Touchless UI in Insurance

This is a guest post written by KV Dipu, President & Head of Operations, Communities & Customer Service at Bajaj Allianz General Insurance Company.

COVID-19 has forced organizations to embark on new journeys in various customer facing domains and the fintech/financial services sector is no exception. Since it has become imperative for organizations to consider the health and safety of customers and employees, touchless technologies are gaining traction across the spectrum to avoid physical contact. While touchless technologies are not new – smart homes, smart health, augmented and virtual reality games, smart cars, etc. are all part of our lives – they have gained a new lease of life and are now being adopted at scale.

There are numerous ways in which human communication occurs; we connect with gestures, speech, and touch along with the choice to switch amongst them seamlessly. However, the human-computer interaction is different and complicated. Touchless UI is a classic approach to control and speak with your gadget without typing or touching the screen to carry out a task. In the “Home insurance” segment, where IoT devices are used for safety along with insurance to cover during theft or burglary, the gestures control becomes an essential tool to protect from intruders. The gesture recognition system can differentiate between people and can avoid unauthorized access. However, it relies on various lighting conditions as the cameras require a desirable ambience.

Gesture vs. voice commands

Gesture recognition uses computer vision; voice recognition uses natural language processing and does not depend on lights or cameras, which add to the cost. On the contrary, gesture recognition beats voice recognition because of its natural character. This is a key factor for the implementation of voice recognition technologies into several fintech products, making the process more efficient and inexpensive. Since users do not need to go through a steep learning curve, the need of change management is eliminated to a great extent.

Typically, the development of such innovations is not without challenges. Incorporation of such gestures requires deep study of human gestures and feature engineering them while developing deep learning algorithms. Error rates, false positives, and false negatives must be eliminated to attain six sigma status. Advanced Driver Assistance Systems (ADAS) in insurance plays a major role in the third-party claims of commercial vehicles. The gestures are not restricted to hand or finger movements; eye gestures help in understanding driver behavior while driving. It helps in deriving a driver score based on the eye movements that helps data scientists analyze whether the driver is drowsy, drunk, or distracted. Consequently, the driver score is used by underwriters to arrive at a premium based on the driver score.

UI design principles

The standard design principles for touchless UI are classified into three categories: action, navigation, and transform gestures.

  • Action gestures: Action gestures involve those related to tapping, long press and swiping that help interact with elements of GUI and access additional functionality.
  • Navigation gestures: Navigation gestures involve actions related to scrolling, dragging, swiping, and pinching that enable users to flip through a product with ease.
  • Transform gestures: Transform gestures involve actions related to compound gestures, pick up and move, and double tap that enable users to zoom into and out of content, reorder content, rotate graphics et al.

Interaction principles are changing by the day as human gestures keep evolving to keep pace with the new behavior brought in by millennials. Data scientists need to consider these changes while doing feature engineering. They also need to curate data sets accordingly as these data sets will eventually lead to the training for ML/DL algorithms.

Whilst the technology evolves, two aspects of customer experience need to be taken into consideration:

  • Ease of understanding: Gestures must be in line with the ones widely known and address gaps in existing ones. Cultural nuances (for instance, a gesture in country A can mean something radically different from the same gesture in country B) need to be taken into account.
  • Realistic responses: Latency is annoying and people switch products/services if the responses are not real time. Traditional authentication with user IDs and passwords/OTPs is not something users expect in the new era of banking and insurance. Gestures and voice commands enhance the customer experience by quick logins and payments. However, for certain aspects of banking, an extra layer of security is applied and the value of transactions is restricted to avoid risk.

    By 2025, 72% of the people across the globe are expected to have smartphones. As touchless UI/UX gains traction, we are in for the new normal – M2M (man to machine) interactions, human communication morphing from voice into gestures, design at the core of customer experience, amongst others, and, most importantly, healthy and happy human beings!

KV Dipu is President & Head of Operations, Communities & Customer Service, spearheading digital transformation, leveraging start-ups from fintech/insuretech globally, at Bajaj Allianz General Insurance Company (a joint venture of Allianz, the world’s leading insurer, and Bajaj Finserv & ranked #8 amongst the global top 100 digital insurers).

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FinovateFall 2020’s Final Day: Collaboration, Mobile Security, and Fintech’s Bright Future

The morning’s first panel, Strategic Partnerships and Collaboration Between Banks and Fintechs, brought insight into what large banks look for when it comes to partnering with a fintech. The top suggestions for fintechs looking to make themselves more appealing to banks included offering scalability and using industry standards for things like data sharing.

Google’s Mike Burr took the stage next to deliver the keynote: Redefining the Approach to Mobile Security in FinTech (and why it works). Burr considered the root concern that banks struggle with when it comes to protecting Android devices. He examined the top ways data becomes exposed and how to get the tools to ensure data security for compliance needs.

The afternoon breakout stages tackled issues on topics across payments, future technology, wealthtech, and banking. These recorded panels, along with all of the content on the main stage, are available in the On Demand section of the event platform through next week so be sure to catch what you may have missed there.

Our afternoon panel, Latin America – The Future of Fintech, and the Dawn of a New Opportunity, considered the range of opportunities in Latin American markets. The group discussed that the region’s diversity makes it ripe for investors and explained how entrepreneurs are reinventing financial services at a local level.

Closing out FinovateFall 2020 was Neri Tollardo, Head of International Relations and Partnerships at Tinkoff, who spoke on how fintechs can remain profitable in a COVID-19 era. Tollardo’s address offered a ray of hope for banks and fintechs. He expressed that the path to profitability is not mutually exclusive of growth. His points of advice included embedding profitability in the culture and the organizational structure, understanding their business, investing in good talent, and searching out verticals that generate returns.

I’d like to extend a huge thank you to everyone who participated in the event, from our demo companies, to our speakers, panelists, and–of course– to our audience. We wouldn’t be here without you!

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More Fuel for the BNPL Fire: Affirm Raises $500 Million

In a series G round, buy-now, pay-later company (BNPL) Affirm brought in $500 million, bringing the company’s total raised to $1.3 billion.

Leading the round were Durable Capital Partners LP and existing investor GIC. Other returning investors Lightspeed Venture Partners, Wellington Management Company, Baillie Gifford, Spark Capital, Founders Fund, and Fidelity Management & Research Company LLC also contributed.

Affirm Founder and CEO Max Levchin referred to the new round as a “vote of confidence” that will help the company advance its mission “to build honest financial products that improve lives.”

Along with the funding announcement, Affirm also unveiled an interest-free and fee-free bi-weekly payment product for transactions over $50. The new product aims to help Affirm’s tools compete with credit cards. “Affirm is now an even more attractive payment option for everyday wants and needs,” Levchin added. “We can also now better support merchants who offer smaller ticket items and bring their customers a more transparent, flexible way to pay.”

Affirm’s BNPL tools reach 6.5 million shoppers across the U.S. and Canada. The company has 6,000+ merchant partners in the U.S., including brands such as Walmart, Peloton, Oscar de la Renta, Audi, and Expedia.

Affirm’s funding comes days after Klarna unveiled its $650 million raise, which brought its total funding to $1.4 billion and boosted its valuation to $10.6 billion.

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5 Questions with Mary Kate Loftus, Senior VP and Director of Digital for M&T Bank

Partnerships between nimble fintechs and trusted banks are essential as we look to build back our economy. Mary Kate Loftus, a panelist in our FinovateFall Strategic Partnerships session, knows this well. As head SVP, Director of Digital for M&T Bank, she fields potential partnerships each month. We sat down with her to discuss what M&T looks for in a partner and where she sees the industry going.

How do you determine your needs for a fintech partner?

Mary Kate Loftus: With all things, we start with our customer. Our teams dive deep into the customer experience through journey mapping, and from this, we can see the pain points and what we need to create. Going about our innovation and partnerships from this perspective, rather than looking at our competitors and building to parity, allows us to create a truly differentiated experience.

When it comes to partnerships, we consider if we are best suited to meet the needs of the client or if we need to turn to an outside source that’s already focusing on these needs very deeply. Banks, like M&T, are able to work closely with their clients in a way that many fintech organizations are not able to do. But often fintechs, free of a complex organizational structure or process, are able to innovate in a very focused way. This ying and yang – the bank’s customer expertise and the fintech’s area expertise – allows for a truly meaningful partnership.

Once we identify a partnership need, we see if we’re aligned in our corporate purpose. This step is critical – it ensures that our approach will be both effective and long-term. Our purpose is to improve the lives of our customers in a meaningful way, and we look for partners looking to achieve the same.

What makes you take a meeting with a potential fintech partner?

Mary Kate: Referrals from existing clients, friends, connections, or colleagues are always a great way to start a potential partnership. Beyond that, I get excited to meet those who come with a clear vision of the problem they’re able to address and a strong understanding of our corporate promise. For us, it’s not enough to simply have a capability, but rather, we build for measurable results and long-term partnership.

Once we’re in the meeting, it all comes down to talent. We want to work with creative, imaginative, curious people, and we’re looking to see those qualities on day one. Together we want there to be a good energy in the room and, equally as important, great ideas.

Lastly, we’re looking to learn from our partners. What can you teach us about what we’re not yet doing?

Can you discuss the PPP rollout and how you overcame the challenge?

Mary Kate: M&T’s successful PPP rollout was thanks to a strong set of existing partnerships and a creative team that was ready to scale nearly overnight.

Before the pandemic, we were working with Blend for our mortgage digital originations so we were already aligned in our purpose. The leadership teams from both organizations were just starting conversations on how we could work together more when the PPP program was announced, and so we knew they were the partner to tap. A cross-functional team brought in Salesforce and Docusign – two other existing partners – to complete the experience.

Within minutes of the program launching, we had thousands of applications. Together, we were able to lead the country in loan fulfillment– 96% of first round loans went through within days — giving $7 billion in funds to small businesses. More importantly, our partnership allowed us to still meaningfully vet the applications, and we’re proud to say that two thirds of the loans issued went to businesses with less than 10 employees.

Our PPP response was led by Eric Feldstein, M&T’s SVP who oversees Business Banking. It’s a success story about the importance of having strong leaders with digital expertise leading a line of business. I believe this successful rollout in a time of real crisis for many will create lasting loyalty in our customer base.

What near-horizon banking technology are you most excited about?

Mary Kate: I’m a big believer in the science behind behavioral analytics and how you motivate customers by understanding how people think.

Every customer is going through a different experience. If one client is going through a life change like having a child or going through a divorce, it’s important to be able to anticipate financially what that journey might look like for them. As we are able to embed more artificial intelligence and meaningful insights, we’ll be able to guide customers toward better decisions that then will improve the quality of their life.

This is why we’re so focused on experience mapping to identify customer journeys — from there we’re able to understand what the moments that matter most are for different segments of customers. When you apply data and insights against those experiences, you’re then able to build a personalized micro-experience. What we’re doing today is lightyears ahead of what we were doing in the past, and I can’t wait to see how much more we can do in this space.

The pandemic is only going to accelerate this. We’re seeing a blend of work and personal lives, and with this, I think the financial services industry will play an even bigger role in making a difference in people’s lives.

What role does the need for diversity play in banking partnerships?

Mary Kate: Diversity plays an absolutely critical role in these partnerships.

At M&T, we know the more diverse voices we have in the room the better decisions and outcomes you can drive for customers. As an institution, you must reflect your community and customers, so you need to draw from a broad range of experiences in order to drive the best business performance and outcome.

When choosing a partner, we look at who we’re working with. We look at what systems are in place and watch out for those that could create outcomes that we don’t want to drive, and, conversely, for those that will drive us further.

This goes back to what I was saying earlier about learning from a partner. Yes, we want cutting-edge technology that will solve customer pain points, but sometimes these pain points are solved through systems, processes, or approaches. We’ve found that by working with a diverse set of partners, we’re able to think in more comprehensive, customer-centric ways.

Mary Kate Loftus is the Senior Vice President, Director of Digital for M&T. She joined the Bank in 2018 as the Head of Strategic Planning for the Consumer & Business Bank. Mary Kate is a career banker with over 20 years in financial services with experience in Digital, Branch Management and Contact Center. Mary Kate holds an MBA from Canisius College, is a 2013 graduate of the Consumer Banker’s Association Executive Banking School and is a member of their Digital Channels Committee in addition to other industry forums

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Striata Acquired by Doxim

Secure messaging company Striata announced this week it has been acquired by Doxim, a customer communications management (CCM) software company. Terms of the deal were not disclosed.

Doxim will use Striata’s technology to expand its CCM platform and provide personalized digital interactive experiences in a secure manner. Doxim CEO Mike Rogalski expressed that the global pandemic has accelerated the need for communications technologies. “Especially with the impact of COVID-19, which has meant fewer face-to-face meetings,” noted Rogalski, “organizations need to find scalable ways to orchestrate and distribute multi-channel communications that are both personalized and legally compliant.”

“The joint strength of Striata and Doxim will power a world-class digital CCM platform and expert team for enterprises and small to mid-sized businesses,” said Striata CEO Michael Wright (pictured). “We look forward to working with Doxim to integrate our technology, systems and culture. The value proposition of the combined organization promises to be a formidable force in the market.”

Striata was founded in 1999 and, with a focus on security and compliance, has worked heavily in the financial services industry. The company’s services include message design, generation, security, delivery, and storage across multiple channels.

Striata is headquartered in New York City, with operations in London, Johannesburg, Hong Kong, and Sydney and partners in North and South America, Africa, Europe and Asia Pacific.

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FinovateFall Digital Day 3: Building Consumer Trust and Creating a More Open Ecosystem

Finovate came back strong this morning, with excellent keynotes and a solid round of fintech demos.

Sarika Sangwan, Global Head of Strategy and Marketing- Financial Services at Pinterest kicked things off with her keynote on building consumer trust in the age of doubt. She illustrated that the best way to build trust is with intentionality and purpose. Sangwan encouraged banks to put the customer first and allow that to drive every decision they make.

The next keynote of the morning featured Tom Feher, Banking Industry Executive of U.S. Financial Services at Microsoft, who spoke on coming together to respond, recover, and reimagine during COVID-19. Feher showcased a range of solutions to help firms return to in-person operations in the midst of the pandemic. He pointed out that low code and no code solutions can not only help organizations respond to issues faster, but also reduce costs.

Today’s final keynote speaker was Paul Rohan, Head of Business Strategy- Finance at Google Cloud on how open banking is 21st century branch banking. Rohan’s discussion combined technology, sociology, and history to consider how banks can change their belief systems (as well as their computer systems) to move into a more open approach that embraces third parties.

Following this was the last set of demos:

  • Authoriti showcased the Authoriti Network that helps create new ways of preventing identity theft, fraud, and misuse of data.
  • Cirrus Secure demoed its cloud-based collaboration hub that impacts a lender’s bottom-line by creating efficiency in place of document chaos.
  • KioWare presented its touchless kiosk environment that enables kiosks to be converted to touchless operation without expensive new hardware.
  • Cinchy showed off its real-time Data Collaboration Platform that helps financial service providers solve data integration, data access, data governance, and solutions-delivery challenges.
  • Lenderfit demoed how it helps lenders close more commercial loans faster.
  • Glia showcased its digital customer service platform that connects financial institutions to their customers using chat, voice, video, cobrowsing and AI.
  • Illuma Labs demoed passive voice authentication for call centers to help banks elevate the user experience, enhance security against fraudsters, and improve operational efficiency.
  • Envestnet |Yodlee presented its data aggregation and analytics platform that provides innovation and insights for financial service providers.
  • Microsoft showcased tools to help firms protect their workforce during each phase of the return to the workplace — and beyond.
  • Horizn demoed how it helps financial institutions dramatically accelerate digital adoption with customers and employees.

Wrapping up today’s show were the Mastercard Priceless Pitches, three-minute pitches from Mastercard’s Start Path participants, including:

  • Previse showed how it leverages AI to power B2B payments and make B2B commerce more efficient.
  • Doconomy presented how it helps consumers calculate the carbon footprint of every transaction they make and offset and reduce their carbon footprint.
  • Enveil showed how it protects data-in-use to enable secure and private data sharing, search, and analytics.
  • vCita presented how it powers small business by offering them tools to manage their money, time, and clients to grow their business.

Tomorrow we’ll kick off our discussion days with another conversation at our interactive networking session, Meet at the Cafe. Afterwards we’ll feature insightful keynote presentations and breakout panels. Stay tuned!

Square Staves Off Competition with the Launch of Two New Payroll Features

Since its launch in 2009, Square has always catered to small business owners. The payment services company is best known for offering micro-to-medium sized merchants an easy way to accept payments and today Square is launching two services to make those business’ payrolls even more robust.

Explaining the problem, Square Payroll GM Caroline Hollis said, “The traditional payroll process is slow and rigid, creating cash flow constraints for employees and businesses alike. This is even more pronounced now given the current economic conditions.”

The new features include On-Demand Pay for employees and Instant Payments for employers. On-Demand Pay will allow employers to offer their workers early access to some of the wages they’ve earned, while Instant Payments helps businesses fund payroll faster than the typical time of three-to-four days.

There is a bit of a catch with these services, however. Both offerings hinge on Square’s Cash App, a mobile wallet that effectively serves as a checking account for P2P payments. With On-Demand Pay, employees can transfer up to $200 of their earned wages to Square’s Cash App for free. Transfering the funds to a third party debit card, however, incurs a 1% or $2 fee. As for Instant Payments, employees that elect to be paid via Square’s Cash App receive their pay within minutes, while those paid via direct deposit get paid “as soon as the next business day.”

The new features are not new to the fintech scene. They will, however, help Square compete with new offerings from other third party fintechs and serve as a way to help Square maintain its multi-million user base of sellers.

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Klarna’s $650 Million Funding Round Boosts Valuation to $10.6 Billion

As the buy-now, pay-later (BNPL) craze explodes, some fintechs are in just the right place to catch the sparks. Payment services company Klarna is one of these players, and it has just landed $650 million in funding.

Today’s round adds to the company’s $1.4 billion in previously raised funds, bringing its total to just over $2 billion. The investment also boosts Klarna’s valuation to $10.6 billion, ranking the company as the highest-valued private fintech in Europe and the fourth highest worldwide.

The round was led by Silver Lake, GIC (Singapore’s sovereign wealth fund), and accounts managed by BlackRock and HMI Capital. Additional funds came from Merian Chrysalis, TCV, Northzone, and Bonnier, which have acquired shares from existing shareholders.

Klarna will use the funds to invest in product development, fuel global expansion, and build on its growth.

“We are at a true inflection point in both retail and finance,” said Klarna CEO and Co-founder Sebastian Siemiatkowski. “The shift to online retail is now truly supercharged and there is a very tangible change in the behavior of consumers who are now actively seeking services which offer convenience, flexibility and control in how they pay and an overall superior shopping experience. Klarna’s unique proposition, consumer preference and global retailer network will prove an excellent platform for further growth.”

As consumers seek alternative methods to finance their purchases, Klarna’s BNPL tool that enables users to pay in interest-free installments has gained impressive traction. The company’s shopping app has more than 12 million monthly active users worldwide, with 55,000 daily downloads.

And Klarna’s game is also strong on the merchant side of things, as many retailers have sought to increase online sales during stay-at-home orders. During the first half of 2020, the company added more than 35,000 new retailers to its existing merchant base of more than 200,000 partners including Sephora, The North Face, Timberland, and Ralph Lauren.

As a result of this growth, the company’s volume grew 44% over the first half of this year to more than $22 billion and its revenue increased 36% year-on-year to $466 million over the same period.

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Digital, Demos, and Reinventing Fintech Dominate Day 1 of FinovateFall 2020

We were welcomed to the first day of FinovateFall 2020 by a familiar face: Finovate VP Greg Palmer. Greg kicked things off with a discussion of the importance of digital offerings, noting the increased accessibility to all.

The opening keynote was from Pablos Holman of Intellectual Ventures Lab who issued the friendly reminder that “nobody has ever invented a new technology by reading the directions.” Holman encouraged the audience to find real problems in the world and start innovating where there is a true need. He pointed out two keys to success in this type of innovation: first, form fintech-bank partnerships to give ideas the traction they need; second, run a lot of experiments by trying a handful of things to determine what works the best.

During his Mastermind keynote, Scott Gnau, VP of Data Platforms at InterSystems encouraged the audience to leverage the inflection point that is COVID-19 to focus on digital transformation and build technology that is resilient to change in the future. Part of the key to this, he explained, is to leverage partnerships but maintain ownership of your own data to remain agile.

After a round of virtual meet-ups and networking sessions, the demos began:

  • Yext kicked things off by showing how it can improve the search experience on company websites and across the entire search ecosystem.
  • Scientia Consulting presented FinTech Insights, a tool that analyzes digital banking competition in realtime behind their login screens.
  • Finzly showed its open banking platform, Finzly BankOS.
  • Lendsmart demoed its AI driven platform that solves for the lack of automation, transparency, and communication in the lending process.
  • Glance Networks presented its solution for transforming in-branch financial consultations into digital meetings.
  • Nacha demoed Phixius, a tool that enables the secure exchange of payment-related information via open APIs within a trusted network.
  • Icon Savings Plan showcased its portable, universally accessible, workplace retirement savings plan that serves as an alternative to the 401k.
  • Remitter presented its AI-powered, white-labeled digital communications platform that helps lenders maximize revenue by optimizing customer engagement.
  • DQLabs showcased its data management tools.
  • XcooBee demoed its payment workflow automation tools that combine self-checkouts and remote pay to help reduce retail touch-points and boost transactions.

Winners of the 2020 Finovate Awards Unveiled

Today we’re announcing the winners of the 2020 Finovate Awards, recognizing excellence in fintech across 23 different categories. This is the second year of the Finovate Awards, which aims to highlight strong work done by the companies who are driving fintech innovation forward and the individuals who are bringing new ideas to life.

This year’s Finovate Awards may not come with ballroom gowns, confetti, and cocktails, but that doesn’t make the accomplishments any less compelling. In fact, the opposite is true. To be receive an award in the midst of a global pandemic-turned-economic crisis is often the result of putting the needs of others first.

Judges for the awards include media analysts, board members, bankers, fintech founders, and more. Each were given the difficult task of taking a record number of nominations and distilling them down to just a single winner in each category.

  • Best Alternative Investment Platform: CNote
  • Best Back Office / Core-Service Provider: MAXEX
  • Best Consumer Lending Platform: NF Innova and Raiffeisen Bank Serbia
  • Best Customer Experience: Commonwealth Bank of Australia
  • Best Digital Bank: STASH
  • Best Digital Mortgage Platform: LendingHome
  • Best Enterprise Payments Solution: PaymentGalaxy by Finzly
  • Best Financial Mobile App: TMRW by United Overseas Bank
  • Best Fintech Accelerator / Incubator: The Venture Center’s FIS and ICBA Accelerators
  • Best Fintech Partnership: (Citizens Bank of Edmond and Teslar Software)
  • Best ID Management Solution: buguroo
  • Best Insurtech Solution: Spire by Ernst & Young
  • Best Mobile Payments Solution: Nordic API Gateway
  • Best RegTech Solution: Facteus
  • Best SMB/SME Banking Solution: ANNA Money
  • Best Use of AI/ML: Socure
  • Best Wealth Management Solution: SoFi Invest
  • Excellence in Financial Inclusion: Current
  • Excellence in Sustainability: PayActiv
  • Executive of the Year: Renaud Laplanche, Upgrade
  • Fintech Woman of the Year: Lisa Kimball, Finicity
  • Innovator of the Year: Elena Ionenko, Turnkey Lender
  • Top Emerging Tech Company: Breach Clarity

While only one company can win each category, it’s also worth recognizing the quality of all of the finalists who made it to the last stage in the process.

We owe a huge thank you to the panel of judges, followers, and everyone who took the time to submit a nomination. Congratulations to the winners!

ABN AMRO Adds Subscription Management Courtesy of Subaio

ABN AMRO is updating its Grip app this week by integrating Subaio’s white label subscription management feature for banks.

The integration comes at a time when users are spending more than ever before on subscriptions, especially digital subscriptions such as movie streaming services and cloud storage products. According to the New York Times, consumers spent an average of $640 on digital subscriptions in 2019, up 7% from 2017.

ABN AMRO’s Grip PFM app now leverages Subaio’s subscription management feature that enables users see all of their recurring payments in one place. The tool alerts users of any changes in subscriptions and even helps them cancel subscriptions from within the app. Subaio relies on an algorithm that uses machine learning to detect patterns in frequency, amount, merchant name, and more.

“Since the launch we’ve already seen tens of thousands of Grip users coming in to see their overview and also cancel subscriptions. It’s fantastic to help people get control of their subscriptions,” said Subaio CEO Thomas Laursen.

Today’s partnership with ABN AMRO is Subaio’s seventh bank partnership. Among the company’s other partners are Nordea and challenger bank Lunar. The company has found that the average user has eight different subscriptions, and that the users are saving $253 (€213) every time they use Subaio’s solution to cancel a subscription.

Founded in 2016, Subaio showcased at FinovateEurope 2020. The company has raised $2.4 million and has 20 employees.

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Who Will Be Left Holding the Bill for BNPL?

You know that buy now, pay later (BNPL) has jumped the shark when even Cosmo is writing about it. After all, BNPL is basically millennials’ way of reverse engineering the layaway programs their parents grew up on.

Not only have we recently witnessed new fintechs launch their buy now, pay later technology, we’re seeing a large increase in incumbent players expand their existing services to include BNPL offerings, as well. Just yesterday, Fiserv announced its BNPL payment option in partnership with QuadPay, and today Standard Chartered partnered with Amazon to offer installment payment plans for customers in the UAE.

While each of the now dozens of BNPL schemes operate a bit differently, most allow the consumer to split up a purchase into multiple installments and repay over a set period of time without incurring interest. As with everything that seems too good to be true, however, negative externalities exist. Here’s a breakdown of the hidden (and not-so-hidden) costs:

The BNPL company

If a consumer makes a purchase and fails to pay one or more of the installments, the BNPL company is generally the one who feels the loss. To mitigate their losses, however, companies generally won’t allow customers to make repeat purchases if they default on a repayment. Not only this, most charge late fees and high interest (some charge up to 30%) to reclaim what they can.

The consumer

The end consumer is always responsible for knowing the repayment arrangement. However, mistakes happen and if the buyer is unable (or forgets) to pay one of the installments, they face multiple costly consequences. As mentioned above, the consumer in default generally faces a late fee. Klarna, for example, charges $35 per month for missed payments. Additionally, while most BNPL offerings are interest-free, some charge high interest on missed payments.


Merchants have a pretty good end of the deal when it comes to BNPL. Many offerings allow them to receive the full amount of the buyer’s purchase up-front, and they are not on the hook if the buyer defaults. Some, such as Splitit, allow the merchant to choose a lower fee if they receive the payment as the consumer repays their monthly installments.

The pricing model for merchants vary. Among some of the fees that BNPL companies advertise are: up to 6% plus $0.30 per transaction, 1.5% plus $1.50 per transaction, or 3% plus $1 per transaction.


While the banks typically aren’t a party to BNPL transactions, these new payment schemes are still costing them. How? Many shoppers are using BNPL to circumvent credit cards, which charge compounding interest each month. For users that are in the habit of financing large purchases, it makes more sense to pay for the purchase over the course of four months, interest-free, than to incur credit card debt by only paying the minimum balance.

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