David Penn, Author at Finovate

Colombian Fintech Startups Dominate Accelerator’s Incoming Class

By David Penn Posted on July 31, 2020
Categories: Finovate Global

Village Capital has unveiled the names of the 12 companies that will participate in its Finance Forward Latin America 2020 accelerator program. The incoming cohort will get five weeks of training to help them improve their business models and tailor their solutions for the current demands of the marketplace. The top two peer-selected startups will be eligible to receive $50,000 each in grant funding from program partner MetLife Foundation. Startups ranked third to fifth each will receive $16,000 in grant funding.

What do the 12 startups chosen – from an applicant pool of more than 140 – suggest about the state of fintech innovation in Latin America?

First of all, in some ways, the geographic distribution of companies is representative of what we see in terms of fintech’s strength in the region. Mexico has three representatives, Argentina has two, and Brazil and Chile both have one. Perhaps more surprising is the representation from Colombian fintech, with the country bringing five startups to the program.

Village Capital notes that the selected startups also reflect impressive gender diversity, with more than 80% of the participating companies having one or more female founders. The accelerator also credited the more than 40% of these companies that are innovating “outside major fintech hubs.”

The startups are involved in a wide range of fintech focus areas – from debt management and credit services to e-commerce, “buy now pay later” solutions. Many of these firms offer innovations that are particularly geared toward un- and under-banked populations. Among the more interesting startups in this category are Fundefir, a Colombia startup that specializes in bringing credit and insurance to the underbanked, and Quipu Market, also based in Colombia, which offers an e-commerce marketplace that enables informal microbusinesses to buy and sell locally using community tokens rather than cash.

Village Capital’s accelerator program features the support of PayPal and Moody’s, as well as MetLife Foundation. Since its launch in 2009, Village Capital has worked with more than 1,000 early stage entrepreneurs via its accelerator programs.

“The coronavirus pandemic has had devastating financial effects on low-income populations in Latin America,” Regional Manager for Village Capital Daniel Cossio said. “Now more than ever, tech-driven innovation can be at the forefront of helping small businesses stay afloat, families manage their income, and the region embark on what is bound to be a challenging recovery.”

See the full list of the incoming companies.

Some of the more recent research on fintech in Latin America includes this February report from CB Insights, which helps provide context for the expectations many analysts had for the region at the end of 2019. For insights since the COVID-19 crisis, the May discussion published by Latin America Reports shows how fintech has played a “stabilizing” role in helping businesses and individuals cope with the economic and social impact of the pandemic.

Here is our weekly look at fintech around the world.

Latin America and the Caribbean

Brazil’s Nubank acquires U.S.-based consultant firm Cognitect.
Payment solutions provider Cohort Go teams up with Brazilian bank Itau as it expands into the country.
Konsentus and Open Vector collaborate to bring open banking to financial institutions in Latin America and Canada.

Asia-Pacific

Hong Kong payments network infrastructure startup EMQ raises $20 million in funding to accelerate cross-border payments.
Venio, a mobile app that specializes in providing financing in emerging markets, goes live in the Philippines.
AEE News Today profiles Malaysian fintech Instapay Technologies which recently partnered with Mastercard to launch an e-wallet service for migrant workers.

Sub-Saharan Africa

Alegra, a cloud-based accounting software provider based in Colombia, announces expansion to Kenya, Nigeria, and South Africa.
Airtel Africa teams up with Mukuru to enable cross-border payments.
Mobile money operators are among the biggest players in fintech in sub-Saharan Africa. TechZim reviews the state of mobile money in the southern part of the continent.

Central and Eastern Europe

A biometric facial recognition-based payments system developed by Romanian fintech PayByFace goes live in Bucharest’s Tucano Coffee shops.
Nordigen scores payments license from Latvia’s Financial and Capital Markets Commission (FKTK), enabling it to provide account information services.
Lithuania’s Bankera introduces business loans for SMEs.

Middle East and Northern Africa

Arabian Business takes a look at the rise in popularity of buy now pay later platforms in the UAE.
Dubai International Financial Centre inks Memorandum of Understanding (MoU) with China’s Jiaozi Fintech Dreamworks.
Al Khaleej Today profiles Saudi Arabia-based payments company Tap Payments and its initiatives to help small businesses during the COVID-19 crisis.

Central and Southern Asia

Indian online investment and wealth management platform, Paytm Money, introduces new Chief Executive Officer Varun Sridhar.
Uzbekistan’s first digital bank, TBC Bank, goes live with technology from Capital Banking Solutions.
Niyo, an India-based neobank, acquires mutual fund investment platform Goalwise.

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Birth of a Bank: Varo Money Secures National Charter

By David Penn Posted on July 31, 2020
Categories: Daily news

It’s been a good year for Varo Money. The company became the preferred destination for clients leaving Moven this spring, when the fintech announced that it was pivoting away from consumer banking in favor of a focus on its financial wellness technology.

A few months later, Varo reported a massive investment of $241 million in Series D investment, taking the mobile banking company’s total capital to more than $419 million.

Today we learn that one of Varo’s biggest goals for 2020 – earning a national bank charter – has been fulfilled. The San Francisco, California-based company has been granted a charter by the Office of the Comptroller of the Currency, and has earned regulatory approvals from both the FDIC and the Federal Reserve, making it now set to launch Varo Bank N.A. Varo is the first consumer-facing, U.S. fintech to accomplish this achievement.

“2020 has been challenging for many of us across the country and has highlighted, once again, how the traditional financial system is not meeting the needs of hardworking, everyday Americans,” Varo Money co-founder and CEO Colin Walsh said. “The ability to operate as a full-service national bank gives Varo more freedom to deliver the kind of innovation and allyship that many Americans have never had from their bank before.”

Launched in 2015, Varo Money offers consumers a digital banking alternative including a savings account with an initial APY of 1.21%, and a checking account that comes with a VISA debit card, and early payday for customers that sign up for direct deposit. Varo’s mobile banking app enables users to check up on their accounts and balances, make transfers and mobile check deposits, monitor incoming and outgoing transactions, and more. The company charges no hidden or overdraft fees for its service, and deposits are FDIC-insured up to $250,000.

Bank charter in hand, Varo will soon be able to offer a broader range of products and services including credit cards, joint accounts, and certificates of deposit.

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Wealth Management and Open Banking: Nutmeg Partners with TrueLayer

By David Penn Posted on July 30, 2020
Categories: Alumni News, Nutmeg

A partnership between Nutmeg and TrueLayer will bring the benefits of open banking to the U.K. wealth management business for the first time. The online investment platform announced that it will leverage TrueLayer’s financial APIs to enable its customers to make faster, more secure payments to their accounts online or from their mobile device.

“The payments industry is still dominated by card payments, but bank transfers are the best and fastest way to get money into a Nutmeg account and therefore into the market,” Nutmeg Chief Operating Officer Matt Gatrell said. Unfortunately, he explained, the lack of a quality user experience has made customer reluctant to use this option. “With this in mind,” Gatrell said, “Nutmeg has worked with TrueLayer to launch Open Banking payments for customers – reducing a lengthy user process to just a couple of taps.”

Courtesy of the new partnership, all users will need to do is login to their bank, and confirm the payment to their Nutmeg account to make additions to their investments. Nutmeg said this will enable investors to get their money into the market quicker, and boasts that it is the first wealth manager in the U.K. to offer this account funding option, which TrueLayer CEO and co-founder Francesco Simoneschi called “the killer use case for Open Banking.”

Simoneschi explained: “Simplifying and speeding up processes such as payments makes a tangible difference to consumers. It helps them to have much more control and choice with their finances. This is a fundamental goal of Open Banking and another step forward in its wider adoption.”

Nutmeg has bigger plans for leveraging Open Banking than just bank transfers. In a blog post at the company’s website, Nutmeg Product Manager Charlie Masters noted that open banking has helped incentivize the company’s integrations with companies like Yolt, Emma, and MoneyDashboard earlier this year. “We see these new financial products as a great opportunity to improve the customer experience,” Masters wrote.

Founded in 2011 and headquartered in London, U.K., Nutmeg has been a Finovate alum for more than eight years. With more than $153 million in funding raised, the company includes Goldman Sachs, Armada Investment AG, Convoy Global Holdings, Taipei Fubon Bank, and Pentech Ventures among its investors.

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Enova to Acquire OnDeck in $90 Million Deal

By David Penn Posted on July 29, 2020
Categories: Mergers & Acquisitions, On Deck Capital

If deal-making is a sign of the health of an industry, then the fintech business – global public health crisis notwithstanding – may be doing better than some suspect.

The latest signs of hi-life from the nexus of finance and technology comes from the news released after hours on Tuesday that Enova International – an online financial services company that provides financing to non-prime borrowers and small businesses – has agreed to acquire OnDeck in a deal valued at $90 million.

“This strategic transaction, which brings together two FinTech leaders, is a great opportunity for customers, employees, and shareholders of both companies,” Enova CEO David Fisher said. “Together, our companies will be stronger because of the complementary strengths and synergies of our businesses.”

Fisher highlighted both OnDeck’s online SME lending business as well as its ODX bank platform as being able to increase Enova’s “scale and resources” and drive continued growth in the company’s portfolio. Enova has nearly seven million customers worldwide and has provided more than $20 billion in loans and financing since its inception in 2004.

Of the $90 million total deal value, $8 million will be paid in cash. OnDeck shareholders will get $0.12 per share in cash and 0.092 shares of Enova stock for each share of OnDeck they own. The deal is based on the implied price of OnDeck shares of $1.38, a 90.4% premium on its closing price of $0.73 per share on Monday, July 27. Enova’s Fisher will lead the combined company, with OnDeck CEO Noah Breslow assuming the role of Vice Chairman and taking a seat on the company’s management team.

Breslow expressed pride in the progress OnDeck has made since its founding in 2006, pointing to the $13+ billion in financing the company has provided small businesses over the past decade-and-a-half or so. He said the acquisition was “the right path forward for customers, employees, and shareholders” and posited that the combined entity would be an even more effective online lender and a more powerful ally to small businesses.

The acquisition has been approved by the boards of directors from both Enova and OnDeck, and is expected to close later this year.

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Turning Ideas into Business Agility: Brazil’s Nubank Acquires Cognitect

By David Penn Posted on July 28, 2020
Categories: Alumni profile, Cognitect, Mergers & Acquisitions

When Bank Operating System creator nCino went public earlier this month, we shared a feature on some of the other fintechs – Finovate alums all – that, like nCino, also hail from the state of North Carolina.

For those who may find North Carolina an atypical location for some of the country’s most innovative fintech companies, recall that many of these fintechs are benefitting from the proximity of the famous Research Triangle. This area of the state includes three universities – Duke University, the University of North Carolina at Chapel Hill, and North Carolina State University, and has had a reputation as a technology hotspot since the 1950s. Hall of Fame caliber technology firms from IBM to Cisco Systems to Red Hat have made “The Triangle” their home over the years, solidifying the region’s high-tech reputation and helping attract new generations of entrepreneurs and technologists.

Recently we learned of big news from one of the members of this new generation. Cognitect, which provides engineering and software development talent and technology to clients in industries ranging from health and science to fintech, announced that it has agreed to be acquired by long-time client Nubank, a financial institution based in Brazil.

Cognitect founder and President Stuart Halloway called the company’s relationship with Nubank “a spectacular success story” for its two signature offerings: Clojure – Cognitect’s general purpose programming language – and Datomic – the company’s transactional database. Nubank currently has 600 Clojure developers, running 2.5 million lines of Clojure code in 500 microservices on 2000+ Datomic servers. “Cognitect has been there every step of the way, helping Nubank’s developers translate Clojure’s ideas into business agility,” Halloway wrote at the company’s blog.

The acquisition, according to Halloway, will pave the way for bigger teams for both Clojure and Datomic – technologies Finovate fans were first introduced to via our FinDEVr developers conference in 2016. In that presentation – and in the company’s return to the FinDEVr stage the following year – the Durham, North Carolina-based company demonstrated how its solutions enable companies to have more control over and insight into their data – including the ability to conduct analytics on real-time information without hindering performance.

Nubank’s relationship with Cognitect in general and Clojure and Datomic in specific stems from the Brazilian neobank’s decision to use those technologies to provide a data infrastructure for its microservices platform. The result, for Nubank’s customers, has been greater clarity and complete history on transactions, as well as insight into the origins of suspicious cyber incidents or problems with data.

“Because we use Clojure and Datomic, we’ve built a tool that has already moved beyond what many of our competitors do, and our speed of innovation – new features, continuous deploys – increases with every passing day,” Nubank CTO and cofounder Edward Wible said in a statement. Founded in 2013, Sao Paulo-based Nubank is Latin America’s largest fintech with more than 20 million customers. Cognitect is the firm’s second acquisition of the year, having purchased software engineering company Plataformatec in January.

Going forward, Cognitect will benefit from the continued leadership in its Clojure and Datomic teams, and the company itself will remain a U.S. C corporation. Datomic customers will continue to receive professional services from Cognitect, though the company expects to transition away from general consulting development. Customers also will likely get the next Datomic feature “a bit sooner” Halloway added, pledging to users that “the resources behind (their) software are greater than ever before.”

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Thought Machine Locks in $42 Million in Funding

By David Penn Posted on July 28, 2020
Categories: Funding, Thought Machine

Cloud banking technology provider Thought Machine has secured another $42 million in funding, boosting its Series B round to a total of $125 million after picking up an $83 million investment this spring. The new infusion of capital was led by Eurazeo Growth and featured participation from new investors British Patient Capital and SEB.

The investment will help the company to continue its international expansion – including the addition of new hires in the APAC region, the U.S., and in Australia. The company also plans to use the funding to fuel development of new products and functionalities, including a new payments solution.

“The prospect of transitioning to cloud native technology is now at the forefront of every major bank’s roadmap,” ThoughtMachine CEO Paul Taylor said. “Plans have been hastened in the wake of regulatory pressure, economic uncertainty, and the need to manage cost-income ratios.”

Thought Machine’s signature offering, Vault, is a modern, cloud-native core banking system designed for financial institutions burdened with legacy technology. Demonstrated at the company’s Finovate debut at FinovateEurope in 2018, Vault provides a secure, fast, and reliable end-to-end banking system that manages users, accounts, savings, loans, mortgages, smart contracts, and other financial products and services. By leveraging APIs and a microservice architecture, Vault is able to provide financial institutions with all the functionality necessary for bank operations. Currently geared toward retail and small business banking, the company plans to add both commercial banking and private wealth services “in the future.”

Named to the Tech Nation Future Fifty in March, and joining the Mastercard Start Path Programme in May, Thought Machine announced in June that its Vault platform was compatible with all major cloud infrastructure providers including Google Cloud Platform, Amazon Web Services, Microsoft Azure, and IBM Cloud. Founded in 2014 and headquartered in London, Thought Machine includes Atom Bank and Lloyds Banking Group among its partners.

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Five Ways Partnerships Between Banks and Fintechs Help Drive Innovation

By David Penn Posted on July 27, 2020
Categories: Bankjoy, Compass Plus, Finastra, Fiserv, Minna Technologies, Partnership Outlook, Temenos

To steal a line from Rob Base and DJ EZ Rock, when it comes to innovation in fintech, it takes two to make a thing go right. Whether the “thing” is an end-to-end digital transformation or creating the technology infrastructure to enable firms to build and market their own innovations, collaboration and partnership with fintechs increasingly seems to be the path that the most forward-looking banks and other financial institutions are pursuing.

With this in mind, here’s a look at some of the more interesting recent partnership announcements over the past month – with an eye toward what these collaborations might be saying about the near-term future of fintech.

DBS Bank: Headquartered in Singapore. Total assets of $420 billion (SGD 579 billion) in 2019. Largest bank in Southeast Asia. Operates in 18 markets around the world.

Partner: Infor
Project: Digital trade financing
Objective: Faster “more cost efficient” financing for the 68,000+ SMEs on Infor’s Nexus network.

Royal Bank of Canada (RBC): Headquartered in Toronto, Ontario, Canada. Has 17 million clients in Canada, the U.S., and 34 other countries. Total assets of $1.2 trillion (1.49 trillion CAD) as of 2019.

Partner: Red Hat, Nvidia
Project: In-house, AI-based private cloud platform
Objective: The new build will allow the bank to develop “transformative intelligent applications” and to bring those solutions to market faster.

Orange: Telecommunications corporation headquartered in Paris, France. Fourth largest telecom in Europe and one of the ten largest in the world with 26 million customers. Total assets of $124 billion (€106 billion) and revenues of $49 billion (€42 billion) as of 2019.

Partner: Temenos, NSIA
Project: Orange Bank Africa launch
Objective: Partnership will bring savings and micro credit services to underserved customers in Cote d’Ivoire, Burkina Faso, Mali, and Senegal.

Lloyds Banking Group Headquartered in London, U.K., Lloyds is the country’s largest digital bank with 16.9 million active customers online and 11.5 million on mobile. Founded in 1765, the bank currently has total assets of more than $1 billion (£833 billion).

Partner: Form3
Project: Along with partners Google Cloud and Microsoft, Form3 will help the U.K.-based bank “investigate and develop” a cloud-payments-as-a-service platform.
Objective: The collaboration, which also includes a minority equity stake in Form3, will simplify Lloyd’s payment capabilities and support enhanced data and new overlay services.

Banca Ifis: Specialty commercial and corporate banking firm for SMEs headquartered in Venice, Italy. The firm has more than 130,000 retail clients in the country, and online funding and deposits totaling more than $4.7 billion (€4 billion).

Partner: Raisin
Project: New deposit products
Objective: Raisin’s customers in Germany will gain access to deposit solutions available from Banca Ifis. The collaboration will enable German customers to take advantage of relatively higher interest rates available in Italy.

Other fintech/financial institution partnerships of note this month:

Bankjoy and CACL FCU and SIU CU
Compass Plus and Xalq Bank
Finastra and Educational Systems FCU, The Peoples Community Bank
Fiserv and American Eagle Financial Credit Union
Minna Technologies, Visa, and Lloyds

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Revolut Adds $80 Million to Series D; Valuation Remains at $5.5 Billion

By David Penn Posted on July 27, 2020
Categories: Funding, Revolut

The only thing better than receiving a $500 million investment in February may be getting another $80 million in funding five months later.

Alternative bank Revolut announced late last week that TSG Consumer Partners is the latest investor to join its Series D round. The $80 million investment from the VC firm takes the London, U.K.-based company’s total for the current round to $580 million. Revolut noted that its estimated $5.5 billion valuation in February remains the same.

Company founder and CEO Nikolay Storonsky told Silicon Republic that the additional funding was an instance of TSG Consumer Partners making an offer the company could not refuse. He said that Revolut was not seeking additional funding when the opportunity from TSG developed. “TSG approached us with an exciting proposition to work together,” Storonsky said, adding that the VC firm’s track record of working with “some of the most successful and innovative consumer companies in recent years” was a major plus for the partnership. TSG Consumer Partners has funded companies like BrewDog, Smashbox Cosmetics, and Vitamin Water.

With more than 12 million customers around the world, Revolut offers consumers a variety of banking and personal financial services including a digital bank account with PFM tools, P2P payments, and interbank exchange rate currency exchange. The accounts also come with a prepaid debit card, early payday for direct deposit customers, and stock trading tools.

Founded in 2015 and making its Finovate debut that same year, Revolut launched in the U.S. this spring and has since opened operations in Lithuania, added to its leadership team in Singapore, and reached a milestone of one million customers in Ireland. More recently, the company has expanded its cryptocurrency service to its U.S.-based customers, and partnered with TrueLayer to bring the benefits of open banking technology to its million-plus customers in France.

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Three Fintechs Driving Financial Inclusion in Nigeria

By David Penn Posted on July 24, 2020
Categories: Diebold, Finovate Global, MasterCard, Scalable Capital, Tinkoff Bank

A report earlier this year from PwC highlighted the “changing competitive landscape” for fintech and banking in Nigeria. For those looking to learn more about both the growing impact of technology in financial services in one of the major countries in Africa, as well as the challenge created by COVID-19, PwC’s review provides an comprehensive overview.

The report also concludes with nine recommendations the analysts believe would encourage continued growth in Nigeria’s fintech ecosystem. These recommendations range from making it easier to invest in fintech companies to encouraging partnerships and “strengthen(ing) the synergy between banks and FinTech players” in a mutually beneficial way.

Financial inclusion is a huge part of both the challenge of – and the opportunity for – fintech in Nigeria. The report notes that more than 30 million adult Nigerians do not have or use either formal or informal financial services products or solutions. This represents more than a third of the country’s adult population. And while the report points out that mobile money operators have been among the businesses to help bring more financial services to the underbanked, there are some fintechs that have taken up the cause of financial inclusion, as well. A trio of these companies are highlighted below:

Bankly is a cash digitization and savings platform that caters to Nigeria’s unbanked. The company provides a digital wallet that is secure, convenient, and accessible, and all users require in order to open an account is a phone number. Bankly leverages more than 2,000 agents across 29 of the country’s 36 states to scale the company’s offering.

In operation for just over a year, Bankly has already picked up recognition from the 2019 Innovating Justice Awards sponsored by the Hague Institute for the Innovation of Law. The company has also participated in the GreenHouse Capital accelerator program. Tomilola Adejana (CEO) and Fredrick Adams are co-founders.

Covr Branchless offers banks, insurance companies, and government agencies a suite of applications that enable them to leverage cloud, GPS, and mobile channels to conduct a wide variety of financial processes. Account opening, instant debit card linking, cash withdrawals, fund transfer, billpay, KYC validation and loan origination are among the operations enabled by Covr’s technology.

Covr is owned by Advancio Interactive, a Nigerian technology company focused on sustainable financial access that was founded by Olufisayo Oludare (Managing Director). Covr won Advancio first place at the Startup Istanbul Challenge in the fall of 2017, only the second Africa-based startup to do so.

FairMoney is a online micro lender that provides instant loans from N1,500 to N500,000 (approximately $4 to $1,300), with average loans of about N12,000 ($33-$35). Using the company’s Android mobile app, prospective borrowers apply for financing by answering a few questions and providing some basic financial information. The app analyzes this information – as well as the borrowers geolocation and other factors – to make a loan offer in a matter of minutes.

But what makes the company especially interesting is the fact that it is working to launch a challenger bank. FairMoney raised $11 million in Series A funding last fall for this purpose and plans to expand its offerings to include current and savings accounts.

Here is our weekly look at fintech around the world.