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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Customer segmentation identification company SheerIDlaunched its Employment Verification tool today in 191 countries. The move enables brands to identify and acquire new customers across the globe.
SheerID’s segmentation tool enables companies to identify consumer subsets such as military members, students, and teachers to help personalize communications and increase customer acquisition via gated, personalized offers for different employee groups. Today’s geographical expansion of SheerID’s technology will help brands build their acquisition efforts on a global scale.
Along with employment verification, SheerID has updated its age range verification tool, which is available in 23 countries. With this offering, brands can more efficiently target consumer groups such as seniors and young adults.
“With this latest expansion of verification types, we’re making it easy for brands to extend their identity marketing campaigns beyond the U.S. and personalize offers in new ways, to new potential customers,” said Jake Weatherly, SheerID CEO. “The opportunity to use personalized offers to acquire consumer tribes is endless, and this latest expansion is yet another step forward in meeting customer demand.”
SheerID leverages 9,000 data sources and 1.3 billion identity attributes. Among the company’s clients are Amazon, Lowe’s, Spotify, and T-Mobile. SheerID, which recently showcased at FinovateSpring 2019, has raised $96 million since it was founded in 2011.
Online marketplace for small business loans Lendiolanded $55 million in combined debt and equity funding today. The investment more than doubles the company’s previous funding, bringing its total to $108.5 million.
The equity portion of the Series E round was led by Mercato Partners’ Traverse Fund, which contributed $31 million, and included contributions from existing investors Napier Park Financial Partners, Comcast Ventures, Blumberg Capital, Stereo Capital, and Runa Capital. Signature Bank led the debt facility with $24 million.
Founded in 2011, Lendio serves as a matchmaker that connects small businesses seeking funding with its network of over 75 lenders. Since Lendio launched at FinovateSpring in 2011, the Utah-based company has funded more than 100,000 loans totaling $2 billion. Over the past two years, Lendio has seen an average year-over-year growth rate of 75%.
CEO Brock Blake called today’s investment a “significant milestone” for the company. “With these funds, we are strongly positioned to grow our existing platform as a trusted loan facilitator that supports both lenders and borrowers, while building out a range of new integrated lending services that get the right loans into the right hands at the right time.”
Lendio will use today’s investment to increase the scope and precision of its flagship loan marketplace; expand lender services functions, which provide lenders access to a white-labeled online loan application; and enhance its small business bookkeeping platform, Sunrise by Lendio. The company launched Sunrise last year after acquiring online bookkeeping startup Billy. The new service aims to help Lendio’s small business clients manage their cash flow and monitor their overall financial health.
“Lendio’s ability to combine data analytics with the human touch to connect small businesses quickly and precisely with ideal lending partners has made all the difference in its success,” said Ryan Sanders, senior investor at Mercato Partners Traverse Fund. “Lendio uniquely solves the problem of inefficient capital for small businesses by bridging lenders and borrowers. They are able to connect both sides and facilitate loans faster and more effectively between small business owners and lending institutions. Lendio’s impressive growth is a result of its technology-backed personalized service which has created a loyal and growing following in the industry.”
Digital money transfer service Azimoannounced today that it has partnered with fellow Finovate alum and blockchain payment solutions company Ripple to power cross-border payments to the Philippines.
Fueling these payment transfers is Ripple’s On-Demand Liquidity (ODL) solution that uses XRP to source liquidity and complete money transfers within three seconds. This time reduction results in a 40% to 60% cost savings over the traditional method that requires businesses to hold cash in pre-funded accounts. ODL has proven especially useful for international payments in emerging markets. The technology is currently available in the U.S., Mexico, Australia, Europe, and the Philippines, with plans to expand across APAC, EMEA, and LATAM.
Azimo, which plans to expand its use of ODL to more markets in 2020, opted to start with the Philippines because it is one of the top remittance destinations. In 2018, the region received $34 billion in remittance payments.
Ripple’s ODL
“We’ve been interested for a long time in the potential of digital assets like XRP to make cross-border payments better for customers,” said Azimo CEO Richard Ambrose. ”Ripple’s ODL solution has significantly reduced the cost and delivery time for cross-border transfers, and our customers are seeing the benefits. As more banks and financial institutions use ODL, we believe it has the potential to replace current methods of foreign exchange trading and to reduce settlement time to close to zero.”
Founded in 2012, Azimo has amassed one million customers. The company facilitates money transfers from 25 countries to more than 200 regions across the globe.
Ripple has 300+ customers in more than 45 countries and six continents. The company’s flagship global blockchain network, RippleNet, facilitates faster and cheaper payments in 40+ currencies.
Global financial platform Revolut has secured its place as the U.K.’s most valuable fintech. The London-based company secured a $500 million investment, bringing its total funding to $836 million.
With this, Revolut’s valuation tripled, escalating to $5.5 billion. As a comparison, digital bank Monzo was valued at $2.6 billion last year. Revolut’s funding was led by U.S. investor Technology Crossover Ventures while a handful of undisclosed existing investors also contributed.
The funding will be used to enhance Revolut’s customer experience, grow its workforce, and create new products that entice users to log into their accounts more frequently. As a part of this, Revolut will use the funds to enhance Premium and Metal subscription account offerings. These paid products are not only a significant part of Revolut’s business model, they also show huge promise, growing by 154% last year alone.
“We’re on a mission to build a global financial platform – a single app where our customers can manage all of their daily finances, and this investment demonstrates investor confidence in our business model,” said Revolut CEO and founder Nik Storonsky. “Going forward, our focus is on rolling-out banking operations in Europe, increasing the number of people who use Revolut as their daily account, and striving towards profitability.”
Revolut employs 2,000 people across 23 global offices. The company counts more than 10 million customers and has processed one billion transactions worth $130 billion since it was founded in 2013.
The company has seen significant success since its early days. Just last year Revolut increased customer growth by 169%, boosted the number of daily active customers by 380%, and saw year-over-year financial revenues grow by 354%. The company aims to continue this growth by launching lending services for retail and business customers, extending high interest savings accounts beyond the U.K., improving customer service, and rolling out banking operations across Europe.
Deepfakes, or synthetic media that uses AI to distort a person’s likeness to imitate another’s, can be entertaining. After all, watching Ross Marquand evolve into 11 different actors in 3 minutes is impressive!
However, as most are aware, there is a dark side to deepfakes when videos threaten democracy by manipulating the public for political gain, or ruin reputations with revenge porn, or spread damaging misinformation. In general, there are two issues with malicious deepfakes. First, deepfakes have the potential to allow a person to pose as someone they are not. Second, they allow criminals to deny a wrongdoing by claiming a genuine video is fake.
Unfortunately, the fintech industry is not insulated from deepfake headaches of its own.
The problem
There are two different types of deepfakes– audio and video. Both media types can manifest multiple issues within financial services. Here is a list of weak spots that deepfakes threaten:
Fraudulent onboarding, such as a criminal posing as someone else or creating a new, synthetic identity
Fraudulent payment authorizations and transfers
Impersonation of business leaders for insider trading scams or tricking employees into taking nefarious actions
These examples aren’t just potential threats. Last March, a voice-based deepfake was used to impersonate the CEO of a U.K.-based energy firm. The fraudster called one of the CEO’s employees, convincing him to transfer $243,000 to a supplier based in Hungary. The money was then moved to a bank account in Mexico and the thief still has not been caught.
Given the wide variety of fraud opportunities, identity verification company iProov recently surveyed 105 cybersecurity decision-makers at U.K.-based financial institutions. The company, which won Best of Show at FinovateEurope earlier this month, detailed the results in a report.
According to the findings, 13% of firms surveyed had never even heard of the term “deepfake.” And while 31% of respondents had no plans to combat deepfakes or were not sure if their organizations had protective measures in place, 28% had already implemented such measures. The survey also reported that 4% of organizations said that deepfakes pose no threat whatsoever to their company. However, the majority of respondents, 40%, said that deepfakes pose a “slight threat.”
The solution
The fintech industry is ripe with security firms, such as iProov, that use AI to combat both video and audio deepfakes with anti-spoofing technologies. Many security companies also offers liveness detection to detect artificial representations of actual clients. Liveness detection plays a major role in detecting identity spoofing during new client onboarding, when cybercriminals may attempt to use a stolen drivers license along with a mask created from a photo of the person in order to set up a fraudulent account. Financial services organizations can also use liveness detection to thwart fraudulent login attempts for technology that uses facial recognition.
Fraudsters, by definition, show complete disregard to regulations. Nevertheless, lawmakers are making efforts to crack down on the technology. In June New York congresswoman Yevette Clark introduced the Deepfakes Accountability Act in the house. that would require video creators to disclose if a video was altered and allow victims to sue. As TechCrunch points out, the act would be difficult to enforce, but at least it’s a start.
There is not much fintech to come out of the state of Wyoming (a quick search on Crunchbase yields 28 results). Today, however, one more startup is added to that mix.
That’s because Avanti Financial, headquartered in Cheyenne, Wyoming, announced plans to launch a bank to serve the digital asset industry. The company recently applied to obtain a bank charter from the Wyoming Division of Banking under the Cowboy State’s special-purpose depository institution (SPDI) law.
If Avanti’s application is approved by the state of Wyoming, the startup will begin operations in early 2021.
Avanti seeks to fill the gap where traditional U.S. financial institutions fall short. In many cases, institutional customers that use digital assets lack a place to engage in payment, custody, securities, and commodities activities.
Founder and CEO Caitlin Long said, “A crucial step in the digital asset industry’s evolution is the formation of a new bank dedicated to bridging digital assets with the U.S. dollar payments system in a compliant manner, and the provision of custodial services that meet the strictest institutional standards.” Long added that Avanti’s launch will “unlock many new products and services around digital assets that only a regulated U.S. bank can provide directly.”
Avanti, which recently landed an undisclosed amount of seed funding, is partnering with Blockstream, a Canada-based group that creates “products and networks that make financial markets more efficient.”
Dr. Adam Back, Blockstream CEO and co-founder, said, “This partnership combines the best in Bitcoin applications with the optimal regulatory vehicle for delivering products and services to institutional customers that require regulated providers. Blockstream’s platforms fit well with Wyoming’s property-rights centric digital asset laws, which will enable Avanti to introduce products into U.S. dollar markets that do not exist today.”
Banking giant BBVA and VC firm Anthemis have backed U.K.-based Wollit in a $1.3 million (£1 million) Seed round.
Founded last year, Wollit aims to support the 43% of U.K. residents who lack a stable income by helping gig economy workers and independent contractors smooth out their cashflow.
Wollit will use the funds to fuel its flagship product, the Wollit Income Promise. According to Wollit CEO Liad Shababo, the new tool “offers a financial safety net for the 14 million U.K. workers whose income fluctuates from month to month.”
The Wollit Income Promise is different from credit cards and loans because it personalizes financing to each user’s individual financial situation. When workers earn less than usual, Wollit provides interest-free top-ups that the user repays once they start earning more.
“With this, we set to end [gig workers’] monthly gamble of feast or famine and provide a safer, more sustainable option than the short-term, risky alternatives,” said Shababo. “Wollit is here to establish a new status quo in financial services. We want to make sure everyone has access to financial wellbeing.”
The investment is one of the first from the BBVA & Anthemis Venture Creation Partnership, which was formed in 2018. “The BBVA & Anthemis Venture Creation Partnership identifies early-stage fintech companies who are looking for both financial and strategic support to accelerate the growth of their business,” said Farhan Lalji, Principal at Anthemis. “This means Wollit now has access to mentors and resources inside the Anthemis and BBVA ecosystems beyond pure capital – including product development, data science, business development, and talent resources – as they grow their business.”
Startups such as Wollit underscore society’s need for financial services geared toward the gig economy. Banks have historically failed to serve consumers with unpredictable income. As Ron Shevlin points out in his piece Gig Economy Banking Is Booming (And Banks Are Missing The Boat), fintechs and challenger banks have been the first to take a chance on this growing consumer segment by serving them with unique products and services that cater to their fluctuating income.
E*TRADE, the digital brokerage behind the stock trading baby commercials in the early 2000s (remember those?) has agreed to be acquired by investment banking giant Morgan Stanley. The all-stock transaction is valued at $13 billion.
The deal is expected to close in the fourth quarter of this year.
Since it was founded in 1982, E*TRADE has built up 5.2 million client accounts and $3.6 billion in assets under management. This will bolster Morgan Stanley’s 3 million client relationships and $2.7 trillion in assets under management. Adding E*TRADE’s digital capabilities to Morgan Stanley’s more traditional offerings will grant Morgan Stanley a more well-rounded approach that ranges from high tech to high touch.
“E*TRADE represents an extraordinary growth opportunity for our Wealth Management business and a leap forward in our Wealth Management strategy. The combination adds an iconic brand in the direct-to-consumer channel to our leading advisor-driven model, while also creating a premier Workplace Wealth provider for corporations and their employees,” said Morgan Stanley CEO James Gorman. “In addition, this continues the decade-long transition of our firm to a more balance sheet light business mix, emphasizing more durable sources of revenue.”
Logistically, E*TRADE CEO Mike Pizzi will lead Morgan Stanley’s E*TRADE business and be charged with overseeing the integration. “By joining Morgan Stanley, we will be able to take our combined offering to the next level and deliver an even more comprehensive suite of wealth management capabilities,” said Pizzi. “Bringing E*TRADE’s brand and offerings under the Morgan Stanley umbrella creates a truly exciting wealth management value proposition and enables our collective team to serve a far wider spectrum of clients.”
Today’s deal comes at a time when brokerages across the U.S. are in a race to zero, lowering trading fees as much as possible to compete with consumer attention. Last year Charles Schwab eliminated fees for stock trades and a month later bought TD Ameritrade for $26 billion.
Social trading and investment platform eToro has never been one to stand still for very long. The company’s development cycle is fast enough to make even the most sprightly fintech jealous.
Roots
eToro was founded by David Ring, Ronen Assia, and Yoni Assia in 2007 with a mission to make trading accessible to anyone, anywhere, and reduce dependency on traditional financial institutions. The company has come a long way since its first iteration, which was, by today’s standards, simple.
Starting up
eToro started as an easy-to-understand online trading platform that made investing more digestible with the use of graphics. Three years after its initial launch in July of 2010, the company unveiled CopyTrader, its social trading platform that enables users to copy the trades of successful investors. The model proved popular among investors and gave eToro notoriety within the fintech industry. After CopyTrader the company launched a mobile app, introduced stocks, unveiled a new interface, and launched CopyPortfolio.
This screenshot from eToro’s FinovateEurope 2011 demo gives off major retro fintech vibes.
Move into cryptocurrencies
In 2013, eToro took a chance on cryptocurrencies, adding Bitcoin trading via CFDs. From there, the company continued to advance its cryptocurrency offerings. Here’s what the past seven years of innovation have looked like for eToro:
2017: enabled users to trade and invest in Ethereum, XRP, Litecoin, and others
2018: launched its cryptocurrency investment offering to users in the U.S.
2019: partnered with TIE to deliver sentiment-driven investment strategies
2019: launched the eToro Club, a personalized trading experience
Best of Show accolades
eToro’s most recent Finovate appearance was FinovateEurope 2017, where CEO and Founder Yoni Assia, along with VP of Product Tal Ben-Simon, took the stage to demoCopyFunds for Partners. The duo won Best of Show bragging rights for the presentation, marking eToro’s fourth Best of Show award since its first Finovate demo in 2011.
To see eToro’s evolution yourself, watch the company’s most recent 2017 demo in contrast with its 2011 demo.
When Lending Club was founded in 2007, the startup aimed to serve as a place to help borrowers avoid dealing with banks. In a somewhat ironic move today, that same startup is becoming a bank itself.
The move is made possible through Lending Club’s acquisition of Radius Bank, an online-only community bank founded in 1987 with more than $1.4 billion in assets.
It’s a logical purchase. Both Lending Club and its U.S. competitor Prosper have struggled with the classic chicken and egg conundrum– they can’t lend money to borrowers without investors ready and willing to lend, and they can’t find people willing to lend without enough qualifying borrowers. By becoming a bank, Lending Club has now adopted a pool of borrowers while having access to customer deposits to lend to those borrowers.
The deal is subject to regulatory approval and is expected to close in 12 to 15 months.
Radius President and CEO Mike Butler called the acquisition “a perfect marriage.” He added that, “with LendingClub bringing the leading digital asset generation platform, and Radius contributing a leading online deposit gathering platform,” they are set up for “long-term success.”
“This is a transformational transaction that allows us to reimagine banking in a way that is free from legacy practices and systems and where the success of LendingClub is aligned with the success of our customers,” said Scott Sanborn, CEO of LendingClub.
Lending Club isn’t the only alternative lender with aspirations to become a bank. U.K.-based P2P lender Zopa is currently working on launching a bank of its own and small business lender On Deck Capital plans to seek out a bank charter this year.
Fraud detection and prevention company Breach Clarity announced this week it has developed a new platform to help financial service providers offer personalized protection for their customers.
The machine learning-powered platform, dubbed Breach Clarity Premium for Financial Services, offers two sets of tools, one for the financial services company and one for the end consumer.
“Financial institutions are in a bad spot when it comes to data breach fallout,” said Breach Clarity founder Jim Van Dyke. “These breaches, most of which they have zero control over, are coming fast and furious, yet the actual damage can take years to occur. We first developed Breach Clarity to help the consumer fight back against the routine theft of their personal information. Now, we’re equipping their financial providers with much greater intelligence to help them strengthen everyone’s financial health.”
Founded in 2019, Breach Clarity analyzes data breaches, scores them in real-time based on 1,000 factors, and offers ideas for protective measures. The database behind the consumer-facing tool includes more than 4,000 data breach incidents, a number that grows by 50 each week.
Breach Clarity Premium for Financial Services has multiple benefits for financial services and their customers. The new tool details the most effective actions both parties can take, based on the information that was compromised, to mitigate loss in the event of a breach. The offering also enables consumers to search for data breaches that impact them without leaving their bank’s website or mobile app.
Breach Clarity is headquartered in Walnut Creek, California. Van Dyke recently demoed Breach Clarity at FinovateFall 2019 in New York.
One of my favorite sayings is, “If you’re not living on the edge, you’re taking up too much space.” Can the same be said of banks who don’t use edge computing? Not exactly.
First, let’s take a look of what edge computing is as it relates to the financial services sector. Edge computing refers to when data processing and storage occurs closer to the person or item creating the data. It is an alternative to cloud processing, in which data is processed at a data center that could be located thousands of miles from the source.
The classic edge computing illustration is an autonomous vehicle. The AI that the driverless car uses has to process a lot of data very quickly in order to be a successful (and safe) driver. Taking too long to decipher between a tree and a person could mean life or death, so being able to process that data as close to the vehicle as possible is key.
Edge computing sounds fancy and has obvious benefits across the technology landscape, but what can it do for banks?
Increase security
Because edge computing eliminates the need to send consumers’ personal information into the public cloud, the security risks inherent to the process of moving data are eliminated. The closer the data stays to its source, the fewer the places cyberattackers can penetrate.
Lower latency
With edge computing, data is able to be processed much faster since it does not have to travel to and from a data center. This increased speed can be beneficial when businesses must make decisions in near-real time.
Boost the use of the Internet of Things (IoT)
Banks are increasingly relying on IoT to interface with their customers. Bank apps, ATMs, kiosks, and technologies such as HSBC’s Pepper all require increased data processing capability. Edge computing opens up possibilities for more IoT options with fewer data limits.
Increased innovation
When security is less of a concern, speed is no longer an issue, and a bank has more options for IoT implementation, innovation is able to flow more freely. This, combined with edge computing’s potential cost benefits, can help banks implement new solutions that otherwise may have been on the back burner.
Lower cost
When there is no need for a data center, costs associated with the data center itself, as well as the costs of sending data back-and-forth to data centers or the cloud are diminished.
