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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
FinovateEurope 2020 is full of changes, and there’s one change in particular I’m excited about.
This year, we’ve added a panel called Investor All Stars. It’s stacked with investors who will offer up their take on the top topics for venture capital funding in fintech. Specifically, the group will examine which sub-sectors of fintech are poised to offer the highest ROI, why investment looks different among various geographical regions, and if fintech is a bubble (and if so, when will it pop?).
Breaking Banks co-host Meaghan Johnson will moderate the discussion, which will include:
Nick Sando, Venture Capital Investor at Octopus Ventures
Nick leads credit and lending investments at Octopus Ventures, one Europe’s largest VCs with £1.2 billion under management. Nick has co-founded companies on both sides of the Atlantic. He is passionate about startups looking to provide fair access to credit and companies leveraging the new data available to better serve the credit industry.
Yoni Arbel, Head of Treasury at Transferwise
Yoni helps the Transferwise Treasury team make sure the company has funds where customers need them in a fast and efficient way. He has 10 years of experience in fintech, joining eToro in 2008, opening their office in London in 2012, and joining Lebara in 2015, building a remittance platform for the customers of the MVNO (Lebara Money).
Manuel Silva Martinez, Partner at Santander InnoVentures
Manuel is a Partner at Santander InnoVentures, which is part of Santander Group’s global corporate venture capital fund, focused on early stage fintech investments. He is responsible for sourcing, executing, and maintaining the investor relationship with portfolio companies. Prior to joining Santander, Manuel spent nearly a decade at BBVA.
Luis Valdich, Managing Director of Venture Investing at Citi Ventures
Luis Valdich joined Citi Ventures in 2015 as a Managing Director in its NYC office. He is responsible for fintech investing in both the U.S. and Europe. Luis’ investments include Clarity Money (acquired by Goldman Sachs), HighRadius, PPRO, ScaleFactor, Octane Lending, Second Measure, HoneyBook, SmartAsset, and Contguard. Prior to Citi, Luis founded and ran JPMorgan Chase’s Strategic Investments group for nearly 8 years and invested in 30+ companies.
The countdown for FinovateEurope is on! We’re just a week and a half away from seeing the newest fintech in Europe and we’d love for you to join. Register today.
When it comes to customer service, even in-person interactions can be unpleasant. And doing business over the phone is usually markedly worse, especially if there is a bot involved.
There is one fintech fighting that stereotype, however. Voca.ai offers a virtual call center agent tailored to the financial services industry. And you won’t find the company referring to this virtual agent as a bot. Instead, Voca.ai uses terms such as “empathetic,” “smart,” and “human-friendly” to describe its virtual agent Voca.
Advancements
Voca implements an AI that has been trained by listening to an organization’s recordings of successful agents. Voca not only imitates the representatives’ responses, it also uses a human-sounding cadence and adds pauses and filler words such as “um.” The use case in the video below depicts a collections scenario. Other possible applications for Voca include lead generation, customer qualification, appointment scheduling, cross-selling, and customer retention.
https://youtu.be/USUdJyD2uUo
Voca’s collections agent in the video sounds remarkably human, especially with such a common name, Sarah. Sarah pauses in all the right places, has sympathetic intonations, and understands David, her client, even when he doesn’t use proper English.
All of this is part of Voca.ai’s secret sauce. The company’s virtual agent leverages information from the call such as speech rhythm, tone, and the speed of the conversation to identify the customer’s intent and emotion. As the call progresses, the virtual agent can even pick up on clues that indicate that what the customer is saying is different from what they actually mean.
What’s lacking
Because of common fraud tactics such as phishing, society has been trained to never offer personal information over an incoming phone call. Figuring out a way for the customer to authenticate themselves without compromising their identity is a major hurdle here. In fact, this is such an enigma that digital identity is one of the biggest topics in fintech, and one that will persist.
Maintaining human cadence is a second item that needs to be considered here. This isn’t obvious in the demo above, but if you watch the company’s demo at FinovateSpring last year (which won Best of Show), you may notice an awkward pause before each answer. For some, the moment of silence may be just long enough to wonder if the caller understood their answer. This could cause them to repeat themselves and result in the voice agent and the customer talking over each other in an awkward exchange.
Despite the challenges present in voice-powered customer service, Voca.ai has created a powerful tool. Voice has come a long way in reducing friction for not only financial services companies, but also their clients. Additionally, the new adaptations of voice have created a more human-like experience, which is something many consumers crave in today’s digital era.
Buy now, pay later company Splitit landed a partnership today with payment platform Stripe. The agreement makes Stripe the payment facilitator for all new merchants who onboard with Splitit. This move is expected to speed up the onboarding process for Splitit’s new merchant clients.
“With Stripe, we are able to not only immensely grow our capabilities to accelerate growth, but continue to reinforce our commitment to providing the best possible merchant experience for installment payments,” Splitit CEO Brad Peterson said. “What once took weeks and the help of many team members will eventually be fully automated to take just hours and eventually minutes.”
Splitit launched under the name PayitSimple in 2013. The company allows end customers to break down large payments into interest-free installments on their existing credit card without requiring a credit check or pre-qualification.
Last fall, the New York-based company partnered with Shopify, making its buy now, pay later technology available to Shopify’s 800,000+ merchants. This came a few months after the company made its payment solution available to more than 2,000 merchants in Malaysia, Thailand, Indonesia, and the Philippines via a partnership with GHL ePayments.
The company listed on the Australian Stock Exchange in early 2019, raising $12 million in an IPO. The company has a current market capitalization of $206 million.
In the past five months, the Financial Data Exchange (FDX) has brought in 25 new members including heavy-hitting industry participants such as Ally, Discover, MassMutual, and TransUnion. The recent boost brings the FDX’s total membership up to 82 organizations, a 3x membership increase since October 2018.
FDX aims to standardize financial data sharing by means of an API and technical standards that adhere to the group’s core principals: Control, Access, Transparency, Traceability, and Security.
“Working together as an industry, we provide consumers and businesses with better transparency, security and control over their financial data, while eliminating access barriers for innovators,” said Don Cardinal, Managing Director of the Financial Data Exchange. “Recently-signed data sharing agreements by our member firms are verifiable steps towards a credential sharing-free future all members are working toward.”
The unified approach will help mitigate screen scraping, a method of gathering consumer data that has the potential to compromise bank security by mimicking fraudulent activity. This, in turn, can make it difficult for banks to distinguish between the two logins. In the U.S., JPMorgan Chase became one of the first banks to stand up against the practice. The bank banned fintechs from screen scraping earlier this year.
A list of all FDX members can be found on the organization’s website.
Break out the PSD2 birthday cake! On January 13 the Second Payment Services Directive (PSD2)– what we now generally think of as open banking– turned two years old.
PSD2 still has a long way to go but has made some impressive progress in the fintech sector. So after two years in, is PSD2 a success? And where do we go from here?
The positive
Despite growing pains, there is evidence that PSD2 has had a positive influence on the fintech industry by promoting both innovation and competition. Challenger banks have taken advantage of open banking, making Europe the leading region for such non-traditional financial institutions. Germany’s N26, for example, now has 2.3 million users– a 3x increase from the year prior.
Although some consumers may not realize it, they are indeed better off. Many banks have expanded their APIs and integrated with third party providers. Additionally, the introduction of more players has increased competition which, in turn, encourages banks to enhance their offerings and customer service. We recently spoke with Token.io CEO Todd Clyde, who added to this list, noting that open banking also offers consumers access to cheaper credit.
Clyde also laid out benefits for businesses and banks. “Businesses will benefit the most from a dramatic reduction in the cost of payments and will therefore lead the adoption of open payments,” he said. “Banks will benefit as they move from compliance to commercializing open banking and bring new API-enabled propositions to market which allow them to compete with big tech and fintechs in the new financial layer and re-intermediate themselves with customers.”
Missed the mark
The progress for compliance with PSD2 has been slow, primarily because of the cost to adapt. Last March, Tink interviewed 442 European banks across 10 markets and found that 41% of the banks were not in compliance with PSD2. Specifically, these banks failed to provide third parties a sandbox to test their APIs. Legacy systems in particular are costly to modernize, which is necessary when integrating with open APIs.
“On the payments side, the stability of the APIs is the greatest barrier, said Clyde. “If a data API fails and your balances are not reflected correctly for a few hours, the consequences are minimal. The same is not true for payments where API resiliency must be high in order to deliver success rates equal to or greater than cards.”
Additionally, end consumers are still not well educated on the purpose or benefits of PSD2. One of the aims of open banking is to place consumers in control of their own data. This means that consumers can allow third party companies to access their data easily and securely and have the right to decide what information third parties can access and for how long. However, Tink reported that, even among senior financial services executives, 20% were “not very familiar” with PSD2. If financial services companies aren’t educating their staff about PSD2, it’s unlikely they are educating their consumers.
Where do we go from here?
In an interview with Adam Farkas, executive director of the European Banking Authority, NS Banking reported that the new regulations will help the European payments market scale more easily and faster than in other regions and that industry participants will compete on a more global scale. Thus far, this has proven to be true. As we mentioned previously, the explosion of challenger banks in the European region is evidence of increased competition.
Multiple other fintech sectors have the potential to scale, as well, including:
PFM solutions are benefiting from a more liberal flow of customer account information and account aggregation.
Fraud prevention solutions prove more effective when they have access to more consumer data. When a customer opens a new account or applies for a new product or service, fraud prevention solutions are able to verify the person’s identity by cross-checking their personal data, such as name, address, and email, against their other accounts.
Underwriting has the potential to become more efficient. When underwriters have access to up-to-date information from credit bureaus combined with a full picture of an applicant’s financial situation, they are able to make more informed decisions and lower default rates.
Digital lending also benefits. In a chat with digital lending company ITSCREDIT, company CEO João Pinto said, “One of the strengths [of ITSCREDIT] is that the platform is open so that implementations can use as much data as is available in order to have a more complete view of customers and their financials. In this scenario, open banking is a key element. It not only makes much more data available from different players, but also makes integrations much easier.”
Traditional banks can create more effective marketing campaigns to customers.
According to Token.io’s Clyde, banks laid the groundwork for open banking with APIs in 2019 and he expects 2020 to be a turning point for open banking. “After a period of stabilization for APIs, transactions will soon follow, starting with data and progressing to payments. 2020 will also be the year of open payments in the U.K., with certain merchant categories going live with single immediate payments and transaction volumes following.”
Software delivery company Persistent Systems and cybersecurity firm ValidSoftjoined forces this week. The two are working together to develop a digital voice authentication solution that integrates into Persistent Systems’ banking solutions. The integration is built on ValidSoft’s Precision Voice Biometrics which continuously verifies a user’s identity.
“As always, the consumer experience is paramount and guaranteeing the integrity of the transaction is vital,” said ValidSoft CEO Pat Carroll. “Identity assurance provides users confidence in the fidelity of their transactions as speech becomes the new user interface of choice for the initiation of sensitive of high value transactions.”
Persistent Systems will use the new authentication technology to help its credit union and small and medium-sized bank clients engage with their customers.
Persistent Systems was founded in 1990 and is headquartered in India. At FinovateFall last year, the company demoed a chatbot functionality built into its Digital Bank in a Box. Along with AI technologies, Persistent Systems offers cloud services, identity products, and security tools.
ValidSoft offers a host of telecommunications security solutions suited for mobile devices. The company’s SMART platform provides voice and mobile network‐based security technologies to protect mobile payment and mobile banking transactions.
Consulting and technology services company Accenturelaunched a new procurement solution today called the True Supplier Marketplace. The new tool taps into the blockchain to more efficiently connect buyers and suppliers.
The company originally launched the True Supplier Marketplace to solve in-house procurement headaches. Today, however, Accenture has created an external SaaS solution for its clients.
True Supplier Marketplace creates a decentralized marketplace where buyers and suppliers can connect and share data easily and securely. Additionally, the True Supplier Marketplace automates actions such as pre-populating digital contracts and providing data for invoicing and payment solutions and provides tamper-evident auditability for transactions. The tool offers the right data to the right people quickly, minimizing lead times.
The company notes that today’s launch is “just the start.” Future iterations of the tool will offer analytics and insights, provide smart contracts for downstream services, and allow suppliers to rate and review buyers.
This isn’t Accenture’s first blockchain solution. In fact, in creating the True Supplier Marketplace, Accenture relied heavily on the work it did to launch Accenture Blockchain for Contracts. And, last April, the company unveiled a tool for the employee benefit sector.
Founded in 1951, Accenture’s 505,000 employees serve clients in more than 120 countries across 40 industries. Last year the company invested $1.8 billion on research and development and training efforts.
Mobile money operator Paga is poised for growth. The Nigeria-based fintech acquired U.S. software company Apposit and announced plans to expand its services geographically.
Apposit was founded in 2007 and builds software to power African tech businesses. The region is, as the company states on its website, a place where “formidable challenges and exceptional opportunities abound.”
Paga will leverage Apposit to expand into Ethiopia, a country that deals with similar cash and payment issues to Nigeria. To help fuel the expansion, the company will tap the experience of Apposit Co-founder and CEO Adam Abate, who will serve as CEO of Paga Ethiopia.
Through the acquisition, Paga Founder and CEO Tayo Oviosu said, “we not only gain a scalable world-class internal engineering team, but we also are in a stronger position to grow our global payments business.”
Paga and Apposit first partnered in 2009. After bringing on Apposit’s 62 employees, Paga’s staff now totals 530+ people. Additionally, the company adds Addis Ababa, London, and Mexico City to its list of office locations.
“Last year we refined our mission and vision to birth our massive transformative purpose: To make it simple for one billion people to access and use money,” added Oviosu. “Apposit has demonstrated strong alignment with our purpose and they have some of the very best engineers I have been privileged to work with, in over two decades in technology in Silicon Valley and elsewhere.”
Challenger bank Vive Bank received some good news from the Bank of England today. The U.K.-based startup has been granted a banking license with restrictions.
Vive is aiming to ship its offerings in the second quarter of 2020 but unlike the region’s other challenger banks, Vive Bank will not be launching a current account. Instead, Vive Bank will focus on unsecured personal loans, a fixed-rate savings account, and PFM tools.
“It’s just not difficult to get a current account, so we want to focus on serving our customers with what they really need,” Vive CEO Nick Anthony said in an interview with AltFi. “We’re looking to serve a market where it’s more difficult for customers to get banking products. We want to make it simple and straightforward. Our unsecured personal loans, for example, will be far more than the narrow offering from high street banks, aimed at helping those with less than perfect credit scores.”
Vive Bank was founded in 2017 and has since refrained from promoting its services. While a waiting list is available on its website, the startup has intentionally remained quiet until today.
If you’ve ever been hacked, having either money or personal credentials stolen, did you stop to think about what type of person, organization, or agenda you were inadvertently supporting?
“Let’s talk about the funding of evil,” said Trusona founder and CEO Ori Eisen during his first Finovate demo. “When a bank loses $10 million, it’s not a good day for the bank. But where the money goes and what it’s being spent on is not good either.” Eisen then turned to the audience to suggest their responsibility in the matter. “You can help stop or curb the funding of evil,” he added.
At first I thought he was joking. Discussion of the “funding of evil” and “stopping the bad guys” sounded like something straight out of a kid’s TV program. However, it’s no joke and it’s unnerving to think of what these “bad guy” fraudsters do with their stolen cash.
In the demo, Eisen went on to explain that one way to curb funding these fraudsters is to make user’s accounts more secure. And in Trusona’s opinion, the best way to do that is to get rid of passwords entirely. The Arizona-based company just raised $20 million this month in support of this concept– getting rid of the password. The investment brought Trusona’s total funding to $38 million.
So what does web authentication look like without a password? The 30 second process requires the user to have their smartphone with them, but doesn’t require access to a cellular network. Upon logging in, the user clicks Login with Trusona. The web interface shows a unique QR code, and the user then opens the Trusona app on their smartphone, scans the QR code, and taps to accept. Once complete, the user can enter the website without the need for a username or password.
In addition to simple authentication, Trusona also offers solutions for ID scanning and proofing, multi-factor authentication, and VPNs.
The need for such a solution stems from faulty password management skills common among consumers and employees today. In fact, last year Trace Security reported that 81% of company data breaches were caused by poor passwords. Trusona offers an SDK that businesses can integrate into their own app to simplify logins for both employees and end customers.
With its recent funding, Trusona said it will focus on expanding its customer base as well as begin working on new product offerings.
Trusona was founded in 2015 and counts Aetna, Kleiner Perkins, and Bain Capital among its clients. The company has demoed at Finovate twice and won Best of Show awards at both of its appearances. Check out Trusona’s most recent demo below.
Community bank marketing expert Kasasaannounced a partnership with Carleton today in which Kasasa will integrate Carleton’s insurance and debt protection calculations into its Kasasa Loan, a move that will allow it to tailor loan limits.
Headquartered in Indiana, Carleton provides financial calculation software, loan origination compliance support, and document generation software. Through the partnership, Kasasa will enable its clients to add debt protection and credit insurance products to their Kasasa Loan offering.
Kasasa will use Carleton’s CarletonCalcs, which will allow it to tailor limits to each client based on their institutional, state, and federal compliance requirements. “By integrating CarletonCalcs throughout the Kasasa service platform, Carleton will ensure compliant loan computations and precise amortization schedules through Kasasa’s dashboard and mobile app,” said Carleton President and COO Matt Ruszkowski.
“We wanted to ensure the Kasasa Loan added a high level of configurability and compliance support to meet our client’s needs, in addition to providing consumers the greatest flexibility when choosing their loans,” said Chris Cohen, EVP, Product Management for Kasasa.
Kasasa debuted its Kasasa Loan in 2017 and showcased it at FinovateSpring 2018. The concept works similar to a regular loan agreement in which the borrower repays according to a regular payment schedule. However, it is unique because every month the consumer has the option to overpay on their loan repayment and at any time in the future if they need to access cash quickly, they have the option to “take-back” any portion of the overpayment.
Kasasa is an Austin-based company with 450 employees. The company counts 900 community financial institutions as clients.
We recently spoke with ITSCREDIT CEO João Pinto. Founded in 2018, ITSCREDIT is a spinoff from ITSECTOR and is a fairly new player in the digital lending space. The Portugal-based company focuses on placing the consumer in control of the lending experience by making the entire process digital.
In this interview, Pinto talks to us about the digital lending opportunity, how his company fits into the current state of this fintech subsector, and what we can expect to see next.
Finovate: There is a wide range of borrowers out there– some who may not be comfortable on digital channels and others who are digital natives. How does ITSCREDIT adapt to this variety?
João Pinto: The main focus of ITSCREDIT is to evolve the lending process so that different types of customers can perform all lending origination actions using online channels. Our aim is that the customers can perform all origination operations online with minimum data input. We do this by retrieving necessary application information from various systems (personal data, financial data, and so on). Our approach to digital lending is to provide processes that are intuitive, attractive, simple, and fast in an online environment to revamp many of the bureaucracies often associated with traveling to the banks’ physical branches.
The customer can access the ITSCREDIT platform via online channels, such as mobile and internet. ITSCREDIT provides interfaces for other channels, as well, such as branch, contact center, and backoffice, which all have access to the client and their application process. This means that the client can start an application in any channel and get information or advice and can continue the process in any other channel. This way, more traditional users that are not as comfortable using digital channels can use traditional channels either in an isolated way, or– more interestingly– in a combined way. The multi-channel approach offers them full control of their application.
Finovate: How does ITSCREDIT underwrite credit risk and how does that approach differ from incumbent players?
Pinto: The ITSCREDIT platform contains four main modules: Flowcredit (Loan Origination), Calculators, Risk Analysis,Scoring, and Collections. Each can operate in isolation or can be combined in any way. Also, the platform is open so that implementations can use as much data as is available in order to have a more complete view of customers and their financials. We believe this is a huge strength of the platform. It allows banks to garner richer information for the risk analysis from both individuals and corporations (through Risk Analysis and Scoring modules), and also makes data available from credit applications processes (through Flowcredit).
In many situations our clients have, in the past, invested heavily in building their credit application analysis. The Flowcredit module easily integrates with such systems and then adds additional information and rules to make underwriting even more accurate and tailored to suit the financial institution needs.
Finovate: Tell us about the role that open banking plays in ITSCREDIT.
Pinto: As we mentioned previously, one of our strengths is that the ITSCREDIT platform is open so that implementations can use as much data as is available in order to have a more complete view of customers and their financials. In this scenario, open banking is a key element. It not only makes much more data available from different players, but also makes integrations much easier.
On the other hand, our platform is based on a services architecture, so that it exposes services that can be consumed by third party entities. For example, the use of calculators and loan origination components can easily be used in different commerce sites and therefore originate completely new lines of business for the institutions. For example, a travel agent can have a payment method on their website for their clients based on a personal loan.
Finovate: Looking broadly at the credit and lending industry as a whole, what changes do you anticipate 2020 will bring?
Pinto: In the past years we have seen financial institutions start to approach digital lending for their clients. This journey is still in its early stages, with few institutions providing such functionalities for a few products. We are sure, though, that in 2020 we’ll see more institutions adopting full digital lending with simpler models more adequate to their clients needs. The launch of PSD2 in Europe and other Open Banking initiatives around the world make it much easier to obtain personal and financial data from credit applicants and therefore make the loan origination simpler and faster.
The other area that we foresee a great expansion is through a space we refer to as dPOS (digital Point-of-Sale). A dPOS enables merchants to provide payment methods for their ecommerce platforms with digital lending, providing lower rates on credit cards for end customers and a lower cost and even extra income for merchants.
Finovate: What’s next on the horizon for ITSCREDIT?
Pinto: ITSCREDIT is a spin-off that will be 2 years old in May. We already have 13 clients on three continents: North America, Europe, and Africa. Our journey on the commercial side is to present the advantages of our solutions to more institutions and get more implementations.
In terms of product evolutions, we are enhancing the digital lending capabilities and models and launching new versions in 2020 for brokers and merchants.
Overall, our big aim is to position ourselves as a world-class player for credit solutions, providing innovative and modern solutions for our customers to help them differentiate from their competitors and become more efficient with higher loan volumes.
You can watch ITSCREDIT demo its latest technology on stage at FinovateEurope next month. Register now to save your seat!
If you’re interested in demoing on the FinovateEurope stage this year, reach out to heather@finovate.com or take a look at our event page for more details.
