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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Scalable Capitallanded $58 million (€50 million) for its roboadvisory platform this week. The new funds come courtesy of BlackRock, HV Holtzbrinck Ventures, and Tengelmann Ventures.
Today’s round brings Scalable Capital’s total funding to $133 million (€116 million) and boosts the Germany-based company’s valuation to $460 million. Scalable Capital will use the investment to grow in the wealth management and brokerage spaces, and invest in the B2B side of its business.
“In times of COVID-19, our funding round is a powerful signal; it shows that our focused, digital business model is convincing the investors,” said company Co-founder and Co-CEO, Erik Podzuweit. “We will use the additional capital to expand our position as the market leader in digital wealth management and to reach new customer segments with the broker.”
With 80,000 customers across Germany, Austria, the U.K., and Switzerland, Scalable Capital has $2 billion in assets under management. The company offers personalized, fully managed investment portfolios.
Using its risk management technology, Scalable Capital’s B2C offering aims to make investing accessible for everyone by charging simple, transparent fees.
“We established Scalable Capital to make investing easier and better through technology,” said Scalable Capital Co-founder and Co-CEO Florian Prucker. “Not only has our B2C business grown strongly over the last few years, but Scalable Capital’s technology is also used by more and more B2B partners; most recently we launched our partnership with Barclays. With this funding round, we also want to expand our team of currently 130 employees in order to drive our expansion and the further development of our platform.”
The company’s flagship offering is a B2B approach that brings its roboadvisory technology to help banks offer their clients a different flavor of investing. Scalable Capital recently added three additional partners to its roster and now boasts partnerships with firms including Barclays, Gerd Kommer Capital, Raiffeisen Banking Group Austria, ING Deutschland, Siemens Private Finance, Openbank, Targobank, Oskar, and Baader Bank, and others.
You’ve probably heard that cryptocurrency exchange platform Coinbase is considering going public later this year or early next year.
But this likely won’t be a traditional fintech IPO. That’s because the California-based company’s culture is rooted in the blockchain, a technology that embraces alternative finance. Furthermore, Coinbase would be the first major U.S. cryptocurrency exchange to go public, and the fintech community will be paying close attention to the outcome.
That said, there are some roadblocks Coinbase may encounter on its journey to Wall Street.
First, in order to go public, the transaction would need to be approved by the U.S. Securities and Exchange Commission (SEC). The hurdle here is that while the SEC has issued guidance on cryptocurrencies, labeling them as securities that are subject to regulation, the organization hasn’t issued guidelines on specific coins, except for a few. In fact, many mainstream financial institutions are wary of cryptocurrencies and see them as a tool for money laundering and illicit activities.
Coinbase will also need to decide how it will be listed. The company can either undergo a traditional IPO that caters to Wall Street investors, take a direct listing approach, or go public via a token offering on the blockchain. While involving the blockchain may be a logical approach for a blockchain-based company, it may cause difficulty, as even a hybrid model would need to be approved by the SEC.
Coinbase must also balance the cryptocurrency market itself. As Laura Shin points out in her podcast Unconfirmed, Coinbase will likely try to time its public debut with the cryptocurrency market, which is known for its volatility. Debuting during a dip in the cryptocurrency market may result in Coinbase receiving a lower-than-expected initial stock price.
These days, you would be hard-pressed to find anyone whose job hasn’t changed because of COVID-19. And since payroll plays a major role in customers’ careers, we wanted to explore the ins-and-outs of how the “new normal” is impacting this subsector of fintech.
Today we caught up with DailyPay Chief Innovation Officer Jeanniey Walden to gain a better understanding of what the payroll and benefits space looks like in 2020.
The recent public health crisis has altered our way of life in many ways. How have you seen it change the employee benefits and payroll space?
Jeanniey Walden: The public health crisis changed everything about life as we knew it, overnight. This impacted every aspect of the workplace, especially in the employee benefits and payroll space. Business leaders had to reimagine, redevelop, and re-engineer how every element of their business works, while simultaneously supporting time-sensitive matters including payroll. The pandemic also drove HR and payroll leaders to leverage technology to design successful remote workforces, leveraging video, virtual coffee dates, mindfulness support and more. They also need to ensure employees were well taken care of, as dynamically and normally as possible, in a new world. On-demand pay is one of the technologies HR and payroll leaders pushed to the forefront in the payroll space supporting not just their employees’ financial needs during the pandemic but also the entire household. Concerns over access and timing of pay were eliminated with the adoption of this new technology.
In fact, DailyPay’s on-demand pay usage has been selected for use by 80% of Fortune 100 companies offering on-demand pay during the wake of the pandemic. And as many Americans became financially insolvent, a recent study indicated a 30% increase of on-demand pay usage relating to an increase in household dependency on a DailyPay user. To exacerbate the problem, unemployment benefits and deferral housing protection are expected to end in July, leaving many people scrambling to find more income.
We expect the changes in payroll and benefits will continue to evolve the hopes of alleviating financial stress as we try to acclimate to our new normal.
In what ways does the traditional payroll process have to reinvent itself to fit into the post-COVID digital era?
Walden: Throughout COVID-19, when and how fast employees get their pay has never been more important. Having access to their own funds has become the lifeline during the pandemic, not just for employees, but for their families as well.
As the pandemic evolved, many new people began using DailyPay to support ever-changing household needs, including their ability to make bulk PPP purchases, purchase data plan extensions on the cell phones, and even enable them to visit the grocery store or pharmacy early, before they became crowded, reducing their chances of getting sick. Today, access to on-demand pay offers families whose significant other has lost their job maintain a sense of normalcy in supporting the household.
The pandemic exemplifies how the current bi-weekly payroll cycle fails to timely and financially cover employees’ necessary and unexpected emergency costs. This is a wake-up call to companies to abandon the traditional payroll process and migrate to a digital, contactless pay solution which provides employees access to their earned pay and eliminates the two-week wait time that employees usually encounter with the traditional payroll process. Speed and safety are prioritized through digitization which ends up saving people valuable time and money.
Let’s talk diversity. How can companies attract a more ethnically diverse workforce?
Walden: Diversity in a company’s leadership and workforce is not just the right thing to do, it’s the smart thing to do. In this current social climate, employees are less inclined to work or apply to a company that is not taking any initiative to create a more diverse workplace. Now more than ever, employers need to take charge to create an inclusive, diverse culture that communicates their corporate values to their staff. Through regular diversity training and open dialogues with employees, companies can consistently reevaluate and update its workforce policies.
To continue to grow, companies need to learn how to retain their diverse employees. This can be easily done by offering employees benefits and opportunities to grow as an individual. Some benefits employers can offer workers are diversity programs, mentorship, inclusive workplace policies, and on-demand pay that provide employees flexibility.
While companies’ attitudes toward diversity can’t change overnight, employers can commit to taking action every day to promote diversity. Businesses need to understand that a “diverse workforce” isn’t a momentary trend and shouldn’t treat it as a tool to simply recruit candidates. It’s a long-term commitment to support and elevate all prospective and current employees.
One of the tricks to curating a diverse workforce is creating the right culture. What are some creative ways that small companies can ensure less turnover during such a volatile time?
Walden: The combination of younger generations in the workplace and the current health crisis has increased the pressure on employers to deliver a better employee experience. Employees expect employers to step up and meet their current needs for personal safety, financial security, and remote work culture amid the pandemic. But they were already pushing for an improved workplace experience before COVID-19 — and those demands haven’t gone away.
While it might feel prudent to put employee experience on the back burner while your organization copes with the pandemic, now’s actually a great opportunity to test how your culture holds up remotely. Because, as you’ll learn in the next point, remote work often goes hand-in-hand with building a better employee experience.
To prevent incurring such high costs and turnover, small businesses can offer their employees financial benefits that are mutually beneficial to the employer and employee. That is why an on-demand pay benefit is gaining so much traction. According to a DailyPay survey, our partners saw a 45% decrease on average in turnover since implementing the solution. In addition to soaring retention rates, employees find their productivity and happiness increase just knowing that they have the option to get their money when they want.
P2P lender and challenger bank Zopa recently formed a partnership with Paylink Solutions to tap into the company’s cloud-based digital income and expenditure product, Embark.
Paylink’s Embark will help Zopa quickly find the most suitable loan product for clients by understanding their affordability. The tool taps into credit report data and leverages open banking technology to offer lenders a 12-month view of customer bank statements. Embark also provides identity verification and document upload technology.
“Teaming up with Paylink Solutions to deploy the Embark tool at this time has enabled us to provide an even better experience for our customers,” said Zopa Chief Customer Officer Clare Gambardella.
The partnership is part of Zopa’s initiative to increase its digital efforts. Embark will enable Zopa’s potential borrowers to use the self-service portal or use an online form with the help of a live customer service agent.
With Embark, Zopa customers also have access to free debt advice. Customers can self-refer to PayPlan, a U.K.-based debt help tool that provides personalized debt management plans.
“From day one, we have seen Zopa’s customers referring themselves to PayPlan; this is in an age where customers want to self-serve more,” said PayPlan’s Head of Partnerships, Andrew Alder. “It’s becoming more important for organizations, solution providers, and debt advice providers to work closely to create innovative ways for customers to still be able to access advice in a frictionless way.”
New information has come out this week about Ant Group’s IPO plans.
Instead of listing on the tech-heavy (and U.S.-based) NASDAQ, Ant Group will list concurrently on Hong Kong’s Hang Seng and Shanghai’s Star Market. This comes after Ant’s parent company, Alibaba listed on the New York Stock exchange in 2014.
Analysts suspect that Ant’s listing plan is largely a response to rising geopolitical tensions between the U.S. and China. There are practical reasons, however, for Ant to list in Hong Kong and Shanghai. Hong Kong introduced weighted voting rights in 2018 and Shanghai’s Star Market offers more market-driven pricing than other domestic exchanges.
“The innovative measures implemented by the Shanghai Star Market and the stock exchange of Hong Kong have opened the door for global investors to access leading-edge technology companies from the most dynamic economies in the world,” said Ant’s executive chairman Eric Jing. “and for those companies to have access to the capital markets.”
Ant’s parent company Alibaba still holds the record for the second-largest IPO when it listed on the New York Stock Exchange in 2014 and raised $24 billion. It is too early for Ant to discuss size and timing of the share sales; analysts have valued the company in the range of $210 billion to $218 billion.
Last week we held Finovate’s first-ever fully digital event. And while the networking hall looked a little different this year, the quality of the discussions remained the same.
The event took place over the course of five days and focused on key trends within the fintech industry, including AI, lending, blockchain, and regtech. One overarching theme– COVID-19 and the shadow it casts over the entire industry– pulsed throughout each discussion.
Given this global turn of events, there is a lot to talk about in financial services. And while some of the themes appear to be the same as last year (customer experience, for example), we now have an entirely new way of looking at things.
With that in mind, below is my take on the top themes at FinovateAsia last week:
Digitization
COVID-19 has brought with it the need for many companies to move online. The financial services sector is no exception. Many discussions examined the do-or-die need for banks and fintechs to digitize their operations as much as possible.
The takeaway Digitization is no longer an option. And in order to attract new customers, firms must not only fully digitize the user experience; they must humanize it.
New opportunities
New challenges always bring new opportunities, and the coronavirus is no exception. Many discussions at the event agreed that there will be clear winners and losers that result after this crisis.
The takeaway Those who continue on with “business as usual” will not only lose customers, but will also miss out on potential new areas of expansion that will result from the public health crisis and economic downturn.
Customer centricity looks different but is still core
Last year everyone was talking about focusing on the customer experience. And while discussions are quite different this year, many speakers brought up the need for customer centricity. They pointed out that shifting the focus to the customer will help preserve the client relationship, which is always cheaper than acquiring new ones.
The takeaway Even if you were previously an expert on customer centricity, it’s time to re-think your strategy. It’s more crucial than ever for banks and fintechs to meet clients’ needs, and much of that revolves around offering a digital-first approach.
One continent, many differences
One topic that arose multiple times throughout the conference was a reminder of diversity within the Asian continent. Not only does each country offer varying challenges and opportunities, but also regions within each country are equally diverse. Many of these differences are not only due to culture, but are also the result of governmental intervention and regulations.
The takeaway Though it may be challenging to conduct business across borders because of the difficulty in dealing with a myriad of regulatory hurdles, each region offers a different opportunity.
Regardless of what the biggest trends of FinovateAsia were, one thing remained clear: there is work to be done.
Every company is a fintech company. Or so saidPlaid CEO and Cofounder Zac Perret earlier this year. Today’s news that web browser Opera plans to acquire challenger bank Fjord Bank certainly affirms Perret’s statement.
Terms of the purchase, which is currently subject to regulatory approvals, were not disclosed.
So what will a web browser do with a bank? According to the press release, Opera will use Fjord Bank to “further accelerate its fintech operations in Europe by launching new, disruptive services aimed at improving consumers’ personal finances.”
“Looking at the fintech space in Europe,” said Opera EVP Krystian Kolondra, “we believe it needs more and bigger challengers who should provide people with smarter and empowering solutions for their personal finances.”
Opera, which counts 50 million active browser users, has already made inroads into the fintech space. Earlier this year the Norway-based company acquired banking-as-a-service provider PocoSys. As a result of the move, Opera built on Pocosys’ digital wallet and payment technology and is currently testing a new version of the Pocopay card and app.
“With the support of Opera, we are also excited to launch our first banking services in Lithuania this summer,” said Fjord Bank CEO Veiko Kandla.
Sometimes the story in a funding announcement isn’t necessarily the funding itself, but rather the investors. That’s the case with today’s news of supply chain finance provider Taulia’s $60 million funding round.
The strategic round, which brings Taulia’s total funding to $177 million, was led by China-based Ping An Global Voyager Fund. J.P. Morgan and Prosperity7 Ventures also participated, along with existing investors including Zouk Capital.
With today’s funding, The Wall Street Journal estimates Taulia’s valuation at $400 million.
The strategic relationship tied with this funding round signals international expansion for California-based Taulia, which already has a global customer base. “Ping An, J.P. Morgan and Prosperity7 Ventures bring a wealth of knowledge that we will leverage to further solve liquidity needs of businesses and contribute to economic growth,” said Taulia CEO Cedric Bru.
“Taulia is at the forefront of supply chain finance technology, with a global footprint that spans over two million SME suppliers and a suite of solutions that dramatically improves SMEs’ ability to manage cash,” said Managing Director and COO of the Ping An Global Voyager Fund, Donald Lacey. “We are excited to partner with Cedric and his team to build out their capabilities in China.”
The investment further deepens Taulia’s ties with JP Morgan. The two initiated a relationship earlier this year that aimed to help J.P. Morgan build a trade finance solution for its clients. “We’re committed to bringing the best solutions in the market to our customers and our strategic alliance with Taulia has been well received by clients,” said J.P. Morgan’s Global Head of Trade, Stuart Roberts. “The investment component is another step in our relationship as we look to better serve clients and their supply chains within our Global Trade franchise.”
Founded in 2009, Taulia helps businesses improve their supply chains by providing financing options with flexible payment terms. Their tools help businesses accelerate payments and free up working capital. A network of two million businesses use Taulia’s technology. The company processes over $500 billion every year. Taulia’s clients include Airbus, AstraZeneca, Nissan and Vodafone.
Cryptocurrency exchange platform Binance made a major purchase today, acquiring digital wallet and crypto debit card company Swipe. The deal closed for an undisclosed amount.
The aim of the acquisition is to help push the use of cryptocurrencies into the mainstream by encouraging payments with cryptocurrencies through traditional financial systems such as debit cards.
U.K.-based Swipe provides a cryptocurrency banking account that offers a multi-currency mobile wallet, the ability to buy and sell cryptocurrencies, access to exchanges with instant settlements, and a Visa debit card.
Users can pay with their Visa debit card at all 50 million locations across the globe where traditional Visa debit cards are accepted. The card also offers up to 4% cash back (paid in Bitcoin), doesn’t charge foreign transaction fees, has built-in security features, and more. The debit card is crypto-to-fiat, meaning the user makes a purchase using cryptocurrency while the merchant receives fiat currency in exchange.
“By giving users the ability to convert and spend crypto directly, and have merchants still seamlessly accept fiat, this will make the crypto experience much better for everyone,” said Binance CEO Changpeng Zhao. “Swipe’s exceptional team has made great strides in furthering this mission and has been instrumental in the industry for bridging the gap between commerce and crypto. The Swipe Wallet alone is unique which acts as a digital bank account for its users, providing access to traditional banking services. We are thrilled to work with a team that shares the same core values and looking forward to our larger efforts ahead.”
Swipe CEO Joselito Lizarondo said that the deal “will place Swipe in the position to make cryptocurrencies more accessible for millions of users worldwide.” He added, “We are excited to work with Binance to continue innovating in this crypto-banking space to further build towards mass adoption on our current and future product lines.”
This is the seventh acquisition Malta-based Binance has made since it was founded in 2017. The company has also purchased CoinMarketCap, BxB, DappReview, and WazirX.
We generally think of healthcare workers, grocery store employees, delivery drivers, and other essential workers as the main heroes of the coronavirus public health crisis. However, there’s one company worth mentioning that has risen to “hero” status for small businesses across the U.S.
That company, Lendio, has been serving small businesses since it launched in 2011 by matching small businesses in need of funding with lenders. After the coronavirus hit and the U.S. Small Business Administration passed the CARES Act and Paycheck Protection Program (PPP), Lendio became a critical resource for merchants across the nation.
After seeing the mass confusion around different types of relief programs and their application requirements, Lendio quickly created a COVID-19 Relief hub on its website to educate business owners, help them apply for funding, and match them with one of its 300 lender partners.
Since April, Lendio has facilitated $8 billion in PPP loan approvals. The company has also helped more than 100,000 small businesses receive approval for PPP loans of an average size of $73,000. This is a massive increase in production for the Utah-based company which, prior to PPP, had facilitated $2 billion in loan approvals since it began operations nine years ago.
The 100,000+ PPP applications Lendio facilitated offered the company a large amount of data (and insight) into the applicants. The company published an analysis of that data last week. Here are some of the findings:
States in the Pacific region received 25% of PPP approvals, while those in the Mountain region received only 9%.
States in the Northeast and Pacific regions saw the highest average loan size ($80,518 and $79,507, respectively). The average loan size is lowest in the South Atlantic ($64,064).
Women business owners made up 32% of applicants.
Businesses in urban areas received 30% of the loans applied for, while suburban businesses received 28%, and rural received 39%.
As for what business owners can expect next, just as with the virus itself, the battle has not been won. “I think the next big market mover is going to be the realization that the PPP program actually had an enormous impact,” Sanders Morris Harris CEO George Ball in an interview with Yahoo Finance. “It worked. It kept the patient alive. But the half-life of the forgivable loans to small businesses comes up pretty soon, comes up mid-July to August.”
Blockchain analysis company Chainalysis is on a mission to promote trust and transparency for cryptocurrencies. Aiding that undertaking today is an additional $13 million in funding to add to its Series B round.
The new investment comes from Ribbit Capital and Sound Ventures and brings Chainalysis’ Series B round to $49 million. The New York-based company’s total funding now stands at almost $67 million.
Chainalysis was founded in 2014 and was recently valued at $266 million, according to Pitchbook. Among its offerings are automated cryptocurrency transaction monitoring software, investigation software for tracing the flow of funds across blockchains, and profiles of cryptocurrency businesses.
As a part of the deal, Chainalysis has gained former Treasury Department official and current Ribbit Capital General Partner Sigal Mandelker as an advisor.
Mandelker and the new funds both play a key role as Chainalysis invests more into the government side of its business. While Chainalysis offers solutions for private sector businesses and financial institutions, the company also works with a handful of U.S. government agencies, including the IRS, the DEA, ICE, and the SEC.
In an interview with blockchain publication The Block, Chainalysis CEO and Co-founder Michael Gronager said, “We extended our Series B in order to meet demand for our services, primarily from government customers. Government agencies understand that visibility into cryptocurrency is important to national security and that crypto crime does not let up during a pandemic. Importantly, this also has long-term benefits to the cryptocurrency industry.”
As transactions move to the digital realm and more countries begin considering CBDCs, Chainalysis is making a smart move in pouring more resources into its government-focused services. Mandelker said she is “excited to work with the Chainalysis team to help develop public-private partnerships, enhance ground-breaking technologies in financial services, and root out illicit networks.”
If you missed the news earlier this week, here’s a recap: Personal Capital agreed to be acquired by Empower Retirement, the second-largest retirement services provider in the United States, for up to $1 billion, composed of $825 million on closing and up to $175 million for planned growth.
According to Forbes, the San Francisco-based fintech is selling for the same price as its valuation in February 2019. The deal is expected to close in the second half of this year.
After a bit of time to digest everything, Personal Capital CEO Jay Shah looked at the decision and what it means for the eleven-year-old company. Shah has been at Personal Capital since the company’s launch in 2009 and will now serve as President of Personal Capital and will also sit on the Executive Team at Empower.
Shah explained that, though many companies have expressed interest over the years in acquiring Personal Capital, none of the opportunities felt right. However, because Empower shares many of Personal Capital’s same “visions and values.”
He went on to describe how, in today’s uncertain world, the buy-out “will ensure extra strength and resources to grow Personal Capital, and bring [clients] more of the great technology and service [they’ve] come to expect. He added that combining the two companies will help Personal Capital support and further develop its features and service offerings.
As for what’s next, Shah said that Personal Capital will continue to operate as it always has. And because the company’s leadership team has committed to stay on for the long-term, the company’s culture will stay in-tact. “I recognize that this announcement feels like a major change, but I also want to assure you that your day-to-day experience with Personal Capital will remain the same,” he added.
