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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
The physical border between the U.S. and Canada may be closed, but that’s not stopping tech startup financing provider Lighter Capital. The Seattle-based company announced today it has launched its services in Canada.
Canadian businesses can now take advantage of Lighter Capital’s debt financing offerings, including term loans and lines of credit, as an alternative funding source from bank loans and VC funding. Both debt financing options offer companies up to $1 million in capital.
The company’s flagship offering, Revenue Financing, will not yet be available to Canadian businesses. Lighter Capital’s Revenue Loans help borrowers access up to $3 million in loans that they repay based on their monthly cash inflow.
“With the Canadian tech industry’s continued growth, we’re seeing a correspondingly greater need among startups for access to venture capital as well as to various forms of debt financing,” said Meredith Powell, Vancouver-based venture partner at Voyager Capital, an investor in Lighter Capital. “Lighter Capital is a trailblazer in the area of debt-based financing and I have little doubt that, given the increasing demand for their services, they’re positioned for success across the nation.”
Fueling its Canadian expansion, Lighter Capital will open an office in Vancouver, British Columbia. The company is also partnering with the Canadian branch of the Founder Institute, a startup accelerator.
Founded in 2012, Lighter Capital has offered more than $200 million to 350+ U.S. startups. Of those, 20% have had successful exits.
The following is a guest post written by Apoorv Gehlot, founder of Matellio LLC, a software engineering studio based in California.
Fintech has drastically improved the products and the services of the traditional financial services in the past few years. However, even after many financial institutions have readily adopted fintech services, there are still some hidden risks in the aforementioned industry. For instance, the integration of the fintech services in the existing banking solutions raised a severe concern for data security. Also, the rapid growth of digital platforms made the fintech industry and its customers uniquely vulnerable to various breaches in IT security networks.
Hence, it is vital to know about various hidden risks involved in the fintech services. Let’s discuss some of them here.
Trending challenges in fintech
Third-party security risks
Internal security is not always enough, especially when it comes to banks. Hence, much of the time, when banks or other financial institutions leverage a fintech service from a not-so-trusted service provider, they end up losing their data, experiencing service failures, and may even suffer a loss of reputation because of inefficient data. These types of damages occur due to third-party security risks. To eliminate third-party risks involved with fintech services, banks and financial institutions should consider the fintech relationship-related risks in their risk management assessment.
Malware Attacks
Malware attacks and hacking are the most prominent types of security issues that are prevalent in the global market. The hackers are now targeting the Society for Worldwide Interbank Financial Telecommunication (SWIFT) more easily. SWIFT systems are used by almost all the banks and top financial institutions to exchange vital financial information.
However, the recent cyberattack on the SWIFT infrastructure indicated the level sophistication of the hackers and malware attackers. The banks and financial institutions have vulnerabilities in their processes, and the hackers take advantage of these vulnerabilities to launch malware attacks.
Data Breaches
We all know that data plays a crucial role in every industry irrespective of their domain. And when it comes to banks and other financial institutions, data automatically becomes a matter of utmost importance. However, with the introduction of inefficient fintech systems in the finance industry, the problems of data breaches rose to a great extent.
Payment card details and user information are readily available to hackers making online transactions prone to cyber thefts. The financial institution partners with third parties, and then data losses may occur due to their inefficient fintech services.
Application Security Risk
Fintech applications are used by many banks to access the real-time financial information of their customers. They leverage this real-time information to carry out transactions and for performing other banking operations.
However, if a software application does not have foolproof security modules and efficient codes, then it automatically becomes more prone to cyber thefts. The attackers leverage the weak security of the applications to steal the customer data and other vital information. So if a person is planning to develop a fintech software solution they need to be very sure that the application has all the vital security features included in it.
Money Laundering Risk
Fintech-driven banks often use cryptocurrency for carrying out financial transactions. These cryptocurrencies are an integral part of the fintech ecosystem, and they are not formally regulated by any set of standards and global regulations.
Hence, the frequent use of non-regulated currencies results in illegal money laundering and even in terrorist funding. Since identifying the beneficiary in any fintech-enabled transactions is not possible due to fintech’s pseudonymous nature, the money laundering operations get enough support from the fintech services.
Digital Identity Risks
With the introduction of digital tools in the banking and finance industry, the use of mobile-based services that used one-time passwords and security codes increased drastically. These security codes and passwords are not as safe and can be easily accessed by a hacker.
The vital data of the banking customers could be easily accessed due to the faulty fintech system provided by some of the fintech service providers. Hence, financial institutions need to revisit their online security architecture to address these risk factors before planning for fintech implementation.
Legacy Banking Systems
Banks are struggling hard to develop and introduce advanced fintech services in their non-patched core banking systems. These traditional banking systems are very much vulnerable to all sorts of cyber thefts. And the main concern is way more than that.
When the tech-friendly fintech services integrate with the existing non-secured banking systems, there are chances that they will be at the target of attackers too. So, the first duty for any financial institution before implementing fintech in their organization is to refresh their core banking systems. That will help the company eliminate losses due to cyber thefts.
Cloud-based Security Risks
Cloud-based solutions are one of the significant aspects of the fintech industry. From payment gateways and digital wallets to secure online payments, cloud computing services offer everything in the fintech ecosystem. Maintaining the confidentiality and security of financial data is critical to banks and financial institutions.
Even though the cloud-based services are considered a secure means of storing the data, lack of adequate security measures can result in the corruption of your sensitive financial information. There are instances when the company partners with an inefficient, cloud-based solution provider and then deals with significant data losses. Therefore, stay updated and be wise while selecting your cloud-based service partner.
To conclude, we can say that, if hackers are unbeaten in their efforts to access the fintech platform with ease and efficiency, the faith of banking customers in the technology-driven fintech platform will be significantly reduced. All this will result in the slow growth of the fintech industry. Hence, balanced innovation is needed to promote the growth of the fintech industry and mitigate the hidden risks of fintech services.
ApoorvGehlot takes a keen interest in exploring various aspects of the digital realm, and ideate solutions with his team of innovators.He believes in sharing his experience and knowledge with readers across the world to enlighten the audience through concise and meaningful write-ups.
The past couple of years in financial services have brought a lot of discussions about the client experience. In fact, that was the topic of my interview last fall with Martin Lange, Director of Client Experience Strategy at BNY Mellon. Is the sudden focus on customer experience all hype?
“Any of us who have been in client experience for a long time would say it’s been around for awhile,” Lange said, adding, “But the industry is looking for new ways of differentiation. And new ways of differentiation– as we’ve learned from other industries– is the client experience.”
Differentiation
So why is a focus on customer experience more important now than last year, last month (or even last week)? It comes down to differentiation.
Last year we wrote about fintechs vying for customer deposits and mindshare by boosting interest rates on savings accounts up around the 3% mark. With the Federal Reserve cutting rates to near-zero, that strategy will be increasingly difficult to follow through with.
Recognizing that this is a difficult time for everyone, banks can offer consumers two simple things that may be hard to come by to improve the customer experience (and no, it’s not toilet paper).
The first is kindness. When customer service representatives have a kind and friendly disposition over the phone it can bring customers a bright spot, especially if they are in isolation from other human beings. Kind words in email and social media correspondence are also easy ways to retain consumer attention.
Financial services companies can also differentiate themselves with compassion. Waiving certain fees, especially when they are small, can be an easy way to only maintain a customer when they are struggling. Even better, banks can follow in the footsteps of Goldman Sachs, GMC, Ford, and other financial institutions by waiving payments for a month without charging interest. When the economy improves clients will remember which firms stood by them during hard times.
Challenges
When it comes to challenges in creating a stand-out client experience, Lange noted two hurdles. The first is attribution. Firms need to know that a spike in sales or client acquisition is attributed to certain actions or events, such as an improved user interface, and was not driven by other changes such as pricing or an altered service structure.
“The other challenge is a culture challenge,” said Lange. He explained that instead of structuring operations around process improvements, where employees fall into the habit of looking for the next thing to fix, firms need to be proactive and design an experience first and allow the design to follow that experience.
Leading with a design idea, Lange said, “can be emotional, and it’s based on empathy. It’s not based on Excel spreadsheets, which the industry is very used to… there are human beings that are interacting and we want to design for human beings.”
Digital payments company Square announced it will launch its small business bank next year. Square’s application for the bank, Square Financial Services, has been conditionally approved for a bank charter.
Square Financial Services will operate as an independent subsidiary of Square. The new bank’s primary objectives will be to offer small business loans for Square Capital’s commercial lending business, and to offer deposit products.
“We appreciate the FDIC’s thoughtful approach to our application, and their recognition that Square Capital is uniquely positioned to build a bridge between the financial system and the underserved,” said Jacqueline Reses, Square Capital Lead and Executive Chairwoman of the board of directors for Square Financial Services. “We’re now focused on the work ahead to buildout Square Financial Services and open our bank to small business customers.”
In preparation for the launch of the new bank, Square has begun the hiring process to staff its new bank headquarters, which will be located in Salt Lake City, Utah. Square Financial Services CEO Lewis Goodwin and CFO Brandon Soto have been charged to lead the bank’s executive team.
This comes just one month after P2P lending company Lending Club announced plans to purchase Radius Bank. The move offers Lending Club users a full suite of banking tools. Square also follows in the footsteps of Varo Money, which received approval for deposit insurance from the FDIC in February.
When digital banking makes bank branches less necessary, should banks keep their branches simple and cater to those that are less technologically savvy or should they transform their branches into high tech havens with kiosks and robots? As it turns out, a handful of banks are trying something in between.
Six banks across the globe are piloting coffee shop branches. These locations not only serve as a way for folks to buy a coffee and a snack, they are also co-working spaces, meeting rooms for non-profits, a place to gain education about personal financial management and, of course, a location where customers and prospective customers can conduct banking activity and apply for a loan.
Check out each bank’s different approach:
Capital One
Capital One was the pioneer in the bank-coffee shop branch model, launching its flagship location in 2017. The bank now has 31 Capital One Cafes and has replaced its bank tellers with “ambassadors” to make banking more friendly and approachable. These locations also offer free, one-on-one money coaching sessions (that don’t apply any sales pressure) for members and non-members alike.
Capital One has partnered with Peets Coffee and offers Capital One cardholders 50% off coffee beverages.
Each cafe offers free wifi and power outlets, comfortable seating, and private community rooms that are free for nonprofit, alumni, and student group meetings and events.
Chase opened its first coffee shop branch in December of 2019. The bank teamed up with Joe Coffee for the pilot of a full service coffee shop in downtown Manhattan.
In some respects, calling Chase’s new branch a coffee shop is a bit of a longshot. It looks like the majority of bank branches I’ve walked into. Chase doesn’t even offer any differentiation on the home page of the branch.
That said, the new location has a more modern look, offers a kid’s play area, and is dog friendly. Another differentiating factor is that the branch has only one teller window and it is located in the very back of the branch.
Tangerine
Scotiabank subsidiary Tangerine has built its image around the cafe concept. As the bank’s website states, “People who know Tangerine know we’re not a typical bank. Typical banks have typical bank branches. We don’t. We have Cafés located in some of the busiest Canadian communities.”
Tangerine’s cafes have a laid back, modern atmosphere. Each location has free wifi as well as coffee and treats for sale (all proceeds go to charity).
Unlike other bank cafes, Tangerine does not offer any teller services since it is a fully digital bank. The bank offers ATMs for cash deposits and withdrawals and employs representatives (called cafe associates) for client acquisition, to upsell products, and to answer client questions.
CaxiaBank
In 2016, CaxiaBank launched imaginBank, a mobile-only bank aimed to serve millennial customers. A year later the bank opened a single physical location, ImaginCafe, to appeal to its user base.
ImaginCafe isn’t quite a bank branch, however. It’s not a place where members can deposit cash or speak with bank representatives. Instead, as CaxiaBank CMO Xavier Mas explained, the cafe is “a place where the ‘imaginBank’ brand is rendered tangible thanks to a blend of innovation, immediacy, the combination of the online and offline environments, interaction with users, and the interests of young people.”
As with many bank-cafes, this location serves as a coworking space and has private meeting rooms and spaces available to rent for meetings and events. It also has an art exhibition space, a fashion showcase room, a modern theatre, a multimedia laboratory, and a gaming area. ImaginCafe hosts multiple events each month including art expos, music discussions, shows, gaming events, and concerts.
Umpqua bank calls its branch locations “stores” and incorporates retail and hotel-like amenities into the locations to make them more welcoming.
EVP of Umpqua Bank Brian Read explained that factors contributing to the uniqueness of the stores include free Umpqua-branded coffee, a dog-friendly environment, and community spaces that host yoga classes and non-profit meetings.
Santander
Santander has eight Work Cafes across the globe. These locations look like traditional coffee houses and aim to make visiting a bank something that consumers want to do, not an obligation.
As with many other banks’ concept branches, Santander’s locations offer spaces where events, conferences, and classes are hosted. These cafes are also geared toward offering entrepreneurs a co-working space and offers advertising opportunities for small businesses.
These concept branches have been successful for the Spain-based bank, which reports that anywhere from 2x to 4x more accounts are opened at Work Cafes than at its traditional branches. Additionally, at the bank’s Spain location the number of customers is increasing by 11% per year and new loan production has been boosted by 73%.
Financial services firm Fiserv made its 32nd acquisition today. The Wisconsin-based company purchased Bypass Mobile, a company that specializes in software and POS systems. Terms of the deal were not disclosed.
The acquisition is expected to help Fiserv support its clients in creating a seamless customer experience across physical and digital channels. By integrating with Fiserv’s universal commerce platform, Bypass will offer businesses a single point of contact. As a result, businesses will benefit from increased operational efficiency, enhanced security, and a more complete picture of customer interaction.
“Adding Bypass to our portfolio will make it easier for our clients to realize their digital transformation strategy, delivering interactions their customers are demanding,” said Fiserv Senior Group President of Global Business Solutions Devin McGranahan. “With this combination, we will improve the omni-commerce experience for businesses and their customers, making it easier and more efficient to pay for goods and services.”
Specifically, Bypass will enable secure Fiserv clients to accept payments in a secure environment across multiple devices. “In combination with Fiserv, we will help businesses accept payments efficiently while continuing to meet customer expectations by providing a variety of payment options,” explained Bypass CEO Brandon Lloyd.
Fiserv was founded in 1984. While the company’s most recent purchase was Merchant Pro Express earlier this month, its most notorious one in recent memory was the acquisition of First Data in January of last year. That deal closed for $22 billion.
Status is something we’ve become accustomed to in the social media era. On Facebook, we update our status to let our friends know how fun our vacation was. On Instagram we brag about our financial status, on Twitter we show off our social status, and on LinkedIn we boast about our professional status.
Comparisons
There’s one fintech in particular that understands this. Aptly named Status, the New York-based company helps users compare themselves with others– though not via pictures, memes, or self-aggrandizing updates. Status takes a user’s financial snapshot by aggregating all of their accounts and anonymously compares a range of metrics with the national average and different groups, including others with similar demographics, people in the user’s geographical location, those that are in the user’s income range, and of the same age.
What exactly are they comparing? Users can analyze their spending, income, debt, assets, net worth, and credit score and compare each figure against those of different groups. Specifically, users can see how much others in their geographical area spend on groceries, how their credit score compares to the national average, how their net worth compares with others in their same age group, how much folks in their same income range spend on housing, etc.
Business model
Because users are motivated to share as much financial data as they can to see how they compare with their peers, Status has excellent insight into which products and services will be most enticing. If Status sees a consumer has a lot of liquid cash, they might show them an ad for a high-interest savings account. Or maybe the user’s vehicle is 15 years old– in that case Status may show them new vehicle financing offers.
Some of Status’ partners include Airbnb, AllState, Liberty Mutual, Betterment, VSP, and Haven Life. Status makes money when it makes a successful referral. This is a common model with B2C fintechs who want to offer their services for free to end consumers.
Personal experience
I have to admit, I’ve enjoyed the comparison capabilities more than I thought I would. My competitive side loves comparing every aspect of my financial standing with others. However, I found it more difficult than I expected to aggregate my entire financial life to gain an accurate comparison. I linked my everyday accounts but there are multiple investment accounts and crypto holdings still outstanding. Additionally, I never found a good way to account for my investment property.
As for the referrals, I was impressed. The offers listed were much more relevant than the offers my bank (which keeps trying to get me to refinance a vehicle loan that I don’t have) usually presents.
Overall, I think I’ll be back. As with all PFM platforms, it is difficult to get a clear picture since transaction categories are often muddled. However, it is still a nice way to not only view my own financial standing, but also compare it with my neighbors.
UAE-based foreign exchange platform Al Ansari has partnered with financial crime compliance company Pelican. Under the deal, Al Ansari will leverage Pelican’s PelicanSecure, a set of AI-based sanctions screening, anti-money laundering tools, and transaction monitoring solution.
Al Ansari selected PelicanSecure for its compliance accuracy, auditability, processing capacity, and AI-based risk classification approach. Company CEO Mohammad Bitar also noted that, because AI is a core part of Al Ansari’s strategy, Pelican’s use of the enabling technology was a factor in the partnership.
“We selected Pelican as we are convinced they can support us enhancing our anti-money laundering and sanctions compliance frameworks to make them more robust through the use of innovative technology, said Bitar. “This is the start of a long-term partnership with Pelican and we look forward to working closely to streamline our operations around sanction screening, transaction monitoring and AML, both now and in the future.”
Pelican is headquartered in the U.K. and was founded in 1993. Among the company’s clients are ADCB, Standard Chartered Bank, Al Mulla Exchange, Wells Fargo, State Bank of India, and Bank of Barbado.
Al Ansari opened its first branch in 1966 and has since expanded to 190 branches. The company has 2,500 employees that help facilitate 80,000 transfers each day for 2.5 million customers every month. Last year, Al Ansari transferred $11.3 billion (AED 40.5 billion) via its network.
Digital alternative banking company Revolutannounced this week it is helping users diversify their portfolios even further by enabling in-app purchases of gold.
The U.K.-based company, which first started with cryptocurrency holdings, then began offering investment in stocks, will enable customers on its Premium and Metal plans to purchase and transfer gold. Users cannot, however, make purchases with their gold holdings using their Revolut card. If a user attempts to make a purchase when they only have funds in gold, Revolut will convert a portion of their gold into fiat currency and use that.
Revolut makes it clear that since gold is not regulated by the U.K. Financial Conduct Authority, funds used to purchase gold – and the gold itself – will not be safeguarded under the U.K. Electronic Money Regulations 2011, the Payment Service Regulations 2017, or the Financial Services Compensation Scheme.
This is good timing on behalf of Revolut. Since the stock market and crypto assets are extremely volatile at the moment, many people are purchasing to gold to grasp onto some stability. And now they don’t even need to leave Revolut’s app to do so.
There is no word on if or when the company will allow trading of other precious metals such as silver or platinum.
What does it take to create an event with true gender diversity? In this piece, Finovate Content and Strategy Director Adela Knox, who was recently named the Goodwill ambassador for the European Women Payments Network (EWPN), explains how she gets the balance right.
Finance leaders have predicted this year could mark a turning point for gender diversity in the banking and finance sector as pressure is mounting and gender pay gap reporting galvanizes efforts to promote more women.
The financial services industry is making progress on gender balance in the workforce. Mindsets are changing and, as a result of hard work and commitment, progress is starting to be reflected in the numbers. Finovate has always advocated for gender diversity at our events globally to support the overall industry change and market shift happening within the fintech sector. There is still a long way to go to create an environment in which women have equal access to opportunity and positive outcomes but we at Finovate are eager to support the industry change every step of a way.
Our team made a commitment to pledge to only run events with mixed-gender panels. As a result a considerable amount is being done to challenge the prevalent all-male conference panels. We provide women in fintech with an opportunity to bolster their profile and to be taken seriously. The gained visibility and platform become fundamental to getting women into the boardrooms and ultimately build their network and advance their careers.
We focus on an equal female-to-male ratio during our speaker acquisition phase and we also proactively support gender equality at our events while running Women in Fintech forums with the goal to empower women in financial services and technology.
The Women in Fintech forums are compiled of networking evenings, workshops, panel discussions, keynote presentations, and debates offering dialogue-driven sessions and initiatives to promote diversity and gender equality at the workplace and educate on why encouraging it matters. Topics include: What is diversity in the workplace? What are the benefits and challenges of diversity in the workplace? How can we manage diversity in the workplace? What should hiring, policies, & practices look like? How can we promote gender equality at workplace? etc.
We collaborate with various industry bodies and associations who strive to create more opportunities for women and minorities, as well as being a champion for a more diverse and inclusive industry for all. Some of the groups that we collaborate with include the European Women in Payments Network (EWPN), Women in Fintech NY, and Women in Fintech SF. This is an ongoing effort and we at Finovate are passionate to constantly grow and elevate our initiatives globally. Recently, i had an opportunity to interview Isil Ugurlu, the German Ambassador of EWPN, while running yet another Women in Fintech forum at the annual FinovateEurope 2020 in Berlin, about what it means for the organisation to collaborate with event organisaers like Finovate. You can watch the interview here:
To promote the gender goal of 50/50 diversity in financial services, women who register by this Friday, March 13, can purchase a ticket to any 2020 Finovate event at a 50% discount. Just enter the code EQUALITY on the booking form.
Mastercardannounced a partnership with Samsung’s security platform, Samsung Knox today in a move that will serve to foster digital inclusion across emerging markets.
“This partnership with Mastercard is our way of making that future available to everyone by helping to close the digital divide, especially in emerging economies and countries,” explained KC Choi, executive vice president of Global Mobile B2B at Samsung.
The two will use Mastercard’s Pay on Demand platform which offers consumers device financing via a pay-as-you-go model. Built by Mastercard Labs, Pay on Demand brings together banks, equipment manufacturers, and telcos to solve issues limiting device financing in underserved markets. The program consists of four components:
A lending marketplace that aggregates lenders who offer affordable device financing
Samsung’s Knox security platform that ensure the safety of consumer data and transactions
Tools that help consumers analyze and build their credit history from usage data
Virtual card numbers that can be used for everyday transactions and to make payments on a device
“At Mastercard, we see a connected world where opportunity and prosperity are possible for everyone, everywhere,” said Jorn Lambert, executive vice president of Digital Solutions at Mastercard. “The Pay on Demand platform enables us to deliver on that vision and foster financial inclusion, giving consumers an opportunity to participate in digital commerce. By combining Samsung’s device management and security expertise with Mastercard’s innovative technology, we are creating an ecosystem that can deliver measurable, positive impact to the communities we serve.”
Pay On Demand will be launched in the Middle East and Africa in early 2020 and will extend to other geographical locations later this year.
Financial commerce technology provider Wirecard announced today it has partnered with Grab, a super app based in Southeast Asia that provides users with everyday services including on-demand transportation and food delivery.
Under the partnership Wirecard will process transactions made using Grab’s ewallet GrabPay in Malaysia, the Philippines, and Singapore.
Grabpay, which is accepted by 600,000+ merchants, works for both online and brick and mortar transactions. Along with payment processing, Wirecard will help introduce Grabpay to more merchants, expanding acceptance across Southeast Asia.
While mobile payment functionality may not be impressive to U.S. users, keep in mind that mobile wallets are much more popular in Asia. In fact, mobile wallets are almost 2x more popular in Southeast Asia than they are worldwide. Among consumers in the region, 44% regularly choose their mobile wallet as a payment method. In comparison, the global average mobile wallet usage is 25%.
Senior Managing Director of Grab Financial Group Reuben Lai explained that Wirecard will help the company build a cashless economy for millions of businesses across Southeast Asia. “Wirecard’s innovative mobile payments solutions will not only complement our GrabPay e-wallet platform, but also offer businesses and consumers the opportunity to transact with greater security, convenience and flexibility,” he said.
Today’s announcement comes just days after Wirecard partnered with another player in the gig economy. Earlier this month the Germany-based company partnered with Xolo to offer more robust financial tools to entrepreneurs and micro-businesses.
