Author: David Penn

BioCatch, the COVID-19 Crisis, and Winning the Race Against Cyberfraud

BioCatch, the COVID-19 Crisis, and Winning the Race Against Cyberfraud
By David Penn Posted on
Categories: Alumni profile, BioCatch
Photo by Roman Pohorecki from Pexels

We caught up with Uri Rivner, co-founder and Chief Cyber Officer of BioCatch, a leading cybersecurity firm that provides behavior-based authentication and threat detection solutions to banks, e-commerce platforms, as well as mobile and web applications.

We wanted to learn how the company, founded in 2011 and headquartered in Israel and New York, has fared in the wake of its major $145 million spring fundraising. We also wanted to hear about the new cybersecurity environment brought on by the global public health crisis and what BioCatch is doing to help institutions manage this challenge.

Finovate: You are one of the founders of BioCatch, and your current role with the company is Chief Cyber Officer? What does this role entail within the company?

Uri Rivner: I was actually head of new technologies at security giant RSA when, in 2011, a foreign state hacked into RSA. It was one of the most famous hacking incidents in history, and following that I was on the look for new technologies that can help the industry against cyber attacks and online fraud. BioCatch, then a very young company, came to us at RSA to present the tech, which sounded really sci-fi. I was impressed and introduced them to industry players who all said that if this was working as advertised, this is a game-changing technology.

At some point the founders of BioCatch asked me to join as a co-founder and help them build the business. I joined mid-2012 as VP of Cyber Strategy. My current role as Chief Cyber Officer is to identify new cybercrime business problems the technology can address, and provide internal and external thought leadership on the role of behavioral biometrics in digital transformation and fighting online fraud.

Finovate: When we last shared BioCatch news with our readers, it was in April on the heels of the company’s $145 million fundraising. How big of a moment was that for BioCatch?

Rivner: It was a major milestone. A vote of confidence that showed us how well the market appreciates what we have accomplished. We’ve taken a scientific field in cognitive studies, something that was working in the lab, and made it extremely practical for use in solving the biggest issues in online fraud across dozens of banks, credit card issuers and companies outside the financial sector, protecting over 100 million online and mobile users. We’ve tackled issues that were initially deemed impossible to solve. And we’ve done all of that with very happy customers and a highly scalable product. It was a proud moment, but at the same time also a commitment to work very hard to justify the trust of our new investors!

Finovate: What has BioCatch been up to in the weeks since then – specifically, how has the COVID-19 crisis impacted the work your company does?

Rivner: Our team has shifted to a work from home model; it was done quite efficiently, and we experienced no issues in continuing to serve customers. We run in the cloud, and there was no interruption to the service. The customers also moved to the same mode of operation.

Finovate: Let’s talk about some of the new security challenges that have developed during the pandemic. It seems like there are fraud “hotspots” everywhere: COVID aid/relief fraud, the security issues of Work From Home, and the potential for identity crime in any track and trace program. Can you talk a little about the cybersecurity landscape in the era of COVID-19?

Rivner: If I had to pick one community that is definitely going to thrive during a global virus outbreak, it’s online fraudsters. They have a golden opportunity to scale their operations while entire companies move their fraud operations and analytics teams to a work from home model, which is not an easy process for, say, a major bank. Here are some of the trends to watch for:

Stimulus Fraud 

American taxpayers get a direct deposit to their bank account using the information included in the last tax return they filed. If they haven’t filed a tax return for 2019 yet, it’s then a race with the fraudsters, who will try to beat them to it and provide a falsified tax return including a bank account that they control. This means the stimulus deposit will go to the bad guys. There are many people who do not file tax returns and go to a website where their information is validated and a check is sent to their address. That’s an easy venue for identity thieves who can obtain full identity records for all U.S. citizens in the dark web. Fraudsters are also impersonating small businesses to apply for stimulus loans using similar methods. In short, it’s a fraudster’s heaven.

Account Opening Fraud

The most scalable fraud operation is opening credit card or personal loan accounts. All you need is to buy a bigger list of stolen identity records, and have a team of people opening accounts in other people’s names. Identity theft is reported to sky-rocket, and it can be quite dangerous, especially if it’s a new digital service that is launching these days. If a new digital service is targeted by a massive campaign, there will be more fraud applications than real applications – that’s disastrous. Traditional defenses such as checking KYC (know your customer) data and device recognition no longer hold, and new technologies such as behavioral biometrics are used to stop such fraud campaigns and reduce false rejections due to high security bars.

Corona Tracker Rogue Apps

Cyber space is teeming with coronavirus scams. The most dangerous scams are the ones that manage to trick users into downloading rogue apps onto their mobile device. They’ll look like useful tools that alert you when a coronavirus carrier is in your immediate vicinity or providing CDC-approved virus contagion maps. But, in reality, they’re after your mobile banking app and mobile e-commerce purchases.

Social Engineering… From ‘Your Bank’ 

“Hey, we’re your bank, and wanted to reach out! The branch is closed, so we’re the friendly help desk. We’ve noticed some issues in your account, and would like to help you sort it out. Can you please install this utility to help us run some tests remotely?” You know the rest of this story.

Uri Rivner demonstrating BioCatch’s Passive Biometrics/Invisible Challenges technology at the company’s Finovate debut in 2014.

Finovate: Earlier this year you were part of a conference presentation that highlighted the importance of machine learning and AI in fighting fraud. What about these enabling technologies is so beneficial when it comes to cybersecurity?

Rivner: My lecture talked about how Sherlock Holmes managed in A Case of Identity to identify an imposter based on a dozen or so “features” related to the typewriter they used to type love letters. Machine Learning can instantly look at thousands of features, resulting in an extremely accurate model that predicts fraud and can adapt itself when cyber criminals change their strategy. At BioCatch we have over 2,000 such features – and not even good old Sherlock could have managed that many in his identity model!

An important consideration though is that some machine learning models are a black box and don’t really provide insights into why a certain action is risky. BioCatch, for example, uses Explainable AI models to make sure customers can get the reasons why a score was high, as well as many negative and positive behavioral factors observed during a session. 

Finovate: What can we expect from BioCatch over the balance of 2020? Has the global health crisis made it more difficult to have visibility into the second half of the year? 

Rivner: Fraud isn’t going away and, in fact, we anticipate a surge in account takeover activity as criminals scale up their cash-out operations. They already have the data they need to steal more money, but they need to scale their infrastructure. Think of mule accounts for moving money out of victim’s account. The crisis makes it easy to recruit mules in work-from-home scams, and to open bogus bank accounts to which stolen money can be moved. Right now criminals are busy doing just that, preparing for a big wave of attacks that is likely to focus on real-time payments such as the relatively new Zelle infrastructure in the U.S., or similar services elsewhere. So demand for a frictionless control that stops fraud and highlights genuine behavior is going to increase.

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ThetaRay Brings AML Solution to Banco Santander

ThetaRay Brings AML Solution to Banco Santander
By David Penn Posted on
Categories: Alumni News, ThetaRay
Photo by Logan Kirschner from Pexels

A newly announced partnership between ThetaRay and Banco Santander will enable correspondent banks to better defend themselves against cybercrime.

Specifically, Banco Santander will use ThetaRay’s anti-money laundering technology to detect activity in SWIFT traffic, risk indicators, and KYC data that may be indicative of money laundering. Banco already has begun deploying ThetaRay’s anomaly detection solution and anticipates a full global rollout “over the next months.”

“We are proud that a financial institution as universally respected as Santander Bank has chosen our AML solution for correspondent banking,” ThetaRay CEO Mark Gazit said. “Recent progress with Partnerships Unit makes me feel Santander is the best financial platform to partner with.”

ThetaRay leverages big data analytics and machine learning algorithms to provide organizations with automatic, real-time detection of suspicious behavior. This enables firms to move faster to address potential threats and to initiate early remediation efforts sooner. ThetaRay’s Investigation Center, designed specifically for the needs of correspondent banking, gives Santander complete access to the data lineage, as well, enabling the bank to conduct extensive forensic investigations to understand the reasoning behind every warning generated by the system.

“ThetaRay’s solution will further improve our ability to detect the earliest signs of money laundering and uncover unknown originating risks,” Santander Global VP for Global Transaction Banking CIB, Carlos Gutierrez said.

ThetaRay demonstrated its technology at FinovateFall in 2015, showing how its fraud and anomaly detection solution helps increase the efficiency and accuracy of cybersecurity systems. Last month, as part of the company’s effort to help financial institutions manage new cybersecurity challenges during the coronavirus crisis, ThetaRay launched FAST START. The new offering packages ThetaRay’s financial crime technology into a cloud-deployable solution that banks can get up and running within 30 days. FAST START is available in three different packages – AML Alert Triage, AML Detection and Monitoring, and Enterprise Fraud Prevention -geared toward the specific kinds of cyberthreats FIs are dealing with.

Founded in 2014 and headquartered in both Israel and the U.S., ThetaRay has raised more than $66 million in funding from investors including ABN AMRO Ventures and Jerusalem Venture Partners (JVP).

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Digital Banking Solution Provider Meniga Raises $9.4 Million in New Funding

Digital Banking Solution Provider Meniga Raises $9.4 Million in New Funding
By David Penn Posted on
Categories: Alumni News, Funding, Meniga
Photo by Niki Nagy from Pexels

As a company, the only thing better than a customer that loves your services and solutions is a customer that wants a piece of the action as well. That’s the happy situation digital banking solution provider Meniga finds itself in; the multiple-time Finovate Best of Show winner has just secured a $9.4 million (€ 8.5 million) strategic investment from current customers Grupo Credíto Agrícola, UniCredit, and Groupe BPCE, which led the round.

The investment, which takes Meniga’s total equity funding to more than $43 million, will help fuel the company’s R&D activities, as well as bolster its sales and service teams. Also participating in the round were current investors Velocity Capital, Industrifonden, and Frumtak Ventures.

Having Groupe BPCE, the second largest banking group in France, as both a customer and an investor is no accident. “Partnering closely with our customers is a key part of our strategy to be the preferred digital innovation partner to our clients,” Meniga co-founder and CEO Georg Ludviksson explained. “An equity relationship is an excellent way to strengthen such partnerships and we appreciate the continued vote of confidence and growing business we have with our impressive global client base.”

Meniga’s funding announcement comes amid a flurry of activity worldwide from the London-based company. In April, Meniga partnered with UniCredit to offer an enhanced version of its smart banking app in the Czech Republic. Also that month, Meniga teamed up with payments and transaction services firm Worldline to help boost digital customer engagement via personalization. Opening a new office in Warsaw, Poland in March, Meniga began the year by receiving its AISP license from the Financial Conduct Authority (FCA) in the U.K.

“The FCA license is an important milestone for Meniga,” Ludviksson said when the license was granted this February, “We will now be able to test new innovations against the Open Banking APIs and with real use cases, which will help us develop products of outstanding quality.”

Meniga’s technology is used by more than 90 million digital banking customers in +30 countries. Founded in 2009, the company most recently demonstrated its technology at FinovateFall in 2019.

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COVID-19 and Fintech’s Venture Capital Crunch

COVID-19 and Fintech’s Venture Capital Crunch
By David Penn Posted on
Categories: Finovate Fintech Halftime Review
Photo by Marta Branco from Pexels

How has COVID-19 impacted fintech funding in the first half of 2020?

Writing about fintech funding in the first quarter of 2020, CB Insights painted a bleak picture of how the global health crisis and its economic effects have put a pall on VC investment in fintech around the world. 

“Worst first quarter for funding since 2017…” “Worst first quarter for deal volume since 2016 …” Across the globe, venture capital investors were on the retreat with only Europe showing significant quarter over quarter growth – thanks largely to the $500 million investment secured by Revolut.

And as the appetite for risk waned, so did interest in smaller fintech startups. CB Insights noted that early stage startups were among the hardest hit in the first quarter, with this subset of companies falling to a nine-quarter low in funding and a 13-quarter low in deal volume.

The struggles of the first quarter of 2020 – when the lockdowns, shelter-in-place, and quarantines were implemented – had reduced much of economic activity to a trickle. With Q2 all but wrapped up – and countries around the world beginning, some more tentatively than others, to reopen their economies – are venture capital investors proving more ready to return to the table?

What were expectations for 2020?

Although VC investment in fintech was down modestly from 2018, last year featured more than enough fundraising to give fintech observers confidence that 2020 could still be a strong year. Again, using CB Insights’ figures, fintech investment pulled back to $33.9 billion in 2019 from $40.8 billion in 2018, with deal volume easing to 1,912 deals in 2019 from 2,049 deals in 2018. Early stage investment declined from a peak in Q1 2018, en route to the 13-quarter low noted above. But investment in more mature startups, Series B and beyond, was strong, with deal volumes reaching their highest levels in five years.

Articles like “Fintech Startups Got All the VC Love in 2019” were also indicative of the general optimism fintech observers felt headed into 2020. Major merger and acquisition deals like Add to this the enthusiasm engendered by major merger and acquisition deals like Fiserv and First Data, and Worldpay and FIS added to the enthusiasm. When combined with the rise of digital banking and regtech, and the addition of 12 new fintech unicorns in the U.S., the conclusions reached by KPMG late last year in its Pulse of Fintech report for the second half of 2019 seemed perfectly sound.

“Fintech investment is well-positioned to grow in 2020,” the report noted, “particularly with the growing proliferation of fintech hubs globally, not to mention the ever-widening scope of fintech offerings.”

How have these expectations played out? Who has benefitted most? 

While fintech VC funding in the first half of the year has struggled, there are signs that this slowdown may be a function of trends that began before the pandemic hit. The second quarter – when quarantines were the case in much if not most countries – did not lack for big fintech deals; Stripe’s $600 million extension of its Series G round in April rivals the $500 million raised by Revolut in February. Micro investment platform Stash scored $112 million in funding in April, as well. Payments company Marqeta announced a $150 million investment – and $4.3 billion valuation – in May. 

Similarly, did COVID-19 cause or merely accelerate a growing VC preference for larger, more established companies over the early stage startups? KPMG was among those who predicted that 2020 would see “frothy speculative deals … increasingly replaced by high-conviction deals focused on companies with proven business models and paths to profitability or access to capabilities in adjacent areas of interest.” This view was shared in February, before the challenge of the global public health crisis had become incorporated fully by many analysts (and not just fintech). Since then, we have seen this play out in the form of new lows in deal volume and deal value for seed and Series A fintechs mentioned above.

When risk appetites are modest, it is understandable that the riskier, early stage startups will be those most likely to suffer. This so far has proven to be the case this year, as investment preferences continue a trend toward relatively more established companies. The fact that this shift had been anticipated by analysts, pre-COVID, suggests this trend is likely to endure in the near term.

Has there been significant geographic variation? Why?

As mentioned above, the only area to see significant VC investment gains in their fintech sector was Europe. In all other regions – Asia, North and South America, Australia, and Africa – both deals value and deal volume were down in the first quarter of 2020.

The profile of VC fintech investment in Europe so far this year was boosted by the $500 million raised by Revolut in Q1. Fintech is in many ways a favorite sector of the European venture capitalists; fintech has lead all others as a destination for VC investment for the past 6+ years. But there was no big Revolut/Stripe level investment in Europe in Q2, although there were a number of smaller deals in firms like U.K. ID verification company Onfido ($100 million) and Germany-based stock trading app TradeRepublic ($62 million) in April. U.K. challenger bank Monzo is also reportedly working to raise capital, as well.

One interesting development on the international fintech funding front is the continued rise of India relative to China. As reported in our weekly Finovate Global column last week, fintech investment in India bested fintech investment in China by a significant margin of more than $50 million. Indian fintechs racked in more than $330 million in funding while their Chinese counterparts raised “approximately $270 million” in capital. Deal volume in India also surpassed deal volume in China in Q1 by 37 to 26. GlobalData, the firm that conducted the analysis, credited the overall cooling of VC investment enthusiasm as disproportionately benefitting India relative to China. 

Interestingly, early stage startups were the preference of Indian investors, compared to a focus on more established fintech firms in China, where the fintech industry is arguably both more advanced and more COVID-sensitive, at least in terms of headline risk.

What are the best projections for H2 2020 and beyond?

The analysts at CB Insights have suggested that we could see a “fintech M&A” spree in the second half of the year. This would mean a resumption of a trend toward consolidation in many areas of fintech that was pronounced in 2019 and at the beginning of this year. They highlight the deals involving Plaid and Credit Karma, SoFi’s acquisition of Galileo and LendingClub’s acquisition of Radius Bank. This is another trend that could be accelerated as part of the industry’s response to the coronavirus, as hardships for some companies become opportunities for others. 

Most fintech analysts remain relatively positive about the industry and its capacity to continue to attract VC money during and after the pandemic. In its report on the fintech and the coronavirus – The Future of Disruptive and Enabling Financial Technology Post CV-19 – Finch Capital sees opportunities for lenders, and for both “agents of digitalization” and digitalization’s newest beneficiaries in mortgage and insurance. Enabling technologies like AI and critical services like cybersecurity and KYC are also likely to continue to fuel innovation and investment in fintech. Interestingly, those industries the report sees as “under pressure” – challenger banks, wealth management, and payments – are among those at the foundation of traditional fintech. This may suggest more disruption – and perhaps more consolidation – ahead for incumbents in these areas once we emerge on the other side of the current crisis.

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Smart Messaging and the Rise of Fintech in India: A Conversation with Gupshup’s Beerud Sheth

Smart Messaging and the Rise of Fintech in India: A Conversation with Gupshup’s Beerud Sheth
By David Penn Posted on
Categories: Finovate Global
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Photo by NEOSiAM 2020 from Pexels

This week on Finovate Global we feature an interview with Beerud Sheth, co-founder and CEO of smart messaging platform, Gupshup. We talked with Mr. Sheth about the smart messaging business and its relationship to driving payments in India. We also discussed the current state of Indian fintech more broadly, including an update on Prime Minister Modi’s goal to improve financial services through a combination of better payments technology and new digital identity solutions.

Finovate: Tell us about Gupshup and the role of smart messaging in enabling payments in India.

Beerud Sheth: Gupshup is a smart messaging platform. We use messaging as a platform to make it easier to use other services such as e-commerce, payments, and more. Messaging enables one-click payments, which makes it easier for consumers to keep up with their busy financial lives. For example, they can pay bills instantly without missing deadlines, manage recurring payments, make a digital payment to an offline merchant, or pay friends quickly and easily.

Finovate: Tell us a little bit about yourself and your background. Why did you decide to launch the company?

Sheth: My name is Beerud Sheth – co-founder and CEO of messaging and AI-building company Gupshup, based in Silicon Valley. We are primarily focused on automating enterprises’ messaging processes across multiple channels using a single API. I am responsible for the overall strategy, execution, and growth of Gupshup.

I also founded Elance, the world’s largest online services marketplace, and also have played various leadership roles at different stages of the company’s growth.

Before founding Elance, I worked in the financial services industry, modeling, structuring, and trading fixed income securities and derivatives at Merrill Lynch and, before that, at Citicorp Securities. My graduate research, at the Massachusetts Institute of Technology’s Media Lab, involved developing autonomous learning software agents for personalized news filtering.

I earned an M.S. in computer science from Massachusetts Institute of Technology and a B.Tech in Computer Science from IIT Bombay, where I was awarded the Institute Silver Medal. I am a frequent speaker at industry events as well as a holder of two technology patents.

Finovate: You recently won a $100,000 Grand Challenge competition sponsored by the Bill & Melinda Gates Foundation. Can you tell us about this contest? Why did you get involved in this event and how do you think it will help promote your technology and solution?

Sheth: The Gates Foundation in partnership with National Payments Corporation of India (NPCI) sponsored a competition to discover new ideas to enable payments for the next billion users – who use low-end feature-phone devices. It attracted over 750 participant companies from around the world. They announced a couple of weeks ago that Gupshup won the 1st prize. Our key insight was that for payments to work well, the primary focus has to be on the user experience. If users have to remember and type in numerous digits, it will never work for users that may not be tech-savvy or have low-end devices.

Gupshup used its expertise in messaging to enable a one-click payment experience. The message contains the entire context about the payment, freeing up the user to do nothing else except authorizing the payment. Gupshup is now working with enterprises and device manufacturers to roll this out to consumers.

Finovate: Your winning entry was a solution called the Smart Feature Phone. What does the phone do and who is the primary market for it?

Sheth: The Smart Feature Phone brings smartphone like capabilities to the feature phone. The target users are the next billion feature-phone users in emerging markets that are left out of the digital ecosystem.

The key feature is the use of messaging to enable chatbots and payments on the feature phone. Chatbots and the Bot Store have the same impact on feature phones as Apps and App Stores did on smartphones. It opens up a wide range of use cases including commerce, gaming, entertainment, sports, etc. Payments enable the monetization of these activities.

Finovate: Can you tell us a little about your partnership with Amazon?

Sheth: Gupshup partnered with Amazon Registry Services to enable customers to validate their bots and register a domain name with Amazon’s BOT Registry.

Without getting too technical, this means users who own, operate, or manage bots published using Gupshup’s tool will be able to be found by end-users no matter what platform or framework they use now or in the future, something previously unavailable for bot owners.

Finovate: You’ve also leveraged your technology to help during the global coronavirus public health crisis. Can you tell us a little about the “COVID bot” you’ve created?

Sheth: CareMe Health, a Chennai-based tele-health company, the National Health Mission of Tamil Nadu and American company Gupshup, worked together in implementing a multi-language WhatsApp-based chatbot readily accessible by millions of citizens in Tamil Nadu and the world over.

The bot, named Careme Bot, is designed to:

  • Educate the users on the health hazards of COVID-19
  • Provide emergency helplines and information on testing centers
  • Facilitate self-reporting
  • Provide up-to-the-minute updates on the COVID pandemic

The creators of Careme Bot are Dr. Arun Babu and Dr. Vasanth Kattalai Kailasam- Chief Medical Officer, Interventional Pain Physician at Northern Light Health, Maine, USAGK, CTO of the company. Check out screenshots of the Careme Bot here.

Finovate: What do you find most interesting about the Indian fintech scene right now? What is it about the fintech scene in India that you think would surprise people outside of India?

Sheth: The scale of a billion-user market would surprise people outside India. India is leapfrogging its way to advanced fintech services since the consumer has been capital-starved for a long time. Indians tend to be conservative about debt which makes them generally creditworthy. However, the financial delivery systems have been lacking, which is now changing because of new technology and startups.

Finovate: You mentioned that one goal of your solution is to help realize the JAM initiative proposed by Indian Prime Minister Modi. Could you elaborate a little on this vision and why it is important?

Sheth: Prime Minister Modi’s vision is to transform India by making sure no citizen is left behind. Three initiatives, in particular, are critical enablers: Jan-dhan (a layer of free, basic financial and payment services for every citizen), Aadhar (unique, biometric-linked identity, like SSN + fingerprints, for every individual) and Mobile (delivery of government services through ubiquitous mobile phones).

The missing piece was the enablement of financial services on low-end feature phones. This problem has now been solved by the Gupshup solution.

Finovate: What can we expect from Gupshup over the balance of 2020 and into the next year?

Sheth: Gupshup is singularly focused on its vision of “smart messaging” i.e., leveraging the power of messaging tools to enable richer services. As people’s lives get increasingly busy and complex, messaging apps, with their ubiquity, simplicity, and richness, are uniquely positioned to be the glue that ties it all together. Gupshup will keep rolling out new components of this over-arching vision.

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NYMBUS Helps Launch Neobank; An Investment Banker Talks Fintech

NYMBUS Helps Launch Neobank; An Investment Banker Talks Fintech
By David Penn Posted on
Categories: Weekly Alumni News

Cloud banking platform provider NYMBUS, which demonstrated its SmartLaunch banking-as-a-service solution at FinovateFall last year, has partnered with Pacific National Bank (PNB) to help the Florida-based company launch a digital-only bank, FACILE.

“We knew we had to act fast to meet the rising consumer demand for digital banking services,” Pacific National Bank CEO Carlos Fernandez-Guzman said. “Only NYMBUS could immediately offer us a proven, unified solution that delivers on-demand access to their wide-range of digital-first technology products combined with a 24/7/365 live call center and remote business process management support.”

The new offering from Pacific National Bank, an institution with more than $656 million in assets, is designed to provide on the kind of online and mobile banking services that young professionals increasingly demand. FACILE will offer both digital checking and savings accounts on a fee-free basis. Accountholders can make mobile transfers and payments, take advantage of personal financial management tools and resources, and access a network of fee-free ATMs. The account also comes with a debit card that features card controls for both better security and keeping spending at a manageable level.

Headquartered in Miami Beach, Florida and founded in 2015 by Scott Killoh, NYMBUS has raised more than $33 million in funding. The company began the year teaming up with PeoplesBank, a Massachusetts-based financial institution with assets of more than $2.9 billion, that deployed both NYMBUS’ SmartMarketing and SmartOnboarding solutions. “NYMBUS will integrate key aspects of our marketing, onboarding, and CRM ecosystems,” PeoplesBank president and CEO Tom Senecal said. “Together with instant end-to-end reporting that crosses business lines, we will ultimately be setup to strategically course correct future spending for even greater outcomes.”

Finovate Podcast Interviews Steve McLaughlin of FT Partners

In the latest edition of the Finovate Podcast, host Greg Palmer catches up with Steve McLaughlin, founder, CEO, and managing partner at Financial Technology Partners. Launched in 2001, FT Partners, as it is known, is the only investment banking firm dedicated solely to fintech. The company has been recognized by the M&A Advisor as “Dealmaker of the Year” and “Investment Banking Firm of the Year.”

Greg and Steve talk about the fintech industry from the perspective of an investment banker. They discuss the issue of capital availability, company valuation, and the idea of a harsher grading rubric for fintech.

Here is the latest news from our Finovate alums:

  • ThetaRay launches FAST START to help banks fight cybercrime during Covid-19.
  • Capita Consulting leverages low-code technology from Outsystems.
  • Minna Technologies launches pilot with Tatra banka in Slovakia.
  • SaltEdge’s new solution helps banks get exempted by the regulator from providing a fallback channel.
  • Token.io’s payments API to power open banking payment services for Upco’s Mobile Messenger.
  • DriveWealth to integrate with Access Softek’s new investing app, EasyVest.
  • ACI Worldwide to provide e-commerce payment processing for retail payments platform, Wundr.
  • Payment processor Trustly teams up with Ecommpay to offer three months of free processing.
  • Finastra launches its Fusion Credit Connect solution on Salesforce AppExchange, FusionFabric.Cloud.
  • Boku powers direct carrier billing and e-wallet payment services for Korean game developer Pearl Abyss Corporation.
  • MX launches Audiences, a new segment builder tool to help banks improve marketing efforts.
  • ID R&D releases IDFraud Contact Center to address subscription fraud in the contact center.
  • DriveWealth to bring U.S. stock investing to India-based INDmoney clients.
  • Coinbase plans to be a “remote-first” company after COVID-19.
  • Fiserv to power P2P payments for Redstone FCU.
  • Ethoca and Mastercard partner to help retailers deal with chargebacks and fraud during the COVID-19 crisis.
  • Kabbage receives SBA approval to fund PPP applications totaling more than $3.5 billion.
  • FIS launches iQ Now, a mobile app for SMEs that enables owners to monitor real-time business performance.
  • WorldRemit teams up with Onfido to enhance the identity verification component of its onboarding processes.
  • iProov to bring its biometric authentication technology to the U.K.’s National Health Service (NHS).
  • Xero partners with online small business bank Relay to offer real-time visibility of cash flow.

Finovate Alum Features and Profiles

Visa Backs GoodData in New Strategic Partnership and Investment – The collaboration includes an investment in the global analytics company and is designed to enable Visa to offer its customers and partners better access to aggregated data and analytics.

Plaid Exchange Offers Open Banking in a Box – The new tool, Plaid Exchange, offers banks a way to provide open banking connectivity to their clients while keeping their clients’ data safe and giving them control of their data.

Counter-intuitive Brilliance: Zafin’s Strategy for Success in Trying Times – How is Zafin helping banks and other financial institutions cope with the current environment?

Alums Assemble! A Look at Finovate Merger and Acquisition Activity in H1 2020 – Here is our quick rundown of some of the biggest M&A action from our Finovate alums so far in 2020.

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India Tops China in Fintech Investment in Q1 2020

India Tops China in Fintech Investment in Q1 2020
By David Penn Posted on
Categories: Finovate Global

China is dominating geopolitical headlines – from the country’s unique challenge with COVID-19 to tensions with Hong Kong and the United States as Chinese leaders gather for the country’s annual National People’s Congress.

But fintech observers would do well to consider developments in China’s neighbor to the southwest, India, whose fintech sector continues to challenge China’s in terms of investment.

In the first quarter of 2020, fintech investment in India again outpaced fintech investment in China. GlobalData, a data and analytics company, released an analysis this week that showed Q1 2020 fintech investment in China came in at “approximately $270 million” while, in India, fintech investment in the first quarter of this year topped $330 million. GlobalData analyst Ayushi Tandon noted that the global pandemic had played a role in dampening VC enthusiasm for fintech investment overall this year so far, and that India had benefitted on a relative basis from this easing of investor passions.

Deal volume showed the same preferences in the first quarter, with 26 deals closed in China in Q1 compared to 37 deals in India.

VC investment in the two countries differed in terms of startup maturity and sub-sector, as well. In China, there has been more investment in cross-sector fintech startups that were looking to scale. In India, payments and lending were the top sectors, and seed funding dominated the quarter’s investments. GlobalData’s report noted that fintechs involved in analytics were the biggest recipients of VC funding in both nations.

India’s fintech industry certainly had the wind in its sails coming into this year. According to research from Accenture, investment in Indian fintechs grew from $1.9 billion over 193 deals in 2018 to $3.7 billion over 198 deals in 2019. The country began to successfully compete with China in terms of fintech investment last year.

Founded in 2016 and headquartered in London, U.K., GlobalData was formed by a consortium of established data and analytics providers. Covering a wide range of industries – from banking and payments to insurance, aerospace, and technology – GlobalData serves financial institutions, government agencies, and corporations, providing thought leadership and analysis, as well as proprietary analytic frameworks to help them make data-driven decisions.

Here is our weekly look at fintech around the world.

Middle East and Northern Africa

  • NEC Payments and stc Bahrain, a telecommunications company based in Bahrain, partner to launch new virtual prepaid Mastercard offering.
  • JinglePay, neobank based in Dubai, announces plans for launch.
  • Emirates NBD collaborates with proptech startup Urban to offer financing program for property rentals in UAE.

Central and Southern Asia

  • Lendingkart, an online lender based in India, raised more than $42 million in Series D funding.
  • Indian SME accounting app Khatabook raises $60 million in Series C funding.
  • SadaPay, a fintech based in Pakistan, wins approval to launch a mobile wallet.

Latin America and the Caribbean

  • Brazil unveils new regulations enabling banks, payments institutions, and other licensed companies to share customer data.
  • Koibanx, a fintech based in Argentina, announces plans to expand to Mexico.
  • Colombian lender ADDI raises $15 million in round led by Quona Capital.

Asia-Pacific

  • Philippines-based mobile wallet GCash to support cashless payments system for taxi service in Manila.
  • Samsung Pay and Malaysia-based e-wallet Boost team up to support cashless payments in Malaysia.
  • Ant Financial invests $73.5 million in mobile financial services company Wave Money.

Sub-Saharan Africa

  • South African business payments platform Peach Payments locks in growth funding with investment round led by UW Ventures.
  • Nigerian fintech Carbon goes live with new social banking service.
  • CompariSure, a fintech startup from South Africa, raises funding from UW Ventures.

Central and Eastern Europe

  • Billon partners with Austria’s Raiffeisen Bank International (RBI) to pilot a DLT-based national currency.
  • EU Startups features CEE fintechs Crypterium, Humaniq, Revolut, and ANNA in its list of promising startups with Russian founders.
  • Financier Worldwide looks at AML and financial crime in Romania.

Top image designed by Freepik

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Ethical AI, Corporate Governance, and the Future of Financial Services

Ethical AI, Corporate Governance, and the Future of Financial Services
By David Penn Posted on
Categories: FinovateAsia Digital 2020, Speaker series

For every conversation about AI that begins with insects, moves quickly through primates, and then launches into the stratosphere of high-minded conceptions of superintelligence, talk about artificial intelligence among executives and entrepreneurs in the financial services and fintech world is far more grounded.

This was the message from Clara Durodié, CEO of the Cognitive Finance Group and author of Decoding AI in Financial Services: Business Implications for Boards and Professionals. Among the more provocative speakers at our conference in Berlin earlier this year, Durodié is likely to make an equally strong impression in her return to Finovate as part of our all-digital FinovateAsia conference in July.

“Technology is a tool to support the business, not a toy to engage and have fun in excellence centers,” she announced early in her address to our FinovateEurope audience. “Technology in our industry is a serious tool. (Technology) needs to follow business strategy, not the other way around.” She likened the responsibility to use technology ethically and with purpose to the responsibility of earning a license to drive. Durodié made it clear that, like a driver and a passenger sitting side by side in a moving vehicle, both technology creators and technology users stand to benefit from a commitment to responsible behavior.

Businesses that embrace a more ethical approach to technology – especially a technology as powerful as AI – are also those that are most likely and able to transition away from what Durodié has called a “product-centric” today to a “customer-centric” tomorrow. She has pointed out that AI can be a powerful tool for personalization in business contexts, while simultaneously enabling companies to move to a qualitatively and quantitatively new level in terms of automated business processes.

“The work we do is around deployment of ethnical AI for business growth and profitability.”

Who makes sure this happens? While the immediate onus is clearly on the business leader, CEO, or founder, Durodié emphasized that much of the business’ leadership will – or should – come from its board of directors, particularly in high-level areas like corporate governance, business strategy, and fiduciary responsibility, where ethical guidance is paramount. “This is challenge number one,” she said of startups and their relationship with their board of directors.

And not just any board of directors. Durodié referenced a study from MIT that indicated that simply having one individual with a “technology” background on a board of directors improved the likelihood that the company working with that board would yield 38% return on assets on a yearly basis. “And if you compound that every year,” Durodié added, “you can see why the people who actually do things right from the beginning will be ahead of the game.”

For Durodié, the conversation on governance is intimately linked (“married forever”) with the conversation on ethics, and it is important that companies develop processes and systems that are “explainable, auditable, and accountable.” This is especially important when the data involved is financial data, and when the technologies to be deployed against this data are as powerful as AI.

“Financial data on our customers is highly sensitive. And we need to treat it as such and protect it as such,” Durodié said. She noted that the companies that will succeed in effectively deploying AI will understand this challenge, and have the moral compass to build tools that are “robust and helpful.” “Algorithms have parents,” she noted. “Every bias, every conditioning we have, comes through the way we generate the data and design systems. It’s very important.”

Check out Clara Durodié’s keynote address from FinovateEurope. And visit our FinovateAsia page to learn more about her upcoming participation in our all-digital, fintech summer conference in July.

Cognitive Finance Group is a specialist consultancy that advises boards of directors on best practices in the adoption, selection, and implementation of AI-based systems.

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Visa Backs GoodData in New Strategic Partnership and Investment

Visa Backs GoodData in New Strategic Partnership and Investment
By David Penn Posted on
Categories: Funding, GoodData, VISA
Photo by Magda Ehlers from Pexels

San Francisco, California-based company GoodData, which demoed its Insights-Platform-as-a-Service technology at FinovateFall, has forged a strategic partnership with Visa. The collaboration includes an investment in the global analytics company (terms not disclosed) and is designed to enable Visa to offer its customers and partners better access to aggregated data and analytics.

GoodData founder and CEO Roman Stanek said that the investment both reinforced the company’s status as a leader in all-in-one data platforms, as well as bolstered GoodData’s mission to enable companies to maximize the way they use data. “Visa’s investment will allow us to increase our focus on interactive self-service analytics, user interfaces, and data visualizations, as well as expand our customer support for managing complex data governance, compliance, cybersecurity, and privacy matters,” Stanek said.

GoodData offers an integrated set of data management, analytics, and insight application development and management components that enhance operational decision-making for financial services companies and insurance agencies. Companies can connect the GoodData platform to multiple data sources in order to build their own standalone or embedded smart business apps.

Visa put the partnership in the context of finding opportunity in the middle of a crisis. “As the world faces pandemic and economic challenges, there’s no better time to invest in areas that will improve the lives of consumers and businesses,” Visa SVP and global head of Data, Security, and Identity products Melissa McSherry said. She added that the insights available via the GoodData platform will not only help Visa’s customers better meet consumer needs, but also will help firms meet them at a time “when those needs are changing fast.”

Before this week’s funding, GoodData had raised more than $115 million, with the company’s last fundraising bringing in $14.4 million in 2018. Earlier this year, GoodData announced that media CMS provider TownNews had partnered with the company to use its data analytics tools to improve revenue and audience engagement. Named one of the Coolest Business Analytics Companies in CRN’s 2020 Big Data 100 roster, GoodData also this month unveiled a new, web-based logical data model (LDM) modeler. This tool complements the company’s just-released, data source management interface to simplify data modeling when starting new data products or extending current enterprise reporting. Critically, the new LDM modeler helps data engineers and data analysts work more effectively together. GoodData co-founder and VP of Product & Marketing called this problem “the greatest challenge facing enterprises building new data products for customers.”

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Raisin Launches Savings-as-a-Service Solution in the U.S.

Raisin Launches Savings-as-a-Service Solution in the U.S.
By David Penn Posted on
Categories: Daily news
Photo by Naim Benjelloun from Pexels

European wealth management firm Raisin is bringing its Savings-as-a-Service solution to the U.S. The new offering, the first U.S.-based product from the Berlin-based fintech, will enable banks and credit unions to provide private-banking services typically not available to the average banking customer.

Foremost, FIs that partner with Raisin will be able to leverage the company’s technology to quickly build custom retail deposit products. These products include market-linked solutions that enable customers to benefit from a resurgence in economic activity while at the same time providing 100% FDIC deposit insurance up to $250,000. Banks and credit unions can also create deposit products with dynamic features such as laddering, and ones that can be optimized for profitability or other individual preferences.

“Given the current economic uncertainty, financial institutions want a share of the big increase in deposits, but many don’t have the technological tools to optimize or meet customers’ current needs,” Raisin U.S. CEO Paul Kodel explained. He said that in order for banks and credit unions to help rekindle the economy, they will need to be able to offer a wider range of solutions. “Banks need affordable products that enable customers to stabilize their assets now, and then also grow with a recovery,” Kodel said.

Raisin Communications Manager Maggie Bell noted that the company’s new offering comes at a time of increased opportunity in deposit products for financial institutions. She cited data from the Federal Reserve indicating that while commercial bank deposit market volume had grown by more than 10% since the beginning of the year, deposits spiked from $13.5 trillion to nearly $15 trillion between the second week of March and the third week of April. Additionally, deposits could represent a significant part of the refinancing mix for banks, Bell wrote, “especially as bonds have become more cost-intensive within the last two months.”

With 92 partner banks, more than 260,000 customers and €23 billion in assets invested, Raisin was founded in 2012. The company provides access to guaranteed deposit products from across Europe and, in Germany, offers diversified, cost-effective exchange-traded fund (ETF) portfolios and pension products. Named a top five European fintech by the FinTech 50 awards, Raisin is backed by investors including Goldman Sachs, PayPal Ventures, Thrive Capital, and Index Ventures.

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Counter-intuitive Brilliance: Zafin’s Strategy for Success in Trying Times

Counter-intuitive Brilliance: Zafin’s Strategy for Success in Trying Times
By David Penn Posted on
Categories: Alumni profile, Zafin
Photo by Burak K from Pexels

A global product and pricing solution provider for banks, Zafin finished 2019 with a new Salesforce integration and began this year with a major change at the top: adding financial services veteran Venkataraman Balasubramanian (known informally as “Bala”) as the company’s new Chief Technology Officer.

Balasubramanian arrived at the Toronto, Ontario, Canada-based company at a time of major innovation in the financial services industry – as well as a time of significant disruption in the everyday lives of people all over the world due to the coronavirus pandemic. How is Zafin helping banks and other financial institutions cope with the current environment? How do some of the most compelling technology innovations of our time – from advanced machine learning and AI to the blockchain and Big Data – give innovators the tools they need to find new solutions to old – and new – problems? We talk with “Bala” about all this and more in our latest Finovate Alumni profile.

Finovate: You have only been at Zafin for a month or two. How are you finding your new position? Any surprises?

Venkataraman Balasubramanian: It has been an incredible first few months for me here at Zafin. First and foremost, I find myself in the midst of a very talented group of people: engineers, business and technical analysts, a robust management team, and a very dedicated client success team. The depth of these teams is a testament to the value our clients see in our products. 

Counter-intuitive yet brilliant has been the approach our management team has taken during these very trying times: to continue to bring in strong talent that will put us in a strong position coming out of this period of economic uncertainty.

Zafin was among the first to move to protect our employees by requiring all to work remotely. Our employees have access to extra “care days” for this year as a benefit. Recognition that the safety and well-being of our team is paramount to our client success is unusual to see in a business our size and one we continue to focus on.

Finovate: You have more than 35 years of experience in financial services and information technology. What attracted you to Zafin?

Balasubramanian: Digital was here to stay even before our current crisis. It is now even more so cemented in our everyday lives. This aspect of digital, however, goes far beyond the creation of experiences into the digitization of entire workflows — propositions that resonate in this context with a cloud-first service architecture, enabled by artificial intelligence and machine learning.

The implementation of such a system typically requires truly digital fintech partners (such as Zafin) and services integration (SI) partners. Having spent considerable time with SI partners in my prior roles, I felt that the timing is appropriate to work with a specific digital enabler. Zafin provided that opportunity in that its solution truly enables a digital transformation of the customer experience across the entire customer relationship and banks’ business lines.  

Finovate: What are some of the things you are most eager to accomplish in your first year as CTO?

Balasubramanian: We are a cloud-based solution today, and I would like for us to be a multi-cloud solution in a manner that is unique. We are currently defining that framework, and I hope to get it to completion during the year. 

In the era of digital transformation, core systems transformation will progress considerably. To that end, I expect to work with both existing core providers and transformational core providers to enable a “Bank-in-a-Box,” with a modernized core and externalized cross-product layers that enable product, pricing, and billing functionalities. Further, we will look to incorporate AI/ML capabilities into our solution to create proactive end-user interfaces. 

Finovate: What are some of the most significant changes in the banking industry going on right now and what role is Zafin playing to help banks and other financial institutions successfully navigate these changes?

Balasubramanian: COVID-19 has redefined life as we know it, and financial services are no exception. Whether it is social distancing, phased restarts of the economy, or just the uncertainty that this virus has created, it has made us all think about the experiences we want in our everyday lives. Naturally, this means digitizing many facets of those experiences. 

We want payments to be contactless and frictionless. We want highly relevant products and offers that seek to simplify our lives. From a banking perspective, Zafin works with banks to digitize the product lifecycle and its applicability to pricing and billing by injecting the customer and relationship context. We also enable banks with a cross-product layer that allows the centralization of product variants across the various systems. These are fundamental building blocks as a bank strives to digitize customer journeys.

Finovate: There are a number of enabling technologies that are helping drive innovation in fintech right now: AI, Big Data, blockchain, machine learning, and so on. Which technologies do you believe are being leveraged most effectively in the industry and how?

Balasubramanian: Each of these enabling technologies is at various stages of maturity, depending on the use case. Blockchain has great applicability not merely as a decentralized ledger, but also in immutability. Yet, that set of applications has some adoption in capital markets and not quite yet in other facets of the industry. Community creation has been a major impediment to its success. 

Big Data, AI and ML have a slightly more nuanced twist: These require a considerable upfront investment in terms of data and infrastructure, hypothesis creation, testing and validation to produce a result. This will likely only be valuable if it is integrated into the delivery system — otherwise, it may turn out to be nothing more than an interesting experiment. 

As these technologies and usage mature, they will prove more valuable. The discontinuity that the current situation creates allows for value systems to be re-arranged, and, in so doing, I believe many more interesting use cases will be discovered.

Finovate: Tell us more about how the COVID-19 pandemic is impacting Zafin and the work it does? How is it impacting you and your work, having just arrived at the company?

Balasubramanian: If there was one major surprise for me that I didn’t answer in the very first question, it is this. We were among the first companies to transition our entire workforce to a remote setup. We rapidly implemented technologies to enhance internal collaboration and client communication. Working remotely may have impeded my own ability to get to know my team personally (as I would have typically done), but given the circumstances, our transition has been about as seamless as it could have been. 

In some cases, COVID-19 has accelerated banks’ plans for digital transformation. Based on the volume and nature of conversations we’re having with banks and partners, if anything, the interest in and demand for what we offer has only increased over the past few months. 

As much as we hope for the return to what we knew as “normal”, we are also certain that a new normal will emerge. And we think we are well prepared for that.

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Alums Assemble! A Look at Finovate Merger and Acquisition Activity in H1 2020

Alums Assemble! A Look at Finovate Merger and Acquisition Activity in H1 2020
By David Penn Posted on
Categories: David's column, Mergers & Acquisitions

Visa’s acquisition of Plaid for $5.3 billion at the beginning of the year set a high mark for mergers and acquisitions among Finovate alums in 2020. How have subsequent deals among our alums in the fintech space measured up?

Unfortunately, many M&A deals keep their financials well under wraps, which makes comparisons difficult. But we can take a look at some of the brighter lights in the merger and acquisition sky, and gain some sense of just how big some of these fintech stars truly are.

Looking at the first few months of the year, we have no figures for the four alums that were acquired in the first half of 2020. Of the acquirers, however, two deals stick out, rivaling the Visa/Plaid purchase in January: Intuit’s $7.1 billion buy of Credit Karma, and Worldline’s decision to put down $8.6 billion for Ingenico.

Below is our quick rundown of some of the biggest M&A action from our Finovate alums so far in 2020.

The Acquired

  • Emailage acquired by LexisNexis Risk Solutions. May 7.
  • Arxan merged with CollabNet VersionOne and XebiaLabs to form new company, Digital.ai. April 17.
  • IdentityMind Global acquired by Acuant. April 1.

The Acquirers

  • SoFi acquired Galileo in $1.2 billion deal. April 7.
  • Tink acquired Eurobits Technologies. March 29.
  • Fiserv acquired Bypass Mobile. March 18.
  • DocuSign acquired Seal Software in $188 million deal. March 1.
  • Intuit acquired Credit Karma in $7.1 billion deal. February 28.
  • Envestnet | Yodlee acquired FinBit.io. February 25.
  • Lending Club acquired Radius Bank. February 19.
  • Worldline acquired Ingenico for $8.6 billion. February 3.

If you are a Finovate alum that was involved in a merger or acquisition in the first half 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! M&A activity prior to becoming an alum not included.

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