Author: David Penn

iwoca Locks in $109 Million in Debt Financing to Help Fund German SMEs

iwoca Locks in $109 Million in Debt Financing to Help Fund German SMEs
By David Penn Posted on
Categories: Daily news, Funding
Photo by anna-m. w. from Pexels

With more than $1.1 billion (€1 billion) provided to small businesses in the U.K. and Germany, London-based SME lender iwoca announced today that it has received $109 million (€100 million) in debt financing from Insight Investment. The new capital will help iwoca continue its work in funding entrepreneurs in Germany.

The investment takes iwoca’s total debt and equity financing to more than $550 million (€500 million). The company, one of the largest fintech SME lenders in Germany, plans to double its workforce in the country to 100 employees and will use the funds to help scale its loan book to give institutional investors more opportunities to participate in the SME credit market.

“More than 90% of companies in Germany are small businesses, yet many of them suffer from poor access to finance as traditional lenders can’t support them the way they need it,” iwoca CEO and co-founder Christoph Rieche explained.

“Our mission is to change that. With Insight Investment we have found a very agile and responsive partner that complements our mission-driven way of working. They provide the perfect basis for us to enter a new phase of growth in Germany,” Rieche said.

Iwoca has gained more than 50,000 customers since offering its first loan in 2012, and lent more than $1.1 billion (€1 billion) to U.K. and German-based businesses. The company offers short-term financing of up to £200,000, and only charges interest – starting at 2% a month – for the days the borrower actually has the money. Iwoca also makes it easy for companies to apply for a top up in the event that additional financing is required, enabling their credit to grow along with their businesses.

The company partnered with German business banking platform Penta late last year, enabling the challenger bank to launch its credit solution. We took a look at challenger banks in Germany as part of our FinovateEurope coverage this month. Last summer iwoca launched a pair of real-time loan integrations with U.K.-based financial marketplaces Funding Xchange and Funding Options.

Among the first fintechs in the U.K. to leverage open banking to offer a lending API, iwoca has been named to the Deliotte Fast 50 and was recognized by cloud accounting platform – and Finovate alum – Xero as its Financial Services App of the Year in 2018 and its Emerging App Partner of the Year in 2017.

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Commitment, FOMO, and Capital: How Smart Corporates Make Partnerships Work

Commitment, FOMO, and Capital: How Smart Corporates Make Partnerships Work
By David Penn Posted on
Categories: FinovateEurope 2020, Speaker series
Photo by Haley Black from Pexels

With one startup for every 1,400 citizens, Israel may have the highest “innovation per capita” ratio of any country on Earth.

That makes it little surprise that Itai Green, founder and CEO of Innovate Israel, would be the one to help explain what corporates need to do in order to make the most out of their collaborations with startups at FinovateEurope in Berlin last month.

Green advocates an innovation model – open innovation – in which corporates leverage their local ecosystems to collaborate and partner with startups, entrepreneurs, universities – even customers and other corporates – in order to develop whatever products or services will allow it to grow and expand. This argues against the in-house innovation model, which many have found to be an insufficient way of driving major innovation due to factors ranging from a lack of internal incentives to inconsistent and/or unclear support from management.

Green made the case to our audience that open innovation provides the lowest risk and the greatest return on investment a company can ask for – if they do it right.

In his presentation at FinovateEurope this month, Green outlined the most important factors that businesses need to keep in mind when working with innovative companies in an open innovation context. He listed nine distinct “Tips for Corporates” – a few of the more compelling ones are highlighted below.

Commitment – A theme that was quite common at FinovateEurope in Berlin this year – that bringing tech-savvy diversity to a financial institution’s board of directors was a must – was echoed strongly by Green. He advocated that companies have at least one technology/innovation-oriented board member – though having three, he noted, was far better. Green said that this kind of board representation was increasingly common in Israel where he pointed out that boards of directors typically had 20% of their members under the age of 40. Compare this to the S&P 500, where the age of the average board member is above 60.

FOMO > NIH – Even among companies that have recognized the importance of digital transformation, there can be a reluctance by corporates to embrace non-native ideas. This “Not Invented Here” attitude can be especially harmful when working with innovative startups, who often arrive on the scene with a passion to, if not disrupt, then certainly make a clear difference for their partner and a strong representation of their technology.

Green argues that a “Fear of Missing Out” on the next big opportunity is a more healthy psychology for the corporate when working with a startup rather than any sense of injured pride at not having come up with the innovation on their own.

Show Startups the Money – Another highlight on Green’s list was the importance of paying for the work. This was a point that Steve Frook of Best of Show winner Horizn would underscore in his FinovateEurope presentation, Landing Your First Bank Customer, later that day. From Frook’s perspective, it was important that startups avoid the temptation to, essentially, work for free in an attempt to show their enthusiasm and eagerness to collaborate. Establishing a business relationship – even a modest one – was an important early step for startups to take, Frook suggested. Green, from the perspective of advising the corporate, concurred. Companies should come to collaborations with startups with a budget and be prepared to use it. Paying startups, Green explained, sends a positive, professional signal to the company and to the broader community of innovators and entrepreneurs, as well.

Founded in 2017, Innovate Israel helps partner global corporations with innovative entrepreneurs and startups in Israel to help them implement advanced technologies in their businesses.

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RegTech, AI, and the Future of Digital Identity

RegTech, AI, and the Future of Digital Identity
By David Penn Posted on
Categories: David's column, FinovateEurope 2020

My first introduction to Dave Birch, Director of Innovation and Global Ambassador at Consult Hyperion, was via his book Identity is the New Money, and a conversation we had at a Finovate event a few years ago. He is as synonymous with the issue of digital identity as any fintech analyst; his book Before Babylon, Beyond Bitcoin, is a fascinating history of the relationship between money and identity.

Birch sees digital identity not just as a way to create a safer, more efficient interconnected world. Instead, he sees digital identity – powered by technologies like artificial intelligence – as capable of restoring the power of relationships at a time of digital and social atomization. “Before we had the kind of urban anonymity of the industrial revolution,” he said, “things were based on relationships: whether I trusted you, whether I wanted to lend you money.”

“And we’ve scaled away from that, and had institutions become intermediaries. But with the new technologies, because we are connected all the time, in a weird kind of way we’re going back to that. In a way, those new connections are taking us back,” Birch explained.

Here are some of the top takeaways from my conversation with Dave Birch this year at FinovateEurope in Berlin.

On whether financial services professionals and regulators are on the same page with regard to the importance of digital identity.

Birch: A long time ago it was the theorists who said we’re going to have to do something about identity. And then a few years ago it was technologists like me who ran into the buffers and said we can’t make any more progress until we do something about identity. But now it’s people like Mark Carney, who is the governor of the Bank of England, saying we can’t make any progress without doing something about digital identity. So it’s gone up the agenda. But my point was that it’s not just technologists who are saying it. It is people who understand the financial system that are saying it. It’s become a priority. And, of course, because of my heritage, I feel that banks have a role to play in fixing the problem.

On why regtech may be the most critical subset of financial technology.

Birch: In terms of the goal, which is to reduce the cost of financial intermediation, it’s getting asymptotic. We’re getting as far as we can get. We’ve already cut the cost of transactions, increased the speed of transactions. We can’t get any further with fintech. The costs that are out of control are the regtech costs. It’s compliance, it’s Know Your Customer (KYC), Anti-Money Laundering (AML) … If we really want to make an impact on costs, we’ve got to attack those costs … And if we really want to do something about that, then we have to start talking about artificial intelligence.

On how advances in digital identity will help build new communities of trust.

Birch: I like to look at what the social anthropologists say rather than what the technologists are saying. Those guys are very into this idea that we live in these clans with relationships. There’s something more human about that. I think that technology, basing identity on relationships, the reputations we establish in those relationships, that is more interconnected.

Nowadays we’re all in lots of overlapping communities of one kind or another. But the idea that our reputations can be forged in those communities, that the values that we share will lead us to form these communities, that the transactions we get involved in, the money that we use, will somehow reflect those values, to me that seems like a very positive vision of the future.

Watch the full, 12-minute interview on Finovate TV.

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London’s B-Social Raises $10 Million in Seed Funding Ahead of Bank Rebrand

London’s B-Social Raises $10 Million in Seed Funding Ahead of Bank Rebrand
By David Penn Posted on
Categories: Daily news, Funding

Continental challenger banks like N26 may be pulling away from the U.K. market. But that is only creating room for newcomers like London’s social payments app B-Social which has raised $10 million (£7.8 million) en route to its transformation into Kroo, a fully-licensed bank.

The funding, part of a seed round, brings the company’s total capital to more than $17.8 million (£13.25 million). Participating in the round was Karlani Capital’s Rudy Karsan, along with additional undisclosed investors.

“Our seed 2 funding round is another key milestone towards building the greatest social bank on the planet and changing the relationship people have with money for good,” B-Social CEO Nazim Valimahomed wrote on the company’s blog. He noted that B-Social has signed up more than 9,000 users and will soon introduce functionality to enable account funding via bank transfer. Valimahomed also added that the company plans to double the size of its team at its headquarters in Holborn.

Most significantly, the investment will help B-Social as it transitions into becoming a bank, to be called Kroo. Valimahomed said that the company is currently in the final, pre-application phase for obtaining a U.K. banking license and hopes to finish the application process “in the very near future.” He referred to the rebrand as a change to an “exciting new brand that fully embodies who we are – intuitive, talented, empowering, social, and collaborative.”

Founded in 2016, B-Social helps users manage shared expenses. The company’s app, available in both iOS and Android, supports bill splitting and group expense tracking, and instant payments between B-Social account holders. The solution also comes with a contactless debit Mastercard that can be used, fee free, both at home and abroad wherever Mastercard is accepted.

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Meet Sonect: Cash Network Builder, Finovate Newcomer, Best of Show Winner

Meet Sonect: Cash Network Builder, Finovate Newcomer, Best of Show Winner
By David Penn Posted on
Categories: Alumni profile, Best of Show, Sonect
Photo by Alexander Mils from Pexels

What’s better than having a large pizza with all your favorite toppings delivered to your front door?

How about a side order of cash, saving you a trip to the ATM or bank branch?

Sonect, which won Best of Show in its Finovate debut at FinovateEurope in Berlin earlier this month, leverages what it calls a social network for cash to help people get the cash they need wherever they are. Based in Zurich, Switzerland and founded in 2016 by CEO Sandipan Chakraborty, the company enables merchants ranging from cafes and coffee shops to pharmacies and bodegas to benefit from the additional customer traffic of Sonect customers.

At the same time, banks can extend their ATM networks with Sonect, avoiding the expense of purchasing and maintaining additional cash distribution hardware.

The solution works simply for the user. After downloading the Sonect iOS or Android app, the user creates a Sonect account. They then select their preferred shop or merchant and the amount of cash they wish to withdraw. The merchant will scan the barcode in the user’s Sonect app, and the funds will automatically be deducted from your account as soon as the transaction is confirmed. The user then receives their cash.

Both banking accounts as well as credit card accounts can be used with Sonect (both Visa and Mastercard are currently accepted.) The solution is free of charge for both users and shops.

Sonect IT Project Manager Thai Nguyen and CEO Sandipan Chakraborty demonstrating the company’s virtual ATM network at FinovateEurope 2020.

Sonect was inspired in part by observing the slow rate of adoption of new technologies like Apple Pay. A self-described “strong believer of (the) death of cash (at) the hand of mobile payments,” Chakraborty nevertheless saw an opportunity to help bridge the gap between the custom and convenience of cash and the opportunities of digital alternatives that have yet to be fully embraced by banks, consumers, and merchants. It’s also worth noting that Switzerland is a country where cash is still very much king; the Swiss National Bank reports that 70% of all transactions in the country are still in cash.

Chakraborty credits enabling technologies like blockchain and open banking APIs for making Sonect possible. An IT Project/Program Delivery Manager with Credit Suisse for more than 12 years, he likens Sonect to a platform similar to Uber and Airbnb that is able to create a vast, service network – in transportation, accommodations, or, in Sonect’s case, for cash withdrawal – without having to bear the burden of building and maintaining a vast physical infrastructure to go along with it.

The Sonect team picks up a Best of Show award in its Finovate debut at FinovateEurope.

Currently available only in Switzerland, there are more than 2,500 shops partnered with Sonect. That said, Chakraborty noted, “We are in a phase where we are expanding within Europe,” adding that because of the company’s Best of Show award, he believes “the word (about Sonect) will spread quicker than we anticipated,” Chakraborty also said that the company has been in conversations with banks “across Europe, across the continent” about potential partnerships.

Sonect has raised more than $8.7 million (CHF 8.5 million) in funding from investors including SixThirty and Loomis AB. The company has 25 employees in its offices in Zurich; Vilnius, Lithuania; and Mexico City, Mexico.

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Envestnet | Yodlee Acquires Indian Data Aggregator FinBit.io

Envestnet | Yodlee Acquires Indian Data Aggregator FinBit.io
By David Penn Posted on
Categories: Envestnet, FinBit.io, Mergers & Acquisitions, Yodlee
Photo by Yogendra Singh from Pexels

Envestnet | Yodlee has acquired another asset in its strategy to further grow and develop its data aggregation and analytics business.

The company has purchased India-based FinBit.io, a data analytics platform that offers a scoring solution, BankScore, designed to help people who struggle to obtain credit due to a poor or insufficient credit history. Both companies are Finovate alums: Envestnet | Yodlee made its last Finovate appearance at FinovateFall in New York back in September; FinBit.io made its Finovate debut at FinovateAsia last fall in Singapore.

Terms of the acquisition were not disclosed. The deal was completed on February 18th.

Envestnet sees the acquisition as accelerating innovation within the company, fueling the ability of the firm to market compliant solutions to new and existing customers in the region. As part of the deal, FinBit.io founder and CEO Prashant Paliwal will lead Yodlee FinSoft, an Envestnet | Yodlee subsidiary focused on the account aggregation business in India and Asia.

Envestnet | Yodlee Chief Executive for Data and Analytics Stuart DePina called India and Asia strategically important to the company, and highlighted the account aggregator ecosystem in India as one of the more vibrant developments in fintech. “We are delighted to empower millions of consumers in India with state-of-the-art Account Aggregator technology and superior user experiences that will allow them to share consented data seamlessly across platforms enabling speedy solutions such as the real-time processing of personal loan applications,” DePina explained.

“Our vision is to empower consumers with the ability to permit the aggregation of their financial data so that holistic analytics can be made available to valuable services like affordable credit, personal finance management, and even accounting,” FinBit.io’s Paliwal said. Paliwal, who founded the Bangalore-based company in 2017, said the acquisition would enable FinBit.io to expand its product portfolio and scale its offerings. Paliwal is a Yodlee veteran, running the company’s APAC fintech business before launching FinBit.io.

Envestnet acquired multiple Finovate Best of Show winning Yodlee in 2015 for $660 million. Founded in 1999, the company has more than 25 million users around the world and 1,200+ financial institution partners including 15 of the top 20 U.S. banks. The publicly-traded firm, ENV on the New York Stock Exchange, has a market capitalization of $4 billion.

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Self Raises $20 Million to Help Americans Improve Their Credit

Self Raises $20 Million to Help Americans Improve Their Credit
By David Penn Posted on
Categories: Daily news, Funding
Photo by Lukas from Pexels

For consumers with credit scores below 600, options for securing financing can be a major challenge. A new company on the scene, Self, has locked in $20 million in new funding to help make those financial hurdles a little easier for Americans with poor credit histories to overcome.

In a Series C round led by Altos Ventures and Conductive Ventures, Self has added $20 million to its total capital, which now stands at $37 million. The Austin, Texas-based company, founded in 2015, offers a Credit Builder Account in which borrowers apply for a modest loan with a Self bank partner that is held on a certificate of deposit. Borrowers make monthly payments, which are reported to the major credit agencies to help establish a credit history. Once the term is complete, the CD matures and the principal amount comes back to the customer.

“Our goal from the beginning was to create a mission-driven company that gives the power back to consumers and helps them achieve their financial goals,” company founder and CEO James Garvey said.

Since inception, Self has worked with 500,000+ customers and provided $400 million in CD-secured loan originations. The company recently launched its Self Visa Credit Card, a secured card that does not require a credit check. The card allows holders to build their security deposit in installments rather than with one large deposit upfront. The card has an annual fee of $25, average for secured cards, but features a higher than average minimum APR for secured cards at 23.74% based on a review by U.S. News.

Named one of the best fintech places to work in 2020 by Ariznet Brands – publishers of American Banker – Self rebranded itself from Self Lender last August and reincorporated as Self Financial. The fintech has partnered with firms including Atlantic Capital Bank, an Atlanta, Georgia-based bank holding company with assets of $2.9 billion, income optimization platform Steady, and nonprofit social enterprise Neighborhood Trust Financial Partners.

“Self inspires us with their dedication to helping consumers take control of their financial future,” Conductive Ventures’ Paul Yeh said. “Today, it’s imperative to be aligned with partners with a shared vision that is meaningful and delivers change for the greater good.”

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Intuit’s $7 Billion Bid for Credit Karma; FinovateEurope Salutes its Best of Show

Intuit’s $7 Billion Bid for Credit Karma; FinovateEurope Salutes its Best of Show
By David Penn Posted on
Categories: Access Softek, Aire, Backbase, Baker Hill, Coinbase, Credit Karma, Daily news, Digital Onboarding, Dorsum, Enveil, Glia, Horizn, InComm, Intuit, iProov, ISARA, Kinetica, Larky, Meniga, OurCrowd, PaySend, Sonect, StrategyCorps, Tradeshift, Trulioo, ValidSoft, W.UP
Photo by Tirachard Kumtanom from Pexels

How’s $7 billion for good karma? One of Finovate’s earliest alums Credit Karma is reportedly the target of what would be Intuit’s biggest acquisition to date. According to The Wall Street Journal, the cash and stock deal could be announced as early as Monday.

Credit Karma will continue to function as an independent company with founder and CEO Kenneth Lin at the helm. The acquisition gives Intuit, maker of online tax filing service TurboTax, another contact point with the online personal finance world. Credit Karma provides its members with access to their credit scores and borrowing histories, helps them monitor their accounts for security breaches and, perhaps most relevantly, has offered a free online tax preparation service since 2017.

If the deal holds up, Intuit will be paying a significant premium for Credit Karma. The personal financial wellness company was last valued at $4 billion, based on a 2018 private market transaction.

With another Finovate conference in the books, our Finovate Best of Show ranks has a new set of members. Congratulations to Dorsum, Glia, Horizn, iProov, Sonect, and W.UP for taking home top honors earlier this month at FinovateEurope!

The victory may have been especially sweet for Sonect, whose Best of Show award-winning demo was also the company’s Finovate debut. The Switzerland-based start-up offers what it calls “the world’s first social cash network” that enables consumers to access cash without having to visit a bank branch or ATM. Sonect offers merchants the ability to grow their business via increased traffic and gives financial institutions a way to extend their ATM networks without the cost of additional hardware.

The Best of Show win was also a first for Horizn. The company, which made its Finovate debut three years ago at FinovateEurope, offers a platform that helps employees and customers maximize the opportunities of digitized financial services. Horizn uses simulator microlearning, as well as gamification and advanced analytics, to promote digital adoption across channels.

And last but not least, a special tip of the hat to Dorsum, Glia, iProov, and W.UP, all of whom won Best of Show honors at FinovateEurope for a second year in a row.

Here’s a round up of recent news from our Finovate alumni.

  • Larky enters reseller agreement with Access Softek.
  • Bison Bank in Lisbon, Portugal selects PSD2-ready software from ndigit.
  • Techround interviews Tradeshift co-founder Mikkel Hippe Brun.
  • Bremer Bank leverages Backbase’s digital-first banking platform to fuel digital transformation.
  • Paysend’s multi-currency global account launches in Europe.
  • Kinetica launches Kinetica Cloud.
  • Futurex taps ISARA to bring quantum-safe cryptography and crypto-agility into its Key Management Enterprise Server (KMES) Series 3.
  • With new FCA license, Meniga seeks to expand product offering.
  • StrategyCorps and Digital Onboarding partner to help banks grow checking account relationships.
  • Baker Hill renews partnership with Washington Trust Bank to streamline loan origination and portfolio risk management.
  • Aire launches Credit Insight Suite to improve access to credit.
  • Coinbase becomes Visa principal to offer more feature for Coinbase Card customers.
  • InComm partners with Eezi to launch Poundland’s gift card program.
  • Enveil secures $10 million in Series A funding for secure data collaboration.
  • Trulioo adds image capture SDK to Trulioo GlobalGateway.
  • Amaiz taps ValidSoft for voice authentication.
  • OurCrowd expands focus on growing early stage tech companies.

Finovate Alum Features and Profiles

eToro’s Evolution – Social trading and investment platform eToro has never been one to stand still for very long. The company’s development cycle is fast enough to make even the most sprightly fintech jealous.

Lending Club Snaps Up Radius Bank for $185 Million – When Lending Club was founded in 2007, the startup aimed to serve as a place to help borrowers avoid dealing with banks. In a somewhat ironic move today, that same startup is becoming a bank itself.

Breach Clarity’s New Offering Provides Consumers Personalized Protection – Fraud detection and prevention company Breach Clarity announced this week it has developed a new platform to help financial service providers offer personalized protection for their customers.

New SumUp Card Empowers SMEs as Business Payment Makers and Takers – The company that has helped bring fintech innovation to e-commerce with its mobile point-of-sale (mPOS), card reading solutions now offers merchants a card of their own.

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OTB Ventures Goes Big on CEE Startups; Analysts Share Insights on Indian Fintech

OTB Ventures Goes Big on CEE Startups; Analysts Share Insights on Indian Fintech
By David Penn Posted on
Categories: Finovate Global, FIS, Infosys, Plaid

With a commitment of $100 million (€92.4 million), Poland-based OTB Ventures will spend the next few years helping back some of the most innovative tech startups in Central and Eastern Europe.

The investor, whose funding is backed by the European Investment Fund (EIF) will target “post-product startups” developing solutions for fintech, cybersecurity, AI, Big Data, Internet of Things (IoT), robotics and other advanced technologies. Known as the biggest venture capital fund in the CEE region, OTB Ventures said it wants companies with “unique intellectual property” and “disruptive ideas.”

“CEE is a cradle of talented engineers and IT specialists, pioneering innovative companies,” OTB managing partner and co-founder Marcin Hejka explained. We see a huge investment potential in these companies with up-and-running products and initial business traction in international markets. The purpose of our fund is to discover, develop, and realize this potential on a global scale.”

OTB Ventures includes AI and consumer analytics firm Cosmose, regtech innovator Silent Eight, and digital transformation solution provider – and Finovate alum – FintechOS – among its more recent investments. With its new fund, OTB plans to commit approximately $15 million to 16 companies, taking stakes of 10% to 15%. OTB’s largest investment in a single company to date was the $10 million in company invested in micro-satellite company Iceye in 2018.

Report Season for Indian Fintech: A number of analyst organizations have picked the second half of February to release their latest insights on fintech in India. In addition to the report from IBS Intelligence noted below, content marketing platform SEMrush released its Top Insights into Fintech Industry of India report this week.

Among the interesting top level takeaways from both reports is the importance of making sure that security and financial education keep pace with the growth of financial inclusion. As more people in frontier and periphery markets become comfortable with sharing their personal details and newly-forged financial identities online, the dangers of criminal exploitation and even simple misuse (poor password management habits, for example) grows, as well.

Here is our weekly look at fintech around the world.

Middle East and Northern Africa

  • Aafaq Islamic Finance to deploy core banking, Islamic banking, and payments solutions from Infosys.
  • Bahrain-based GFH Financial Group acquires 70% stake in pan-MENA payments technology company, Marshal.
  • National Bank of Yemen goes live with the ICS Banks Universal Banking Platform from ICSFS.

Central and Southern Asia

  • Pakistan-based mobile wallet Sadapay readies for launch.
  • Entrepreneur features fintechs apps that are helping SMEs in India go digital.
  • IBS Intelligence unveils its India fintech report.
Photo by Vikas Sawant from Pexels

Latin America and the Caribbean

  • The Central Bank of Brazil to enter the payments business with the launch of its new app, PIX, later this year. PIX will provide immediate settlement for all transactions.
  • TechCrunch profiles fintech startup Belvo and its aspiration to become the Plaid of Latin America.
  • Bank Innovation features Mexico City, Mexico-based digital bank Stori.

Asia-Pacific

  • Singapore-based, installment payment startup Hoolah expands to Malaysia.
  • Indonesian online lender UangTeman raises $10 million in new funding.
  • Get, a digital commerce platform based in Myanmar, acquires local lender Daung Capital.

Sub-Saharan Africa

  • Nigeria’s LAPO Microfinance Bank, the largest microfinance institution in the country, to deploy core banking, payments, and digital experience solutions from Oracle Financial.
  • African Banker examines the balance between financial inclusion and consumer protection as Kenya’s fintech boom expands.
  • Nigerian consumer lending platform Carbon announces $100,000 fund to support startups in insurance, health, and education.

Central and Eastern Europe

  • Poland-based OTB Ventures raises $100 million to back tech startups in the CEE region.
  • Wirecard partners with Raiffeisen Bank International to bring digital payments solutions to markets in 13 Eastern European countries.
  • Germany’s Opel Bank chooses FIS’ cloud-native, Modern Banking Platform. This marks the solution’s first deployment in Europe.

Top image designed by Freepik

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Grab to Get $700m from MUFG to Offer Insurance, Lending by Smartphone App

Grab to Get $700m from MUFG to Offer Insurance, Lending by Smartphone App
By David Penn Posted on
Categories: Daily news
Photo by Kelly Lacy from Pexels

Grab, the Singapore-based ride-hailing company well en route to becoming a full-fledged fintech, as well, will get $700 million in new funding from MUFG Bank according to the Nikkei. The investment will be part of a collaboration designed to bring services like lending and insurance to markets in Southeast Asia via smartphone apps. MUFG Bank is a subsidiary of Japan’s Mitsubishi UFJ Financial Group.

The Nikkei report has not been confirmed by MUFG or Grab, but Bloomberg notes in its coverage that the firms “intend to announce their alliance soon.” The partnership allegedly will consist of MUFG Bank overseeing lending and insurance operations, while Grab will leverage its AI and data analysis technology to analyze customer data to help MUFG match the right insurance and financing offerings with the right customers.

Grab is one of the top examples of a company leveraging its analytics and networking technology to expand beyond its original offering. Founded as a ride-hailing service in 2012, Grab is now developing a regional super app that combines a variety of services – including payments and financial services – along with rides. With a reported 166 million downloads in the region, the company operates in eight Southeast Asian countries, including Indonesia and Thailand. Grab has an estimated valuation of $14 billion, and includes SoftBank Group among its investors.

Ratna Sita Handayani, Senior Research Manager with Euromonitor International discussed the rise of the super app during her presentation at FinovateEurope earlier this month. Other examples of super apps in Asia include Tencent’s WeChat and Alibaba’s Alipay. Like Grab, Indonesia super app Gojek leverages its role in the everyday transportation lives of its consumers to expand its offerings – in Gojek’s case, for food delivery, hiring cleaning help, and billpay.

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Ally Financial to Acquire CardWorks in $2.65 Billion Deal

Ally Financial to Acquire CardWorks in $2.65 Billion Deal
By David Penn Posted on
Categories: Daily news, Mergers & Acquisitions

Digital financial services company Ally Financial announced this week that it will acquire non-prime credit card and consumer financing company CardWorks. The deal, which has been approved by both companies’ boards, is valued at $2.65 billion ($1.35 billion in cash and $1.3 billion in Ally stock).

The acquisition adds a top-20 U.S. credit card platform and a top-15 merchant acquiring business to Ally Financial’s direct bank deposit, auto financing, insurance, and commercial product lines. The combined entity will serve 11+ million customers in 50 states when the transaction is closed in Q3 of this year.

CardWorks founder, chairman, and CEO Don Berman praised Ally Financial as an “ideal partner” for the “people-centric, compliance-focused” and technology-enabled organization he built in 1987. “In leveraging Ally’s commitment to innovation and adaptiveness, the combined company will be well positioned to meet the financial needs of our ever-growing customer base and deliver sustainable growth and performance,” he said. After the deal is closed, Berman will join both Ally Financial’s Board of Directors as well as the company’s executive management team.

Detroit, Michigan-based Ally Financial was founded 101 years ago as the General Motors Acceptance Corporation (GMAC) and retained that name until 2010. The company is one of the largest auto financing firms in the U.S. by volume, and is a top-20 U.S. bank by assets ($180+ billion). Ally Financial trades on the NYSE under the ticker ALLY, and has a market capitalization of $10 billion.

Ally Financial also has an online bank, Ally Bank, which is headquartered in Sandy, Utah, and offers mortgage financing as well as deposit and other banking services. As part of the acquisition, CardWorks subsidiary Merrick Bank will merge into Ally Bank.

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From SuperApps and AI to Financial Inclusion 3.0

From SuperApps and AI to Financial Inclusion 3.0
By David Penn Posted on
Categories: FinovateEurope 2020

From the rise of the superapp to financial inclusion 3.0, the insights of our Fintech What’s Hot/What’s Not analysts at FinovateEurope last week continue to artfully disrupt our signature demo-only format.

Mixed in with live demonstrations of the latest innovations in payments and customer engagement (see our Best of Show coverage), our main stage analysts reminded us of the critical differences between machine learning and AI, the opportunities of 5G connectivity, and how open innovation helps companies maximize technological change.

Ratna Sita Handayani of Euromonitor International highlights the rapid growth of mobile payments in Asia.

Does the rise of the super app in Asia anticipate the future of apps in the West? Ratna Sita Handayani, Senior Research Manager with Euromonitor International, looked at the rapid growth in mobile payments in Asia, and the way that companies outside of traditional financial services such as ridesharing firm Grab have moved effectively into the payment space. Highlighting similar accomplishments from Japanese social media giant LINE and the continued rise of AliPay, Handayani considered how hyperlocalization and other strategies are helping these new offerings gain ground.

Promoting a “more autonomous, more distributed, and more ethical” fintech industry, Forrester VP and Research Director Oliwia Berdak encouraged innovators to move from thinking about the “next best product” to a value-for-value exchange in which interests align. Berdak compared many of the more limited fintech offerings of today with solutions such as smart contracts and even autonomous debt management that more fully take advantage of the latest technologies like advanced machine learning.

Berdak urges a move “from myopic and disoriented” to “more autonomous and more ethical” in fintech.

This is necessary in large part, Berdak suggested, to help manage the cognitive load of all the information that technology delivers in the first place. In other words, we need technology to “take the human” out of the technological equation we’ve created.

Tosin Agbabiaka, an Early Stage Investor with Octopus Ventures, leveraged his own experience – from frontier through the periphery to an increasingly divided developed world – to paint a vivid portrait of Financial Inclusion 3.0. Agbabiaka provided a deep, nuanced understanding of the challenges of developing countries like Nigeria in the 1990s where basic financial access was a principal obstacle to progress (Financial Inclusion 1.0). He then explained the difficulty periphery nations have when boom times stall and a lack of liquidity threatens to turn financial crises into catastrophe – like Greece in the late 2010s (Financial Inclusion 2.0).

A look at the challenges and opportunities on the periphery during Financial Inclusion 2.0

If the first stage of financial inclusion is about optimizing for basic access, and the second stage is about optimizing for quality and efficiency, as Agbabiaka indicated, the third stage of financial inclusion is about optimizing for affordability. This is the world we see in North America and Europe where the benefits of a digital, interconnected economy exist in abundance, but are harder for a growing number to obtain. These are places characterized by gig economics and alternative financing in response to low wages, funding challenges for micro- and small businesses, and the debt burden of higher education.

This is a critical challenge for fintech, Agbabiaka suggested, but it is not a challenge that needs to be pursued out of a sense of social good alone. Financial inclusion 3.0 represents the union of access, quality, affordability and, to coin a phrase used by another analyst above, aligns the interests of the frontier, the periphery, and the center when it comes to technological innovation. In this world, as Agbabiaka explained, “those served benefit as much as the newly-served.”

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