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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Payment and transaction services company Worldline and credit decisioning firm Algoan are joining forces.
The two are developing a credit assessment tool that will help lenders make better, faster, and more efficient lending decisions.
The credit assessment solution will leverage Worldline’s open banking experience as well as Algoan’s credit decisioning expertise.
Payment and transaction services company Worldlineannounced a partnership with credit decisioning firm Algoan. As part of the agreement, the two firms will work together to develop a credit assessment solution to help lenders and services providers make better credit decisions.
Specifically, the partnership will leverage Worldline’s open banking experience. “At Worldline we look for innovative partners who share our vision and enable us to enrich and expand our open banking services,” said Worldline Managing Director Financial Services Michael Steinbach. “As a lead and one of the largest Open Banking providers in Europe, we are committed to unlocking the full potential of Open Banking. With Algoan, we will be able to offer our customers an end-to-end and cost-efficient white-label solution to assess credit worthiness.”
According to Alogan CEO Michael Diguet, it is an ideal time to launch this solution. “Open Banking credit scoring is experiencing momentum that big players should embrace,” said Diguet.
Another key resource behind the credit assessment solution is Alogen’s four years of credit scoring expertise. Financial institutions can use the new tool to receive more accurate credit scoring and increased processing efficiency. Underwriting use cases include personal finance, consumer lending, auto finance and leasing, retail lending, BNPL, insurance, and utility providers.
The credit assessment solution will also bring benefits to borrowers. The enhanced data means that more borrowers may be approved and will receive their approval faster.
Having won its first contract to facilitate card transactions in 1973, Worldline currently has 20,000 employees in more than 50 countries and counts annual revenue of almost $4 billion. Gilles Grapinet is CEO.
In a world full of inequalities, it is no surprise to see an imbalance when it comes to finances, and investing in particular.
For more insight into this industry conundrum, we spoke with Rukayyat Kolawole, CFA. Kolawole is familiar with inequities in the financial world, given her role as Founder and CEO of PaceUP Invest, a new platform launching on May 15th that offers e-learning, financial coaching, investment strategy, and execution for women and underrepresented groups.
Our conversation below highlights not only tips on bridging the knowledge gap, but also on building diversity and her view on the future of the retail investing industry.
When it comes to retail investing, there is a significant knowledge gap. What are some practical ways the fintech industry can bridge this gap and ultimately increase the number of investors?
Rukayyat Kolawole: The fintech industry can bridge this gap by incorporating financial literacy into its solution. The main reason people, especially women and those from underrepresented communities, do not invest is because of the lack of knowledge and being underserved by the finance industry. Many robo-advisors stop the process if the client indicates they are a novice to investing. Even though they include information and definitions of financial terms on their platform, this is not provided with the aim of increasing financial literacy overall, irrespective of the product they sell.
This represents a missed opportunity by the current robo-advisors to provide learning products and improve financial knowledge. At PaceUP Invest, we provide a hybrid, jargon-free financial literacy and investment platform to bridge the gap, and we have seen the impact on different communities. Incorporating behavioral science is also key to helping educate and increase the participation of potential retail investors.
How does the industry stand to benefit when the number and diversity of investors increases?
Kolawole: The industry will benefit immensely from a retail investor’s perspective because we will start to see a lot of gaps. For example, we’ll see a pension gap, retirement gap, and racial wealth gap gradually narrowing. Policies are still needed to ensure all these gaps are narrowed. Underrepresented communities and minorities will be greatly impacted by making a financial decision that will increase not only the number but also the average financial assets that they will hold. The economic benefit for society would be even larger.
When we look at capital allocators, it is still very much the old boys’ club of white and male. Very little is going towards women and people of color. The only way that people can get funding to solve real problems affecting their communities is if more women and people of color are writing the cheques. Otherwise, it’s going to be the same boys’ club.
How has the state of retail investing and retirement planning changed from how it was just five years ago?
Kolawole: Across the globe, we saw a spike in retail investing due to easy-to-use investing and trading apps. 2020 was called the year of retail investors, and the pandemic has no doubt contributed to the spike in retail trading. People became more empowered than ever. Retail trading has taken off more in the U.S. than in Europe. Retail investing in Europe makes only around 5% to 7% of total investments in Europe, compared to 25% in the U.S. and 60% in China.
With the large pension gap in Europe still not changing much in the past five years, low-interest rates, and new online brokerages being built could help to propel enough momentum to increase participation in the capital markets to solve these problems. Retail investing is here to stay!
However, we need to make it more inclusive for women and underrepresented communities.
When you think about what the industry will look like 10 years from now, what do you think will be different? What role will decentralized finance play?
Kolawole: People will have more choices and be in more control of their finances. More people will be financially independent and empowered via choices of products that solve their problems. Fintech will revolutionize and help to reduce a lot of gaps we currently have when it comes to money and wealth.
Banks will have their place in the future financial system, requiring more flexibility and a customer-centric approach by partnering with fintech companies to solve real-life solutions.
However, our financial world will probably not become that decentralized due to regulations and governments wanting to retain monetary power.
Canada’s Neo Financial closed $145 million ($185 million CAD) in funding.
The round brings the three-year-old company’s total funding to almost $240 million ($299 CAD) and boosts its valuation past $785 million ($1 billion CAD).
Neo is now one of only a few Alberta-based tech companies to become a unicorn.
Canada-based Neo Financial’s newest funding round has boosted the company up to unicorn status in Canadian dollars. The $145 million ($185 million CAD) investment was led by Valar Ventures and saw participation from Tribe Capital, Altos Ventures, Blank Ventures, Gaingels, Maple VC, and Knollwood Advisory.
Today’s investment boosts Alberta-based Neo Financial’s total funding to almost $240 million ($299 CAD). It also marks the company as one of just a few tech companies in the region to become a unicorn.
Founded in 2019, Neo Financial differentiates itself with its user-friendly banking technology. The company boasts one million users of its four main products, which include a credit card, high-interest savings account, and investment tools. Additionally, Neo Financial is slated to launch a mortgage offering by the end of this year.
“We’re constantly challenging the status quo,” the company said in a blog post, “and asking the questions that should be asked: What if you only needed one loyalty card instead of 20? What if your financial services experience was as seamless as Netflix or Spotify? What if getting a mortgage could be a fully digital experience? What if the future of banking wasn’t a bank?”
With 650 employees under its roof, a number that has doubled in the past year, Neo Financial is growing. The company has added more than 11 products and features in the past year alone. To fuel this growth, the company adding 100 people to its workforce in Calgary and Winnipeg.
“The pace at which this team releases new products and grows its customer base is among the fastest we have seen in our careers,” said Valar Ventures Founding Partner Andrew McCormack.
Maple VC’s Andre Charoo echoed those thoughts. In an interview with TechCrunch, he said, “Neo is the fastest growing company I have seen in Canada… I believe Neo has a shot at owning at least 10% of the aggregated $550 billion banking sector in Canada (ie. $50 billion) due to the network effects it has created with its unique merchant loyalty program.”
Robinhood unveiled its new stock lending feature, Stock Lending.
The new offering enables investors to lend shares and receive passive income from borrowers.
Stock Lending democratizes securities lending and provides Robinood with an additional revenue stream.
Stock brokerage app Robinhoodannounced the launch of Stock Lending today, a new feature that will allow users to lend out stocks in their portfolio to earn passive income from borrowers.
“Robinhood does the work of finding borrowers and managing transactions while customers can add a potential source of passive recurring income to their portfolio,” said Robinhood Chief Brokerage Officer Steve Quirk.
There are no minimum balance requirements in order to take advantage of Stock Lending, but users must have stocks paid in full. Fractional share stocks are not eligible. Once investors authorize Robinhood to lend the funds, Robinhood matches the user with a borrower. After their shares are lent out, users can track earnings, see their positions, and enable or disable Stock Lending at any time.
And while investors are still able to sell the shares they lent out at any point, there are a few potential downsides to Stock Lending. First, users’ loaned securities may not be protected under the Securities Investor Protection Act. Additionally, investors will receive cash payments instead of dividends on securities they loan out, which will likely have tax implications. Also notably, users may lose the right to vote with respect to their loaned securities.
The move democratizes access to fully paid securities lending. It also positions Robinhood to benefit from an additional revenue stream, as the company will pocket a portion of the fees from each loan.
Robinhood is in the process rolling out Stock Lending to its customer base. The company expects the feature to be available to all users by the end of this month.
India’s Kaleidofin closed a $15 million investment round this week.
The funds bring the company’s total funding to almost $23 million.
Kaleidofin will use the capital to launch and scale its lending arm, KaleidoCredit.
India-based financial services provider Kaleidofinannounced it has raised an additional $5 million in funding, adding to the $10 million investment the company received in January of this year. The $15 million round brings Kaleidofin’s total funding to just shy of $23 million.
Participating in the round’s latest installment are Bill & Melinda Gates Foundation’s Strategic Investment Fund and angel investors. These investors join previous contributors Omidyar Network, Oikocredit International, and the Michael & Susan Dell Foundation.
“We are delighted to have investors known for their deep focus on informal sector customers and innovation promoting financial health, as partners, said Kaleidofin Co-founder and CEO Sucharita Mukherjee. “The partnership seeks to offer a broad range of financial services to underserved communities with a specific focus on low-income women customers at scale. The new funds will be used to further strengthen all our product lines, but will specifically help us launch and scale our KaleidoCredit business aimed at offer customized credit products for individuals and nano and micro SME customers.”
Founded in 2017, Kaleidofin serves 1.2 million customers across 14 states and 230 districts in semi urban and rural India.
Kaleidofin seeks to serve India’s population of 600 million underbanked consumers in what it calls “the informal economy.” The company’s offerings include KiScore, a credit health analysis tool; KaleidoCredit, its lending arm; and KaleidoPay, a payments tool; and KaleidoGoals, goal-based savings solutions. The savings solutions come in three tiers aimed to help a range of users either begin or start their savings habits.
Today’s news comes at a time of increased interest and activity in Indian fintech. Yesterday, Andreessen Horowitz announced his VC firms has earmarked $500 million to invest in Indian tech startups. India is an area ripe for fintech disruption thanks to its population’s high rate of technological adoption combined with the region’s large number of unbanked and underbanked consumers.
Fiserv is leveraging a partnership with The Clearing House to help its bank clients offer real time payments.
Banks that integrate into Fiserv’s NOW Gateway will benefit from real time payments in peer-to-peer payments, interbank account transfers, billpay, and more.
The partnership comes as the U.S. Federal Reserve announced pilot participants of its own real time payments system, FedNow.
Fintech solutions provider Fiserv is in the fintech headlines today for its move to help its bank clients provide real time payments to their end users. The Wisconsin-based company is partnering with The Clearing House (TCH), which is allowing Fiserv’s bank customers to access its Real Time Payments (RTP) network via Fiserv’s NOW Gateway.
Banks can integrate into the NOW Gateway, which leverages the RTP network, to offer their clients a range of real time payments services, including peer-to-peer payments with Zelle, payouts for gig economy work and insurance claims, interbank account transfers, and real time bill payments. Ultimately, the move will allow financial institutions to send and receive real time payments on behalf of their customers over the RTP network, which connects to over 60% of bank accounts in the U.S.
“To remain competitive, financial institutions must offer real-time payment capabilities. That’s why we are committed to making real-time implementation easier for any financial institution, from regional bank to community bank, to credit union,” said Fiserv’s President of Digital Payments and Data Aggregation Matt Wilcox. “Our work with The Clearing House to integrate the RTP network with our NOW Gateway is the latest advancement towards this goal.”
Founded in 1853, TCH clears and settles more than $2 trillion a day through wire, ACH, check image, and real-time payments. The company’s RTP network facilitates real time payments by immediately clearing and settling payments. In the first quarter of this year, the network cleared almost 37 million transactions totaling almost $16 billion.
Today’s news comes as the U.S. Federal Reserve’s real time payments tool, FedNow, began onboarding pilot participants. Fiserv is among the first 120 pilot organizations, a list which also includes Finastra, Green Dot, Q2, Square, Temenos, and Visa. The purpose of the pilot is to establish connectivity and perform technical and operational tasks that will lay the groundwork for full-scale, end-to-end testing later this year.
Fiserv most recently demoed at FinovateWest 2020 where it showcased its Virtual Banking Assistant, a tool that helps banks deliver intelligent, AI-driven conversational experiences. With nearly 10,000 financial institution clients, the company facilitates 12,000 transactions each second. Frank Bisignano is president and CEO.
Last month, President Joe Biden signed an executive order on ensuring responsible development of digital assets. The order, which comes at a time of rising interest in digital assets such as cryptocurrencies, seeks to protect consumers, financial stability, national security, and reduce climate risks.
We recently spoke with Peter Torrente, National Leader of KPMG’s Banking and Capital Markets practice, to gain some insight on how the executive order may impact banks and fintechs. With more than 30 years of experience, Torrente primarily works with global financial services companies.
What are the highlights of the executive order?
Peter Torrente: The U.S. has an interest in responsible financial innovation including the continued modernization of public payment systems. This executive order details the country’s first comprehensive government strategy for exploring digital assets. It outlines steps to reduce risks that digital assets could pose to consumers, investors, and businesses. It also addresses other important considerations such as financial stability and financial system integrity; combatting and preventing crime and illicit finance; national security; U.S. leadership in the global financial system and economic competitiveness; financial inclusion and equity; and climate change and pollution. Finally, it also explores a U.S. Central Bank Digital Currency (CBDC) by placing urgency on research and development of a potential digital version of the dollar.
What are the major implications for banks and fintechs?
Torrente: The executive order seeks to ensure that the largest financial regulators, including banking regulators in the United States, make coordinated plans to oversee the blockchain industry. I see this order as a good signal for a comprehensive set of regulations for the digital asset industry. First, the new laws and regulations will require banks and fintech companies involved in the digital asset industry to enhance their governance and control frameworks related to Anti-Money Laundering (AML) / Combating the Financing of Terrorism (CFT) processes. Second, this executive order indicated that the federal government sees digital assets as an important part of the economy and society; it creates opportunities for traditional banks take another look at their digital asset strategy. Lastly, it explores a U.S. CBDC, which would significantly impact domestic and international wire transfer processes. I also see this order as an encouraging signal for banks and fintech companies to push forward with financial innovations associated with the digital asset industry.
Will the executive order benefit end consumers? Or make them worse off? How?
Torrente: Yes, it has the potential to benefit end consumers. First, the initial set of regulations will focus on establishing the baseline rules to protect investors and consumers from fraudulent activities. It can create transparency for end consumers and help them make informed decisions. Second, this executive order promotes building innovative financial platforms. End consumers may benefit from improvements in business performance, efficiency, and enhanced financial inclusion through these innovations. Given digital assets have the potential to increase the speed of payments, it can vastly improve access to financial services, especially for low-income Americans often left out of the traditional banking system. Lastly, new policies and laws for the digital asset industry could potentially help reduce excessive price volatility and improve market stability as cryptocurrency becomes a mainstream financial technology.
Do you envision further regulations around ESG in the future?
Torrente: The pace of proposed rules and regulations related to ESG risk identification, measurement and disclosure has clearly accelerated over recent months. But when we take a step back, these regulatory actions are largely the result of growing interest from a variety of stakeholders – investors, analysts, community groups, and government leaders – who may have been focused on sustainability and ESG for years. There is a widespread desire among stakeholders for enhanced consistency and comparability across ESG targets and metrics. Standardized disclosure requirements are viewed as important to advancing the broader ESG agenda. Stakeholders’ expectations of companies’ ESG strategies, commitments and disclosures are only increasing, which may lead to additional regulatory guidance and focus.
A look at the companies demoing at FinovateSpring in San Francisco on May 18 and 19. Register today and save your spot.
Spave lets users tap into everyday purchases to increase their savings, give to causes that matter to them, and have control and confidence in their finances. Spave transforms your spending, for good.
Features
We have a patent-pending engine that allows users to choose where they direct their spavings
Access to more than 1.5 million accredited U.S. nonprofits
Partners gain access to user insights
Why it’s great
Spave can help CUs empower their members to save more, give more, and live more by breaking down the barriers that hold them back. Empower your members to transform spending for good.
Presenters
Susan Langer, CEO Three words best describe Langer: Observer. Planner. Connector. Langer is a life-long learner and lover of people. Her 30-year professional journey within financial services, marketing and advertising, international development, and non-profit industries has taught her the value of listening to understand, the significance of appreciating others’ differences, and the extraordinary power of collaboration. LinkedIn
Sarah York, Chief Marketing & Digital Officer York is an active advocate for inclusive entrepreneurship and financial literacy. Her expertise spans data-driven growth, digital technology platforms, as well as global digital strategy. LinkedIn
Christen Wright, Head of Product Wright is a seasoned product leader, leading product for Reseda Group, a CUSO of MSUFCU. He has contributed to experiences at Delta, AT&T, and Best Buy. He was in 100 Black Men of Atlanta in 2020. LinkedIn
The investment includes $115 in debt funding and $60 in equity funding.
Wagestream will use the funds to add to its product lineup and fuel its U.S. expansion.
Earned wage access tool Wagestreamlanded $175 million in combined debt and equity funding today. The Series C round, which brought $115 in debt and $60 in equity, boosts the U.K.-based company to a total of $254 million in total funding.
New investors in the round include Smash Capital, BlackRock Innovation and Growth Trust, and Silicon Valley Bank. Existing investors Northzone, Balderton, QED, LocalGlobe, XYZ, Village Global, and Fair By Design also contributed.
Founded in 2018, Wagestream has offered one million workers access to $4.7 billion in wages that they’ve earned. The company considers one measure of its success as capital raised to liquidity released. Wagestream estimates that, prior to today’s investment, the company’s ratio was 1:55. That is, for every $1 of capital it raised, it released $55 of capital. “We’re aiming for a ratio of 1:100, meaning every $1 of capital raised by Wagestream will unlock $100 of impact for frontline workers,” said Wagestream Co-founders Peter Briffett and Portman Wills.
In addition to making that ratio possible, today’s investment will also power the development of new services, including an insurance offering that automatically adjusts coverage and premium, an app that enrolls users into optimal energy plans, fair credit without the need for a traditional credit score, and an intelligent savings installment plan.
Wagestream will also leverage the investment to expand internationally. Specifically, the company will focus on serving U.S. users. To fuel this move, Wagestream recently opened its U.S. headquarters in Washington, D.C.
Payment-card-as-a-service startup Deserveannounced it can now empower its banks and B2B clients via a new tool, the Commercial Card Platform, that enables customers to add a commercial payment card offering to their product lineup.
“We are extending our digital, cloud-native, mobile-first platform from consumer cards to commercial,” said Deserve CEO and Cofounder Kalpesh Kapadia. “With this, we will enable any financial institution or platform that serves other businesses to embed and issue commercial credit cards. For non-banks, this can be a significant source of revenue and can enhance brand loyalty. Our platform will enable those who serve small and medium-size businesses and corporations to offer true credit combined with sophisticated expense management.”
Formerly known as SelfScore, Deserve has re-imagined traditional credit cards by transforming the application and onboarding processes, as well as the credit card itself by bringing them into the digital-first era. The company enables businesses to provide a white-labeled or co-branded card program made possible via a set of configurable APIs and SDKs.
The new Commercial Credit Card product helps companies, banks, and online lenders offer a white-labeled or co-branded credit card product for their business customers. The full-service card product offering will include underwriting, instant virtual card issuance, digital wallet provisioning, and enterprise controls that will enable management to track, manage, and understand business expenses.
Customers Bank, which is headquartered in Pennsylvania and counts $19.6 billion in assets, will be the first bank on Deserve’s Commercial Card Platform. “Together with Deserve, we are looking forward to offering an exciting and valuable product to our small business customers, combining credit with powerful expense management,” said Customers Bank President and CEO Sam Sidhu.
Founded in 2013, Deserve raised an undisclosed amount of funding from Visa last fall, adding to the company’s $287 million in total funding. Among Deserves investors are Mastercard, Goldman Sachs Asset Management, Sallie Mae, Ally Ventures, Visa, Accel, Pelion Venture Partners, Aspect Ventures, and Mission Holdings.
Identity expert SailPoint is making waves this week. The Texas-based company has agreed to be acquired by private equity firm Thoma Bravo.
The all-cash deal, which values SailPoint at $6.9 million, will take the company private. SailPoint debuted on the New York Stock Exchange under the ticker SAIL in 2017. As part of the transaction, SailPoint stockholders will receive $65.25 per share, which represents a premium of 48% to the company’s 90-day volume-weighted average price.
SailPoint cited multiple benefits of the new arrangement. As a private firm, the company will have increased flexibility and resources to provide identity security solutions. Additionally, SailPoint can now tap into Thoma Bravo’s operating capabilities, capital support, and software expertise. “The transaction will also allow us to pursue our long-term growth trajectory with greater flexibility and effectiveness to support our customers, expand our markets, and accelerate innovation in identity security with the backing of a strong financial partner with deep sector expertise,” said SailPoint Founder and CEO Mark McClain.
The deal comes at a time of increased interest in cybersecurity. Because many employees are still working at home after the pandemic, fraudulent attackers are taking advantage of increased security vulnerabilities. Additionally, experts have warned of potential cyber threats arising from the Russia-Ukraine war.
“SailPoint is ideally positioned to capitalize on the large and growing demand from modern enterprises for robust identity security solutions that secure their business and reduce risk,” said Thoma Bravo Managing Partner Seth Boro. “Their market-leading identity security platform provides the autonomous and intelligent approach that the market requires today, especially among larger enterprises and as hybrid working becomes more common.”
The transaction is expected to close in the second half of 2022.
Humanizing AI has been a challenge ever since humans created AI. At FinovateEurope last month, digital pioneer, AI scientist, and author of The Fifth Industrial Revolution Inma Martinez shed her wisdom on how firms can create a human-centric approach to AI innovations.
Martinez has been developing with AI since the year 2000, when she and her team built the first AI to power original mobile internet services. Since then she has been working in other sectors that have digitized, including music, video, and smart cities.
In her conversation with Finovate’s David Penn at FinovateEurope, she discussed how retail banks and fintechs can create a human-centered approach to technology. The first step is to consider the needs that the user at the other end will have, Martinez explained. She added that organizations must take into consideration that, at the end of the day, they have to service the needs of the person.
As a second point on humanizing AI, Martinez advised firms to not only better manage their data, but also make the data available to all parties in the organization who may need access to the data. This reduces the friction of calling data back from the lake or needing to contact data services.
In her interview, Martinez also compares the usage of AI in the financial services industry with other sectors and offers advice on how firms can prepare for future disruption.
