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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Citizens Savings Bank and Trust, the oldest African-American-owned bank in the U.S., is the latest regional FI to partner with Computer Services Inc. (CSI) in order to offer its customers a range of digital banking services.
“We always want to honor and cherish the history and legacy we have, but we must also lead our team and our organization toward the future,” Citizens Bank president and CEO Sergio Ora said. “We can be very committed and passionate about our vision and mission, but in order for us to help people develop financial independence and wealth equality, we must have the resources and technology. CSI will play (an) integral role in giving us that.”
Founded in 1904 by a trio of African-Americans in Nashville, Tennessee, the originally-named One-Cent Savings Bank and Trust Company was dedicated to serving black Americans in the wake of the Civil War and, more directly, the collapse of Reconstruction. Still serving the community over 100 years later as the oldest, continuously operating African-American-owned bank in the U.S., the firm changed its name to Citizens Savings Bank & Trust in 1920. By 1946, the bank had reached $1 million in capital and deposits and, by 2014 arrived at its goal of $100 million in assets.
“For more than 100 years, Citizens Bank has never faltered in its mission to provide financial opportunity to individuals and communities who have been overlooked and underserved,” David Culbertson, president and COO of CSI, said. “We are honored that this important and vibrant institution chose CSI to deliver innovative solutions that will help its customers grow wealth, solidify their businesses and make their dreams come true.”
Citizens Bank will deploy Computer Services’ core banking platform NuPoint. The solution was cited last year in Aite Group’s core vendor report and praised for its “excellence in user experience” and ability to improve internal reporting. “CSI’s newly redesigned core banking platform … stands out from its competition as a result of its modern look and feel, graphics, and innovative way of displaying banking relationships,” Aite Group senior analyst David Albertazzi said last spring.
Headquartered in neighboring Kentucky and founded in 1965, Computer Services Inc. provides digital banking, cybersecurity and IT, and regulatory compliance solutions to financial institutions and corporations around the world. Last month, CSI teamed up with Finovate alum Featurespace to launch a new anti-money laundering solution, WatchDOG AML. Also in December, the company announced a partnership with Iowa-based Premier Bank – who will also deploy CSI’s NuPoint solution.
Two of Finovate’s most innovative alums – open finance/Money Experience specialist MX and financial data infrastructure company Hydrogen – have teamed up in an integration partnership that will make it easier for fintech developers to create sophisticated apps in minutes.
With access to account aggregation and enhanced data courtesy of MX’s financial data APIs, Hydrogen’s clients will be able to embed and secure accurate financial data connections into their solutions. The integration, according to Hydrogen, will improve the efficiency and cost savings of the development process by more than 80% – a major goal of the integration.
“We are very excited to formally launch this partnership with MX,” said Mike Kane, co-founder of Hydrogen. “As we tackle the enormous, embedded finance opportunity, our combined years of experience in working with financial institutions and technology companies made this a natural partnership for us.”
As part of the agreement, users of Hydrogen Money and Cards solutions (supporting PFM/BFM and card issuance functionality, respectively) will also be able to access additional MX solutions, including the company’s automated financial management and ML-powered insights, as well as MX’s account connections for money movement.
Calling the partnership a “perfect match on so many levels,” MX EVP of Partnerships Don Parker said that working with Hydrogen will help MX grow in the embedded finance market, which he called “an increasingly important opportunity” for the company. “The partnership opens up MX functionality to even more fintech companies and organizations that are already working to improve financial strength and access to quality financial tools,” Parker said.
Lehi, Utah-based MX most recently demonstrated its technology at FinovateFall in 2019. The multiple-time Best of Show winner showed how its MX Enabled platform helps financial institutions add to their product offerings by linking them with third-party fintechs through MX’s API ecosystem. More recently, MX forged partnerships with VyStar Credit Union and credit education company Borrowell. This spring, the company discussed how it developed a free, open-sourced loan application portal to facilitate PPP funds at the onset of the global health crisis.
Hydrogen made its Finovate debut in London in 2018. Headquartered in New York, the company announced a strategic investment from FINLAB, a new incubator created by EML Payments, back in November. Also last fall, Hydrogen announced that it had been selected for Plug and Play’s 2020 Winter fintech cohort, and unveiled partnerships with fellow Finovate alum Dwolla and market data services provider Barchart.
With a Democratic administration only weeks away from taking office, some are wondering about the prospects for a revitalized Consumer Financial Protection Bureau (CFPB). Created during the last Democratic administration – and largely sidelined during the now-ending Trump administration – the CFPB has found itself back in the fintech headlines in recent days.
PayPal Takes On CFPB Over Card Rules
A federal judge brought resolution to a lawsuit PayPal filed against the Consumer Financial Protection Bureau in December 2019. U.S. District Court Judge Richard Leon agreed with PayPal that the CFPB had overstepped its authority in its effort to regulate prepaid cards and digital wallets. PayPal had asserted that in forcing them to include “short form” fee disclosures that included categories that were not relevant, the CFPB’s rule was confusing customers. What’s worse, customers were being led to believe, PayPal claimed, that they were exposed to a wide variety of potential fees – which was not the case.
The situation seems almost to be one of mistaken identity. The rules being applied by the CFPB with regard to expenses like ATM balance inquiries make sense for providers of reloadable prepaid cards, but not for PayPal, which does not subject its customers to these fees. That said, it was the CFPB’s rule-making authority itself that was the target of what Reuters described as a judicial “decision studded with exclamation points.”
PayActiv Wins Earned Wages Access Approval
Meanwhile, the Consumer Financial Protection Bureau’s aim seems to be more true in the case of of earned wage access. PayActiv, Finovate alum and innovator in the earned wage access space, announced last week that its program is exempt from Federal lending laws per new regulations established by the CFPB.
The key issue was whether or not PayActiv’s Earned Wages Access (EWA) program, which enables workers to get access to their already-earned wages in advance of scheduled paydays, involves credit. If it did, the program would be subject to the Federal Truth in Lending Act, as well as Regulation Z.
Fortunately, the CFPB ruled that “the accrued cash value of an employee’s earned but unpaid wages is the employee’s own money” and, as such, does not create a debt obligation. PayActiv added that the approval was both the first of its kind from the CFPB and specific to PayActiv’s EWA program. The CFPB added that the company’s initiative was an “innovative mechanism for allowing consumers to bridge the gap between paychecks (and) differs in kind from products the Bureau would generally consider to be credit.”
PayActiv co-founder and CEO Safwan Shah called the approval a “watershed moment” for his company. “We are very proud that the CFPB has recognized this important innovation and validated PayActiv’s pioneering work in creating low or no-cost employer-sponsored access to earned wages. Employers can take comfort in knowing that PayActiv continues to be the leader in responsible EWA for employees.”
Synchrony Gets Nod for Secured/Unsecured Credit Card
The new dual feature credit cards (DFCC) from Synchrony Bank are designed to provide financing opportunities for consumers who do not have strong credit profiles. Cardholders provide a security deposit in order to use the credit cards in their secured mode and, if certain eligibility criteria are met after a minimum of one year, the cardholder becomes eligible to use the card in its unsecured mode. And last week, the CFPB gave the wholly-owned subsidiary of Synchrony Financial the green light to go forward with its DFCC solution.
In large part, the CFPB’s ruling for Synchrony represented a broader embrace of bringing financing to consumers with lower credit scores. The Bureau referred to these efforts as “represent(ing) a potentially significant point of access to credit for certain consumers” and favorably compared Synchrony’s dual feature card to other secured card offerings.
Critically, Synchrony will provide complete transparency with regard to the cost differences between the secured and unsecured features, including the lower rate on the secured card. Cardholders that graduate to the unsecured Synchrony credit card are not eligible to return to the secured card.
With $7.5 million in fresh capital and a green light from the U.S. Patent & Trademark Office for its “Credit Bureau 2.0” moniker, Finovate newcomer Trust Science enters 2021 even better prepared to fulfill its mission of empowering lenders who serve un- and underbanked communities.
“Between 64 million and 100 million Americans, adult consumers, cannot be scored for credit, or scored properly. In the world, it’s three billion adults,” Trust Science founder and CEO Evan Chrapko explained during his company’s Finovate debut in 2019. “We’re here to solve that problem and give deserving people the credit that they deserve.”
Founded in 2007 and headquartered in Edmonton, Alberta, Canada, Trust Science is part of the burgeoning subprime credit risk analysis industry. In recent days, Trust Science confirmed both that it has boosted its total capital to $11.5 million and that it had secured trademark approval for its AI-powered, dynamic credit scoring platform – Credit Bureau 2.0.
Trust Science’s platform leverages AI and machine learning to generate profiles that can be used to provide credit scoring for thin file and no-hit consumers. The solution uses alternative and unstructured data, such as the size and scope of social networks, message and data sentiment, and other factors to “expand the scorable universe” of potentially worthy borrowers and to provide better product fits for all customers.
Since its FinovateSpring appearance, Trust Science has forged partnerships with Inovatec Systems, Vergent Loan Management Software (formerly eSoftware Solutions), and was nominated as AI Company of the Year by the Canadian FinTech and AI Awards. Just under a year ago, the company hired former Equifax executive Jeremy Mitchell as its Chief Data and Analytics Officer. As part of his 20 years of experience in alternative data and analytics, Mitchell was part of the original development team that built VantageScore, a rival to the traditional FICO score.
“Trust Science is building solutions that benefit both the consumer and the lender,” Mitchell said when the appointment was announced. “This decade will see the world expect Alternative Data and AI to be harnessed for good, like Financial Inclusion.”
We cannot yet speak for the decade and alternative data. But we already know the role alternative data has played in supporting financial inclusion over the past year, as the health and economic consequences of COVID-19 have put severe financial stresses on small businesses, their workers, and their families.
Chrapko addressed this challenge – and opportunity – in a CEO Letter early last year as the lockdowns were taking hold across the world. “Individuals and businesses are already feeling financial shortfalls,” he wrote. “Lenders like you are going to need to make decisions about a growing number of individuals within the context of a volatile and uncertain market.”
With concerns over new, more contagious strains of the coronavirus forcing more lockdowns and social distancing, the pressure on lenders is not likely to relent any time soon. Leveraging alternative data – via partnerships with companies like Trust Science – may help them make more accurate, fairer, credit decisions to ensure that thin-file borrowers get the help they need and lenders take on only the risk they can afford.
Digital banking platform Oxygen secured $17 million in new funding today. The Series A round featured participation from a sizable array of investors ranging from Runa Capital and Rucker Park, to fintech entrepreneurs like Plaid co-founder William Hockey and celebrity athletes like NFL wide receiver Larry Fitzgerald.
Added to the $7 million in seed funding the company picked up just over a year ago, this week’s investment takes Oxygen’s total capital to $24 million. In its announcement, the company noted that the financing will enable it to add talent, accelerate growth, and continue to develop its consumer and SMB banking solutions.
“This investment not only validates what we’ve built but also enables us to continue pursuing our vision of building financial tools that integrate seamlessly with the digital world of today and delight our customers,” Oxygen CEO Hussein Ahmed said. “We founded Oxygen because we wanted to provide financial services in the same way people interact with technology in their everyday lives.”
With an emphasis on both consumer and small business banking, Oxygen brands itself as the bank for “free thinkers, rebels, and entrepreneurs.” The challenger bank offers personal accounts with no monthly fees, cashback rewards, up to two-day early deposit, an Oxygen Visa debit card, and multiple virtual cards. Business customers benefit from these features also, as well as business management tools for making cash flow projections, integrating accounting solutions, creating LLCs, and mailing checks from the Oxygen app. Both personal and business accounts are FDIC-insured through Oxygen’s partnership with The Bancorp Bank.
Headquartered in San Francisco, California, Oxygen has gained more than 125,000 accounts and achieved revenue growth of more than 900x since launching at the beginning of last year. In May, the company announced a partnership with CPI Card Group to develop its own personal and small business debit cards. Tearsheet.co profiled Oxygen founder Ahmed in December.
From fears of a cyberspace-based New Cold War between Russia, China, and the U.S., to emerging fraud threats to financial services companies, small businesses, consumers, and work-from-anywhere employees, the issue of cybersecurity is likely to loom large over all technology discussions in 2021.
To this end, we caught up with Uri Rivner, Chief Cyber Officer of BioCatch. Headquartered in Tel Aviv, Israel, and a Finovate alum since 2014, BioCatch offers an AI-driven behavioral biometrics-based platform that enables online identity verification and reduces fraud by providing account opening and account takeover protection, as well as defense against social engineering scams.
I would be remiss if I didn’t take this opportunity to ask a cybersecurity expert about the massive breach involving SolarWinds and, allegedly, Russian hackers. How do you think about this incident as a professional and how should we think about it as individuals, consumers, etc.?
Uri Rivner: This is the broadest, deepest cyber espionage campaign in a decade; the last wave of this magnitude was attributed to China, which launched a massive industrial espionage campaign some 10 years ago against hundreds of major U.S. and global corporations. I was on the receiving end of that attack during my time at RSA, which was breached in March 2011, and it was a watershed event with far-reaching implications. It galvanized the U.S. intelligence community to action, brought cyber awareness in Corporate America to the Board level, and injected a real sense of urgency to the cyber security industry.
The SolarWinds campaign has a similar effect. When FireEye – the gold standard in endpoint protection and cyber intelligence against state-sponsored attacks – is itself breached, people take notice. When dozens of high-security networks deploying every imaginable combination of state-of-the-art tools and security procedures are compromised, everyone raises an eyebrow. Those who wonder whether the cyber security scene is growing into a new “bubble” received a very clear message: listen, folks, let’s get something straight – cyber security is still unfinished business.
What was the big theme in cybersecurity in 2020? Do you believe this trend will remain as strong in 2021?
Rivner: The big theme in cybercrime in 2020 was the impact of the global pandemic on fraud and identity management. Fraud teams worldwide had to operate from home, resulting in deficiencies that fraudsters were quick to exploit. Online account opening and account takeover fraud surged, and potentially billions of dollars were scammed through government stimulus package fraud. When the dust settles in 2021, we should see the financial sector adopt new, automated fraud controls to close those gaps.
With banks accelerating their mobile-first strategy and releasing new, high-risk functionality available only for mobile platforms – e.g. P2P payments – we should expect 2021 to feature more mobile-based social engineering and malware attacks. Mobile authenticators such as fingerprint and selfie biometrics will suffer from the same fate as any other “strong authentication” technology – they’ll be circumvented using end-users as “moles” to tunnel below the security fences.
You have outlined a variety of cybersecurity trends you think we will face next year. You talk about the rise of “mule detection” as a priority for fraud detection teams. Can you elaborate on how widespread this has become and what is being done to fight it?
Rivner: Thousands of bogus U.S. bank accounts are opened each day online for the purpose of serving as “mules”. Opening a fake bank account is easy as identity records are traded in the dark web, and it’s cheaper to create your own digital mule account than to recruit a living-and-breathing collaborator to funnel your funds. Fortunately, banks use new, next-generation technologies. Device reputation highlights compromised devices used by criminals, while behavioral biometrics can identify when a genuine user uses long-term memory to enter personal information; whereas fraudsters are not familiar with the victim’s personal data and can’t type it the same way.
Outside the U.S., “work from home” mule recruitment is surging given the constant lockdowns and economic crisis caused by the pandemic. But consider this: say a user normally holds their device in a certain way, has a certain typing cadence and finger press size. All of a sudden you spot a different personality inside their account, with new habits and gestures, and the “guest” always checks in shortly after money is received… You just detected a mule, sharing their account with a “controller.” Often these “mule herders” control dozens, or even hundreds of mule accounts.
You’ve also noted that regulators worldwide are taking greater notice of social engineering scams. We’ve known that these are some of the most powerful ways that systems have been penetrated. What are regulators doing to help fight social engineering scams?
Rivner: Social engineering isn’t new, but deep social engineering is a new and dangerous mutation. This is when cybercriminals convince the user to log into their bank account and simply move money to another account belonging to the fraudster. This is done so cleverly that it has become a real epidemic – first hitting U.K. banks a few years ago, and then spreading to mainland Europe and Australia. It’s likely to reach North America in 2021, and banks are far from being ready to deal with this massive problem.
Global regulators are paying close attention to what’s happening in this front. They’re likely to demand strict and immediate measures to protect the vulnerable population from such scams using a combination of traditional transaction monitoring and next-gen capabilities such as detecting signs of hesitation, duress, distraction or being guided based on subtle behaviors measured on the user’s PC or mobile device.
On the technology front, you’ve pointed to the growing attention fraudsters are giving to fintechs and the emerging industry of mobile-first banks. What are the vulnerabilities here and what can fintechs and neobanks do to fix them?
Rivner: The mobile transformation in the financial sector is not evenly spread geographically. In Europe and Asia, mobile-only banks, payment apps and fintech are old news. In North America, the revolution is much more recent, and revolutions are always the best drivers for financial crime. Many U.S. banks offer Zelle, a peer-to-peer payment service, only through mobile apps and not yet via online banking. Additionally, the number of mobile-only financial services, loan providers and other fintechs is skyrocketing.
Crime rings that have focused their online fraud strategy solely on web applications have to adapt fast. Expect to see heavy showers of Mobile RATs and help desk scams, mobile-focused social engineering, mobile overlay malware, rogue apps, mobile emulators and other nasty fraud schemes. Fintechs and neobanks use a risk-based approach in which passive, frictionless device and behavioral biometric controls trigger active biometric controls in case of an anomaly.
You’ve said that one interesting development in fraud technology is the greater role they are playing in “trust and safety.” What do you mean by this and why is it happening now?
Rivner: The banking industry has been using advanced device and behavior analysis to fight fraud, but those technologies are also poised to play a major role in trust and safety. The problem is not stopping cyber criminals, but rather identifying genuine end-users who misuse the system, circumvent controls, gain unfair advantage over other end-users in, say, a marketplace or a gaming site, and generally breach trust and safety controls.
The global pandemic accelerated digital transformation and exposed many of these risks. For example, remote workers who have been vetted and background checked can share their accounts with others who haven’t so they can punch in more hours, creating new security exposures for the company that employs those workers. Once something like this happens, a company can lose things that are sometimes more important than actual money: accountability, fairness, trust and reputation.
As the price of bitcoin returns to old highs, we see a renewed appetite for cryptocurrencies and digital assets of all kinds. Add to this a new generation of investors raised on the wealth-building possibilities of alternative assets like private securities.
The result is a range of new opportunities – as well as customer expectations and regulatory obligations – for financial services firms and fintechs alike to deal with.
We checked in with Scott Purcell, CEO and Chief Trust Officer of Prime Trust, to discuss this new landscape of digital asset investment and management, and find out what we should expect in terms of innovation in this space in 2021.
Many longer-time Finovate watchers will recall the work you did with FundAmerica, which was acquired by Prime Trust a few years ago. Tell us about what you are doing as CEO of Prime Trust today?
Scott Purcell: I am very proud of the work we did for the crowdfunding industry with FundAmerica, and in fact it continues to provide escrow, compliance, payment processing, and other services to about 75% of the market – just now under the Prime Trust umbrella. My role has evolved rapidly as Prime Trust has grown to provide services to new industries, most notably blockchain, real estate, and the next generation of alternative trading systems (ATS), which are exchanges for private securities.
We are one of the top financial institutions servicing the cryptocurrency market, and by far the leading infrastructure provider for ATS. That means a lot of growth, which has taken me away from being hands-on with sales, product development, operations, and accounting to a point where I now have an incredible team of people who are responsible for those areas, and frankly they are way better than me at doing them.
This has set me free (well, if 12-hour days are considered “free”) to focus on the vision and product roadmap, overall market strategy, and closer engagement with key investors, partners, vendors and customers. It’s fun to see the company grow and we are incredibly excited about the things on our plate for 2021.
Prime Trust recently announced a partnership with Zytara to help them launch their stablecoin. How did this relationship come about and what do you believe will come of it?
Purcell: Zytara is built on the Stably stablecoin platform which integrates into Prime Trust’s API’s for back-office infrastructure. As the online gaming industry continues to grow, so does the need for a common stablecoin that can be used across multiple platforms. Zytara will be covering this and also plans to bring a variety of other items to involving digital assets to the gaming community. We are excited to see Prime Trust infrastructure being leveraged for video gaming as a new industry sector with unlimited upside.
There’s been a resurgence in interest in cryptocurrencies of late – and the rise of stablecoins has been a part of this. What do you think are the key drivers of interest in stablecoins right now? How powerful and enduring do you believe those drivers to be?
Purcell: Prime Trust provides services for over two dozen stablecoins, so I’ve got pretty good visibility into what works and what doesn’t. The key thing is utility. People need to have a frictionless and compelling reason to use a stablecoin. Zytara is a great example of that, as it will be used for easy transactions in a gaming environment. Others are specifically built for use on crypto exchanges as a mechanism to de-risk from volatile crypto or to take a break from trading, while keeping funds in electronic form so they are easy to re-engage in the markets. The more that stablecoin issuers can add utility and ease of use, then the more enduring they will become.
Let’s talk about Prime Trust more broadly. When it comes to fintech headlines, financial infrastructure companies are among some of the most critical – and sought after – partners in financial services right now. What role are financial infrastructure companies like Prime Trust playing in helping facilitate the next generation of fintech apps and innovations?
Purcell: Every single fintech innovator needs a set of financial services in order to build their businesses, with APIs to integrate into. And surprisingly there are very few who do this. That’s why you’ve seen Robinhood, CashApp, Chime, Acorns, Betterment, and so many others scramble around cobbling together different bank, compliance, custody and other vendors. The set of services these innovators need is common across all markets and includes payment processing, compliance, custody of alternative and traditional assets, accounts for individuals, businesses and retirement programs, trusted transaction settlement, reporting, escrow, debit cards, and (especially in crypto) fiat on/offramps and liquidity.
Prime Trust is the only partner from start through growth that fintech innovators can rely on as a single API-driven source for all of these services. Thus, the next generation of fintech success stories can build and launch their businesses in record time to market, and confidently scale their back-office operations.
This fall you launched a core accounting and customer asset management platform, PrimeCore. What capabilities does this platform provide banks, exchanges, and other financial institutions? How has the solution been received?
Purcell: The traditional bank core systems – FIS, Fiserv, and Jack Henry as well as traditional trust company core systems, SunGard, Innovest and others – are expensive, slow and clumsy at handling non-traditional business models … which is what fintech innovation is all about. For instance, none of them can hold assets out to 18 decimal places of precision, which both fractionalized and digital assets require, and none provide multi-asset transaction settlement systems. And they are incredibly slow at onboarding new customers and enabling modules on-demand.
So, we built PrimeCore out of frustration at trying to work with some of these vendors, who just weren’t interested in the rapid innovation and speed of service required for new and emerging markets. Not only does this give us control over our costs and our product rollouts, it also provides a much better experience for our B2B customers (and, thus, their retail and business customers).
How has the COVID-19 pandemic impacted Prime Trust’s operations – as well as those of your company’s clients and partners?
Purcell: The good news is that we’ve continued to grow like crazy during the pandemic. It’s been incredibly frustrating to not be able to hop on planes to visit customers, partners, vendors, and our investors in person. And it’s caused some havoc at times when employees or their relatives tested positive, and we had to send the whole company home until people tested negative. This may not be a huge problem for some departments, such as engineering or sales, but it is hard on compliance, the wire room, accounting and the executive team.
Also, as a financial institution, each employee is required to take at least one contiguous week a year of vacation, and at this time that’s not exactly fun telling them “okay, just stay home even more now!” Like everyone else, we can’t wait for this to be behind us so we can get back to business … and living our lives.
What trends this year in the financial services industry do you see as becoming even stronger in 2021? In what way will Prime Trust be a part of those trends?
Purcell: Payments is a $110 trillion annual market and, with the pandemic, the drive to “contactless” and remote systems has been exponential. And the fractionalization of traditional and alternative investments, which has been a proven trend by WealthFront, Acorns, and others, will drive an entirely new phase for capital markets. Prime Trust is looking forward to servicing these trends as they continue to build momentum and disrupt the status quo of financial services in 2021. It’s going to be a great year!
Finovate alums raised more than $472 million in the fourth quarter of 2020. This sum brings the total raised by alums this year to $3.9 billion. Given the relatively sharp fall-off in Q4 funding this year, the fact that 2020’s investment total not only rivals that of last year, but also approximates our all-time, alumni investment high mark from 2018, is noteworthy.
Q4 of 2020 saw a retreat from the strong investment trends that have characterized the final quarter of the year since 2016. This year’s fourth quarter funding total was more reminiscent of the levels reached in Q4 2015, when 28 alums brought in more than $302 million in funding.
Previous Quarterly Comparisons
Q4 2019: More than $876 million raised by 21 alums
Q4 2018: More than $800 million raised by 19 alums
Q4 2017: More than $730 million raised by 23 alums
Q4 2016: More than $700 million raised by 26 alums
The top equity investment of the quarter was the $103 million raised by Tink in December, followed by the $60 million raised by both Microblink and OurCrowd. Interestingly, our top three investments were in alums with significant, non-U.S. business.
Top Quarterly Equity Investments
Tink: $103 million
Microblink: $60 million
OurCrowd: $60 million
DriveWealth: $56.7 million
eToro: $50 million
M1 Finance: $45 million
Five Degrees: $27 million
Bluefin: $25 million
NetGuardians: $19 million
Wise: $12 million
Here is our detailed alum funding report for Q4 2020.
October 2020: More than $148 million raised by seven alums
If you are a Finovate alum that raised money in the fourth quarter of 2020, and do not see your company listed, please drop us a note at research@finovate.com. We would love to share the good news! Funding received prior to becoming an alum not included.
There’s no better time than the present to plan for the future. That’s the approach taken by European fintech Bitpanda, which announced earlier this week that it was investing €10 million ($12 million) to launch a technology and innovation hub in Poland. The initiative will be headquartered in Krakow and will employ 300 engineering professionals with diverse backgrounds to “develop innovative and challenging projects” to improve finance and bring “transparency” to investing. Bitpanda co-founder and CTO Christian Trummer will lead the effort.
“While staying true to our goal of tearing down financial barriers, innovating with speed in a more nimble and proactive manner is just as critical as looking at Bitpanda’s assets through a different and forward-looking lens as the company gains momentum,” Trummer said in a statement. “I’m confident that we will be able to attract the most skilled professionals from the whole region, running from Backend Developers, Software, Machine Learning and QA Engineers to Product Owners and Scrum Masters.”
The hub announcement comes in the wake of Bitpanda’s $52 million Series A round in September – led by Peter Thiel’s Valar Ventures – and follows the company’s successful 2020 expansions to Spain, France, and Turkey. Bitpanda’s Series A was among the largest in Europe this year.
“Placing Bitpanda’s first Technology & Innovation Hub in Krakow, with its globally-renowned developers, an exciting local tech scene and geographical proximity to Vienna, was a pretty clear choice for us,” Bitpanda co-founder and CEO Eric Demuth said. “It’s the best asset to attracting the right talent who can help Bitpanda pursue innovation of the highest standard.”
Founded in 2014 and headquartered in Vienna, Austria, Bitpanda is a leading European neobroker that specializes in digital asset investing. This fall, Bitpanda teamed up with Raiffeisen Bank International to bring blockchain-interoperability to banks in the EU. Th company also launched its Bitpanda Crypto Index (BCI), which provides an automated way for cryptocurrency investors to buy multiple cryptocurrencies at once and more readily diversify their holdings.
Big data analytics platform Thetaray, which made its Finovate debut five years ago at FinovateFall in New York, announced late this week that its Anti-Money Laundering for Correspondent Banking solution has been selected by Spain’s Cecabank. The wholesale bank will use the AI-powered technology to analyze SWIFT traffic, risk indicators, and other data to identify anomalies that can signify criminal activity.
“We were already using traditional rules-based systems, but we wanted to increase our ability to monitor cross-border transactions,” Cecabank Compliance Head Alfredo Oñoro said. “When an industry colleague recommended ThetaRay’s AML solution for correspondent banking, we immediately reached out and began discussions. We are extremely impressed with ThetaRay’s technology and excited to share its capabilities with our bank customers and, if so requested, with our regulators.”
ThetaRay’s anomaly detecting algorithms are relied upon by corporations in financial services, industrial manufacturing, and critical infrastructure to defend against a wide variety of threats and cybercrimes, ranging from money laundering to terrorist financing. ThetaRay offers fraud detection, ATM security, and an early threat detection capability that minimizes false positives, enabling firms to modernize their legacy systems with a compliant, cost-savings solution.
“This announcement serves as notice that ThetaRay’s AML for Correspondent Banking solution is not just for global financial institutions,” ThetaRay CEO Mark Gazit said. “It is also a perfect fit for mid-sized banks aiming to improve their AML controls. Cecabank plays a crucial role in the Spanish market, and we are very pleased that they’ve chosen ThetaRay to help secure their customers’ cross-border transactions.”
ThetaRay’s partnership with Cecabank comes in the wake of a similar collaboration the company announced with Banco Santander over the summer. With offices in Israel and New York City, ThetaRay has raised more than $81 million in funding. ABN AMRO Ventures and Jerusalem Venture Partners (JVP) are among the company’s investors.
Interesting in learning more about fintech in Latin America? This week on the Finovate blog we featured an article from non-profit organization Invest Puerto Rico that makes the case for untapped opportunity on the island.
Fintech is growing fast, at a rate of 25% per year through 2022. Puerto Rico’s close proximity to the world’s financial center – New York City – gives island-based fintech firms the opportunity to remain connected while taking advantages of key local benefits such as STEM talent, local financial literacy, and attractive tax incentives.
PayCentral and Mastercardteam up to launch new online payments platform for SMEs, DigiCentral.
Interswitch Group, a Nigerian digital payments company, partners with Kenya-based Credit Bank to launch a multi-currency prepaid card.
South African fintech Ukheshe acquires mobile payments startup Oltio
Central and Eastern Europe
Germany’s Solative, which provides indices and index solutions to the financial services industry, raises $60.4 million in growth funding.
Irish core banking technology provider Leveris inks partnership with Czech bank, Česká spořitelna.
Polish fintech SMEO, which provides online factoring services to small and micro-enterprises, locks in €4 million in funding ahead of its planned international expansion.
Middle East and Northern Africa
Digital open banking app sync secures license from the Qatar Financial Centre Authority.
Central Bank of Oman unveils fintech regulatory sandbox.
IBS Intelligence reviews the top four fintechs disrupting payments in the UAE.
Central and Southern Asia
Pakistan’s SadaPay obtains approval from the State Bank of Pakistan for pilot launch in 2021.
India Posts Payments Bank and the Indian Department of Posts introduce new digital payment app, DakPay.
Bangalore-based payments platform Cashfree raises $35.3 million in round led by Apis Partners.
Latin America and the Caribbean
Brazilian financial market intrastructure company B3 partners with Genesis to access its low-code application platform.
Mozper, a debit card for kids and their parents, goes live in Mexico following $3.5 million seed funding round.
BNAmericas looks at Azimo’s partnership and expansion plans for Latin America following its alliance with Uruguay’s dLocal.
Asia-Pacific
Singapore and Thailand announce plans to link their national payment systems in 2021.
Malaysia’s AFFIN Bank launches new corporate internet banking platform for SMEs, AffinMax.
Vietnam Briefing examines the rise of Vietnam as a startup hub.
According to the World Bank there are 1.7 billion unbanked adults in the world. In the United States, this number is just over 14 million, representing more than 6% of all households in the country. Analysts have suggested that, in Europe, while there are some well-banked countries (Germany, the Baltics in particular), there are others, especially in Central and Eastern Europe, where large numbers of citizens lack access to basic banking services. In Romania, for example, more than 50% of the country’s adults are unbanked.
I should say at the outset that it is impossible for me to write about financial inclusion without tipping my cap in the direction of Tosin Agbabiaka. An investor with Octopus Ventures, Agbabiaka’s presentation on what he called “Financial Inclusion 3.0” at FinovateEurope in February was as fascinating a discussion on the topic as I have come across. Catch his conversation with Finovate VP and host of the Finovate podcast Greg Palmer from earlier this year.
For our purposes, let’s start with the World Bank’s definition of financial inclusion. The World Bank defines financial inclusion as providing individuals and businesses with access to useful and affordable financial products and services that meet their needs. This leads us to ask: in the current context of COVID-19, nationalism, and lingering economic inequality, how can we achieve a financial inclusion worthy of the times we live in?
What?
One important question to ask when it comes to financial inclusion is quite fundamental: what are financial services trying to provide? There is a danger in “porting” services and solutions to one community simply because they may have worked in another. At a time of rapid technological innovation and adoption – such as we are in right now – this temptation can be difficult to resist. But failure to understand the specific needs of a given community – greater access to earned wages, or the ability to pay cash for online products or services, for example – can result in not only the failure of a well-intentioned initiative, but also potential negative feelings toward the idea of trying new technologies in the future.
This is one of the ways that fintechs can play innovative roles by developing solutions that highlight needs – such as broader access to cash – that may seem niche or be overlooked entirely by traditional, even community-based, financial institutions.
Who?
Who should be included in mainstream financial life? While the answer “everyone who wants to” is obvious, it is also insufficient. Who is going to make the investment to provide financial services in areas where the market may be broad but thin? Even more problematic are those needs that are severe, but relatively narrow and not easily remedied by methods successful in communities where conditions are different. Countries and regions where incomes are low and inconsistent, trust in traditional institutions poor, and the stability of the currency itself at times an issue come to mind.
And in the same way that the conversation on inclusion rightly has emphasized the importance of gender and ethnic diversity, it is also important to think about other communities that have been traditionally excluded from or had severely limited access to financial services. Families and businesses in rural areas and in farming communities, many of whom it should be mentioned are women- and/or ethnic minority-led, are often the most overlooked communities in financial life. This is true both in the developed and developing world. A recent broadcast by journalist Chris Hayes on the eve of Thanksgiving highlighted the life and work of those whose job it is to put food on the tables of millions during the holiday season. It was a helpful reminder of how “essential” this work is and these workers are, and why any financial inclusion must respond to their needs as well.
Where?
Meeting underbanked populations in the communities where they live is a critical component of not only providing them with the financial products and services they need, but also of engaging with them and learning about what those needs are in the first place. Outreach into ethnic minority neighborhoods via civic and even public sector institutions is one first step financial institutions can take, as is partnering with minority-, women-, veteran-, and LGBTQ-led businesses who have firsthand knowledge of the needs of their communities.
This is also true for virtual communities. In some instances, for example, offering financial services to underbanked individuals with mobility, sensory, or cognitive challenges may mean less outreach to physical neighborhoods and more engagement with online communities and networks.
When?
One truism about planning drawn from the world of professional hockey is the idea of skating not to where the hockey puck is currently, but instead, by accurately judging its trajectory, skating to where the hockey puck is going. Similarly, those looking to provide financial services to underbanked communities should be as alert to their future needs as they are to the current needs in those communities.
Some trends are easier to anticipate than others. If we believe that Millennials in general, for example, are entering their prime family formation years, then what is the appropriate response from the financial services and fintech community? I would argue it is an excellent time to intensify outreach to young women, as well as Millennials who are members of ethnic minority groups who might not have the same access to the kind of financial planning resources that are critical when starting a family. A special effort to engage young members of underbanked communities about financing opportunities for higher education seems like a similarly worthwhile effort for banks and community-oriented financial services organizations in late winter and early spring, as well.
But no crystal ball is required. Again, engagement with underbanked communities is key. The easiest way to know which way the train is headed is to climb on board.
Why?
Whether driven by rational self-interest, an renewed altruism, or some combination of the two, the growing desire to bring financial services to those who do not have them – and want them – is one of the most important developments in fintech and financial services. There will be missteps, overreaches and embarrassing assumptions along the way. And in the eyes of some critics and skeptics, this will be evidence that the cause is hopeless or that those attempting to fulfill it are incapable.
But, to steal a phrase, ensuring that the blessings of technology and modern, wealth-building financial services are available to as many people as possible, may be as important a goal as any other in our industry. And at a time when more people are seeing banks and other financial services providers in a brighter light than they have in a decade – thanks to their recent participation in PPP financial rescue efforts, for example, and the fading memories of the Great Financial Crisis – there may be no better time than the present to pursue it.
The Avengers may have a Hulk. But social investing app Public, which offers Millennial and older GenZ investors the ability to make commission-free fractional share investments in U.S. stocks and ETFs, has a Hawk.
The New York City-based company announced this week that it has closed a $65 million Series C round that featured participation from skateboarding legend Tony Hawk, as well as a host of VCs and angel investors.
“As technology continues to disrupt barriers, Public.com is creating a platform that makes investing accessible to everyone, while providing a place where they can share ideas and build their confidence as they build their portfolios,” Hawk said in a statement.
Public is not the only investment the famous skateboarder has made in his retirement. Hawk was an early investor in Nest, backed DocuSign, and put money into a San Diego brewery named Black Plague. Five years ago, Hawk participated in the Series C round for Blue Bottle Coffee, a roaster and retailer that offers coffee subscriptions. The company was purchased by Nestle two years later for $500 million. “I like startups because I like being on the ground floor of stuff,” Hawk told Reuters in 2017.
Public’s round was led by Accel. Joining in the Series C along with Hawk and Accel were Lakestar, Greycroft, and Advancit Capital – as well as former chairman and CEO of Time Warner Dick Parsons. The investment comes less than a year after the company’s successful Series B funding, and takes the firm’s total capital to $90 million.
Public is among a growing number of fintechs looking to capitalize on three of the most powerful trends in retail investing these days: commission-free trading, fractional share investing, and a rising demand for investment opportunities from Millennials entering their prime family formation years. In addition to enabling its members to make fractional share purchases of U.S. stocks and ETFs – investing as little as $5 – Public offers a transparent community of both subject-matter experts and fellow traders and investors to help newer members learn how to wisely participate in the markets.
“Our mission to change the culture of investing is resonating with a new generation of investors who value collaboration over competition,” Public.com co-CEO Leif Abraham said. “By building the social network for investing, we’re giving people a place to share ideas and discover new ways of thinking in the same place they invest.”
Hawk is not the only celebrity investor in Public. Also participating in the round was Mantis VC, a venture capital outfit founded by electronic music duo, The Chainsmokers. Launched in September with $35 million in commitments from investors like Mark Cuban and Keith Rabois, Mantis VC has also invested in startups like fitness app Fiton and mortgage-lending startup LoanSnap.
“We couldn’t be more thrilled about our investment in Public.com and the potential this company has,” MANTIS VC partner and member of The Chainsmokers, Alex Pall said. “We’re all about community and Public’s social focus makes the stock market a more inclusive space where everyone can get educated and excited about investing.”
HooYu announced on Monday that GB Group (GBG), an identification verification specialist based in the U.K., has agreed to acquire its Investigate subsidiary in an all-share deal valued at approximately $5.34 million (£4 million).
“The acquisition of HooYu Investigate by an outstanding company like GBG is a testament to the technological achievement of the HooYu development team,” HooYu CEO Keith Marsden said. “We are now very excited to focus all our energy on taking the award-winning HooYu Identity platform forward.”
HooYu launched HooYu Investigate in 2017. The platform automates the fraud investigation process, leveraging data visualization to enhance the ability of users in compliance, anti-fraud, and law enforcement to identify and prevent cybercrime. GBG will add the technology to its portfolio of anti-fraud solutions, and both Investigate client contracts and the platform’s developers will join GBG as part of the transaction. HooYu will continue to run its digital customer onboarding and KYC solution, HooYu Identify, which includes NatWest and Vanquis Bank among its customers.
GBG CEO Chris Clark praised HooYu Investigate as an “exceptional product” that will complement GBG’s current business. He also looked forward to a future in which both the GBG and HooYu development teams are working together to build new solutions. “By joining forces with HooYu Investigate, GBG will create a scalable platform for growth, providing customers with a critical service to fight ever more sophisticated financial crime and reduce organizational risk in the U.K.” Clark said.
Founded in 2015 – and making its Finovate debut two years later at FinovateEurope – HooYu offers businesses configurable tools to make the customer boarding process easy for customers while ensuring maximum KYC compliance. With just a selfie taken by a smartphone or webcam, HooYu applies both traditional verification methods such as database checks with ID document validation, digital footprint analysis, and facial biometrics to provide an identity confidence score that reveals how many of the customer’s identity attributes (name, address, birthdate, etc.) can be confirmed. This gives businesses the insight they need not just for customer onboarding and KYC, but for age verification, customer due diligence remediation, and fraud prevention, as well.
