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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
A $60 million investment will enable digital asset compliance and risk management platform TRM Labs to help organizations and institutions better identify cryptocurrency-based financial crime.
“Crypto is moving faster than any sector in our lifetimes,” TRM Labs CEO Estaban Castaño said. “Organizations need a blockchain intelligence partner that can stay ahead of the evolving risk landscape – from ransomware attacks to DeFi exploits. This round enables TRM to continue to offer the most reliable data and most innovative technology solutions in the market to its customers.”
The Series B funding was led by Tiger Global and featured participation from a number of major firms including Visa, Amex Ventures, Citi Ventures, PayPal Ventures, Block (formerly Square), as well as DRW Venture Capital, Jump Capital, and Marshall Wace – among others. Combined with the capital TRM Labs has raised to date, the San Francisco, California-based firm now has total equity funding of nearly $80 million.
TRM offers a cohesive platform to empower businesses to better manage financial crime risk. The company’s technology enables firms to assess the risk profile of Virtual Asset Service Providers – what TRM calls “Know-Your-VASP” – and other cryptocurrency businesses. TRM’s platform provides forensic capabilities that allow organizations to investigate the source and destination of cryptocurrency transactions, and transaction monitoring that helps companies screen cryptocurrency wallets and transactions for AML and sanctions compliance.
TRM supports more than 900,000 digital assets across 23 blockchains, and features cross-chain analytics to enable seamless movement between Bitcoin, Ethereum, other blockchains. This allows organizations to build comprehensive visualizations that enable a more accurate and complete tracking of the flow of funds. Users of TRM’s platform can select from more than 80 different risk categories to establish their own risk scoring criteria.
Founded in 2017 and emerging from the Y Combinator two years later, TRM has since grown revenues by 6x year-over-year and expanded its workforce from four to 60. Cryptocurrency businesses such as Circle and MoonPay currently use TRM’s technology to identify suspicious activity in digital asset transactions and to satisfy AML requirements. Government agencies are using the company’s solutions in order to learn more about advanced cryptocurrency-related financial crime, ranging from hacks to terrorist financing. Last month, cryptocurrency payments company Dash announced an integration with TRM Labs to bolster its ability to monitor transactions on its platform for financial crime.
“By integrating with Dash, we enable organizations, including virtual asset service providers who want to list Dash, the ability to detect cryptocurrency fraud and financial crime and strengthen their compliance with AML/CFT regulations,” Castaño said when the integration was announced in November.
Asked what she was most proud of after a year as CEO of IDology, a GBG company and a leader in identity verification and fraud prevention, Christina Luttrell gave a big tip of the hat to her team.
“Without a doubt, I am most proud of what our team has delivered to IDology customers and the difference they have made,” she said. “For example, our dedicated fraud team recently spotted a new fraud vector utilizing tumbled email addresses and collaborated with IDology’s product innovation team to build, test and deploy a capability that mitigated the risk head-on, within weeks. Their dedication to serving our customers is energizing and I’m humbled by their contributions every day.”
In over 10 years at IDology, Luttrell has significantly advanced the company’s technology, forged close relationships with IDology customers, and driven the development of technology innovations that help organizations stay ahead of constantly shifting fraud tactics without impacting the customer experience.
We caught up the IDology’s Chief Executive in the wake of the company’s victory at the Finovate Awards, where IDology was named “Best Identity Management Solution.”
IDology won Best Identity Management Solution at the Finovate Awards this fall. What is unique about IDology’s approach to fraud fighting and identity verification?
Christina Luttrell: First, thank you for the honor. I am exceptionally proud of my team and thrilled about upcoming innovation we’ll be introducing into the marketplace.
Regarding the IDology difference, it’s based on our philosophy and relentless focus on customer success. From a business value perspective, we facilitate more revenue with less friction and fraud while enabling compliance. What makes IDology unique is how we go about it. We always consider ourselves a product company with a solution offering that utilizes vast and diverse data sources, acquiring deep fraud expertise, and building our consortium network for collaborative cross-industry fraud insights and combining all of these elements into one single integrated flexible platform called ExpectID.
We pioneered multi-layered identity verification by fusing physical and digital identity attributes. When we conceived identity verification orchestration and built the ExpectID platform we wanted to go beyond basic data matching to leverage thousands of diverse, high-quality data sources, correlate multiple identity attributes such as location, device and activity-based data, and use advanced algorithms and rules engines to analyze and evaluate risk factors. We were especially intentional to empower customers to customize a nearly infinite number of identity attribute combinations to gain more control of data and better understand risk.
We are innovating the ExpectID platform to new levels with anti-fraud machine learning layers, adding cross border verification, enriching data intelligence and launching more mobile capabilities so our customers can keep ahead of fraud and stay ahead in their business.
Can you discuss the importance of data diversity in the identity verification process and the challenge of achieving it?
Luttrell: Single sourcing identity data for verification is dangerous. With massive breaches, entire identity data pools have been compromised, packaged and sold on the Dark Web for new account fraud and account takeover schemes. This can be especially problematic when financial institutions use the same data sources for identity verification as they use for credit risk analysis.
Diversifying data from multiple streams and sources, whether public sources or digital attributes, such as email or mobile phone providers, and fusing them together, enables a more complete identity profile and deters schemes, such as synthetic identity fraud. The challenge isn’t so much in accessing identity data feeds, but in designing and orchestrating effective technologies and skill sets to create decision engines with precision and accuracy that can quickly adjust as fraud and consumer behaviors shift. Doing so takes years to develop, deliver, harden, and prove.
What role do configurability, flexibility, and orchestration play in an identity verification regime?
Luttrell: Our research shows that 90 percent of businesses view identity verification as a strategic differentiator. However, that competitive advantage is only realized when businesses are empowered to verify who they want, when they want, and which attributes they want, with economy and precision.
As a result of COVID and its implications on businesses and consumers, the identity attribute data and fraud landscapes are changing at faster rates than ever before, resulting in a growing number of elements that need to be tweaked, tuned, and verified to validate a consumer’s identity.
At the same time, we found that 70 percent of Americans think companies collect personally identifiable information (PII) online about them without their knowledge. Needless to say, consumers want to provide as little PII as possible. They also express intense dislike for encountering unnecessary verification steps and will abandon account creation if they feel the identity collection process isn’t secure or is overly complex. All of these factors point to real challenges for businesses.
The ability to build, customize and evolve their identity verification programs to suit the unique requirements, risks and opportunities of their industries, use cases, customers, and compliance needs – and defend against ever-evolving fraud schemes – is critical for businesses.
The ideal identity verification solution empowers businesses to customize and fully flex transparent validation checks, workflows, and attributes economically, at any time throughout the customer journey. When looking to mitigate fraud, either upfront in the customer journey or upon re-entry, the desired solution will provide a high level of flexibility to validate customer leads without sacrificing risk protection and compliance or generating front- or back-end friction.
A superior solution will enable businesses to pick and choose, mix and match identity attribute proofing and curate workflows, based on their unique needs.
Last but not least, the orchestration of multiple systems and services is key. At IDology, we’ve embedded flexibility for seamless orchestration across services and systems to our solution for over 14 years. Coordinating with many data sources and services, while offering deep “home-grown” analytics based on hundreds of combined years of experience in fraud and identity can enable businesses to onboard legitimate customers without friction while keeping the fraud out. Our orchestration platform is a one stop shop for managing KYC / CIP, validating emails, geo location, phone numbers, identity signals, and access to the largest consortium network in the country, offering dynamic and seamless escalation for methods such as document verification-based smart rules controlled by the business.
One of the more important developments in AI technology is the idea of explainable AI which enables the results of a solution to be understood by human agents. Is explainability a similarly important concept in the world of digital identity verification?
Luttrell: Artificial Intelligence (AI) and Machine Learning (ML) are hot buzzwords that often seem to be used interchangeably. Although widely used, there are major misconceptions about what these words actually mean. True AI means that a machine knows what to do with zero human interaction. When companies talk about using AI today, they’re really talking about using machine learning, which is an application of AI in which the system is “trained” by feeding it huge amounts of data and allowing it to adjust and improve.
As an early adopter of machine learning, we believe it plays an important role in building trust, removing friction and fighting fraud. By applying machine learning to the identity verification process, we have the power to analyze massive amounts of digital transaction data, create efficiencies, and recognize patterns that can improve decision making. At the same time, we recognize that machine learning alone is not enough.
Counter to the many benefits of utilizing machine learning are risks in its propensity for bias, lack of data transparency, and absence of governance. While machines are great at detecting trends that have already been identified as suspicious, a critical blind spot is their inability to detect novel forms of fraud. This is why we believe in a hybrid of machine learning and human intelligence.
Since 2016, we’ve supplemented machine learning with our fraud review team and today, continue using data, technology and expertise to meet the business needs of customers by verifying identities with high locate rates, low friction and less fraud. With the powerful combination of machine learning and human fraud expertise, we can analyze large amounts of data at scale while leveraging the intuition and expertise of our fraud review team to detect novel fraud, govern AI models to eliminate bias and reduce risk, and provide closed-loop data transparency.
Among the more recent challenges to identity verification is synthetic identity fraud. How significant is this problem and what needs to be done to combat it?
Luttrell: Synthetic identity fraud (SIF) continues to trouble businesses, causing financial institutions alone $50-$250MM in financial losses each year. The growth of this type of fraud can be attributed to its effectiveness for criminals and how difficult it is to detect.
Although there are no silver bullets, eradicating SIF requires businesses to monitor diverse data sources and employ multiple layers of integrated identity intelligence supplemented with system-specific SIF attributes, such as location, device and activity factors. This, along with dynamically evaluating a combination of cross-industry fraud data, machine learning, and human intelligence, has the potential to help businesses pinpoint instances of SIF.
You took over the top spot at IDology a year ago. What are you most looking forward to in your second year?
Luttrell: Going into the new year, I am excited about multiple things. For starters, GBG’s acquisition of Acuant opens up all kinds of possibilities to serve our customers with new innovation. I am also excited about global identity verification and making ExpectID the ultimate cross-border verification platform for easy and flexible international compliance and privacy from one single system. From tokenized identities to blockchain and advancements in machine learning, we are going into the next year with momentum and energy from the bottom up.
Speaking of accomplishments, you were recently named Woman of the Year at Golden Bridge Business and Innovation Awards. What does this recognition mean to you? What advice do you have for women who are pursuing leadership opportunities in technology today?
Luttrell: I have a great deal of gratitude and am humbled by the recognition. I see the recognition as a reflection of the excellence and talents of the entire IDology team. It also shows that I’ve been blessed with meaningful mentors along my career journey. At IDology in particular, dedication to our customer’s success is a value that has served me and the company well.
The advice I would offer women, and anyone for that matter, is to place the customer at the center of everything you do. Lead with confidence, but balance it with humility. Set and focus the business goals, persevere and stay positive. At the end of the day, we are all in this together so the kinder, the better.
In a Series A funding round led by FINTOP Capital, automated fraud and dispute resolution solution provider Quavo has raised $6 million in funding. The financing, according to FINTOP partner John Philpott, will help the company “expand their go-to-market strategies, grow their brand, and add further expertise fo the Quavo ecosystem.”
Founded in 2015, Quavo offers a chargeback management solution for fintechs and financial institutions that provides automatic regulatory, card network association, and product enhancement updates. The company’s Disputes-as-a-Service technology is cloud-based, and integrates with core banking platforms, financial service providers, and merchant collaboration software with zero upfront implementation costs. With its AI-enabled fraud management solution, ARIA; its automated dispute management software, QFD, and its human intelligence service, Dispute Resolution Experts; Quavo offers end-to-end dispute management that helps financial services firms reduce losses and provide real-time resolutions while remaining compliant.
“We are incredibly excited about our Series A raise,” Quavo co-founder and Managing Partner Joe McLean said. “FINTOP has a fantastic reputation, depth of knowledge in the financial services space, and its team is comprised of genuine and authentic leadership.”
Speaking of leadership, the investment comes as Quavo announces the formal creation of its board of directors, which will feature FINTOP partners John Philpott and Jared Winegrad as board members. Quavo co-founder and managing partner Dan Penne credited FINTOP for its “specialization in fintech and familiarity scaling companies to the next level.” He added, “Access to the FINTOP network and this infusion of capital will drive advances in Quavo’s products and services for existing and future clients.” Among the fintechs in FINTOP’s portfolio are firms such as FISPAN and Digital Onboarding, both Finovate alums.
Quavo’s recent fundraising is the second major capital infusion in recent years. In June of last year, the company announced a “multi-million dollar funding round” from Decathlon Capital. More recently, Quavo was recognized as a “Rising Star” at the 2021 Pega Partners Innovation Event in May for its work with credit unions and regional banks in particular.
“Our mission from day one was to create a complete Disputes-as-a-Service offering,” Quavo co-founder and Managing Partner Richard Jefferson said upon receiving the Rising Star award from Pegasystems. “The capabilities of the underlying Pega platform allowed us to accomplish this quickly and economically, which has enabled us to capture the imagination of the market. We thank our key vendor Pega for recognizing this accomplishment.”
Quavo’s clients include banks such as KeyBank, TD Bank, and Euro Pacific Bank; credit unions including NASA FCU, Schools First FCU, and Patelco CU; as well as fintechs like ADP, CardWorks, and Green Dot. The company is headquartered in Wilmington, Delaware.
With plans to launch initially in Mexico before expanding to Colombia and Central America, fintech startup Jefa is out to do what even the most innovative challenger banks have so far failed to do: bring better financial opportunities to women in Latin America.
Company CEO and founder Emma Sanchez Andrade Smith highlights the fact that nearly 1.3 million of the world’s 1.4 million underbanked people are women. Add to this the problem that the majority of new, digitally-oriented financial institutions are focused on mature markets in Europe and the United States rather than in emerging markets. Combined, these two facts represent a major challenge for women in developing markets – and a potential opportunity for creative fintech entrepreneurs.
Jefa announced earlier this week that it has secured $2 million in seed funding to bring financial empowerment women in Latin America and the Caribbean. More than a dozen investors participated in the round, including The Venture Collective, partners of DST Global, Foundation Capital, Amador Holdings, The Fund, FINCA Ventures, Rarebreed VC, Siesta Ventures, Springbank Collective, Bridge Partners, Hustle Fund, Foundation Capital, Latitud, J20, and Magma Partners. A number of angel investors such as Daniel Bilbao, JP Duque, Ricardo Schaefer, Jean-Paul Orillac, and Allan Arguello were also involved in the financing.
Founded in 2020, and an alum of TechCrunch’s Startup Battlefield, Jefa has 115,000 women on its waitlist and the backing of Visa, with whom the firm forged a seven-year strategic partnership. The alliance will enable Jefa to launch a Visa card for the Mexican market, where more than half of the country’s women are unbanked.
“Visa believes in empowering women – from entrepreneurs to home-makers,” Visa Latin America and the Caribbean Senior Director of Fintech Partnerships Sonia Michaca said. “Financial and digital inclusion transform economies. Women, who control the lion-share of everyday household spending, should be at the core of this transformation, yet women are vastly underserved by traditional banks.”
Visa sees the partnership also as a way to help respond to growing demand for contactless payment options. A recent study led by the company underscored rising interest for contactless payments from women in Latin America, with 44% of female consumers in Brazil reporting more frequent use of contactless payments and 58% saying they would not shop at a store that did not offer them. With Jefa, women need only a government-issued ID to open a free, “no minimum balance required” account and access built-in savings apps as well as other “women-tailored features.”
“Jefa is a solution for women that empowers them with the tools they need to create a better livelihood,” Smith said. “At Jefa, we take a multifaceted approach that addresses the numerous barriers women face to entering the global economy. This includes using gender-disaggregated data to inform our product, designing distribution channels to reach women in place they trust, and providing services that are tailored to their distinct financial behavior.”
A graduate of Duke University and The London School of Economics and Political Science (LSE), Smith previously co-founded Eversend, Africa’s first neobank, in 2018. She was also the director of Togo-based Microfinance des Jeunes de Farende where she launched and ran the first microcredit organization for youth in West Africa.
FinovateEurope 2022 is right around the corner. If you are an innovative fintech company with new technology to show, then there’s no better time than now and no better forum than FinovateEurope. To learn more about how to demo your latest innovation at FinovateEurope 2022 in London, March 22-23, visit our FinovateEurope hub today!
Here is our look at fintech innovation around the world.
When it comes to Florida’s credit unions, in terms of both assets and membership, it doesn’t get any bigger than Suncoast CU. Founded in 1934 as Hillsborough County Teachers Credit Union, the institution converted to a federal charter as Suncoast Schools FCU in 1978. The company has since become the largest credit union in the state of Florida, as well as the 10th largest credit union in the U.S. based on membership and assets, which total more than $14 billion. The credit union has 75 full-service branches and serves more than 991,000 members in 40 counties in Florida.
The credit union also has become the latest institution to team up with financial data platform and modern connectivity leader MX. Suncoast will leverage MX’s data enhancement platform, its PFM, and MXinsights technology to enable its members to proactively manage and take action to improve their finances. The partnership is designed to improve processing efficiencies for Suncoast, as well as fuel more customer-engaging experiences and accelerate growth, by putting the institution’s data more accessible and more actionable.
“By providing our members with a better experience, powered by accessible and relevant information about their financial lives – what they need and when they need it – we’re helping them solve real issues on their terms,” Suncoast Credit Union President and CEO Kevin Johnson said. “We believe this will lead to even more connected Suncoast members and provide more availability for our employees to provide personalized assistance.”
As part of the collaboration, Suncoast’s members will gain access to budgeting, auto-categorization, and debt management tools, as well as the ability to view all of their data in a single platform. The credit union will be able to leverage MXinsights to play a proactive role in their member’s financial health, communicating with them about their account activity and empowering them to develop and maintain healthier financial practices.
“The combination of cleansed, intelligent data powering personal financial insights that MX is providing Suncoast makes for a delightful money experience from a credit union that truly cares about the financial health of its members in Florida and beyond,” MX Chief Customer Officer Nate Gardner said.
A multiple time Finovate Best of Show winner, MX has teamed up with a number of customer-centric financial institutions in recent months. This includes a partnership with Massachusetts-based Cambridge Savings Bank to help the $5 billion asset institution launch its Money Management personal finance visualization solution. MX has also partnered with fintechs such SUMA Wealth, which is dedicated to serving the Latin/Hispanic community, as well as with payroll connectivity API company Pinwheel and credit union mobile banking solution provider Mahalo Technologies. Headquartered in Lehi, Utah, MX was founded in 2010. Ryan Caldwell is co-founder and CEO.
A new partnership between credit underwriting software provider Zest AI and Wyoming’s largest credit union, Blue Federal Credit Union, will enable the institution to provide faster and more accurate loan decisioning across its auto, credit card, and personal loan portfolios.
Blue Federal Credit Union Chief Credit and Risk Officer Jason Buchanan called the partnership with Zest AI “a big win for our members.” He added that “Zest will also allow Blue to reach underserved borrowers across the credit spectrum while maintaining our standards of compliance and credit risk management. The granularity we have access to through Zest is broad and provides all of the features and details we need to explain our credit decisions.”
Zest AI leverages more data and better math to enable banks and credit unions to move beyond the limitations of their legacy credit scoring methods. The company claims that its models use 10x more variables to provide a more accurate picture of borrower risk and empower its financial institution partners to approve more borrowers safely. Blue FCU expects to deploy Zest AI’s technology early next year, and anticipates a 30% boost in loan approval rates as well as the ability to make loan decisions in less than five seconds.
“A Zest-built model gives them transparency, control, and a faster and more accurate decision that approves more members,” Zest AI CEO Mike de Vere said. “Blue’s investment in Zest is really an investment in its community.”
Headquartered in Los Angeles, California, and founded in 2009, Zest AI is a registered Credit Union Service Organization (CUSO) whose credit union customers represent $56 billion in assets and four million members. Named one of Fast Company’s “Next Big Things in Tech” last month, Zest AI won the 2021 Finovate Award for “Best Use of AI/ML” in September. This year, the company forged a partnership with student payment platform Climb Credit, and collaborated with Florida’s largest credit union Suncoast Credit Union. Over the summer, Zest AI secured $18 million in funding in a round led by strategic investors VyStar Credit Union and First National Bank of Omaha. The investment took the company’s total capital raised to $250 million.
With more than 100,000 members in communities across Wyoming and Colorado and beyond, Blue FCU was launched as Warren Federal Credit Union in 1951. The institution merged with Community Federal Credit Union in 2016, and rebranded as Blue FCU. The credit union moved its headquarters to Cheyenne earlier this year, and currently has more than $1.4 billion in assets. Stephanie Teubner is CEO and President.
An investment of $35 million will enable Solutions by Text (SBT), a compliant text messaging platform for consumer finance companies, to power broader adoption of its solution across the consumer finance lifecycle. The growth financing round was led by Edison Partners, and featured the participation of Stifel Venture Bank, a division of Stifel Bank.
In addition to the funding news, Solutions by Text also announced the appointment of former ACI Worldwide executive David Baxter as its new Chief Executive Officer
“Now more than ever, consumer finance organizations are taking a hard look at how to strengthen digital consumer relationships while maintaining compliance with national standards,” Baxter said. “Our opportunity to capture market share through existing and expanded platform capabilities is immense and we’ve assembled an exceptional team and board to turbo-charge this next chapter of growth.”
As part of the investment, co-founder Mike Cantrell and Edison Director Network members Ron Hynes and Nick Manolis will join the Solutions by Text board of directors.
Headquartered in Dallas, Texas, and maintaining remote teams and offices throughout the U.S. as well as in Bangalore, India, Solutions by Text was founded in 2008. The company’s technology is used by more than 1,400 consumer finance companies – ranging from auto finance and lending to banking – who use SBT’s compliant texting solutions to support origination, servicing, and collection operations. Solutions by Text helps ensure that communication policies and practices are compliant with key regulations such as the Consumer Finance Protection Bureau’s Fair Debt Collection Practices Act (FDCPA), including a new Regulation F which went into effect today. The revision clarifies the ability of consumers to stop collection calls and/or text messages and is intended to respond to the rise of new communications methods.
Solutions by Text offers two-way texting to ensure seamless communication with customers, as well as a pay-by-text product, Text Pay, and a customizable URL shortening tool called SmartURL. SBT’s technology can be integrated via the company’s API, which enables access to the full range of the company’s text messaging tools including budgeting, reporting, file imports, message templates, and distribution lists.
“(SBT) is uniquely positioned to scale growth in the fintech market with a team of deep regulatory compliance, messaging, and payments expertise, not to mention a sizable loyal customer and partner base with significant embedded opportunity,” Edison Partners General Partner Kelly Ford said. “Eight in ten U.S. adults use text messaging on a regular basis,” Ford noted. “With Solutions by Text, financial institutions are meeting these consumers where and how they want to be met, and doing so with peace of mind.”
In a round led by Nyca Partners, cloud native core banking technology platform Thought Machine has secured $200 million in new funding. The Series C investment gives the London-based fintech a valuation of more than $1 billion, giving the company so-called “unicorn status.”
Thought Machine will use the new capital to continue development and evolution of its flagship solution, Vault, and its Universal Product Engine. Vault leverages APIs and a microservice architecture to provide institutions with all of the functionality necessary to offer both retail and small business banking services. A system of smart contracts enables companies to configure Vault to support a variety of retail bank products including current and savings accounts, loans, credit cards, and mortgages. And as a cloud-based solution, Vault offers institutions security, flexibility, scalability, high availability, and an absence of friction.
Vault also enables institutions to better manage run and change costs so that banks only pay for the hardware they actually use and benefit from the ability to launch new products quickly and deploy upgrades to existing solutions with zero downtime.
“We set out to eradicate legacy technology from the industry and ensure that banks deployed on Vault can succeed and deliver on their ambitions,” Thought Machine founder and CEO Paul Taylor said. “These new funds will accelerate the delivery of Vault into banks around the world who wish to implement their future vision of financial services.”
Also participating in the Series C were new investors ING Ventures, JPMorgan Chase Strategic Investments, and Standard Chartered Ventures. Existing investors Lloyds Banking Group, British Patient Capital, Eurazeo, SEB, Molten Ventures, Backed, and IQ Capital also contributed. Thought Machine has raised more than $348 million in equity funding to date.
Thought Machine demonstrated its core banking solution, Vault, in its Finovate debut at FinovateEurope in 2018. More recently, in September of this year, the company announced that JP Morgan Chase would replace its core banking suite with Thought Machine’s Vault. Also joining Chase in transitioning to Vault this fall was Arvest Bank, which operates a cohort of small, U.S.-based community banks. In April, Thought Machine announced an integration with fellow Finovate alum Wise (formerly Transferwise) to enable companies using Vault to access low-cost international fund transfers.
Founded in 2014, Thought Machine was named “B2B Fintech of the Year” by AltFiNews earlier this month.
Regardless of where you stand on the Revolut/Yoppie partnership “intention versus execution” debate, it is nevertheless remarkable how fintechs and financial institutions are reaching out beyond their traditional collaboration competencies to reach new markets and promote an ever-widening array of causes.
This week’s Finovate List Series looks at three ways that banks and fintechs are helping pave the way in terms of greater financial inclusion for underrepresented groups and deeper understanding of how everyday behaviors can have a significant impact on the environment.
Gender
The first digital banking platform in the U.S. dedicated to serving the LGBT+ community, Daylight, launched earlier this month. The platform is built to help LGBT+ financial services consumers to manage their finances and save for future expenses ranging from emergency funds to gender transition surgery and related medical expenses. The company notes that with an estimated 30 million people in the United States who identify as LGBT+, the community remains significantly underserved in financial services.
“This country is at a critical turning point where we have recognized companies and services have been performatively suporting the LGBT+ community versus serving its unique needs,” Daylight co-founder and CEO Rob Curtis told Retail Banker International earlier this month. “Despite our community’s combined $1 trillion in buying power, we are still ignored – roughly 20% of LGBT+ people are unbanked or underbanked.”
Daylight will offer Visa-branded cards in the customer’s preferred name, rather than the customer’s legal name, as well as financial tools to help prioritize spending decisions and meet financial goals. The platform will also provide expert financial advice and access to a network of financial management “coaches” that specialize in responding to the unique financial needs of those in the LGBT+ community. A member of Visa’s Fintech Fast Track program – and the program’s first LGBT+-based fintech – Daylight is also supported by card issuing platform and Finovate alum Marqeta.
Daylight has announced that it will begin operations in the middle of next month, starting with an invite-only, beta period involving “a few hundred people.” The company will focus first on markets in California and New York.
Ethnicity
In the wake of the George Floyd-inspired, Black Lives Matter protests of 2020, a spotlight has been shown on the rising number of financial institutions catering to African Americans.
Among the newer entries to this cohort is Adelphi Bank, which announced earlier this month that it has filed paperwork with the FDIC to become the first black-owned, depository institution in Ohio.
“We know that African Americans typically don’t have access to financial institutions to the degree that the majority community has,” former Fifth Third Central Ohio president and CEO Jordan Miller said to The Columbus Dispatch. “We know that our financial situations are not as strong in most cases. And so we want to make a difference in the community across Franklin County, to give those underserved a voice and financial services,” Miller, one of Adelphi Bank’s proposed incorporators, added.
The bank would be located in the King-Lincoln/Bronzeville neighborhood, and its backers stated that they plan to raise $20 million in equity capital upon earning FDIC approval to open. The institution takes its name from the city’s first black-owned bank, Adelphi Loan & Savings Company, which was launched in the early 1920s. The new bank will be part of a $25 million development called Adelphi Quarter, which will feature both housing and ground-floor businesses. The Columbus Dispatch reported that the original facade of Adelphi Loan & Savings has been incorporated into the new structure.
Sustainability
This week we reported on the partnership between Tink and ecolytiq to give banks, financial institutions, and fintechs the ability to offer environmental impact data to their customers. These kind of solutions, which include options like carbon footprint calculators, have been among the chief ways that many innovative companies have sought to bring their sustainability technology to the world of financial services.
Today we learn that micro-investing platform Wombat has added a new option to its impact investment offerings: a sustainable food ETF (exchange-traded fund) that enables investors to get exposure to dozens of companies that are involved in developing sustainable food production systems and products. These companies include new, but well-known brands such as plant-based food company Beyond Meat, oatmilk company Oatly, and farm-to-table business Tattooed Chef.
The fund, called The Future of Food, is the fifth impact investment offering on Wombat’s platform. The ETF was created via a partnership between thematic ETF issuer Rize and thematic research company Tematica Research. It will trade on the London Stock Exchange under the ticker “FOOD LN.”
“At Wombat we have found that some of our most popular thematic funds are those that offer impact investment opportunities, such as our Medical Cannabis and Green Machine ETFs,” Wombat co-founder and CEO Kane Harrison said. “We think this new sustainable food fund is a great addition to that range and it means we now offer a very competitive choice of impact investments when compared with other micro-investing platforms.”
Founded in 2019, Wombat currently has more than 190,000 users.
A new partnership between North Dakota-based Cornerstone Bank and Buy Now Pay Later company Credova is the latest example of how bank-BNPL partnerships are becoming increasingly common in financial services. Per the agreement, Cornerstone Bank will do business as Noka and will provide loan origination for Credova, which specializes in BNPL solutions for the outdoor recreation, farm, home, and ranch markets.
“This is the next step in our company evolution, to partner with Cornerstone Bank, a pillar in the banking community,” Credova CEO Dusty Wunderlich said. “It’s not often you find a bank with a nearly 100-year history be so nimble and forward thinking, but that’s exactly what we’ve discovered in Cornerstone Bank.”
One of the ten largest financial institutions in North Dakota, Cornerstone Holding Company, the parent company of Cornerstone Bank, is a $1 billion financial institution with 11 locations in North and South Dakota. Headquartered in Fargo, Cornerstone offers its customers access to business and personal loans, deposits and cash management services, and both online and mobile banking.
“This exclusive agreement furthers our vision of being who people turn to when they are making important decisions about their money,” Cornerstone Bank chairman Gary Petersen said. “Cornerstone Bank and Credova share very similar cultures and approaches to doing business, making this relationship a great pairing. Both organizations will benefit from each other’s areas of expertise.”
Founded in 2018, Credova recently relocated its headquarters from Nevada to Bozeman, Montana. The move, according to Wunderlich, reflected a desire to base operations in “a location that echoed our values and allowed us to continue to lead an outdoor lifestyle.” The POS financing platform offers a virtual card and extended installment financing along with its “Pay in 4” BNPL program that will allow consumers to divide their purchases into four, zero-interest payments. Available as either an on-site or an in-store integration, Credova’s financing platform has enabled merchants to realize a more than 3x increase in AOV (average order value) compared to other payment methods, a more than 51% increase in overall sales volume, and a more than 72% increase in conversion rates. Credova includes 3H Tactical, Big Tex Outdoors, Broadheads and Bullets, and Cedar Pet Supply among its most recent brand partners.
Sustainability-as-a-Service company ecolytiq has announced a partnership with Visa-owned, European open banking platform Tink that will bring personalized impact footprint calculations and other pro-sustainability solutions to banks, financial institutions, and fintechs. The technology, which helps encourage customers to shift their behavior toward more sustainable choices in terms of spending, will be available initially in the DACH region (Germany, Austria, and Switzerland) and eventually expanded to other, larger markets in Europe.
“ecolytiq’s solution was created with the ability to quickly scale, because we know that global warming needs exponential climate action enablers,” ecolytiq CEO and co-founder Ulrich Pietsch said. “Tink is a strategic partner with a proven track record for enabling banks and fintechs to deliver the data-driven digital solutions their customers want and need. ecolytiq is the next-generation of these products.”
Ecolytiq’s products include ecoAware, which uses country-specific calculations to determine a customer’s personal environmental impact based on their bank transactions; ecoEngage, which helps bank customers determine ways to reduce their environmental impact via feedback loops, footprint analytics, and peer group comparisons; and ecoAction, which enables bank customers to offset their environmental impact via donations to ecolytiq’s certified offsetting partners. ecoAction allows individuals to compensate 100% or more of their carbon footprint, and ecolytiq plans to soon add ESG investment funds as a donation destination as well as the ability to select a green energy provider with its ecoSwitch solution.
An alum of Finovate’s developers conference, ecolytiq demonstrated its technology at FinDEVr 2021 earlier this year. Founded in 2020 and headquartered in Berlin, Germany, ecolytiq has already forged partnerships with Visa, FinTecSystems, challenger bank Tomorrow, and Worldline. Over the summer, the company won recognition in the Impact Shakers Awards in the “Education” category.
Two-time Best of Show winner Tink, based in Stockholm, Sweden, most recently demonstrated its technology on the Finovate stage at our European conference in 2019. The company’s open banking platform handles more than one billion API calls a month; supports more than 3,400 bank and financial institution integration partners; and reaches more than 250 million bank customers across Europe. Tink’s products help institutions confirm account ownership and verify income; provide up-to-date, standardized and categorized transaction data; offer a fully embedded payments experience to boost engagement and conversion, and enable firms to build smart, intuitive personal finance management solutions. In addition to its partnership with ecolytiq, Tink has also recently embarked upon collaborations with French payments service provider Lemonway and German PFM app Placons.
“The combination of Tink’s transactions product and ecolytiq’s sustainability expertise creates a valuable proposition for financial institutions and fintechs across the DACH region to offer services that better measure and help reduce carbon footprint,” Tink Regional Director for the DACH region Cyrosch Kalateh said. “We look forward to extending this partnership in the future, helping ecolytiq to expand at speed across Europe on our open banking platform.”
“Open banking empowers consumers and small businesses to use their financial data to expand access to financial services, such as demonstrating their financial wellness to increase access to credit, aggregating financial data to improve personal financial management, and to more seamlessly set up and manage payments,” Mastercard Chief Product Officer Craig Vosburg explained. “Together, we’ll continue to build up on our API connectivity and our multi-rail strategy to enable greater consumer access, control, and choice around the world.”
Aiia is the company known formerly as Nordic API Gateway, the leading open banking platform in Northern Europe. More than 40 financial institutions, as well as a number of enterprises, rely on the platform to integrate financial data and offer A2A (account-to-account) payments. Via a simple API, the solution supports a wide variety of payment services ranging from one-off, e-commerce payments to bulk payments for SMEs. The company demonstrated the technology at its Finovate debut at FinovateEurope earlier this year.
Founded in 2017, Aiia includes Danske Bank, OP Bank, Lunar, DNB, and Santander Consumer Bank among its partners. A licensed Payment Initiation Service Provider (PISP) and Account Information Service Provider (AISP), Aiia has raised more than $15 million (€13.5 million) in funding to date. This includes a $5 million investment from DNB and Danske Bank in April of last year.
“For the past decade, we have worked to build Aiia into a leading and quality-driven open banking platform, which has onboarded hundreds of banks and fintechs onto safe and secure open banking rails,” Aiia founder and CEO Rune Mai said when the acquisition news first broke in September. “We have worked closely alongside banks, customers, and local authorities to ensure that our APIs show the true effect of open banking. We’re excited to become a part of Mastercard and progress our journey of empowering people to bring their financial data and accounts into play – safely and transparently.”
Aiia is the latest fintech acquisition by Mastercard. The purchase comes a year after the completion of its acquisition of real-time financial data and insights company Finicity.
