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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
European deposit marketplace Raisin announced today it acquired New York-based Choice Financial Solutions. Terms of the acquisition, which marks Raisin’s fourth purchase in the past year, were undisclosed.
Raisin will license Choice FS’ technology to banks in the U.S., a move that will bring the company one step closer to its U.S. launch. Last year, Raisin teased the geographical expansion with the appointment of Paul Knodel as U.S. CEO.
Raisin U.S. CEO Paul Knodel
“Joining forces with Choice Financial Solutions lets Raisin begin offering cutting-edge services to banks and customers before we even launch our U.S. platform,” said Knodel. “As a leading innovator in the deposits space, Raisin sees Choice FS as a perfect fit for our mission in the U.S. deposits market. The enthusiastic market feedback we have already received affirms how ripe the savings space is for just this type of personalization.”
Choice FS has a decade-long track record of providing banks with technology to help their clients save for long-and-short-term goals. The company’s secret sauce is customization– something modern consumers have become accustomed to in today’s era of BigTech solutions. Choice FS allows banks to customize terms, distributions, amounts, and withdrawals to maximize return on savings accounts, creating a highly-personalized savings experience with an intuitive user interface. Company founder and CEO Daniel Smith refers to this personalization as “the missing piece” for banks and depositors.
Raisin was founded in 2012 and has since brokered $20.6 billion (€18.5 billion) for 200,000 customers in 28+ European countries and 90 partner banks. The company provides a free marketplace where consumers can browse European deposit products, ETF portfolios, and, in Germany, pension products.
Supply chain payments company Tradeshift just unveiled details about a $240 million funding round today. The investment– a combination of debt and equity– comes from new and existing investors. Tradeshift’s total funding is now $672 million.
The San Francisco-based company will use the investment to boost expansion efforts and gear toward a “direct path to profitability in the near future.” The funding will also be used to grow Tradeshift’s network finance program that provides liquidity to companies in 100+ countries.
And it appears that Tradeshift is already on the right track. Last year the company tallied record expansion; growing its revenue more than 60% and closing more than 300 enterprise deals. What’s more, 40% of the total transaction volume across its platform occurred in the last 12 months.
“It’s clear that the investor community has a strong focus on growth combined with profitability and they like our plan,” said Tradeshift CEO Christian Lanng. “As a network business, growth is always going to be a key part of our story. But it’s also important that we manage that growth responsibly.”
Tradeshift’s business commerce platform connects more than 1.5 million companies across 190 countries. To date, the company has processed more than half a trillion dollars in transaction value. After Tradeshift’s most recent funding round of $250 million last spring, the company’s valuation was boosted to $1.1 billion.
As for 2020 plans, Lanng said that the company’s focus “will be about doubling down in areas where we’re seeing the greatest momentum while continuing to ensure we have the necessary balance in place to fully capitalize on the enormous opportunities in front of us.”
Risk management and advisory services firm INTL FCStone announced today that its London-based subsidiary has agreed to acquire GIROXX for an undisclosed amount.
Headquartered in Germany, GIROXX offers international bank transfers and currency hedging. INTL FCStone plans to leverage this technology to expand its current client base to small-and-medium-sized enterprises (SMEs).
As part of the agreement, INTL FCStone’s advisory services will be made available to GIROXX’s clients. GIROXX founders Klaus Hoffmann and Jörg Sonnenschein said that the deal will help the company “gain the resources to offer hedging services on a multi assets basis.” As a result, the founders anticipate that GIROXX will solidify its client base and boost company expansion.
The purchase marks INTL FCStone’s sixth acquisition and its fourth in less than 10 months. The company said that these purchases, combined with internal restructuring, are part of an effort to protect clients from negative effects of Brexit.
“Our objective is to offer SME’s the ability to hedge all parts of their production processes, and to allow these corporates to have access to a digital payments and hedging platform,” said Carsten Hils, Global Head of INTL FCStone’s Global Payments Division.
Following the deal, INTL FCStone plans to open its client base to companies with less than 1,000 employees in Europe, a market with 350+ correspondent banks. The acquisition is pending approval from BaFin, Germany’s financial regulatory authority.
Founded in 1981, INTL FCStone is publicly listed on the NASDAQ under the ticker INTL. The company has a market capitalization of $947 million.
Thailand’s biggest bank by assets, Siam Commercial Bank (SCB), announced it has partnered with blockchain solutions company Ripple. SCB will leverage Ripple’s RippleNet to power the cross-border payment offering in its mobile app, SCB Easy for the app’s 9+ million users.
RippleNet is Ripple’s global payment network that works across 40+ currencies and consists of more than 200 financial institutions. Because RippleNet leverages the blockchain, users are able to track funds, delivery time, and status.
“It is so difficult to send and receive money today. People must physically go to a bank branch, fill out long and complicated forms and wait for payments to be received—with no transparency,” said SCB’s SVP of Commercial Banking, Arthit Sriumporn. “With our service, their loved ones from abroad can transfer payment and receive money immediately.”
SCB is also working with Ripple and EMVCo to add a QR code-based payment solution to SCB Easy. Once complete, the QR codes will enable users to make payments without using the local currency.
This isn’t SCB’s first partnership with Ripple. The bank first partnered with Ripple in 2018 when it became the first financial institution using RippleNet to pilot multi-hop, a tool that enables banks to settle frictionless payments on behalf of other banks in the network.
Ripple has offices in San Francisco, New York, London, Luxembourg, Mumbai, Singapore, Sydney, and Brazil. Ripple recently closed $200 million in a Series C round, bringing the company’s total funding to $321 million and boosting its valuation to $10 billion.
Banks are facing an increased number of competitors these days. Not only are traditional banks vying for customer deposits, but fintechs and challenger banks want part of their funds, as well.
The average U.S. savings rate is just 0.09% APY, so any amount banks can offer beyond that is a differentiator. However, some banks have gone all out and are offering more than 2% interest. The highest APY we saw totaled a whopping 6.17%.
Here are the 8 financial institutions (listed in alphabetical order) we found that are offering accounts currently paying more than 2% interest:
BrioDirect
2.1% APY with a minimum balance of $25
Digital Federal Credit Union
6.17% APY on first $1,000 with a minimum balance of $5
Elements Financial
New accountholders can earn 2.1% APY for one year on a minimum of $2,500 that has been transferred from another financial institution.
Fitness Bank
Members earn 2.20% APY on a minimum balance of $100 if they walk 12,500 steps or more per day (or 10,000 steps per day for those age 65 or older) as calculated on their fitness tracker.
GreenDot
Users earn 3% APY, which is paid on a maximum of $10,000 and is held in a separate account that the consumer is unable to access until the account anniversary. The high yield savings account must be opened in tandem with Green Dot’s Unlimited Cash Back account, which pays customers a 3% cash-back bonus on all online and in-app purchases. The account charges a $7.95 monthly fee if a consumer’s purchases (excluding mobile bill payments, ATM withdrawals, and ACH transactions) are less than $1,000.
T-Mobile Money
Users earn 4% APY on balances of $3,000 or less. Any amount over the $3,000 threshold earns 1% APY. There is no minimum balance requirement but account holders must deposit at least $200 per month into the account to earn 4% APY.
TotalDirectBank
2.1% APY on balances of at least $5,000 and no more than $500,000.
Vio Bank
2.02% APY with a minimum deposit of $100
Many of these financial institutions are able to offer higher-than-average rates by keeping their operating costs low. In most cases, the lower operating cost is the result of being an online-only bank. However, two of the banks listed above (Digital Federal Credit Union and Elements Financial) have physical branch locations, as well.
Another aspect that helps with offering high interest is setting appropriate limitations. Interestingly, the two banks on this list that have branch locations (re: higher operating costs) are the two with the most stringent restrictions on their savings accounts. Setting up appropriate limits on account earnings can make banks’ offerings look attractive without costing too much. Conversely, too many restrictions will frustrate consumers and, perhaps worse, compromise trust.
The People’s Bank of China (PBOC), China’s Central Bank, announced it has accepted an application from American Express (AmEx) that expressed the company’s intention to operate in China.
Reuters reported that the PBOC announced the receipt of AmEx’s application via a WeChat post on Wednesday. The bank, however, did not disclose information about the approval timeline.
This follows the PBOC’s approval in November of 2018 for AmEx to clear card payments in partnership with China’s LianLian Pay to process payments in Yuan. This week’s announcement also makes AmEx the first U.S. card network company to gain access into the China market. In order to commence operations, however, AmEx still needs final approval from the PBOC.
China is beginning to open up its credit card payments market to foreign players after restricting access. For the past ten years, foreign payment card companies could only tap into China’s credit card market via partnership with state-run UnionPay.
Visa and Mastercard are expected to follow suit to claim their stake in China’s $27 trillion market.
Traditional players aren’t the only ones eyeing the China opportunity. Last October PayPal gained controlling interest in China-based GoPay. The move granted PayPal a license to offer online payment services in China, making it the first foreign company to be granted such license.
Telecommunications giant Sprint and German financial services provider Wirecard announced they are teaming up to deliver the Internet of Payments.
Under the agreement, Sprint will integrate Wirecard’s commerce solutions into its Curiosity Internet of Things (IoT) platform. Essentially, the two will embed payment capabilities into IoT deployments.
Sprint’s Curiosity IoT combines Curiosity Core, a virtualized IoT network, with Curiosity OS, an IoT operating system. The project will be piloted in the retail sector where the two will work together to “deliver the retail experience of the future” by enabling a connected purchasing experience.
“This opens up many commercial opportunities, and also delivers an unparalleled commerce solution for our global clients and their customers,” said Ivo Rook, Sprint’s senior vice president of IoT and product development. “As IoT becomes even more central to how enterprises run, we look forward to identifying new opportunities and use cases for these technologies. The growing internet of things will lead to new and innovative transactions, like directly between devices, and this collaboration will power such use cases.”
IoT has a wide range of applications in the payments space. With IoT, consumers can move beyond traditional payment devices and instead pay using wearables, their car, and voice-enabled devices such as Alexa. In many settings these types of payment methods are already possible but they are not widespread.
Georg von Waldenfels, executive vice president of group business development at Wirecard said that the collaboration will help Wirecard “meet a growing demand for commerce without barriers.” Waldenfels added that teaming up with Sprint is a “significant step toward developing the shopping experience of the future.”
This isn’t Sprint’s first foray in the IoT space with a fintech. In 2018, the company partnered with Dynamics to launch the Wallet Card, an IoT connected, battery-powered payment card.
Dutch financial services corporation ING announced today it is spinning off Katana into its own entity called Katana Labs.
As a part of its move to independence, Katana has closed $3.9 million in funding, half of which ING contributed “to enable further growth and to pave the way for an independent future for Katana.”
Katana began as one of 25 of ING’s innovation initiatives. The project follows in the footsteps of Yolt and Cobase, former ING innovation initiatives that scaled up outside of ING’s labs.
“Supported by ING Labs, we developed, tested and validated the technology. Now it’s time to move to the next phase as an independent fintech,” said Santiago Braje, CEO of Katana. “We are very excited about the opportunities we see in developing our platform and expanding our client base.”
ING launched Katana to help traders leverage predictive analytics to determine bond pricing based on historic and real time data. In 2018, ING enhanced the tool with the launch of Katana Lens, a tool for bond market investors that identifies the most promising trades based on historical data. Last year, Global Finance Magazine highlighted Katana as Innovator 2019.
“In the past few years, Katana has managed to grow from an internal innovation project to a serious value proposition for bond investors. We attracted major clients who see the added value of this super smart AI-tool. I’m proud that with our support Katana grew out to a fully-grown fintech that is ready for an independent future,” said Annerie Vreugdenhil, head of Innovation at ING Wholesale Banking.
Katana Labs has incorporated in the U.K. and is now headquartered in London.
The last decade brought about a lot of discussion around digital identity. Dozens of security companies created new solutions to help banks authenticate their user’s identity and verify their personal information. Throughout the years, those authentication methods have evolved from comparing a simple selfie with a picture of a driver’s license, to tracking how a user navigates a web page, to assessing their online footprint.
Lately, however, the topic of conversation has shifted from authenticating digital identities to creating a digital identity infrastructure. But what exactly is a digital identity infrastructure and why is it important in fintech?
What is digital identity infrastructure?
Digital identity infrastructure is the set of processes a company has in place to verify users’ digital identities and manage their access. This infrastructure is especially important for banks and fintechs who host their information in the cloud, are frequently increasing the amount and types of information gathered, and are often times moving fast.
Why is digital identity infrastructure important in fintech?
This is where identity infrastructure comes into play– it helps companies scale faster and more simply. Creating a methodology around identity verification helps organizations leave behind a siloed approach in favor of a more holistic methodology that is consistent with the framework of the rest of the company.
What does the industry have to say?
David Birch, a well-known thought leader in the fintech industry, talked to us about digital identity last year at FinovateEurope. He laid out a handful of ideas on the subject, including his thoughts on creating identities for non-human objects such as robots. Some of the topics Birch discussed include:
The need to develop a framework around digital identity, including its definition
How banks should be responsible for developing the infrastructure around identity
There will be a future where robots will need passports
You can catch the full interview below.
Birch takes the stage at FinovateEurope next month to discuss how digital identities will be a game changer in the war against financial crime. He will also speak on a panel discussing which new technologies will transform financial crime and what an enterprise-wide financial crime risk assessment should look like.
Still need your ticket to FinovateEurope? Book now and we’ll see you in Berlin on February 11 through 13. If you register before this Friday, you can save up to £1,000.
Lending solutions provider Open Lending has agreed to merge with Nebula Acquisition Corporation, an acquisition company sponsored by True Wind Capital.
The merger will take place via an acquisition in which, once finalized, Nebula will purchase Open Lending and form a new Delaware holding company called Open Lending Corporation. The new entity will be publicly-traded on NASDAQ with an estimated value of $1.3 billion.
Members of Open Lending’s executive team– John Flynn, cofounder, president, and CEO; and Ross Jessup, cofounder, CFO, and COO– will lead the new company. Flynn commented that there is “significant runway” for new growth, considering Open Lending’s existing banking relationships and “untapped opportunities” with new partnerships.
Open Lending was founded in 2000 and offers automated lending solutions to banks, specializing in automotive lending. Ultimately, Open Lending helps banks offer near-prime borrowers more attractive borrowing rates without changing the risk profile for the bank. In 2019, Open Lending facilitated more than $1.7 billion in automotive loans for 275+ financial institutions.
“Open Lending’s ability to demonstrate consistent organic growth and high levels of profitability represents an exciting investment opportunity within the risk-based analytics ecosystem,” said Adam Clammer, Nebula co-CEO and founding partner of True Wind. “John and his team have developed a highly-scalable technology platform that helps hard working consumers get into a new or used car at the best rate possible. We look forward to partnering with Open Lending’s management team and Bregal at this exciting inflection point in the company’s growth.”
E.U.-based alternative lending company B-North announced this week it landed $2.6 million (£2 million) in new funding. The investment comes as part of crowdfunding efforts via Crowdcube and Growthfunders.
Combined with the $5.5 million (£4.2 million) the company has already raised, today’s round brings B-North’s total funding to just over $8 million, according to FSTech. The company will use the new capital to increase its workforce and boost its infrastructure.
While B-North has yet to launch, the company plans to do so in “mid-2020.” Taking a step in that direction, last month B-North partnered with Newcastle Strategic Solutions, which will provide a deposit-taking solution for the new lender.
While there are multiple alternative lending companies in the fintech sector, B-North aims to differentiate itself by lending up to 10x faster than incumbent players, placing core banking functions closer to the customer, and tapping its commercial finance broker channels for distribution. Much of this will be accomplished through “lending pods,” as the company calls them, which will launch across Manchester in the second half of this year.
B-North was founded in 2015. Jonathan Thompson is co-founder and CEO.
If you’re unfamiliar with the California Consumer Privacy Act (CCPA), you might want to stop catching up on email you missed over the holiday and focus on this new regulation. Here are a few highlights of California’s new law, which went into effect yesterday.
CCPA grants California residents new rights when it comes to their data and privacy. Essentially, this group of consumers are now entitled to know what data businesses collect about them, where they received it, how they plan to use it, who they have shared it with, and if it will be sold.
Here’s are some take-aways of what fintechs need to know now that the new rule has taken hold:
What’s required of you
Essentially, California consumers have the right to receive a report of their personal information that a business has collected on them for the past year, the right to have that data deleted, and the right to limit the sale of their data to third parties.
All of this means that in addition to tracking consumer data, businesses are also responsible for reporting where the data came from and where it’s going.
CCPA may not apply to you
The state of California has almost 40 million residents, and if you’re conducing business in the U.S., you likely have clients there. And even if you don’t, CCPA grants the new privacy rights to all California residents as defined by income tax, even if they are not currently living in the Sunshine State. In contrast, those living in California but paying income tax in another state are not covered by CCPA.
That said, there’s still a chance CCPA won’t apply to you. Businesses with gross annual revenues less than $25 million, or those that deal with personal information of fewer than 50,000 consumers, or businesses that generate less than 50% of their annual revenue from selling consumers’ personal information are exempt.
Heads up: you could be sued
Data breaches are generally always costly, and CCPA will add to the expense. If a consumer notifies a business that it has improperly handled their data and the business doesn’t rectify the issue within 30 days, the consumer has a right to sue for damages in the amount of $100 to $750 per incident, injunctive or declaratory relief, or another option deemed suitable by the court.
On top of that, if a business experiences a data breach, sells consumer data without permission, or retains data after the consumer requested it to be deleted, the Attorney General has a right to charge violators $2500 to $7500 for each consumer data file involved.
CCPA may go federal
As you plan out methodologies to document data collection, usage, and distribution, don’t limit your systems to Californians. The privacy act may eventually be escalated to the federal level so plan your data protocol around all of your U.S. clients.
Just because you’re GDPR compliant doesn’t mean you comply with CCPA
The U.K.’s General Data Protection Regulations (GDPR) went into effect in May of 2018. But just because you’ve mastered your compliance strategy for GDPR doesn’t mean you can rest easy when it comes to CCPA.
On the contrary, there are a handful of differences between the two, as outlined by Pillsbury Law:
The coverage group
The privacy policy disclosures
The breadth of disclosure rights
The data disclosures and deadlines
The right to opt-out
The explicit protection against discrimination
For a more in-depth look into the differences, I highly recommend taking a look at Pillsbury Law’s piece.
Identity verification may be an issue
A user may request access to all of his data, but how do you ensure he is indeed who he says he is and not a criminal? Furthermore, how do you ensure he is a California resident?
According to IDology COO Christina Luttrell, “If GDPR is an indicator of how CCPA will unfold, then businesses need to consider how criminals can and will exploit subject access requests.”
Luttrell went on to explain, “The organizations that will be well positioned to complete CCPA-related requests are the ones that understand the facets of CCPA identity verification (IDV) and adopt IDV systems that scale and automate, are secure and easily integrated, and have multiple IDV methods that will satisfy consumer needs.”
You may be late but you’re not too late
In the event a business violates the CCPA, it has additional time before fines and enforcement take hold due to the 30 day period to cure noncompliance.
If a business can fix a problem with its privacy compliance and follow the procedures set forth in the law to do so, then they haven’t violated the law and will not be subject to a lawsuit for the failure to comply.
