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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Small business financing and payments company Behalf has a new man at the top. The company announced that Rob Rosenblatt, who has been serving as Behalf president for the past six months, will now take over the role of Chief Executive Officer of the eight-year old firm.
“Consumers have enjoyed a broad range of financing solutions offered by retailers and e-tailers for many years,” Rosenblatt said in a statement. “Now is the time for every major business seller to make net terms and extended financing solutions available to their customers in order to facilitate commerce. Behalf is ideally suited to help accelerate the adoption of these solutions.”
Rosenblatt will replace company co-founder Benji Feinberg, who had served as the company’s CEO since its founding in 2012. Rosenblatt’s appointment will mean that Behalf’s customer-facing functions will be based in New York City, with the firm’s R&D capabilities continuing to be housed in Behalf’s offices in Ra’anana, Israel.
Before coming to Behalf in February of this year, Rosenblatt was Head of Lending and GM of Lending Operations for Kabbage. He was also previously Chief Customer and Chief Marketing Officer for Flywire. Rosenblatt is currently on the board of directors of prepaid card provider PEX Card.
Behalf helps small businesses manage cash flow and expenses by enabling them to quickly and affordably finance almost any business purchase. The company uses its own proprietary credit scoring methodology to guide its purchase financing, and pays vendors directly on behalf (hence the name) of small businesses while collecting repayments on behalf of the vendor. With Behalf, B2B sellers are able to get paid upfront, without needing to worry about credit risk, as well as enjoy larger average order sizes. Buyers benefit from ready access to financing, including avoidance of the financing fee if repayment is made during the grace period.
“There is real demand for Behalf’s financing solutions in B2B commerce,” Behalf Executive Chairman Michael Heller said. “Now is the ideal time for Rob and the entire Behalf team to seize the opportunity and focus on growing the company.” Heller is also an Operating Partner at Oak FT/HC and MissionOG.
Behalf has raised $310 million in funding from investors including Viola Growth, Spark Capital, MissionOG, Visa, and Sequoia Capital Israel.
What have the companies that won Best of Show awards at last year’s FinovateFall conference been up to in the months since our New York show? With our autumn event less than a month away, we thought it would be a great time to check in on the nine companies that took home top honors this time last year.
BlytzPay – Integrated its digital payments technology with Dealer Management Systems (DMS) leader ABCoA Deal Pack. Announced strategic partnership with AFS Dealers.
Cinchy – Joined the 2020 MassChallenge FinTech Program in December 2019 along with five fellow Finovate alums. The program noted that 70% of the participants in its previous cohort launched a pilot or proof of concept within a year. Earned a $500,000 cash prize as one of the winners of the 2019 VentureClash competition. Raised $10 million in funding in May.
College Aid Pro – Partnered with Horsesmouth, a company that provides educational and marketing solutions for financial advisors and their clients. Announced collaboration with the American Institute of Certified College Financial Consultants. Teamed up with online student loan refinancing marketplace Credible.
ebankIT – Forged North American partnership with fellow Finovate alum Enterprise Engineering this spring. Announced updates to its multichannel banking platform.
Glia – Won Best of Show at FinovateEurope for a second year in a row. Integrated its technology with fellow Finovate alum Alkami’sOnline Banking Platform. Inked partnerships with 20 credit unions across the U.S.
MX – Topped 50,000 direct-to-bank API agreements to major financial institutions and fintechs. Launched data connectivity API, Path by MX. Named one of Inc. Magazine’s Best Workplaces 2020.
owl.co – Named one of Canada’s Most Innovative Tech Companies by the Canadian Innovation Exchange. Delivered $1 million in revenue within six months of launching.
Pinkaloo Technologies – Raised $1.25 million in funding. Joined Goldman Sachs-owned Ayco Marketplace for financial counseling and wellness services. Partnered with Eastern Bank to power its Give for Good charitable giving program.
Zogo Finance – Teamed up with fellow Finovate alum Bankjoy. Announced partnerships with 11 community banks and credit unions across 12 states. Surpassed 1,000,000 financial literacy modules completed.
FinovateFall Digital 2020 kicks off Monday, September 14 and continues through Friday, September 18 with hours of live and on-demand content. Visit our registration page today and join us for Finovate’s biggest, digital-first event to date.
In a round led by Sorenson Ventures, identity verification innovator Socure has locked in $35 million in new funding. The investment, which takes the company’s total capital to $96 million, featured the participation of three new funders: Citi Ventures, Wells Fargo Strategic Capital, and MVB Financial Corp, as well as existing investors Commerce Ventures, Scale Venture Partners, and Flint Capital. Socure said the additional funding will support the firm’s growth objectives and enable the company to add to its platform’s machine learning capabilities.
“We are grateful to have had significant investor interest despite the current economic environment, and are proud to have taken less money than was on the table,” Socure CEO Tom Thimot said. “As we continue to build on our position as the leader in Day Zero identity, we are prioritizing investment in new verticals, talent, products, and capabilities.”
The investment reflects a growing importance on identity verification at a time when more and more individuals and businesses are relying on digital channels. Companies with identity verification solutions that can quickly – i.e., in real-time – establish that individuals are who they say they are and do so with as few mistakes as possible will become increasingly valuable partners for businesses looking to maximize engagement and commerce via digital channels.
Socure’s funding news comes just a few months after the company unveiled its latest digital identity verification solution, Intelligent KYC. The company’s technology accelerates customer acquisition and boosts auto-approval rates by leveraging advanced graph analysis and machine learning to verify identity in real-time. With partners ranging from banks and lenders to telecommunications firms and insurance companies, Socure enables its clients to achieve 85% fraud capture rates, a 90% increase in auto enrollments, and up to 10x reduction in false positives.
Most recently demonstrating its technology at FinovateFall in 2017, Socure was founded five years earlier by Sunil Madhu and Johnny Ayers (SVP). Named one of Forbes’ Top 25 Machine Learning Startups to Watch, and recognized by Gartner as a Cool Vendor in AI for Banking and Investment Services this spring, the company added a document verification module, DocV, to its Socure ID+ platform earlier this month.
Socure is headquartered in New York, and maintains offices in San Diego, San Jose, and Chennai, India.
A recent analysis by Brookings looked how technology, platform regulation, and China policy may be impacted by the policies of a future Joe Biden/Kamala Harris administration should President Trump fail to be re-elected. As might be expected, the review pointed to greater regulation – including anti-bias and worker rights advocacy – as one likely outcome if a new administration takes office next year.
Also interesting are the ways that the Brookings analysts – and others – see a Biden/Harris administration as an enabler of technological advancement and innovation, especially in the area of technology infrastructure. This is also one of the ways where a Biden/Harris administration could be most constructive for fintech.
As the Brookings analysts point out, the fact that the Democratic vice presidential nominee is a Senator from California (who represents Silicon Valley) suggests that there might be greater insight into the issues and challenges of the 21st century technology industry than exists in the current administration.
This likely cuts both ways. A Democratic administration would likely be more supportive of immigration policies that would enable tech firms to keep and attract more talent – as well as for international talent to decide to innovate and build in the U.S. rather than in Europe or Asia. This would benefit fintechs across the board as much as it would benefit technology companies generally.
At the same, there’s no doubt that regulation – especially financial regulation – would likely see a resurgence. While many are wondering about the prospects of an Obamacare 2.0 in a Biden/Harris administration, fewer are discussing the possibility of a CPFB 2.0 and the likelihood of a renewed attention on fintech’s lenders in particular. I think that the CPFB’s creator, Massachusetts Senator Elizabeth Warren, would probably not be headed to Treasury in the event the American people put Joe Biden in the White House, but her influence on the resurrection of the agency would be powerful.
At the same time, it is worth remembering that Joe Biden has a far different historical relationship to the world of finance, if not fintech, compared to Senator Warren. As a multi-decade senator of Delaware, Biden has been criticized – including by Senator Warren – for his “energetic work on behalf of the credit card companies.” A 19th century Delaware law allows any American company to incorporate in the state and not a few firms over the years have taken advantage of this to “place their profits in Delaware-based holding companies to avoid paying taxes in the places where they actually operate” as Tim Murphy described in Mother Jones last year.
It may be too much to suggest that the First 100 Days of a Biden Administration would feature a tug-of-war between the new president and Warren over the appropriate attitude toward consumer lending and credit. But the presence of both does suggest that any policy that emerges could be more moderate than might otherwise seem.
Digital receipts platform ReceiptHero will join Mastercard’s Lighthouse Development Program in September. The Helsinki, Finland-based company made its Finovate debut earlier this year at our Berlin conference, demonstrating how its digital receipts technology makes accounting easier for banks and PSPs while giving customers greater transparency into their spending.
ReceiptHero is one of 15 companies from the Nordic and Baltic countries to be included in the program’s fall cohort. Participating startups will work with program partners such as Swedbank, SEB, and OP Bank, and receive guidance on topics such as communications and marketing, as well as strategic development. The startups also will explore potential collaboration opportunities with program partners. In the final stage of the program, the companies will have the ability to make digital pitches to investors.
“By joining the latest Lighthouse batch, we hope to work closely with Mastercard and its partnering banks on making digital receipts the new normal,” ReceiptHero CEO Joel Ojala said.
Also participating in the fall program are five companies from Sweden: Gimi, Charge, Youcal, Ponture, and FossID; and five companies from Lithuania: Kevin, ConnectPay, Regvolution, Spell, and Savings Pands. In addition to ReceiptHero, there are another four companies from Finland: Voima Gold, XMLdation, Arctic Security, and InvestSuit.
“In every edition of the Lighthouse Program, we can see that the Nordics and Baltics are genuinely leading in payments innovation,” Head of Digital Development and Fintech Engagement for Mastercard in the Nordics and Baltics Mats Taraldsson said. “This proves the importance of strengthening the ecosystem through open innovation platforms such as Lighthouse.”
Founded in 2018, ReceiptHero teamed up with Verifone last fall, enabling digital receipts to be linked to customers’ payment cards. Verifone has a major presence in the Nordic region, and the partnership allowed ReceiptHero to access not only a larger part of the Finland market, but also to expand to other Baltic countries where Verifone “already has a large footprint,” Ojala said. Later that same month, ReceiptHero announced a collaboration with Nordea, which added the company’s digital receipts to its Nordea Wallet app.
ReceiptHero began 2020 with a pledge to plant one million trees by 2025 by donating $1 to conservation charity One Tree Planted for every new merchant that joins its digital receipt platform.
The West won the Cold War, says conventional thinking, not via open confrontation, but by making the cost of competition prohibitively high for its adversary. Some of the brightest minds in the digital identity business believe that a similar approach is key to undermining the ability of criminals to profit from cyberfraud.
“Eliminating all fraudulent accounts is an admirable goal, but perhaps unattainable,” wrote Cameron D’Ambrosi, Principal, One World Identity, and an upcoming participant in our FinovateFall DigitalFuture Financial Crime roundtable. “Making it more expensive to create a fraudulent account than the profit generated by a fraudulent account is … achievable. It will go the farthest towards meeting the goals of trust and growth teams alike.”
In a blog post earlier this year, D’Ambrosi put the case for digital identity in the context of the current global health crisis, seeing COVID-19 – and the social and economic response to it – as an accelerant of trends that had been in place before the onset of the coronavirus.
As D’Amborsi explains, in a world in which individuals are increasingly accessing an ever-growing array of digital platforms – on their own or under the influence of algorithms – distinguishing authentic users from digital-created fakes and imposters – is critical to a 21st century online experience that can be trusted. This challenge will be all the more intense because of the incentive brands and businesses will have to “go viral” and spread their content as widely as possible. Ensuring that customers are not conned by brands that are scams and that merchants are not fooled by customer-impersonating bots is a key task for digital identity companies today.
On the issue of digital identity and financial crime, Jas Randhawa, Chief Compliance Officer for Stripe has underscored the rise and challenge of “newer fraud typologies” and opportunities for fraud in the current, COVID-19 environment. He has also observed that the renewed volatility of the stock market during the global pandemic unfortunately has also provided fertile ground for fraudsters. Add to this the powerful incentive for merchants and other businesses to “go digital” in response to lockdowns and work-from-home, and the result is additional pressure on the ability of the identity management infrastructure – for institutions and individuals alike- to determine real, legitimate actors from fake or malevolent ones.
Randhawa will also join our FinovateFall Digital conversation on Future Financial Crime this September. A 14-year veteran of financial crimes and compliance management – including six years with PwC – and a certified anti-money laundering specialist, Randhawa has emphasized three general themes from his experience in compliance: de-siloing decision-making, embracing technology, and understanding the cyclic nature of identifying problems, developing solutions, innovating as new challenges arise – and then starting the whole process over again.
Randhawa’s example of Stripe is interesting, given that the company is a digital-first entity. While that shielded the firm from having to digitize in the middle of a pandemic, the company was faced with the task of securely onboarding a surge of businesses who had suddenly made the decision to pursue digitalization. Moreover, the company needed to thread the needle of keeping bad actors off the platform while not being so restrictive as to undermine its own goal of “growing the GDP of the Internet.”
For Randhawa the current circumstance likely represents a New Normal as far as the innovation cycle in compliance is concerned. “We’ll have to keep whacking away at this problem,” he said during an online panel earlier this year, Real Identity Validation in a Digital World, sponsored by One World Identity. He emphasized that creativity will be required in order to achieve an experience that is simultaneously the most seamless and the most secure.
Among the companies helping businesses and individuals cope with the new requirements of the New Normal are firms like Jumio and SheerID. Both companies are innovators in the digital identity management space, both Finovate alums, and both portfolio companies of venture capital firm Centana Growth Partners. Founded in 2015, Centana considers authentication and identity technology companies among its core competencies and the firm’s co-founder Eric Byunn will also join our conversation on Future Financial Crime next month.
“Authentication is of critical importance to a broad range of online and mobile applications across industries such as financial services, e-commerce, travel, and the entire sharing economy,” Byunn said four years ago when Centana acquired Jumio, making a statement that is all the more true today. He called identity “top-of-mind for companies” last fall when SheerID was named to the Deloitte Technology Fast 500.
Centana also has a more direct commitment to financial crime fighting than just its investments in digital identity innovators. The VC firm is also a backer of SpyCloud, a Finovate Best of Show winning startup that specializes combating account takeover (ATO) fraud and recovering stolen credentials from the online criminal underworld or “dark web.” SpyCloud raised $30 million in funding earlier this week in a round led by Centana and featuring the participation of Microsoft’s venture capital fund, M12, as well as Altos Ventures, Silverton Partners, and March Capital Partners.
“SpyCloud’s approach to fraud prevention is helping businesses protect themselves and their customers at a time when threats are more pervasive than we’ve ever seen,” Byunn said when the funding was announced. “We heard from major financial institutions and a wide range of enterprises that SpyCloud’s solutions are critically important to their anti-fraud efforts.”
The fact that VC firms continue to plow money into companies that fight cybercrime – either directly like SpyCloud or indirectly by enhancing the identity management infrastructures we rely on – is a positive sign in and of itself. But in the context of winning the arms race against technology-savvy criminal adversaries, it’s a welcome indication that the money is flowing in an area where the challenge appears never-ending.
Alternative credit scoring innovator CredoLab announced a new $7 million investment today. The Series A round was led by identity data specialist GBG, a company that entered a technology partnership with CredoLab back in June and is now taking a minority stake in the Singapore-based firm. CredoLab plans to use the additional capital to fuel expansion in markets in Asia, Latin America, Europe, and Africa.
Founded in 2016, CredoLab made its Finovate debut at our Asian conference in 2018. At the event, the company demonstrated its proprietary CredoScore which converts digital footprints into highly predictive scores that can be used by banks and lenders to guide credit decisioning. The company’s technology examines mobile device data – collected after securing the user’s permission – and leverages AI-based algorithms to analyze 50,000+ data points to, as the company puts it, “connect the dots that traditional credit scoring methods can’t.”
GBG Group uses Credo’s technology to bolster its own antifraud platform’s ability to determine creditworthiness during the onboarding process. GBG Chief Executive Chris Clark praised the way Credo’s risk scoring will help it better serve “good customers who are financially excluded” – especially by lowering false positives.
In addition to its partnership with GBG, CredoLab teamed up with GoBear and fellow Finovate alum Mambu in June to help the financial platform expand to the Philippines. The previous month, CredoLab was highlighted by Fintechnews Singapore in its look at fintechs in SE Asia that are making a difference when it comes to financial inclusion. The company this year has also worked with LenDenClub, among the fastest-growing P2P lending platforms in India, and collaborated with Salary Dost – also based in India – to help the lending platform enhance its underwriting process.
A winner in the ASEAN Open category of the SFF x SWITCH Fintech Awards last year, CredoLab was recognized in January as Indonesia’s first credit scoring company. Since inception, CredoLab has powered more than $2 billion in loans issued, analyzing more than one trillion data points across 21 countries. Peter Barcak is co-founder and CEO.
This is a guest post written by Philippa Ushio and Hal Bienstock of Prosek Partners.
In an extremely uncertain business environment, there are two things that almost every expert agrees to be true:
The most innovative companies are likely to come out ahead when the COVID-19 crisis comes to an end
Diverse leadership teams are more innovative and generate better business results
So, why is it that venture capitalists ā the very people tasked with funding innovation ā are so monolithic? According to a report from Richard Kerby of Equal Ventures, just three percent of VC employees in 2018 were Black and only one percent were Hispanic. Eighteen percent are women.
The numbers for fintechs tell a similar story. According to research from Oliver Wyman, women represent just 14% of fintech boards, compared with 23% in the banking sector. The consulting firm found that 39% of fintechs it studied had no women on their board at all.
Now consider that McKinseyās Delivering Through Diversity Report found that companies in the top-quartile for ethnic/cultural diversity on executive teams were 33% more likely to have industry-leading profitability. And research from Boston Consulting Group found that companies with more diverse management teams have 19% higher revenues due to innovation. Clearly, thereās a disconnect.
That said, we can agree that not all talk about diversity and serving underserved populations is just lip service; many fintechs are in fact delivering on their missions. Facilitating access to PPP is a good example, with loan marketplaces like Lendio, Fundera and Nav having all been credited with reacting quickly to help small businesses during the first round of government support. And many neo-banks and earned wage access providers are helping low-income workers achieve financial wellness during a period of great economic uncertainty. Pandemic aside, there is no doubt that it is easier today than it was 10 years ago for businesses and individuals to get reasonably priced short-term credit, specialized financial advice, and avoid high percentage loans, among other things. Yet, for all the good fintechs are doing, itās impossible not to think about the problems that founders havenāt begun to even consider ā let alone solve ā because they donāt have people on their teams who are actually living with these issues.
In addition to the disturbing lack of ethnic and gender diversity at VC firms, Richard Kerby found that 40% of VC employees went to one of just two schools – Stanford or Harvard. How many of them grew up unable to afford an unexpected $400 expense, like 40% of Americans? Or with parents running small businesses that lived or died based on what was in the cash register at the end of the day?
Over the past decade, fintechs have done a lot to help small and medium businesses. But thereās an opportunity to do so much more and there has never been a more important time than now as so many face the reality of shutting their doors in the wake of the pandemic.
If founders and VC firms continue to ignore the benefits that diversity in leadership bring, it wonāt be long before the disruptors find themselves disrupted by those who are more innovative, more thoughtful about the problems they are trying to solve, and more able to reach a customer base that consists of far more than just Harvard and Stanford grads.
The good news is that things are changing. Many fintechs and VC firms put out strong statements of support following recent racial justice protests and committed themselves to taking measurable action to diversify. Only by living up to these ideals can the current fintech wave continue to build. Let’s watch this space.
Philippa Ushio is SVP at Prosek Partners where she leads teams in developing communications strategies and mounting multi-disciplinary campaigns to protect and enhance business value. Throughout her career, she has provided strategic counsel to clients facing a wide variety of complex issues, focusing particularly on their communications challenges.
Hal Bienstock is a Managing Director at Prosek Partners. A fintech specialist, he has spent more than 20 years working as a brand strategist and corporate communications executive. He has extensive experience counseling C-suite leaders and developing integrated campaigns that change perceptions internally and externally.
Urban FT’s newly-launched X-35 FinTech Core will enable financial institutions to centralize their fintech infrastructure into a singular hub that sits beside and is connected to the bank’s existing core or payment processor. The API-based, developer-friendly technology helps FIs create and deploy new, innovative solutions to their customers faster and at significantly less expense.
Urban FT sees the new offering as a tool to help smaller and mid-sized FIs maximize their engagement with their customers via more personalized products and services. Company CEO Richard Steggall said in a statement that providing these resources to banks was not just a matter of helping them keep up with the larger competition, but also was designed to empower them to “leap frog the competition entirely.”
“We founded Urban FT with the vision of giving our clients the means to dream big and deliver exceptional, and that’s exactly what X-35 does,” Steggall explained. He compared his company’s approach to providing “an Amazon Web Services for FIs” enabling them to leverage Urban FT’s R&D team on a continuous basis. “FIs can digitize nearly every interaction they have with their customers while significantly compressing the number of implementations, systems, and platforms they need to outpace the competition.”
Urban FT’s new solution is geared toward bridging the gap between the dreams of open banking and the reality of a fintech infrastructure that is not yet capable of maximizing this opportunity. By contrast, Urban FT’s offering relies on a cloud-based, serverless, microservice architecture that supports continuous innovation, seamless updates, and greater operational efficiencies in a scalable environment. “It makes the ‘impossible’ possible by providing both the foundation and the plumbing that realize the vision that many have tried but few have been able to deliver on,” said Urban FT board member and former Citibank Managing Director Aditya Menon.
Founded in 2013 and headquartered in New York City, Urban FT made its Finovate debut in 2015. A member of the Inc. 5,000, Urban FT has more than 500 financial institution clients, and processes more than $18 billion in transactions a year. The company has raised more than $15 million in funding.
Account takeover (ATO) prevention specialist SpyCloud locked in $30 million in Series C funding today. The round, led by Centana Growth Partners, featured participation from all of the company’s existing investors, a list that includes Altos Ventures, March Capital Partners, Silverton Partners and M12, Microsoft’s venture capital fund. This week’s funding takes SpyCloud’s total capital to $58.5 million.
“Criminals work together to steal information and find creative ways to monetize it. As a result, even the most careful and sophisticated organizations are vulnerable,” SpyCloud CEO and co-founder Ted Ross said. “SpyCloud will continue to pursue new and innovative ways to stay ahead of criminals and provide solutions that make the internet a safer place for individuals and businesses.”
SpyCloud made its Finovate debut in the fall of 2017, earning a Best of Show award for its exposed credential monitoring and alert service. The company, based in Austin, Texas, finds and recovers stolen and compromised assets that are actively trading on the digital underground, capturing 40 million exposed assets a week using techniques that go beyond web crawlers and other automated solutions.
This spring, SpyCloud partnered with security operations platform ThreatConnect, integrating its database with two of ThreatConnect’s offerings. More recently, the company teamed up with third party risk management platform Privva, and worked with MENA-based information security valued added distributor Spire Solutions,
One of the more interesting partnerships SpyCloud announced this year was a collaboration with Zero Trafficking, a company that provides solutions to combat human trafficking. Taking advantage of the fact that the bad guys are as likely to suffer from the same data breaches and stolen credentials as everyone else, SpyCloud has leveraged its technology to help Zero Trafficking round them up.
“Billions of data assets per year are exposed in breaches, including assets belonging to criminals,” SpyCloud Head of Investigations Jason Lancaster explained. “By drawing on the 100+ billion assets SpyCloud has recovered from third-party breaches, Zero Trafficking can piece together criminals’ digital breadcrumbs to uncover the identities of specific adversaries engaging in human trafficking activity.”
The aptly-named stock trading app Robinhood continues to show that it is as good at taking money from the rich as it is in bringing investment opportunity to the masses. The company announced on Monday that it has raised $200 million in new funding in a Series G round featuring D1 Capital Partners. This latest funding comes less than a month after the Robinhood closed a Series F round that was topped off with a $320 million investment, and takes the company’s valuation to $11.2 billion.
“For seven years, the team at Robinhood has been focused on enabling more access to the markets for more people,” the company’s blog read Monday morning. “With this funding, we’ll continue to invest in improving our core product and customer experience.”
Believe it or not, Robinhood has been busy between its last multi-million dollar fundraising less than 30 days ago and this one. Earning certification as a Great Place to Work in the U.S. in July, Robinhood hired Christina Smedley as Chief Marketing Officer early this month and, also in July ,unveiled a new visual identity. Last week, ahead of today’s fundraising announcement, the company revealed plans to “hire hundreds of additional registered financial representatives in both Texas and Arizona this year.
“Supporting and communicating with our customers – both those new to investing and those with more experience – is a critical part of our responsibility to them,” Head of Customer Experience at Robinhood Alex Mesa said. “We’ve more than doubled our support team since January and we’ll continue to grow our teams to provide timely, helpful responses to our customers.”
With its commission-free trading and investing platform, fractional share availability, and Millennial, mobile-first mindset, Robinhood has become a major influence in the retail brokerage business. Founded in 2013 and headquartered in Menlo Park, California, the company has more than 13 million traders and investors on its platform.
The big card companies continue to make the kind of deals that underscore the importance of fintech to the future of financial services. This week we get confirmation that international payments giant American Express has agreed to acquire SME lender Kabbage.
Terms of the deal were not disclosed. Speculation on the deal in recent days has put the purchase price between $850 million and $1 billion.
The acquisition will include Kabbage’s team, its suite of financial technology solutions, as well as the company’s data platform and IP built for small businesses. American Express also plans to leverage Kabbage’s technology and talent to offer additional cash flow management and working capital solutions to its small business customers. In the acquisition announcement, American Express highlighted Kabbage’s recently introduced business checking account, which centralizes funds for easier cash flow management.
“This acquisition accelerates our plans to offer U.S. small businesses an easy and efficient way to manage their payments and cash flow digitally in one place, which is more critical than ever in today’s environment,” President of Global Commercial Services at American Express Anna Marrs said.
A Finovate alum for more than a decade, Kabbage has raised $2.5 billion in funding, with the company’s last equity round closing in 2017 after raising $250 million. This year, in addition to the launch of its business checking account, Kabbage distinguished itself as a major conduit for small businesses seeking COVID-19 related relief funding. The company said it has facilitated 300,000 Paycheck Protection Program (PPP) loans valued at more than $7 billion. Kabbage’s participation in the program was a dramatic return to its role as a resource for small business financing after the company suspended SME lending in April in response to the global health crisis.
“At Kabbage, we have always made the success of America’s small businesses our primary objective,” Kabbage CEO and co-founder Rob Frohwein said in a statement. “We have built a technology and a data platform that provides them with the kind of capabilities and insights often reserved for larger businesses. By joining American Express, we can help more small businesses succeed with a fully digital suite of financial products to help them run and grow their companies.”
As part of the agreement, both Kabbage’s securitized SME loans and its PPP laons will be serviced by an separate entity to be established by Kabbage and American Express, the Financial Times reported.
American Express’ purchase of Kabbage comes less than a month after another big acquisition in the online SME lending space: Enova International’s $90 million deal for OnDeck. For both companies, the acquisitions provide the opportunity to expand meaningfully beyond their core competencies: Enova adding to its consumer lending operations, and AMEX bringing working capital and SME financing to its commercial card business.
The acquisition is expected to close later in 2020.
