A Fintech Filter for Artificial Intelligence in 2017

In what The New York Times is calling The Great AI Awakening and Forbes has dubbed The Year of AI, 2017 is shaping up to be obsessively focused on artificial intelligence, a field that has been around for awhile (remember playing checkers against a computer?) but has finally matured to the point of usefulness.

Because the technology has finally reached its tipping point, AI, and its close relative machine learning, have taken a variety of industries by storm, bringing self-driving Ubers to the streets of San Francisco (and then carting them away); robotic vacuum cleaners to dirty household floors; and natural language processing to chat bots and IVR communications. With AI already embedded into these industries, it’s easy to find examples of how the technology is shaping fintech.

Below are eight areas of fintech into which AI has made inroads. Each area is ranked and rated (out of 5 stars) based on how it is currently influenced by AI and based on AI’s potential to add value.

Robo advisory

  • Fintech example: Robo advisors are built on AI technology, which is used to augment portfolio management and rebalancing decisions typically made by a (sometimes biased) human. To see tens of dozens of these examples, check out our post on B2C wealth tech.
  • Current AI application: 4 stars
  • Potential AI application: 5 stars

AI is already a standard tool in robo advisory. Because the very nature of robo advisors is to replace humans, the potential application of AI in this space is huge, especially when enhanced with machine learning and held accountable using blockchain.

Advisory tools

  • Fintech example: Similar to B2C robo advisory platforms that leverage AI to automatically manage and rebalance users’ portfolios, advisors can automate their clients’ portfolios to minimize human error while still offering a personal touch. Kensho (FEU14) introduced Warren to helps advisors perform quantitative analyses on market data. ForwardLane (FS16) uses AI powered by IBM Watson to offer financial advisors access to quantitative modeling and highly personalized investment advice generally only available to ultra high net worth individuals.
  • Current AI application: 4 stars
  • Potential AI application: 5 stars

Just as AI is already standard in direct-to-consumer robo advisory, so is it with advisory tools, since many were built on the premise of AI.

Fraud detection

  • Fintech example: Multiple card issuers use AI to detect unusual spending activity. Feedzai (FEU14) uses AI combined with machine learning to analyze sets of big data created during a user’s online sessions to mitigate fraud associated with online account opening, payments, and ecommerce.
  • Current AI application: 4 stars
  • Potential AI application: 5 stars

AI is already heavily leveraged for use in fraud detection. Combining it with the blockchain, which can provide an un-editable ledger of events, paired with AI’s ability to analyze large data sets in real time makes it even more powerful.

Underwriting

  • Fintech example: AI can help underwriters create a uniform metric that accurately identifies risk across borrowers. Aire.io (FEU15) leverages the power of AI to create and assign credit scores to thin credit file individuals.
  • Current AI application: 4 stars
  • Potential AI application: 5 stars

The lending industry has already transformed its underwriting practices from relying on large databases to now using AI to analyze large amounts of scattered, unstructured data. Because AI can analyze these data sets in real time, there’s great potential for both borrowers and lenders to benefit.

Regulatory compliance

  • Fintech example: Banks can use AI to quickly scan legal and regulatory text for compliance issues, and do so at scale. IpSoft’s Amelia is a customer service bot that helps banks maintain compliance in conversations with customers.
  • Current AI application: 3
  • Potential AI application: 5

Relying on AI to scan for compliance issues instead of a team of employees helps avoid human error and allows financial institutions to quickly analyze multiple documents and practices. Because it removes human biases and error, AI has great potential in regulatory compliance.

Marketing

  • Fintech example: Marketers can better up-sell or cross-sell banking and finance products by using AI to identify and anticipate client needs. SBDA Group (FEU 16) helps banks leverage their data using algorithms and machine learning to create targeted marketing campaigns for individual customers.
  • Current AI application: 3 stars
  • Potential AI application: 4 stars

Fintech companies have been using AI to draw conclusions from bank data for a few years now, but marketing is an area in which human input still adds a lot of value.

Customer service

  • Fintech example: Firms can leverage AI to identify which clients are at most risk of leaving a bank or advisor. FinovateAsia 2016 Best of Show-winner, Finn.ai (FA16), offers a white-labeled chat bot that integrates into existing messaging platforms such as Line, Facebook Messenger, Alexa, and even the bank’s web chat interface.
  • Current AI application: 2 stars
  • Potential AI application: 5 stars

Banks have been hesitant to adopt chat bots and other AI-based customer service products because the technologies are not quite smart enough. Finn.ai overcomes this challenge by offering a Talk to a Human button at the bottom of the chat interface. This technique, combined with the implementation of machine learning and advanced natural language recognition, makes this space prime for growth in 2017.

Reporting tools

  • Fintech example: Advancements in natural language, along with AI’s ability to analyze large data sets, have made it possible for banks to rely on software to automatically create and distribute reports. Narrative Science (FF13), for example, automates the creation of anti-money laundering reports and allows the bank to adjust for the tone of the writing.
  • Current AI application: 2
  • Potential AI application: 4

We’ve seen AI used to generate reports, both in written and video form, in the wealth management and compliance sectors. However, there is still room for natural language reporting to extend to other forms (such as inside of a chat interface) as well as to other sectors of fintech.


In addition to these eight areas of fintech, there is a miscellaneous category that comprises technology such as ColletAI, which automates debt collection. Check out CollectAI, Comarch, and MoneyHub, along with other AI-based fintech at FinovateEurope next month.

While AI is widespread in many areas of fintech, it is still far from others, such as tax and estate planning, which require complex inputs and decision making. However, bolstering AI in these difficult areas using machine learning, the blockchain, and human intervention offers some potential for growth in 2017.

Since AI is pervasive throughout many sectors of fintech, it may not be too early for your company to begin searching for a Chief Artificial Intelligence Officer.

Fintech Favorites

Featured

  • U.K.-based challenger bank Atom opens to the public. The bank’s iPhone and iPad app is built on the Unity gaming platform and is the only way to access the mobile-only bank. Atom has a customer service team equipped with AI and machine learning, and has bolstered its security using voice and face biometric login. Atom Bank is the first of a handful of U.K. challenger banks set to launch this year, including Mondo, Starling Bank, and Tandem. Atom is headquartered in Durham and is already valued at almost $190 million. Check out Business Insider’s coverage.

Deals

  • Akamai (FEU 15) acquires Soha Systems, which offers secure access as a service for enterprises. This matches well with Akamai’s aim to offer cloud-based services to enterprises, and places it in a good position for a potential acquisition. See our coverage.
  • Jack Henry & Associates (FF 15) collaborates with Visa (FDSV 14) to accelerate P2P payments to debit cards. This may help banks compete with other services that have sped up settlement times, such as Zelle (formerly clearXchange) and Venmo (FS 13). See the press release.

Milestones

  • IBM (FF 16) announced a $200 million investment for a new global headquarters for its Watson IoT business. The headquarters will be located in Munich and is one of IBM’s largest-ever investments in Europe. This move is part of a $3 billion initiative to bring Watson’s computing expertise into the world of IoT. See IBM at FinDEVr Silicon Valley, 18/19 Oct 2016. See VentureBeat’s coverage here.
  • Banking Technology reported that Misys (FEU 15) is preparing to issue an IPO in Nov 2016 with a $6.9 billion float. Advisory firm Moelis will be overseeing the move. Misys was delisted from the London Stock Exchange in 2012 when it merged with Turaz. Misys CEO Nadeem Sayed says going public is a “logical step in our evolution.” See Banking Technology’s coverage.
  • Aire (FEU 15) raised $2 million. Along with the funding announcement, the alternative credit-scoring platform announced it is now authorized and regulated by the Financial Conduct Authority (FCA), the U.K.’s financial regulator. This places it on a more level playing field to compete with the big three credit bureaus. See our coverage.

Tech

  • Thomson Reuters (FF 12) unveils blockchain-dev platform, BlockOne ID. Built for Ethereum, BlockOne ID is an experimental framework in which app owners can manage access to their blockchain contracts in a controlled environment. See Banking Tech’s coverage.

Aire Raises $2 Million, Receives Regulation from the Financial Conduct Authority (FCA)

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Alternative credit-scoring company Aire is a London-based startup that shows no sign of “Brexiting” any time soon. The company just closed an additional $2 million in funding, adding to the funding round it closed in April.

Today’s round was led by White Star Capital alongside Sunstone Capital and Accion Venture Lab and brings Aire’s total funding to $7 million. The company plans to use the new funds to expand its platform into new markets.

Aire announced it is now authorized and regulated by the Financial Conduct Authority (FCA), the financial regulator in the U.K. If you’re not familiar with the FCA, this is a pretty big deal for a startup. Receiving FCA authorization brings Aire onto a level playing field with the big-three credit bureaus.

In a statement, Aire co-founder and CEO Aneesh Varma said:

It’s a huge step for us and also for credit scoring. We strongly believe that lenders and their customers need a fairer and more accurate way to assess creditworthiness […]. As things stand, genuine hard-working people are being penalized by the way credit scores are created, and that’s not good for growth, innovation or well-being. We believe we have a solution to address this issue, balancing the numerous forces at play across data, ethics, regulation and technology.

Aire seeks to democratize access to credit by gathering meaningful data about potentially credit-worthy clients via an online interview and other reliable sources. By using artificial intelligence, the company processes the data to qualify users for credit. The company also helps lenders by expanding the pool of qualified applicants. Although Aire is currently focused on working with personal loan and credit card lenders, it plans to broaden its range of financial products.

Founded in 2014, Aire launched its API at FinovateEurope 2015 in London. In April the company was recognized in the European Fintech Top 100 list at the 2016 European Fintech Awards. Most recently, the company was featured in Tech City News magazine for its use of artificial intelligence.

Finovate Alumni News

On Finovate.com

  • Fintech Favorites: A Roundup of Top Stories in Fintech
  • Aire Raises $2 Million, Receives Regulation from the Financial Conduct Authority (FCA)

Around the web

  • India-based HDFC Bank selects Backbase to implement its digital banking platform.
  • Inc. Magazine features entrepreneur and veteran Blake Hall, CEO and co-founder of ID.me.
  • Neustar appoints Nick Hulse as chief revenue officer.
  • Kristina Campbell joins PayNearMe as chief financial officer.
  • Fiserv collaborates with CoreLogic to provide enhanced loan-modification technology.
  • Xero teams up with Barclays to improve access to transaction data for U.K. businesses.

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.

Finovate Alumni News

On Finovate.com

  • Revolut Lands $8.7 Million, Launches Crowdfunding Campaign
  • Spiff Raises $150,000; Adopts Tech Talent from Fink

Around the web

  • Asset TV interviews CEO Tony Aguilar, founder, Student Loan Genius.
  • Business Quarter profiles Ormsby Street MD, Martin Campbell.
  • TechCityNews features Aire in an issue devoted to artificial intelligence.
  • TickSmith upgrades its TickVault Platform with file inventory module.
  • Bank Info Security interviews Fiserv anti-fraud specialist, Andrew Davies.
  • CNBC column on financial fraud and retirees quotes Liz Loewy, general counsel for EverSafe.
  • Bill.com launches Bookkeeping Accelerator Program.
  • CNBC features Moven founder and CEO Brett King speaking about his newest book, “Augmented: Life in the Smart Lane.”
  • Kasasa Named One of the Best Places to Work in Austin for a Second Consecutive Year.

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.

Check Out Who Took Home Top Honors at Last Night’s European Fintech Awards

GroupPhoto(Photo credit: http://www.fintech.nl/)

Last night in Amsterdam the 2016 European Fintech Awards celebrated innovators shaping the future of finance. A total of nine awards were presented to companies selected by a panel of judges for the quality of their pitch.

Four of the winners are Finovate and FinDEVr alums, including BehavioSec, who won the overall award of Best European Fintech Company of 2016:

BehavioSec
Category: Risk, Intelligence, and Security
HQ: Stockholm, Sweden
Founded: 2009
FinovateFall 2015 demo
FinDEVr San Francisco 2015 presentation

Backbase
Category: Innovative Banking Software
HQ: The Netherlands
Founded: 2003
FinovateEurope 2016 demo

Kreditech
Category: Financial Inclusion
HQ: Hamburg, Germany
Founded: 2012
FinovateSpring 2014 demo

Xpenditure
Category: Best of Show, selected for the best pitch
HQ: Mechelen, Belgium
Founded: 2011
FinovateEurope 2016 demo

A total of 29 Finovate and FinDEVr alums were recognized in the European Fintech Top 100 list. Companies awarded on this list were selected by a combination of online public votes (weighted 25%) and a panel of judges (weighted 75%).

  • AdviceGames
  • Kantox
  • Aire.io
  • Klarna
  • AMP Credit Technologies
  • Kontomatik
  • Azimo
  • Kreditech
  • Backbase
  • Mambu
  • BehavioSec
  • mBank
  • Cloud Lending Solutions
  • Meniga
  • ebankIT
  • Nutmeg
  • eToro
  • Qumram
  • ETRONIKA
  • Scalable Capital
  • eWise
  • SmartEngine
  • Fenergo
  • TransferWise
  • Holvi
  • Trustly
  • IdeaBank
  • Zopa
  • InvoiceSharing

The European Fintech Awards are organized by Amsterdam-based publishing company Alex van Groningen BV. The company offers a great explanation of the awards: “The purpose of the FinTech awards is not to scientifically prove who are the best FinTech companies. The judging is primarily based on the judges’ individual ideas and views on the nominating companies using their expertise, knowledge and ideas.”

Aire Receives Funding from Accion Venture Lab

AireHomepage2016

Aire, a startup that democratizes access to credit, received funding from Accion Venture Lab, a $10 million nonprofit initiative dedicated to building a financially inclusive world. The amount of the investment was undisclosed; the company stated it prefers to focus on the strategic partnership with Accion.

Aire boasts previous funding from Barclay’s Accelerator, Techstars, and SparkLabs Global Ventures. The London-based company gathers meaningful data about potentially credit-worthy clients via an online interview and other reliable sources. It uses artificial intelligence to process the data and qualify users for credit. The company also helps lenders by expanding the pool of qualified applicants.

Co-founder and CEO Aneesh Varma, who we interviewed earlier this year, launched the company in 2014 after he personally experienced the difficulty of accessing credit, despite being a credit-worthy individual. In a press release, Varma commented on the funding:

Accion Venture Lab has been very supportive of our research and product since our early years. I am really glad to have them come onboard now as we start our international expansion.

Aire, which launched its API at FinovateEurope 2014 in London, plans to use the funding to fuel international expansion.

Finovate Alumni News

On Finovate.com

  • “Aire Receives Funding from Accion Venture Lab”
  • “Refund.me Brings its Air Travel Compensation Service to Business”
  • “Credit Sesame Launches SnapLoan, The Amazon One-Click for Consumer Loans”

On FinDEVr.com

  • “Envestnet | Yodlee Unveils its Risk Insight API”

Around the web

  • Global Debt Registry announces plans to bring loan-validation technology to marketplace lending industry.
  • CryptoCoinNews takes a look at recent funding for Stratumn, a blockchain development platform.
  • P2Binvestor teams up with independent adviser, MW Eaglewood Americas.
  • Locavesting profiles StreetShares, which in mid-May will begin lending to small businesses.
  • Crowdfund Insider interviews Cloud Lending CEO Snehal Fulzele.
  • Cachet Financial and Ingo Money renew partnership.
  • Ripple adds former HSBC payments executive and SWIFT board member, Marcus Treacher, as its new global head of strategic accounts.
  • LendKey announces it has underwritten, originated, and deployed more than $1 billion in capital to borrowers.

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.

Finovate Alumni News

On Finovate.com

  • “Welcome to Day One of FinDEVr New York”

Around the web

  • Irish Tech News interviews Bryan Clagett, Geezeo CMO.
  • The Columbus Dispatch profiles Klarna and its efforts to make online commerce easier.
  • New York Times column on companies helping employees retire student debt features Tuition.io.
  • BankNXT Fintech Podcast chats with Aire founder, Aneesh Varma.
  • GMC Software introduces its Inspire Mobile Advantage solution that helps create a responsive, interactive and regulatory-compliant mobile experience.
  • Vera launches new IRM-as-a-Service platform to allow developers to use Vera’s SDK.

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.

 

CEO Interview: Aire.io’s Aneesh Varma

AireHomepage2016

Aneesh

We recently caught up with Aneesh Varma, founder and CEO of Aire.io, for an interview. Varma launched the London-based company in 2014 to help thin-file customers qualify for essential financial products.

He graduated from Lehigh University as an engineer with a secondary degree in quantitative finance, and in 2014 was nominated as the European Commission’s Entrepreneur of the Year.


Finovate: What is Aire doing that its competitors are not?

Varma: At Aire, we don’t focus on competitors. We instead are focused on building the best product based on our core principles of what we would like to see in the world.

One such core principle at Aire is to go beyond just the data, and understand the story of the applicant. Many companies these days get carried away by big data—throwing 20,000 data points at the problem. But in reality it can lead to situations such as Ben Bernanke not being able to re-mortgage when he changed jobs. The ‘data’ was changing jobs; the ‘story,’ however, was still that he had a strong income.

At Aire, our research has been focussed on leveraging artificial intelligence and the cognitive sciences to evaluate more meaningful and deeper data. Understanding the individuality of each applicant and not relying on population-based statistics.

All of our personal data comes directly from the user—via our virtual interview, done in an adaptive interface. It’s like having a human underwriter to interview every applicant, but automated, so we can run it at scale with real-time scoring.

This is really powerful, as the Aire process can score anyone without any dependency on external data. This is especially important as we expand into new geographies.

AireMultichannelAire’s multichannel application form

Finovate: What is the biggest challenge Aire faces in achieving its goal of offering fair access to finance?

Varma: The work we are doing at Aire is really personal to us. In many ways, we have ourselves been victims of the cracks in the current system of credit scores. We know what it means to be financially excluded. It’s really tough.

Our work is to onboard more lenders who share the same ethos as Aire about ensuring people aren’t getting marginalized just because they don’t fit into the standard boxes.

We know the Aire product works. Over the last few months, we have been able to observe empirical evidence data of our performance, and it is really phenomenal how we can boost acceptance up to 14% while still ensuring over 90% of candidates get through our process.

It’s a changing world. More and more of us are going to be self-employed, become freelancers and or migrate to other countries. We shouldn’t be left out.

Finovate: How do you engage with developers?

Varma: Ours is a startup with a purpose. We are solving a real problem—and, in fact, a really hard problem. There is no hype to our work. It is pure performance which is why we have to carefully leverage technology, research and human emotions to build a great product.

This attracts a very particular type of people who genuinely care about making an impact with their work. This really has become part of the DNA of our company.

For most of us in the team, this is our second or even third startup. And we constantly trying to optimize on everything we have done in the past. Most importantly, we focus on culture and hiring the right people.

We have a very rigorous hiring process over six stages. But once someone gets through that, we provide one of the most exciting work environments in London. You are surrounded by leading experts in each field and get to learn from them. And even teach them a few tricks! Perhaps a reason why we are attracting some great minds to join us on this journey (and a place on the European breakout list via Scott Sage).

Finovate: What’s on the horizon for Aire in 2016?

Varma: The biggest push now is to take our product to more people, in more markets. North America is next on the horizon, and we are launching there shortly. The emerging markets are also relevant, and we are starting to prepare the groundwork there.

Naturally, ongoing research is very important to improve our product. We continue to invest in research across the various fields that will enhance our offering for new markets, including fellowships with our partner universities. Ultimately, there are going to be multiple versions of how we end up delivering our scoring product to consumers.

And other than that, it’s about focussing on hiring great people. This problem we set out to solve requires not just engineers and scientists, but people across various disciplines. We have baked that into our culture as a company. So a major part of my role ends up looking at how to bring together various people to collaborate as we invent new dimensions to our product.

At FinovateEurope 2015, he debuted the Aire Credit API which enables lenders to use Aire to check credit for a thin-file client.