Starling Bank Flies with $77.5 Million in New Funding

Top U.K.-based challenger bank Starling Bank raised $77.5 million (£60 million) from existing investors Merian Global Investors and JTC.

Today’s investment brings Starling’s total funding to $417 million (£323 million).

“The support of our existing investors represents a huge endorsement of our business strategy, as we continue to ramp up our growth,” said Anne Boden, Starling Bank founder and CEO. “We’re constantly innovating and have big ambitions to turn Starling into a world-leading digital bank.”

Starling will use the funding to support “rapid expansion” efforts and to create products and services that compete with traditional financial institutions. Helping motivate its employees to push for this expansion, the bank is awarding shares to its staff.

“We could not do this without the support of our 800 employees, who work so hard to provide a better banking experience for our customers, giving them more control over their finances. So I’m thrilled to be giving shares to them,” said Boden.

Since launching its banking app in 2017, Starling has amassed 1.25 million accounts and holds $1.61 billion (£1.25 billion) in assets under management. The bank was founded in 2014 and is headquartered in London with offices in Southampton, Cardiff, and Dublin.

Divvy Launches Lightweight Funding Option for Businesses

Business spending and expense management platform Divvy is opening up new financing possibilities this week for its business clients with the launch of Divvy Capital.

The new funding option is done via invoice financing. Divvy enables its business customers to “float” their invoices for terms of one, two, or three months. Repayment is straightforward and there is a single, flat fee with APRs ranging from 10.8% to 11.4%.

The Utah-based company describes the new offering as a “flexible, lightweight” funding option that is separate from the Divvy Credit Card, which gives businesses both a physical and virtual Mastercard that offers 1% cash back plus 15% to 50% off select travel expenses.

Since all of Divvy’s current business clients are automatically pre-approved, there is no need to wait on credit approvals and funds are disbursed in near-real time. The company has been testing the new financing model for the last six months and it is now opening it up to its wider customer base.

“Divvy Capital is our most important public move in that direction,” the company stated in its press release, adding, “but stay tuned—2020 is full of many more big announcements to come.” A look at the Divvy Capital page reveals that the company is planning to launch short-term loans of up to $50,000 for terms of up to 12 months and and option that allows businesses to float a portion of their credit card balance for a fixed fee.

SoFi Secures The Bancorp as Debit Card Issuer

Financial services startup SoFi is partnering with The Bancorp to serve as the company’s backend banking provider and card issuer for SoFi Money.

The company launched SoFi Money last year to serve as an alternative banking product. SoFi’s challenger bank features include spending and budgeting tools, billpay, remote deposit capture, peer-to-peer payments, and a high interest cash management account.

Accountholders also have access to SoFi’s flagship borrowing products such as student loan refinancing, private student loans, personal loans, and home loans. As a competitive edge, SoFi also offers member benefits such as career coaching and VIP access to the SoFi Stadium, courtesy of last month’s partnership with Mastercard.

A rendering of the SoFi Stadium, set to open this summer in Inglewood, CA

The Bancorp is one of the top private-label debit and prepaid card issuers in the U.S. for Visa, MasterCard, Discover, and UnionPay. The company has more than 75 million prepaid cards in distribution and processes 1.1 billion transactions each year.

“As a true pioneer in the fintech space, SoFi has been setting and surpassing industry standards by providing outstanding products and services to its members,” said Damian Kozlowski, President and CEO of The Bancorp. “We are incredibly proud to be selected as a key partner that will support SoFi’s mission to deliver innovative products and services to new and existing members.”

Everything Fintech at Davos 2020

The five-day World Economic Forum wrapped up late last month. The event, based in Davos, Switzerland, hosted some of the brightest minds in the world to speak on some of the biggest issues facing our society today.

We combed through the agenda to bring you a view of the discussions through a fintech lens. Here’s a summary of some of the most interesting fintech-related topics covered at the global event.

Shaping the Future of Financial and Monetary Systems
The majority of this session wrestled with digital transformation. One of the overarching themes in this discussion as it related to digital transformation was the idea that we’ve recently reached a major inflection point in the banking industry. That is, banks are no longer adding products and services to their existing models, but the very nature of how they operate is beginning to change. And as these changes happen, banks can only move as fast as their customers are willing to move alongside them.

Shaping the Future of the Digital Economy
This panel represented a range of industries. Specific to the financial services industry, PayPal CEO Dan Schulman said he expects the fintech industry to see more innovation in the next five years than it has seen in the last 30. The cause of this development speed comes down to AI. Along with AI, digital transformation was another hot topic. The panel agreed that digital transformation has opened up new opportunities and in many cases requires firms to revamp their entire business model.

From Token Assets to a Token Economy
This session sought to answer the question, “how can tokenization make illiquid assets accessible without creating new financial risks?” The panelists explained how tokenization makes fractional ownership possible with physical goods, such as a famous painting or a piece of real estate. One overarching theme that pulsed throughout the discussion is that global regulation is behind in the tokenized asset realm. So while technology may be advanced enough for a tokenized asset economy, we are still many years away from it being commonplace.

How to Implement Responsible AI
The World Economic Forum has teamed up with the government of Singapore to create a model framework of governance for the use of AI. This panel discussed the new framework and how it addresses the explainability of AI, which aims to be simple enough for all players to understand. As a part of the effort, the group has also released a toolkit for boards of directors to understand how to conduct AI oversight.

The Real-World Impact of 5G
This session hosted representatives from Verizon, Qualcomm, and ABB. The group addressed political and policy issues around security and trust. Secondary to the conversation were social concerns. The first considered if 5G will cause a digital divide between societies that have 5G and those that do not. The other social concerns addressed were potential climate change and health concerns.

Global Cybersecurity Outlook
The general consensus of this panel is that we are currently losing the battle of cybersecurity. The panelists looked at who is ultimately responsible to act as the authority to govern fraudsters, discussed the balance between security and consumer privacy, and considered whether businesses’ cybersecurity spending is happening in the right areas. Finally, the panelists concurred that security is not an IT problem, but that it is a business problem and everyone at the organization should be a security expert to some extent.

Creating a Credible and Trusted Digital Currency
This discussion looked at opportunities, challenges, and concerns around digital currencies. The panel acknowledged that digital currency adoption has a certain and definite future. Representatives addressed real use cases, including cross-border payments, financial inclusion, and fraud prevention. Among the discussion points were stablecoin competition, central banks’ participation, as well as cultural effects. Much of the dialogue circled back to digital currencies issued by central banks (CBDCs).

Other sessions worth a look include Valuing Unicorns, Building Trust in Data Flows, and Investing in the next Frontier.

Stop Looking at Your Customer Base as a Faceless Mass

If you ask Balázs Vinnai, president of W.UP, one size does not fit all when it comes to banking. In fact, his company’s entire premise is built around creating a personalized user experience.

Earlier this month we chatted with Vinnai about the struggle that banks face when it comes to tailoring their user experience to suit each customer individually.

Balázs Vinnai

Finovate: Why do you think banks have such a difficult time creating a personalized user experience?

Vinnai: There are several reasons: patched-up IT systems, outdated vendors, a lack of entrepreneurial spirit, just to name a few. But legacy thinking is by far the biggest culprit. Many incumbents still think that digital transformation is about buying the right technology and streamlining a few processes. That’s part of it, of course, but mostly it’s about understanding customers as much as possible and catering to their very needs.

Finovate: What is one small step banks can take to improve their customer experience?

Vinnai: Stop looking at their customer base as a faceless mass. Banking customers are individuals with unique needs and problems, goals and habits. With the help of advanced data analysis, banks can do much more than segment or micro-segment them. They can create segments-of-one and laser-target each and every customer with the right financial solutions.

Finovate: How does improving the customer experience ripple out to add value into other areas of a bank, such as fraud prevention?

Vinnai: Personalization in general is becoming a means of survival instead of added value. Completely rethinking how customer experience is delivered might seem a bit radical today but, in the long run, failing to do so will have more severe consequences. A Gartner study says that by 2030 as many as 80% of traditional financial service providers will go out of business if they can’t catch up with digital-savvy competitors.

Finovate: Tell us about what W.UP does and what sets the company apart from its fintech competitors.

Balázs Vinnai: W.UP is a personalization platform that allows banks to understand and meet their customers’ needs in real time. It comes with pre-built use cases that are easy to set up and tailor to banking systems, processes, and goals. What makes it different from other AI-driven tools is that not only does it give customers a better insight into their finances, but it can also spot and offer solutions for key money moments and complex life situations.

Finovate: Last year was considered to be “the year of the customer” in fintech. Do you think that mentality will continue into 2020?

Vinnai: I think every day should be about the customer in banking and fintech alike, no matter what year it is. And it shouldn’t just be an empty motto or mission statement. It’s time incumbents and challengers teamed up and walked the talk together.


Check out W.UP’s Best of Show-winning demo at FinovateEurope 2019 and don’t miss the company’s upcoming appearance at FinovateEurope on 11 through 13 February in Berlin.

TokenSoft Launches Investment Accounts

Token issuance and asset servicing platform TokenSoft announced the launch of TokenSoft Investment Accounts today. The new accounts offer financial institutions a way to give their clients who invest in security tokens self-managed investment wallets.

“We’re excited to bring a multi-signature wallet security packaged in a self-controlled, easy to manage brokerage-style experience to the over 100,000 investors using our platform,” said TokenSoft CEO Mason Borda.

The new investment accounts offer investors a more traditional, brokerage-style experience; access to dividend distributions; and automated reinvestment. Additionally, issuers will receive support for compliant security token standards and integrated reporting and disclosures.

“The ability for non-technical individuals to self-custody is going to change the way assets under management models work in traditional finance,” said Jordan Davis, VP of Business Development at TokenSoft. “Wallets like TokenSoft Investment Accounts will put pressure on financial institutions to provide better client servicing, value-add services, and investment management tools to earn investors’ business. People will be able to add or remove service providers from accessing their assets the same way you can add or remove profiles from your Netflix subscription.”

TokenSoft’s mission is to accelerate the adoption of the blockchain in financial markets. The company launched its white-label token securities issuance platform in 2017 to help companies tokenize their assets in an economy that does not have the infrastructure to support such transactions. Below are a few use case scenarios:

  • Venture capital firms can tokenize portions of their limited partnership interest
  • Banks can tokenize their assets under management, creating a stablecoin
  • Startups can tokenize their equity to offer investors and employees fractional ownership

Among TokenSoft’s clients are Andra Capital’s Silicon Valley and Arca Investment Management Firm. The company was founded by James Poole and Mason Borda and is headquartered in San Francisco, California.

Figure Names Former Coinbase COO as President

Blockchain-based financing company Figure announced today it has scooped up Asiff Hirji, former COO of Coinbase, as its new President.

In his tenure at Coinbase, Hirji helped the company grow its revenue to more than $1 billion and boost its valuation to $8 billion. He also served as Operating Partner at Andreesen Horowitz and was COO at TD Ameritrade. Prior to those positions, he held senior leadership roles at TPG Capital, Saxo Bank, HP, and Bain Capital.

“Asiff has already been a critical advisor to me on how we manage the growth of Figure in order to drive the transformation of financial services across categories and around the world,” said CEO Mike Cagney. “His deep experience in the financial services industry and his long history of helping companies drive and manage growth are both going to be important to the growth of Figure and the creation of our new merchant bank.”

Figure was founded in 2018 by former SoFi Founder and CEO Mike Cagney. The company provides direct-to-consumer solutions to help consumers optimize their finances via three products, a home equity line of credit, mortgage refinance, and student loan refinance. The company leverages the blockchain to process the loans and offers a simple application process to provide funds in a matter of days, not weeks.

In his new role, Hirji is responsible for building a new bank division that will enable banks to leverage Provenance, Figure’s blockchain-based transactions platform.

“Blockchain will crash the costs of financial services, making products more affordable and available to all. Figure is one of the very few companies actually turning that promise into reality,” said Hirji. “The opportunity now is to scale to more financial products and open this capability to all financial institutions. I feel fortunate to be able to help make the promise of blockchain a reality.”

Since the company’s launch, Figure has now become the fourth largest originator of HELOC loans in the U.S. The company has raised $1.2 billion in combined debt and equity and is headquartered in San Francisco, California.

Follow the Money: FinovateEurope’s VC All Stars Talk Fintech Investment in Europe

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.

Here’s How Far We’ve Come with Voice AI in Customer Service

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.

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.

Splitit Taps Stripe to Facilitate Merchant Onboarding for Payment Installments

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.

25 More Firms Join Unified Approach to Financial Data Sharing

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.

PSD2 Turns Two: Where Do We Go From Here?

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.”