves can afford to repay the loans with their developer-level salaries.  

Bottom line: The uptick in digital specialty lending is win-win-win. There are potentially good returns for investors (note 2) while more capital flows to both entrepreneurs looking to expand and employees wanting to sharpen skills. Ultimately, that leads to a more productive and engaged workforce and a more rigorous economy. 

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CoderLoan homepage (link, 27 May 2014)

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Notes:
1. For a 38-minute discussion on crowdfunding student lending, check out the panel at the Lendit conference in San Francisco three weeks ago (link). The panel included Vince Passione, LendKey; Mike Cagney of SoFi; David Klein of Commonbond; Cameron Stevens of Prodigy Finance; and Brendon McQueen of Tuition.io.
2. Most of the activity is too recent to fully understand whether the risk is being priced adequately (see NextCard in 2002), but the results from the earliest entrants — Zopa, Prosper and Lending Club — are promising.
3. For much more on crowdfunding (debt and equity), see our May 2013 report (subscription).

App Annie Acquires Distimo; Raises $17 Million from Current Investors

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An acquisition and $17 million in new funding mark a busy morning of big announcements for mobile-app analytics specialist App Annie.

Let’s start with the money. Existing investors Greycroft Partners, IDG Capital Partners, and Sequoia Capital are responsible for the latest round of funding for App Annie, which now has $39 million in total capital. According to the company, the additional investment will help spur new product development, and support entry into new markets.

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And speaking of new markets, App Annie’s acquisition of its European-based rival, Distimo is likely to help the company reach potential clients where Distimo has been dominant. Unsurprisingly, a share of the new investment will go toward helping finance the purchase.
The acquisition will more than double App Annie’s workforce (from just over 100 to more than 240), and Distimo’s Netherlands headquarters will be repurposed as a research and development center for the company. The combined entity will have almost 600,000 apps relying on their platform and nearly 270,000 registered enterprise users. Terms of the acquisition were not disclosed, although the deal is reported to have been a combination of cash and stock.
Read some interesting backstory on how the deal came together in this blog report from Lizette Chapman of the Wall Street Journal’s Venture Capital dispatch. 
Between its Store Stats, Analytics, and Intelligence, App Annie’s technology is widely used by app publishers and developers, including more than 90% of the top 100 grossing iOS publishers. The company’s solutions provide valuable data and analytics on metrics like downloads, revenues, and rankings, and also track reviews.
Based in Beijing, China, with offices in Hong Kong, Tokyo, Seoul, San Francisco, and London, App Annie was founded in March 2010. Bertrand Schmitt is CEO. The company demoed at FinovateAsia 2013 in Singapore. See a video of the presentation here.

DemystData Brings in $5 Million for its Big Data API for Financial Institutions

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For DemystData, big data is more than just a buzz word. The New York-based company focuses on improving financial institutions’ access to information to optimize interaction with customers.

The company announced today it raised $5 million in a Series A investment. Investors include:

    • Notion Capital
    • SingTel Innov8
    • Arbor Ventures
    • P2P Equity Partners
    • Errol Damelin (UK-based Wonga founder)

DemystData previously received two investments of undisclosed amounts.

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The company’s software aggregates data from multiple sources in real time to build customer profiles. Institutions use these profiles to make better decisions. DemystData is processing more than 30 million profiles for financial clients, which include some of the largest, global P2P lenders in the U.S. and U.K., as well as leading banks in AsiaPacific.

Using this new investment, DemystData plans to continue its global growth while expanding its team. Additionally, it hopes to further enhance its API.

To learn more about DemystData, check out its FinovateAsia 2012 demo video, where it debuted Credit-in-a-Box. Interested in this and other back-end systems for FIs? Pick up your ticket to FinDEVr to check out more.

China Loves Mambu: Microfinance Network Picks Cloud Banking Platform for SME Lending

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Global microfinance network Opportunity International (OI) has selected Mambu as its core banking platform for small business lending in China.

According to OI CIO Robert Westcott, the fact that Mambu would help them launch more products and services to more clients faster and more efficiently was a key selling point. OI China is particularly interested in reaching markets in rural areas of the country and, as both cloud-native and mobile-friendly, Mambu’s technology was viewed as the “perfect solution.”

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Mambu, in the words of company CEO Eugene Danilkis, is a “cloud, SaaS, core banking application” that enables a variety of types of financial organizations to launch and service loan and deposit products. With an emphasis on speed, scalability, and simplicity, Mambu is designed to respond to what Eugene says is the “nearly two-thirds” of SMEs – and micro businesses – that are not well-served by “inflexible” legacy banking systems.
Opportunity International provides SME loans ranging from $20,000 to $1 million USD. The non-profit organization employs more than 17,000, and provides financial services and training to more than 5 million clients in 22 countries.
Mambu currently works with more than 100 institutions in 30 countries around the world, representing more than one million accounts. The company was recently in the headlines with news that the micro finance program at Yale University had adopted its platform. Mambu demoed its technology at FinovateAsia 2013 in Singapore.