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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Fintech giant FISunveiled a new venture arm today. The Florida-based company is targeting a goal to invest $150 million in fintechs over the course of the next three years.
The investment arm will focus on early-to-growth stage startups across the fintech sector and will centralize around emerging technologies such as AI and machine learning, digital enablement and automation, data and analytics, security and privacy, distributed ledger technology, and financial inclusion.
FIS launched the new venture arm to “nurture a growing ecosystem of innovators within and outside the company” as well as to complement its other initiatives including the FIS FinTech Accelerator program, the FIS Innovatein48 research and development competition, and its innovation labs.
“At a time when many other fintech firms are scaling back their investments, FIS is deepening its commitment to stay at the forefront of innovative technologies that can help our clients accelerate digital transformation and emerge even stronger from the current pandemic,” said FIS Chief Growth Officer Asif Ramji. “FIS Ventures is a significant new component of our investment strategy to identify and bring to market innovative new technologies that advance the way the world pays, banks, and invests.”
And FIS Ventures has made it clear that the funding relationship is not just about the money. The company will form strategic partnerships with each funding recipient. In turn, the companies will not only benefit financially but will also gain from FIS’ reach, scale, operating expertise, customer-base, and channel partners.
FIS Ventures’ first investment went to Flutterwave, a Nigeria-based payment acceptance platform.
Founded in 1968, FIS is a Fortune 500 company and is a member of Standard & Poor’s 500 Index. The company demoed at Finovate in 2016. In the third quarter of last year FIS made one of the biggest acquisitions of the year, purchasing Worldpay for $34 billion.
Shortly after adding ETH, XRP, and three stablecoins to its platform, blockchain payment services provider BitPay announced today it has added one more to the mix.
BitPay is collaborating with digital asset exchange platform Binance to add the Malta-based company’s stablecoin, BUSD, to its platform. The new addition will enable BitPay’s 2 million users to top up their BitPay card and wallet using BUSD and will also allow the company’s merchant clients to accept BUSD as a form of payment in cross-border transactions.
Binance’s BUSD, which is pegged to the U.S. dollar, offers merchants across the globe a currency that is as stable as the dollar but offers the beneficial aspects, such as security and efficiency, of blockchain-based payments.
“The partnership with Binance is about more than supporting another stablecoin, it is about making cross border payments simple and easy for both businesses by leveraging the global influence of Binance Exchange,” said Stephen Pair, CEO of BitPay. “With BUSD, BitPay expands blockchain payment choices for all our customers across the global payments space who want the flexibility of paying on the blockchain with the stability of the U.S. dollar.”
“Stablecoin is the forerunner of blockchain-powered payments by its nature. Partnering with BitPay will enable merchants and businesses from around the world to accept BUSD,” said Binance Founder and CEO Changpeng Zhao. “We believe a growing number of merchants and businesses will start adopting crypto, and we are glad to provide the payment solution together with BitPay, making the process simpler and easier.”
Bitpay has processed more than $2.8 billion since it launched in 2011 and now operates a $250 billion crypto marketplace. The Atlanta, Georgia-based company offers bank deposits in 38 countries. Among Bitpay’s clients are Microsoft, Newegg, AT&T, and Dish Networks.
Founded in 2017, Binance ranks among the top digital asset exchanges by volume and number of users. On average, the company facilitates around $2 billion in trades each day and has more than 15 million users.
Support for BUSD in BitPay’s wallet goes live today. The company will launch support for merchants “in the coming days.”
Payment automation solutions company AvidXchangeannounced this week it added $128 million to its Series F funding round. When included with the $260 million the company raised earlier this year, the oversubscribed round tops $388 million.
The round includes funds from new investors Lone Pine Capital, Schonfeld Strategic Advisors, and clients of Neuberger Berman. Existing investors, including Pivot Investment Partners, Mastercard, and Sixth Street Partners also participated.
AvidXchange will use the funds to fuel strategic growth initiatives and innovation.
“With only 40 percent of U.S. businesses automating their accounts payable processes, we continue to solve a real problem for companies that still rely on paper invoices and checks, fundamentally changing the way they pay their bills” said AvidXchange Co-founder and CEO Michael Praeger. “This has become even more evident as we see businesses implementing continuity plans and shifting to work from home models, making automation essential to support mission critical processes and keep operations running.”
AvidXchange offers solutions to help businesses manage the entire payments process– from invoice to payment– in a completely digital manner. The firm also facilitates payment fulfillment and manages supplier relationships to help companies focus on their business.
AvidXchange’s SaaS-based technology solves a huge pain point for U.S. businesses, as a full 60% of them still pay bills with paper checks.
While there is no word on an updated valuation for AvidXchange, the company was thought to be valued at $2 billion in January of this year.
Commerce monetization company Empyrannounced this week it has been acquired by its long-time partner Augeo, a loyalty and engagement firm. Financial terms of the deal were undisclosed.
Under the agreement, Empyr will rebrand as Figg, combining Augeo’s card-linking technology with Empyr’s publisher experience. Figg will benefit from Augeo’s existing 60 million users and $300 billion in transaction volume for loyalty offers.
Empyr launched in 2011 and has since raised $48.2 million in funding. The company’s API relies on data partnerships with VISA, Mastercard, and American Express to power card-linked loyalty rewards for offline businesses.
“While the timing might seem counter-intuitive, we believe there is an urgent need to bring advanced technology and more encompassing advertiser offer content to consumers seeking greater value,” said Augeo CEO David Kristal. “Some retail sectors like grocery, household essentials and health-related products are near capacity, while the travel industry, hospitality, restaurants and many local service businesses are battling to stay afloat. As things begin to improve, Figg will be uniquely positioned to connect consumers with advertisers to help accelerate commerce in the U.S. market.”
Valor Siren Ventures provided an undisclosed amount of financial support. “This is a compelling combination, to have VSV lead with new capital invigorating the operational and technology investments made by Augeo and Empyr in recent years,” added Bill Ruh, former Chairman of Empyr.
Kristal, who is also Executive Chairman of Figg, said the company chose the name Figg because it reflects its mission. “Figs define persistence and reflect the enduring quality that we felt spoke to our adaptability, sustenance and resolve,” he said.
The name also demonstrates the company’s adaptability, which is especially relevant in a time of pandemic. “Augeo was first launched during challenging times, and that experience has fortified our ability to press through adversity and grow. Today, we are looking through this current challenging time toward the “next normal.” We have a unique strategic focus around cash preservation coupled with ingenuity, adaptability and where possible, growth,” added Kristal.
Since the U.S. government launched the Paycheck Protection Program (PPP) to help keep small businesses afloat as they grapple with the economic effects of COVID-19, the program has received plenty of criticism.
Banks were vastly underprepared and under-informed about the program, which made them ill-equipped to support their customers. Adding to headaches, small business applicants were often left wondering if their application was approved and if and when they would receive funds.
Now on April 16, the program’s $349 billion has dried up. In some ways, this is a sign of success. Small businesses across the U.S. have been granted access to funds that otherwise they would now have via PPP loans. So where did the $349 billion go?
We checked in with data aggregation site covidloantracker.com which offers the following stats:
11,300+ small businesses have applied for loans
4% of small businesses have received their PPP funds
Average loan size was $216,000
The median PPP loan size is $98,500
Average payment speed is 8.2 days
The banks who distributed these loans primarily consisted of small, regional banks, which issued 76% of the funds. JP Morgan Chase paid out 10% and Wells Fargo and Bank of America each distributed 1%.
While small businesses from all 50 states received funds, more than half (54%) of the PPP fund recipients hail from Texas, while 21% came from Georgia, 30% from California, 18% from Wisconsin, and 16% from Illinois.
As for what’s next, Congress is currently working on adding more funds to the program. The cash should be available to small businesses “soon.”
Application security company Arxan Technologiesannounced yesterday that it has joined forces with two other industry firms, CollabNet VersionOne and XebiaLabs, to form a new entity, Digital.ai. Financial terms were not disclosed.
The three businesses will combine their expertise– business agility, software delivery, and application security– into a single platform. Overall, Digital.ai seeks to aid companies pursuing digital transformation to deliver digital experiences that customers trust.
“Digital.ai enables enterprises to focus on business outcomes instead of outputs, unifying value creation, delivery, and protection practices to drive efficiencies and create engaging, secure digital experiences that customers value and trust,” said Digital.ai CEO Ashok Reddy. “Now more than ever, it is critical that organizations leverage the power of business agility to optimize processes and make decisions rooted in customer centricity. Doing so will result in higher quality, more secure products that are delivered faster and drive stronger customer and employee engagement.”
Arxan’s approach to security is to protect apps “from the inside out.” The company protects the app’s binary code, JavaScript, and cryptographic keys to guard common entry points from fraudster attacks.
Digital.ai serves companies across multiple sectors including automotive, finance, digital media, gaming, insurance, medical devices, and more. The company’s customers include ABN AMRO Bank, KeyBank, KLM/Air France, Siemens, and Toyota.
Today’s news comes almost 20 years after Arxan’s launch. The San Francisco-based company was founded in 2001 by Hoi Chang and Mikhail Atallah. Since then, Joe Sander has taken the role as CEO.
News from regtech companies has been flowing in 2020. Not only that, we saw significantly more regtech companies at FinovateEurope earlier this year than we have at previous events.
To get some insight into what’s driving this, we caught up with Apiax Co-founder Ralf Huber, who has over 16 years of legal and compliance experience within the financial industry and helped launch Apiax in 2017.
Talk to us about how Apiax makes regulations digital. Aren’t most regulations already available in a digital format?
Ralf Huber: Yes and no. It depends on your definition. PDF documents are technically a “digital format” but they are one-dimensional and still require a lot of manual interpretation. Truly digital is, in our meaning, responsive and machine-readable regulations.
Considering the pace of innovation in business you would expect to find more digital solutions in legal and compliance, but in reality it is lagging far behind with manual processes and text-based resources. As well as costly and inefficient, the ambiguous terminology can be difficult to interpret, which ultimately puts the business at risk. We want to change that.
At Apiax, we transform text-based manuals into responsive and machine-readable compliance rules. These rules combine individual case attributes with relevant regulations for precise dos and don’ts to any given business scenario.
In practice, you can access guidelines through user-friendly apps and be compliant at the touch of a button – as opposed to reading 50+ pages from a policy or manual. Alternatively, companies can integrate the rules directly into their internal applications and workflows to serve as a “compliance plug-in.”
What is behind the name “Apiax”?
Huber: Apiax simply refers to what it enables you to do.
API stands for Application Programming Interface and is the technology we use to integrate our compliance rules into digital processes, like a compliance layer. It allows for rules to work behind the scenes of existing infrastructure to identify, block, or notify of noncompliant actions. Once compliance has gone digital, it supports business growth and helps create highly efficient processes whereby compliance is the only possible outcome. This is also known as compliance by design.
AX refers to “ask,” a spelling version used historically and still today in some parts of the world. In other words – ask the API!
How has COVID-19 impacted Apiax? Have any opportunities arisen out of the crisis?
Huber: COVID-19 has shaken entire industries and many companies have had to re-evaluate core business practices and compliance frameworks because of it.
We at Apiax trust the capabilities of technology and understand its central role in making organizations lean and resilient. Our digital-first solutions reflect the way we already operate and do business ourselves.
Lately, we have seen broader industry endorsement as financial institutions aim to keep their compliance units operational when team availability becomes challenging. Many companies look for ways to digitalise their core client-facing processes, a transition which requires machine-readable compliance expertise. Paper-based documentation and text-based policies do not fit into this digital workplace and accessibility is poor.
Now, more than ever, it is important to share know-how seamlessly and independently of team availability — especially with business stakeholders. Adapting to today’s challenges will help shape future best practices and key processes. We will all learn and come out of this better equipped to tackle uncertainties and change. In the meantime, we are here to help with that transition. Simply drop us a message.
Regtech seems to be becoming more mainstream in fintech. Tell us why 2020 is turning out to be the year for regtech solutions?
Huber: RegTech has traditionally taken hold in the financial services industry with its undergoing wave of technology and constant regulatory scrutiny. Building on a tough decade of post-recession initiatives and an influx of financial regulations, many organizations look for ways to minimize the burden and spend of compliance measures in favor of growth objectives and innovation.
Meanwhile, technology has made it possible to add user experience and accessibility to regulation – two concepts that used to be far away from each other. RegTech enables organizations to better stay in line with compliance standards whilst materializing growth plans with a stronger go-to-market readiness.
If you missed Apiax’s demo at FinovateEurope earlier this year, you can watch the full demo video below.
Payment acceptance and business management platform Stripe announced an extension of its $250 million Series G funding round today. The additional $600 million in funds come from existing investors including Andreessen Horowitz, General Catalyst, GV, and Sequoia.
The investment is Stripe’s largest so far and brings the California-based company’s total funding to $1.6 billion.
The company will use the new funds to hire more staff, invest in its software, make strategic acquisitions, and expand internationally. Stripe has launches pending in Bulgaria, Cyprus, the Czech Republic, Hungary, Malta, and Romania.
Stripe first announced its Series G round in September of last year, in a pre-COVID-19 world. However, despite the vast differences in the global economy at that time, the company’s valuation has actually increased– from $35 billion last September to $36 billion today.
A $1 billion rise in valuation is rare these days, when startups across the globe have been told to brace for down rounds. The company attributes this boost to the increased digital adoption that has occurred as a result of businesses moving their operations online because of the coronavirus.
“People who never dreamt of using the internet to see the doctor or buy groceries are now doing so out of necessity. And businesses that deferred moving online or had no reason to operate online have made the leap practically overnight,” said John Collison, Stripe president and co-founder. “We believe now is not the time to pull back, but to invest even more heavily in Stripe’s platform.”
Stripe was founded in 2010 and has since padded its client base with well-known firms such as Caviar, Coupa, Just Eat, Keap, Lightspeed, Mattel, NBC, Paid, and Zoom– a partnership that was just unveiled today.
Taxes, especially in the U.S., can be anxiety-inducing not only for consumers but also for small businesses. And even though this year’s tax filing deadline has been extended to July 15, the filing and payment requirements remain unchanged.
“The daunting task of gathering documents for a year that has passed is one that is difficult for small business owners, especially when they already feel overwhelmed at tax time,” said Lil Roberts, CEO and founder of Xendoo. “Coupling that pain point with small businesses feeling that federal tax is a “black box” and understanding how to maximize tax savings is also extremely frustrating.”
Fortunately, where there is a financial problem there is a fintech solution. There are many fintechs available to help both individuals and businesses not only understand their taxes but also to facilitate tax payment. Below, we’ve highlighted the top 10 tax-focused fintechs.
ANNA
ANNA offers a business bank account and mobile tax app that help merchants with their invoicing, expense tracking, and taxes. The company’s app reminds businesses about tax deadlines and helps them prepare by estimating how much they owe as they earn revenue. ANNA also has a team of accountants to help prepare and submit tax returns.
Avalara
Avalara offers tax compliance tools for a range of businesses. The Seattle-based company, which counts customers such as Pinterest, Adidas, and Bed Bath & Beyond, offers products to help companies calculate sales tax, gather data to prepare and file tax returns, as well as collect, store, and manage tax documents on behalf of the business. Avalara offers products tailored to specific businesses, including ecommerce, lodging, communications, and restaurants.
Credit Karma
In 2016, financial health company Credit Karmalaunched a free tax filing service. Interestingly, the company was recently purchased by TurboTax parent Intuit for $7 billion. In comparison with Credit Karma’s free service, TurboTax charges users anywhere from $60 to $120 for a federal return and $45 for a state return.
DAVO
DAVO launched in 2011 to be the ADP for merchants’ sales tax. In other words, DAVO automates the entire sales tax process on a business’ behalf. The company connects to the merchant’s point-of-sale technology to collect sales data and sets aside taxes on a daily basis. When sales tax is due, DAVO files and pays on the small business’ behalf.
Gusto
HR and payroll company Gusto has a robust set of services to make small business owners’ lives easier. The company automatically files payroll taxes and distributes I-9s, 1099s, and W-2s to employees. Gusto also helps businesses stay compliant by staying up-to-date on changing tax laws and doing all tax-related calculations on the business’ behalf.
Refundo
Refundo offers a suite of solutions to help tax preparers bring their operations into the digital age. Among the company’s products are mobile document transfers, audit assistance, tax preparation fee collection service, payment acceptance tools, and refund advance technology. At the end of the day, the company’s solutions not only make the tax preparer’s life easier, they make the lives of their taxpaying clients easier, as well.
RoamHR
With a mission to make self-employment easier, RoamHR automatically removes tax withholdings from users’ accounts once they get paid and places the funds into a RoamHR Tax Withholding Account. The company also offers tools that help users track deductible expenses, such as mileage, and helps them file their business taxes each quarter.
Taxnology
Taxnology has built a digital tax compliance center, a web-based solution to help businesses manage their taxes digitally. The company stores business’ historical tax data in the cloud so that it can be used for future cash flow planning and budget purposes or retrieved in the event of an audit. Taxnology is currently only available in Hungary.
Xendoo
Xendoo offers bookkeeping and CPA services that connect with businesses’ financial accounts to deliver monthly reports, business insights, and tax filing. Because Xendoo has a comprehensive view of the merchant’s financials, the company is able to provide tax consulting services, as well.
Xero
Cloud accounting software company Xero has been helping small businesses with their bookkeeping since it was founded in 2006. The company also offers solutions to help tax preparers who have Xero clients automate and customize tax-related tasks. For businesses who prepare taxes on their own, Xero offers tools to file taxes online, as well as prepare sales tax returns using software that leverages a company’s sales data to automatically calculate the taxes.
Roberts added one final thought for those businesses working toward that July 15 deadline. “For a smooth process, best practice is to have monthly bookkeeping done so tax benefits are being collected all year, and having books in order to make tax time more peaceful.” And during a pandemic, anything that can make a process more peaceful is worth doing.
Digital identity verification platform Onfidoreeled in $100 million in a round led by TPG Growth this week. Salesforce Ventures, Microsoft’s M12 Capital, and others also participated. The London-based company’s total investment now sits at just over $182 million.
The company, which counts TechStars, YCombinator, and 500 Startups among its previous investors, will use the funding toward R&D and global expansion. Specifically, Onfido plans to boost its operations in the North American market.
Onfido started off in 2012 with $20,000 in funding from Oxford University and made those funds last for a whole year. After that, the company said it could go one of two routes: it could grow quickly and rely on investment to sustain operations or it could opt for slower growth but be financially self-sufficient.
“We’ve naturally chosen the grow-fast path because we strongly feel that the time to solve the digital access problem is overdue, and urgently needs to be solved, for good,” said CEO and Co-founder Husayn Kassai.
From the outset, Kassai and fellow co-founders Eamon Jubbawy and Ruhul Amin focused on creating a new standard for digital access that looks beyond credit bureaus for a more inclusive approach that stops fraud without compromising the user experience. “Identity is broken and getting worse, contributing to $2 trillion in laundered money,” said Kassai.
To help overcome this, Onfido tapped the power of machine learning to assess 4,500 types of documents from 195 countries for authenticity, as well as match document photos to the user’s selfie. The technology, which the company showcased at FinovateFall 2018, can be used for user onboarding, identity verification, fraud detection, age verification, and to help meet AML and KYC requirements.
“We didn’t fundraise to just get to the next milestone, we need the funding as we’re changing the world,” added Kassai.
With more than 350 employees across nine offices in London, San Francisco, New York, Albuquerque, Lisbon, Berlin, Paris, New Delhi, and Singapore, Onfido helps more than 1,500 companies verify their users. Among the company’s clients are Revolut, Zipcar, Expensify, and Bitstamp.
COVID-19 has rewritten so many rules about the economy. It is now more difficult than ever to underwrite risk and ultimately understand if a consumer will pay back their loan.
The Wall Street Journal reported late last month that many lenders have implemented stricter lending requirements because of this challenge. In some ways, this is necessary for banks to protect themselves. However, the more stringent standards also create hardships for consumers who could really use some extra cash right now.
Policymakers have intervened to encourage banks to loosen their lending standards to meet consumer needs during this time. Banks are being told not to pay attention to credit as much as they used to and to not collect more than a year’s worth of data for underwriting.
“There is significant pressure by the Small Business Administration to make unsupported loans,” said career banker and author Richard Lawless. “Banks are being told, ‘don’t pay attention to bad credit.’ This will result in loan losses of 10%, or more. All of which amounts to the new CDC guidance for banks, ‘don’t wear you mask, don’t wash your hands, touch everything, and gather in large groups. It’s okay, the government has got your back.'”
Fortunately, non-traditional underwriting models have been gaining popularity in the fintech space. Many of these models don’t rely on a borrower’s financial standing, but instead pull data from alternative sources such as social media. Two things fueling this recent explosion include the availability of more data and the advanced expertise of AI.
California-based Neener Analytics relies on both of these aspects– the abundance of data as well as AI– for its risk outcome predictor. The company offers businesses an “automated psychologist” that tells companies the likelihood that a prospective borrower will pay back a loan. Unlike the way many companies analyze creditworthiness, Neener Analytics doesn’t look at whether or not the consumer’s financial situation is in good shape. “The question isn’t can they pay us back– that’s easy to figure out,” said CEO Jeff LoCastro during his demo at FinovateSpring 2019. “The question is will they.”
The company places a lot of weight on what it considers small data and human data. Regarding the impact of the COVID-19 crisis on consumer credit scores, LoCastro said, “The market is going to be hit with a tidal wave of newly undecisionable consumers: consumers who on a Monday were a good bet, but by Friday will suddenly be unacceptable. They missed payments because of a global COVID shut-down…not because they are a bad risk; this is a health crisis, not a financial one. But the big data algorithms can’t account for that… Only small data can see beyond COVID; only through small data is the consumer still a distinctive individual human being endowed by a unique matrix of conditions and domains that manifests in binary outcomes.”
To help businesses underwrite risk in this new environment, Neener Analytics’ tool turns to social media. With over 70% accuracy, this “automated psychologist” tool can be summoned via a one-click decisioning tool or a chatbot dubbed ARIA. Both methods eliminate the need for lenders to ask more questions on loan applications, which often leads to abandonment.
“We all know sometimes bad things happen to good people,” added LoCastro. “The only way to bridge this is through human data . . . not through more underwhelming historical, transactional, or relational approaches. With Neener Analytics, consumers who were a good bet on Monday . . . will still be a good bet on Friday.”
Regtech company Kyckr, which first partnered with its client Citigroup in 2016, has extended its relationship with the bank. Kyckr announced today that it will now provide Citi Commercial Bank with its client verification platform.
Kyckr’s verification platform has information on more than 200 company registries and 170+ million legal entities across 120 countries. Citi Commercial Bank will use the company’s API to verify business information using documents that detail ownership and control, financials, solvency, and more when onboarding new commercial clients.
“Onboarding new clients when opening a bank account is the first stage in customer verification, involving gathering vital information on the customer and conducting identity checks to comply with Know-Your-Customer regulations,” said Kyckr CEO Ian Henderson. “More and more businesses are looking into automated and accurate means of adhering to Anti Money Laundering and Know Your Customer obligations to prevent fraud, and this is where our technology is well positioned in the market.”
Along with Citi Commercial Bank, Kyckr also serves Citi’s Institutional Clients Group (ICG) and Trade and Transaction Services (TTS) with its corporate data solutions.
Kyckr has provided APIs and cloud-based automated decision engines to help companies with KYC compliance, due diligence, and customer onboarding since it was founded in 2007. The Australia-based company is listed on the ASX under the ticker KYK and has a market capitalization of $10.85 million (AUD $16.9 million). Since going public, Kyckr has raised $11 million in post-IPO equity.
In addition to Citigroup, Kyckr’s clients include DemystData, the Bank of Ireland, and others.
