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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Some fintech observers may have gotten an inadvertent peek at the news yesterday. But today the big funding rumor has been confirmed: Less than a week after announcing its strategic partnership with fellow Finovate alum Hydrogen, money experience innovator MX is back in the fintech headlines with word of a $300 million fundraising.
TPG Growth led the round with a $150 million commitment. Also participating were existing investors CapitalG, Geodesic Capital, Greycroft, Canapi Ventures, Digital Garage, Point72 Ventures, Pelion Venture Partners, and Regions Financial Corporation. The Series C round takes MX’s total capital to $505 million and increases the firm’s valuation to $1.9 billion – making MX fintech’s latest unicorn.
In a statement, company CEO Ryan Caldwell said that in addition to hiring more talent, MX will use the capital to boost its platform’s data collection and enhancement capabilities. He specifically mentioned the importance of “scaling and finding additional ways to market” which underscores MX’s recent forays into embedded finance and its just-announced partnership with Hydrogen.
“The financial industry is at an inflection point as organizations look to become not only intermediaries, but true advocates for their customers by offering personalized insights and data-driven money experiences,” Caldwell explained. “Along with incredible partners, we are helping financial institutions and technology companies accelerate their digital roadmaps and launch next generation services and apps that will fundamentally transform how people interact with their money.”
MX helps businesses turn raw, unstructured data into valuable, insight-rich assets. This empowers them to build new solutions and services for their customers, drive growth, and boost brand loyalty. In addition to cleaning and categorizing data, MX’s technology adds key metadata that enables companies to better fight fraud, make faster loan approvals, and help their customers make better financial decisions.
In the funding announcement, Derek Zanutto of CapitalG praised MX’s ability to “leverage data strategically” and favorably compared MX’s potential impact on the financial industry to that of Netflix in the streaming content space and to Amazon in the e-commerce space. TPG Growth’s Mike Zappert noted that his firm was committed to investing in the digital transformation that is sweeping through financial services and sees MX as a big part of it. He called MX’s technology “a clear differentiator” that has delivered “tremendous growth for the Company over the last 12 months.”
MX currently works with more than 2,000 banks, credit unions, fintechs, and other companies, and includes 85% of digital banking providers among its partners. This has given the Lehi, Utah-based company a combined reach of more than 200 million consumers. A multiple Finovate Best of Show winner, MX last demonstrated its technology at FinovateFall 2019.
First things first: congratulations to SoFi. The financial services platform has earned a $8.65 billion post-money valuation after agreeing to a merger with Social Capital Hedosophia Holdings, a publicly traded special purpose acquisition company or SPAC that specializes in consumer-focused fintech businesses.
Now, what in the world is a SPAC? And why would merging with one be a sound route to the public markets?
A SPAC is pretty much as described. It is a corporation that is built specifically to buy other corporations. A SPAC, which has no other business operations, works by raising money via an initial public offering, and then using that capital to acquire other companies. These entities are taking advantage of the contemporary interest in the IPO market, leveraging demand for new companies – mostly in technology – into demand for firms betting on the ability to know which among these companies are longer-term winners.
The decision to merge with Social Capital – and to pursue this new route to going public – says a lot about the company initially known as “Social Finance” when it was founded almost ten years ago.
“SoFi is on a mission to help people achieve financial independence to realize their ambitions,” company CEO Anthony Noto said. “Our ecosystem of products, rewards, and membership benefits all work together to help our members get their money right.”
By giving its members a one-stop-digital-shop for financial services such as consumer financing, investments, and insurance, SoFi is well-positioned to take advantage of what Noto called “the secular acceleration in digital first financial services offerings.”
This momentum is in evidence within SoFi’s own ecosystem, as well. Social Capital founder and CEO Chamath Palihapitiya noted the “acceleration of cross-buying by existing SoFi members” as creating “a virtual cycle of compounding growth, diversified revenue, and high profitability.”
Speaking on CNBC, Palihapitiya compared SoFi favorably to Amazon and said that the company best represented the kind of banking solutions people want most. From its origins as a student loan refinancing company to its current incarnation as a diversified financial services platform, SoFi reported more than $200 million in total net revenue in Q3 2020 and is on pace generate $1 billion of estimated adjusted net revenue this year. Noto will continue as CEO of SoFi post-merger.
The deal comes just months after SoFi earned “preliminary, conditional approval” from the U.S. Comptroller of the Currency for a national bank charter. A bank charter, the company noted in the merger announcement, would lower the cost of funds and “further support SoFi’s growth.” In an interview with Yahoo! Finance, Noto explained that this was key to having the ability to provide lower interest rates to consumers and would drive innovations like SoFi Money, the company’s cash management account.
Another plum in the purchase is Galileo, a leading provider of customer-facing and backend technology infrastructure services for financial services providers that SoFi acquired last April. There are 50 million accounts on the platform.
From SoFi’s perspective, “deal certainty” was one of the reasons why the company took advantage of the SPAC route to the public markets rather than a traditional IPO. Palihapitiya is a veteran of the nascent SPAC craze, having taken a number of companies, including Virgin Galactic Holdings in 2019, public in this fashion.
Founded in 2011, the San Francisco, California-based company participated in our developers conference, FinDEVr New York 2017. At the event, SoFi teamed up with data platform Quovo to demonstrate their innovations in providing secure authentication for bank accounts. SoFi currently has more than 1.8 million members and has raised $2.5 billion in funding to date.
Digital banking platform Modularbank has secured a $4.8 million (€4 million) investment in a round led by Karma Ventures and Blackfit Capital Partners. The company, founded in 2018 and headquartered in Estonia, said that the seed funding will help it establish operations in the U.K., as well as add engineering and product development talent to meet its expansion goals.
Modularbank’s banking-as-a-service technology leverages APIs and microservice architecture to offer a core banking solution to serve both retail and business banking customers. And because Modularbank is, in fact, modular, companies can select the specific services they want – core banking, deposits and savings accounts, assets and collateral, lending, financial accounting, and payments – to build the solution that best fits their needs.
“Increasingly, people are demanding more flexible and convenient services that fit around the way they work and live and in response, there is a wave of digitalization and embedded finance on the horizon, beginning to build,” Modularbank CEO Vilve Vene explained. “To harness this momentum there is a real need for lean, yet sophisticated core banking technology and that’s where Modularbank comes in, as we do exactly that. Modularbank was set up to enable banks and other customer-facing businesses to devise and roll out personalized banking services quickly and easily.”
Also participating in the round were Plug and Play Ventures, Siena Capital, and Ott Kaukver, angel investor and former CTO of Twilio and Skype.
Modularbank made its Finovate debut at FinovateEurope in 2019. Since then, the company has collaborated with Germany’s Senacor Technologies and announced a strategic partnership with payments processor NETS Estonia. In December, Vene was named one of the most impressive women in fintech in 2020 by Fintech Futures.
CRED, a credit card repayment company based in Bangalore, India, has scored $81 million in funding courtesy of a Series C round announced earlier this week. Led by existing investor DST Global, the investment featured the participation of Sequoia Capital, Ribbit Capital, Tiger Global, and General Catalyst, and gives the company a valuation of $806 million.
The company’s founder Kunal Shah said in a statement that the funds would help support CRED’s growth and added that CRED is committed to providing wealth-creation opportunities for its employees, as well. Shah said that the company has allocated 10% of its cap table for ESOPs (employee stock ownership plans).
CRED processes a fifth of all credit card bill payments in India. The membership-based company rewards those who pay via CRED with CRED coins that can be used to win exclusive rewards or to earn access to curated products and services. More than 35% of premium credit card holders in the country use CRED, which has seen its overall user base climb to more than 5.9 million users. The company also benefits from creditworthy borrowers – the median credit core for CRED users is 830. CRED members reportedly spend on average 2x the amount of the average CRED user.
For some, news that German digital bank N26 was entering the increasingly competitive challenger banking market in Brazil was met with a loud “it’s about time!” The neobank, which previewed its intentions to launch operations in Brazil back in 2019, may have been temporarily wrong-footed by the twin complications of Brexit and COVID-19. But the news this week suggests that the firm is back on track with its Latin American expansion plans – and a showdown with Nubank.
Not only is Nubank the home team when it comes to neobanking in Brazil, the institution is also the biggest challenger bank in the world in terms of customers and valuation (25 million of the former, $10 billion of the latter). This compares favorably with N26’s five million customers and valuation of approximately $3.5 billion. That said, the Berlin-based challenger bank has significant wind at its back, having just celebrated the one-year anniversary of its arrival in the U.S. back in August and, more recently, locking in $100 million in one of the largest funding rounds of 2020.
Russian bank Tinkoff announces that its voice assistant is now available as both Oleg (male) and Olya (female).
PYMNTS.com features Toms Niparts, CEO of Jeff, an app-based lending platform headquartered in Latvia.
Middle East and Northern Africa
A new 425 million euro line of credit from the European Investment Bank will help Egypt’s Banque Misr support small businesses affected by the COVID-19 pandemic.
A partnership between Visa and fiat-to-crypto service provider Simplex will enable the Israel-based fintech to issue crypto debit cards.
RuPay launches new payment solution for Indian merchants – RuPay PoS – courtesy of a partnership with RBL Bank and PayNearby.
The normalization of relations between Israel and some of its neighboring countries has encouraged the State Bank of India to offer trade finance solutions to Israeli corporations.
Critics have called a new regulation in Mexico that bars third-parties from using platforms or APIs to offer financial services directly “a death sentence” for the fintech-as-a-service model in the country.
Kenya-based MSME financing platform Pezesha takes first prize at the 2020 AFI Inclusive FinTech Showcase.
Chairman of the Digital Lenders Association of Kenya Kevin Mutiso weighs in on the role of “customer-centric regulation” in shaping the growth of fintech.
In a round led by existing investor Insight Partners, multi-channel digital customer experience specialist Glia has raised $78 million in capital. The Series C round takes the company’s total funding to $107 million, and will be used to help scale the company’s digital customer service offerings with an emphasis on product development and an eye toward potential strategic acquisitions.
“Just as Zoom has transformed the way consumers communicate with colleagues, family and friends, Digital Customer Service is changing the way businesses support and engage with customers,” Glia co-founder and CEO Dan Michaeli explained. “This is an area that has gone mainstream, as evidenced by Facebooks’s recent billion-dollar acquisition of Kustomer.”
Glia’s fundraising comes as the company reports growth of more than 150% in 2020. This is due in part to the impact of COVID-19 related lockdowns and Work From Home policies that drove consumers and employees alike toward digital channels for commerce and work. Glia’s platform enables customers to communicate with businesses using any channel – voice, text, video – and to seamlessly transition between those channels during the interaction. The technology allows customer service representatives to guide customer journeys, increasing personalization and efficiency and boosting customer satisfaction and retention rates.
Insight Partners Lonne Jaffe praised Glia’s platform for providing the tools required for businesses to engage customers digitally and “communicate through the customer’s channel of choice.” Dan Brown, founder and CEO of Interactive Intelligence, who also participated in this week’s investment, added that Glia represents a solution for companies that are “still focused on moving antiquated, on-premises telephony systems to cloud contact centers that essentially offer the same functionality.” Brown added that if he were to build his company again today, “I would take Glia’s approach.”
Founded in 2012 and headquartered in New York, Glia last demonstrated its digital customer service technology at FinovateWest Digital 2020, earning Best of Show honors. Formerly known as SaleMove, Glia has teamed up with more than 150 financial institutions, insurance companies, and fintechs, most recently partnering with intelligent virtual assistant company Interface, and fellow Finovate alum and AI-powered chatbot developer, Finn AI.
Our keynote speaker series has been a major feature in the transformation of Finovate from a demo-only showcase to its current incarnation as a digital-friendly, intellectual marketplace for fintech insight and thought leadership, as well.
With a new set of digital and in-person events planned for 2021, we wanted to take a quick look back at some of the speakers who have provided some of the most unique insights into the nexus of finance, technology, and society over the past year. Stay tuned for big announcements this month on what we’ve got in store!
Steven Van Belleghem, author of Customers The Day After Tomorrow
Providing a special address at FinovateEurope just over a year ago, Belleghem took attendees on a fun and insightful journey that looked at how enabling technologies – from 4G and social media – have forced businesses to reconsider the nature of customer service. And with even more powerful enabling technologies like quantum computing and AI right around the corner, he suggested further disruptions to and opportunities in the relationship between customers, businesses, and the products and services they provide are almost assured.
Interestingly, Belleghem points to a new relationship – B2A or business-to-assistant – that will actually make it easier for all parties to negotiate this new, more personalized, but more complex and challenging e-commerce experience. But even as he sees the consumer taking a less active role in everyday financial decision-making, Belleghem still sees human nature behind the wheel. “It’s not going to just be technology that drives new customer expectations,” he said, “it is also going to be personal dreams and wishes, and also the challenges the world will be facing.”
Pablos Holman, Futurist, Founder of Turing AI
“Please crawl out your window,” folk singer Bob Dylan once crooned. “Use your arms and legs, they won’t ruin you.” A similar sentiment was at the center of the keynote address by futurist and founder of Turing AI, Pablos Holman. Speaking at our first all-digital fintech conference, FinovateFall Digital, back in September, Holman urged his audience to focus on solutions to real problems and to avoid the comfort zone of the tried and true. “Nobody has ever invented a new technology by reading the directions,” Holman noted.
For fintechs specifically, Holman – who is also an Inventor with the Intellectual Ventures Lab – urges two strategies. First he encourages startups to see bank partnerships as a way to understand more clearly the needs of financial institutions and their customers. Second, Holman bluntly recommends “running a lot of experiments” to ensure that you remain open to often-overlooked solutions that might actually work best.
Nancy Giordano, strategic futurist and TEDx curator
In her keynote opening address at FinovateWest Digital, Navigating the Big Shift – How Exponential Technologies are Changing … Everything, Nancy Giordano highlighted the fact that as we are struggling to keep up with rapid technological change, we must be vigilant to the pitfalls of becoming paralyzed in the face of it.
For businesses, the strategic futurist cautions against the temptation to “not make decisions,” encouraging them instead to be readier to “act dynamically” in the face of uncertainty. A little over a generation ago, it was the political that became personal. Increasingly, Giordano observed, it is the professional that is becoming personal. And technology is playing a major part in making this happen.
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.
