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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
AI-powered decision making firm Fractal Analyticslanded a $360 million investment from alternative asset firm TPG Capital this week. The round brings the 21-year-old company’s total funding to $685 million.
While there is no official word on Fractal’s valuation, Fractal CEO and Co-founder Srikanth Velamakanni told Bloomberg earlier this year that the company is “assessing interest from investors valuing the company at significantly more than $1 billion.”
The funds are coming from TPG’s Asia-focused private equity firm, TPG Capital Asia. The deal, which is expected to close in the first quarter of this year, is comprised of a combination of a primary investment and secondary share purchases from funds advised by private equity advisory firm Apax. Both TPG and Apax will be minority shareholders in Fractal.
As part of today’s deal, TPG’s Puneet Bhatia and Vivek Mohan will sit on Fractal’s board of directors.
“Fractal is building a great workplace and an innovative culture that’s driving significant client outcomes through our ‘user focused, decision-backwards’ approach to solving problems,” said Velamakanni. “TPG’s capabilities across all our markets and their proven success in building and supporting top AI providers is the perfect complement to the partnership we’ve enjoyed with Apax, whose insight and expertise have been instrumental in accelerating our growth.”
Headquartered in New York City, Fractal helps businesses leverage AI to power and inform human decisions. The company serves a range of industries, offering products including Senseforth.ai, a conversational AI platform; Samya.ai, a revenue growth AI; Crux Intelligence, an AI-powered analytics platform; Eugenie.ai, a tool for AI-driven operational efficiency.
Fractal employs 3,500 employees in 16 offices across the globe, including the U.S., the U.K., Ukraine, India, Singapore, and Australia. Last month, the company appointed Manish Tiwari as Chief Information Officer. Last summer, Fractal announced it is exploring an IPO. The funding route would help fuel the company’s growth now that companies have made a post-pandemic push to move their operations to the cloud. “The floodgates have opened,” said Velamakanni. “We have the scale to be a public company.”
Sky News announced this week that Lloyds Banking Group plans to invest in loyalty app Bink. According to the source, Lloyds will invest “millions of pounds” in exchange for a minority stake in the U.K.-based fintech startup.
Founded in 2015, Bink enables consumers to forgo traditional plastic loyalty cards by registering their debit or credit cards and linking them to various loyalty schemes. The company’s technology helps retailers identify and reward customers each time they shop, offers banks a way to keep their cards top-of-wallet, and provides a simplified way for shoppers to earn rewards.
In 2019, Bink formed a strategic partnership with Barclays, which made a $13.5 million (£10 million) investment. This deal made Bink accessible to Barclays’ seven million U.K. customers.
Barclays customers can find Bink within their existing mobile banking app, where they can join, accrue, and redeem rewards. Other users can download the Bink app and establish their Bink wallet to begin building rewards.
Lloyds’ partnership with Bink is expected to go live in the next six months, but it is still unknown the amount, or at what valuation, Lloyds plans to invest in Bink.
Bink’s card-linked offers tool is very reminiscent of the many loyalty and rewards schemes that rose out of the mobile wallet craze in 2015. When NFC and Bluetooth Low Energy became promising enabling technologies, many startups (and even some established companies) tried to replace consumers’ everyday mobile wallets. Though mobile wallets failed to take off seven years ago, they are making a comeback today thanks to increased digital adoption.
Given that consumers are finally ready to adopt these new technologies, perhaps Barclays and Lloyds are on to something. Is this the start of a card-linked offers and merchant-funded rewards resurgence?
Visa-owned open banking platform Tink has finalized its purchase of FinTecSystems. The acquisition, which was initiated prior to Visa purchasing Tink, was first announced in May of last year. The integration of the two companies combines Tink’s open banking platform and FinTecSystems’ product suite to offer a more complete solution when partnering for open banking technology.
Additionally, FinTecSystems brings Tink new customers including N26, DKB, Santander, Solarisbank, and Check24. The Germany-based open banking firm will help Sweden-based Tink build on its growth strategy and expand into the DACH region, where FinTecSystems is currently powering over 150 banks and fintechs.
“Germany is a key market for Tink, and we are excited to have acquired an innovative leader with a strong reputation for the quality of its bank connectivity and payments services,” said Tink Co-founder and CEO Daniel Kjellén. “We have followed FinTecSystems for many years and are impressed by what they have achieved. Through this acquisition, we are taking a big step into the DACH region, and we look forward to supporting the FinTecSystems’ team to further accelerate their growth.”
FinTecSystems was founded in 2014 and facilitates data analytics, digital account checks, account aggregation, and open banking payments. The company connects to more than 99% of the banks in the DACH region, and in Germany specifically, three in every four online credit decisions involve FinTecSystems’ technology.
FinTecSystems’ 78 employees have joined Tink’s team, which now sits at almost 600 employees. FinTecSystems will continue to function as an independent, regulated company in Germany.
Today’s deal comes two years after Tink landed $103 million (€85 million) in a funding round that boosted its total raised to $308 million. The acquisition also comes after Tink itself was bought out by Visa in June of 2021 for $2.1 billion (€1.8 billion).
Tink, whose open banking platform is used by more than 10,000 developers, was founded in 2012 and currently serves 18 markets from its 13 offices. The company is a two-time Finovate Best of Show Award winner, and most recently demoed at FinovateEurope 2019.
FinovateEurope 2022 is right around the corner. If you are an innovative fintech company with new technology to show, then there’s no better time than now and no better forum than FinovateEurope. To learn more about how to demo your latest innovation at FinovateEurope 2022 in London, March 22 to March 23, visit our FinovateEurope hub today!
Late last month, credit management solutions provider CRIFannounced plans to team up with Swoop Funding, a business funding and savings platform. CRIF anticipates the partnership will help the U.K.’s community of 5.9 million SMEs access more funding and ultimately grow.
Swoop will leverage CRIF’s Credit Passport business credit scoring technology that provides real time credit scores for SMEs. This tool will benefit both Swoop and the small businesses themselves. Swoop will help match businesses with funding and savings products. For businesses with lower credit scores, this will help them potentially find previously unavailable sources for working capital. The partnership will also offer SMEs insights into their businesses’ financial performance and viability, and help them see how lenders view them.
“We designed Credit Passport to remove friction in the lending decisioning process and help SMEs get the right funding for them, when they need it, as well as to help educate businesses so they can build the most financially healthy and resilient companies,” said CRIF Realtime Chief Product Officer Glen Keller. “CRIF’s partnership with Swoop puts us at the heart of the U.K.’s SMEs with useful information at a time when they need it the most and will really make a difference to the market.”
CRIF’s Credit Passport helps bridge the gap between the financial industry and business owners. The tool leverages open banking to offer lenders a view into SME’s credit quality and will give Swoop’s SME clients insight into their own business credit score.
Swoop was founded in 2018. The company’s business funding and savings platform helps SMEs discover the right funding solution– ranging from loans to equity to grants– to fit their need. Swoop also has a business financial management (BFM) spin, and offers tools to help businesses identify savings opportunities. The company has matched its more than 79,000 customers with over $187 million in funding.
Italy-based CRIF was founded in 1988 and has more than 5,500 employees working across 70+ subsidiary companies on four continents. The firm counts 10,500+ financial institutions, 600 insurance companies, and 82,000 businesses as clients. In all, one million consumers in 50 countries use CRIF’s services. In 2020, CRIF acquired PFM company Strands to complement its customer acquisition, portfolio management, and credit collection tools. Last year, CRIF participated as an investor in nine fintech funding rounds.
Decentralized credit platform Credixlanded $2.5 million in early stage seed funding this week. The Belgium-based company will use the fresh capital to speed up the release of its alpha version and launch its protocol on the Solana mainnet.
DRW Cumberland and ParaFi Capital led the round. The Transfero Swiss BRZ Solana Ecosystem Fund, Solana Ventures, Parrot Finance, MGNR, Mercurial, Petrock Capital, Fuse Capital, and several angel investors also contributed.
Credix was founded just last month by Thomas Bohner, Maxim Piessen, and Chaim Finizola. The team is seeking to bridge the gap between decentralized finance and real-world assets, bringing uncollateralized loans to emerging markets, starting with Latin America.
“The rise of DeFi, crypto, and stablecoins provided Credix with all the required lego blocks to rethink the end-to-end debt capital markets flow,” said Bohner. “Credix is democratizing access to credit investing for both borrowers and investors by connecting them through a decentralized credit marketplace.”
Along with today’s funding announcement, Credix also appointed four new members to its advisory team. Chike Ukuagbu, Head of Crypto Strategy-Emerging Markets at Visa; João Bezerra Leite, Former Managing Director and CTO at Bank Itaú; Reginald de Wasseige, Investor at Augmentum; and Kenneth Bok, Managing Director Blocks, ex-Goldman Sachs will all serve as advisors to the Credix team.
In the next few weeks, Credix will launch its first credit lines for Latin American borrowers. In the first quarter of 2022, the company will extend access for underwriters and liquidity providers and will open the pool to the community within the first half of next year.
Rocket Companies, the parent company of tech-driven real estate, mortgage, and financial services businesses, acquired personal finance app TrueBill today. The deal is expected to close by the end of the year for $1.28 billion in cash.
“We are very impressed with what Truebill has created – providing a simple, intuitive client experience to help its users save significant money,” said Rocket Companies CEO Jay Farner. “The company is a perfect fit for the Rocket platform. Truebill’s work helping Americans keep track of their finances and providing guidance that leads to better financial outcomes follows the same philosophy as Rocket Companies – leveraging the power of technology to remove the friction from complex transactions – and applies it to everyday life.”
Founded in 2015, TrueBill helps its 2.5 million members manage subscriptions, improve credit scores, track spending and renegotiate bills. The company analyzes $50 billion in transactions each month and has saved consumers a total of $100 million.
For Rocket Companies, the purchase will push the subsidiaries toward their goal of creating a centralized destination for consumers to manage their entire financial lives. Rocket Companies will also benefit from Truebill’s recurring revenue, which is on track to generate $100 million each year. This figure is more than double the annual revenue the company generated in 2020.
As for its own operations, Rocket Companies generates $1.3 billion each year from the monthly payments made by the organization’s 2.5 million clients for mortgage servicing.
With the new year just two weeks away, it’s a good time to reflect.
We spoke with Justin Passalaqua, Chief Market Officer of North America for Worldline, on what he has seen in the payments space this year and the payments trends he anticipates taking over in 2022.
Were there any payments trends that emerged this year that you didn’t expect to see?
Justin Passalaqua: I wouldn’t say any trends caught me by surprise necessarily. However, I did not expect how quickly businesses started adopting payment methods like contactless, e-commerce, and order ahead payments.
These trends have been in the works for a while. But the accelerated growth of these payment methods due to the pandemic, I think, caught everyone off guard. Not only have we seen tremendous growth in contactless and online payment options, but the more we see these used in the market, the more enhancements are made to make payments seamless.
How have embedded payments altered the course of fintech thus far?
Passalaqua: Users can make payments anywhere, at the touch of a button and, as a result, the industry has seen an increase in conversions by almost 40%. The fewer steps it takes a user to make a payment, the more likely they will complete a purchase. And if they have a great experience shopping with a merchant, they are more likely to shop there again.
Loyalty has become a huge growth driver, especially in the order ahead/food industry. The rise of mobile apps makes it easy for businesses to offer more rewards for repeat customers, establishing trust between the business and consumer. When software and app providers implement the right tools that simplify the checkout process and strengthen loyalty, everyone benefits.
What payments trends do you anticipate dominating in 2022?
Passalaqua: One trend I have seen a lot of over the years that I expect will evolve in 2022 is Integrated Software Vendors (ISVs) building their own payment gateway or leveraging a Payments-as-a-Service (PaaS) platform and white labelling it with their own brand. As ISVs aim to be an all-in-one solution for their customers, owning the end-to-end payments piece essentially transforms them into a payment provider.
Another trend that will continue to dominate next year is the further decline of cash and the increased adoption of cards and mobile wallets. In 2021 we saw a 12% global decline in cash payments due to COVID-19. People will continue to adopt card and mobile wallets at a faster rate, and not just for safety and sanitary reasons. With the more rapid and convenient experience offered by cards and mobile wallets, we will probably never see a backwards shift to cash again.
What’s in the pipeline for Worldline in 2022 and beyond?
Passalaqua: Without giving away our secret recipe, we have big plans for expansion next year. First, we are investing heavily in the U.S. market. Although Bambora and Ingenico are well known in Canada and the U.S., Worldline is relatively new to North America. Our goal is to make Worldline a trusted household name for ISVs and the payments industry.
We are also focusing on growing our contactless/card-present payment solutions with new technologies to make card-present payments even more effortless. We are enhancing our bank-to-bank technologies to expand our payment types, focusing on our ACH solution, which aligns with our plans for the U.S. market.
Digital investment platform Scalable Capitallaunched a crypto offering this week called Scalable Crypto. The new tool, which Scalable Capital is launching in partnership with Europe’s largest digital asset investment company CoinShares, helps users invest in cryptocurrencies.
Scalable Crypto will help everyday investors participate in crypto markets by offering access to crypto investments via regulated stock exchanges in Germany. The new tool will integrate with the company’s existing wealth management and broker offerings, and will hold cryptocurrencies in secured, cold wallets at regulated custodians.
“We make trading crypto as easy as trading shares or ETFs,” said Scalable Capital Co-founder and CEO Erik Podzuweit. “Crypto currencies are well established as an asset class in a balanced portfolio. With ‘Scalable Crypto’, we are providing an affordable and intuitive offering to help even more people to enter the crypto world. The expansion is the next stage in our journey to become Europe’s leading digital investment platform.”
Scalable Capital is making it easy for crypto-novices to experiment with digital currencies. Users trade on the Xetra and gettex exchanges and do not need to open a separate wallet to do so. Instead, cryptocurrencies are held in the form of securities in the customer’s existing account. Additionally, Scalable Capital takes care of the tax details for crypto securities.
Founded in Germany in 2014, Scalable Capital was launched during the roboadvisor craze and now has more than $6.8 billion (€6 billion) under management on its platform. Today, the company offers both B2C and B2B tools. The company provides private individuals digital wealth management, a broker with a flat rate, and overnight and time deposit offers. For B2B clients, Scalable Capital develops solutions for digital investment. Some of the company’s current clients include ING, Barclays, and Santander.
Scalable Capital, which demoed its technology at FinovateEurope 2016, has 330 employees across its offices in Munich, Berlin, and London. Earlier this year, the company landed $180 million in new funding, bringing its total to more than $317 million. Scalable Capital has an estimated valuation of $1.4 billion.
In many ways, my predictions of what to expect in fintech in 2021 still stand in 2022. Indeed, the trends I anticipated– embedded banking, open banking, automation, and banking-as-a-service– are still hot-button issues that banks and fintechs need to address.
Last year we were recovering from the deluge of the digital transformation agenda and it was difficult to see what was beyond pandemic-related trends. This year, however, there has been an obvious shift. The conversation around decentralized finance is transitioning from a quiet murmur to a louder and more pervasive discussion.
What are some important topics banks need to address in 2022? Below are four conversations banks and fintechs must have next year:
Digital identity
Now that the pandemic has driven so many services to the digital channel, the topic of digital identity must be addressed. This issue ties directly into the security of not only money movement, but also the security of users’ data. Without an efficient way to authenticate users, banks and fintechs expose both themselves and their customers to risk.
Decentralized finance
Decentralized finance (DeFi) is taking off across the globe. According to DeFi Pulse, there is currently $96 billion locked in DeFi, up from $25 billion a year ago. If banks want to be part of the conversation, it is no longer a topic they can ignore. While some experts believe that DeFi will eventually kill off banks, others see banks as an integral part of the future of DeFi.
CBDCs
Central bank digital currencies (CBDCs) is a topic that dovetails from DeFi, but is even more relevant for banks. That’s because CBDCs will be government-issued, and because the government doesn’t have the infrastructure to distribute and manage digital currencies, traditional banks will be key in the issuance of CBDCs. If you haven’t already, it’s time to think about the role your bank can play in this space.
Open finance
The U.S. is overdue for regulation on open banking. In fact, we are so late to the game that the topic has already evolved from open banking to open finance. Though there have been murmurs of open banking discussions in the U.S., nothing formal has taken hold. Consumers are ready, however. Not only have their online presences expanded, they are also becoming increasingly aware of their own data privacy and data usage.
Consumer payment services company Klarna has selected account-to-account (A2A) payments company GoCardless to offer debit bank payments to its U.S. clients.
Specifically, Klarna will use GoCardless’ technology to transfer funds via ACH for its Pay in 4 offering that enables customers to split any purchase into four interest-free payments both online and in-store.
GoCardless CEO and Co-Founder Hiroki Takeuchi said that he anticipates alternative payment methods to experience rapid growth as leveraging debt falls out of favor. “Over the next few years we expect account-to-account payments to challenge the dominance of cards as they tap into changing consumer demand and provide merchants significant benefits in terms of cost, conversion and churn,” Takeuchi said.
Klarna CTO Koen Köppen noted that the U.S. is a key market for Klarna. The company doubled its customer base in the last year, and now has more than 21 million U.S. customers. “To continue along that trajectory,” Köppen noted, “we need partners that not only provide our consumers and retailers more choice and control but also offer us cutting-edge technology and best-in-class service. We’re excited to work with GoCardless and leverage its expertise in account-to-account payments as we expand in the U.S.”
GoCardless, which wonBest Enterprise Payments Solution at the Finovate Awards earlier this year, was founded in 2011. The U.K.-based company’s technology helps merchants collect recurring and one-off payments from customers via ACH transfers. Businesses can integrate GoCardless’ API to automate payment collection and reconciliation billing for subscription and invoice payments. Among GoCardless’ clients are DocuSign, Survey Monkey, and Box.com.
Today’s news about Klarna’s new ACH payment capabilities for U.S. customers is the latest in the company’s recent push into the North American region. Last month, Klarna announced it is adding its Pay Now option to its U.S. payment services. The company also unveiled plans to launch its physical debit card in the U.S. market.
GoCardless entered the U.S. market in 2019 and has since opened two offices in New York City and one in San Francisco. By the end of next year, GoCardless plans to grow its U.S. team by another 125%.
As the name implies, super apps are super in nature. They differentiate themselves from traditional apps by offering a much wider variety of services than fintechs typically offer, acting as platforms that fulfill more than just a singular purpose.
We recently spoke with Marcell King, Chief Innovation Officer of Payveris, for his view on the battle among banks, fintechs, and super apps, as well as his outlook on the future of super apps both in the U.S. and abroad.
What’s your definition of a super app?
Marcell King: A super app is a single place for users to go to for all of their financial, communication, money movement, entertainment, and shopping needs. It’s designed to provide consumers with the utmost convenience and frictionless access to a variety of services they use on a day-to-day basis. A super app earns a piece of the spend on everything the consumer purchases and can leverage this data to deliver personalized experiences and cross-sell products or services. The consumer gets ultimate convenience and the owner of the Super App increases the size of its revenue pool.
How do Super apps threaten FIs and fintechs?
King: The possibility of one dominant super app emerging in the US poses the biggest threat to smaller-asset financial institutions in particular because they often can’t match the resources Big Tech and Big Finance bring to the table. This answer grows more complicated depending on how you define what constitutes a true “fintech” company these days. Many fintechs have developed micro-niche applications, which a super app could likely consider to be a “feature” in the app. In that case, it would be easier for a consumer to access the feature in the super app versus opening up another app for the same purpose.
What opportunities do super apps have for Fis and fintechs?
King: I believe this could go one of two ways, or both. Use case number one is that the super app partners with specific types of financial institutions and fintechs for specific white label services. For instance, PayPal could partner with a large bank to support added new financial management features, offering consumers checking and savings accounts from the partner bank or credit union. The other is that multiple financial institutions link their branded services to the super app brand, enabling the super app to be a consolidator of services, similar to a brick and mortar mall. In both cases, the super app uses its brand power to consolidate services, making it easier for the consumer to get the benefit of convenience. The super app generates revenue and receives data that can be leveraged to cross-sell relevant products and services to that individual consumer.
Why haven’t super apps been successful in North America and Europe?
King: There are a few reasons for this. First, with intense competition between tech giants, the market is more fragmented with popular services such as Facebook’s WhatsApp and Apple’s iMessage. There isn’t one player dominating a specific part of the market, which makes it more challenging to create a super app experience.
Another reason is super apps rely on a plethora of user data to be successful, which is a challenge in the U.S. and Europe, where there are more laws in place to govern consumer data and privacy. Both countries have a record of limiting the growth of companies that become powerful to protect consumer rights. Most recently, the U.S. Consumer Financial Protection Bureau issued orders for info to tech giants, including Google and Amazon, on their use of consumer data. This will make it more challenging for one company to become a dominant super app.
What will it take for super apps to gain popularity in geographies outside of Asia?
King: We’re beginning to see the super app model emerge in places like Latin America. Due to regulation, it’s clear that North America and Europe will need government support in order for super apps to gain popularity. For instance, China’s WeChat and AliPay have benefited from strong government support and its regulation to block WhatsApp, Signal, and Facebook, which has removed the risk of competition.
A super app will need to gain popularity and trust in one market in which it can then expand into other services to succeed. Uber, for example, started out as a rideshare app disrupting a legacy industry when ridesharing was an untapped market. Even with competition emerging since its inception, Uber commands a majority of the market share. Due to its early success, Uber has been able to expand and establish itself as a top meal delivery service.
Walgreens is in the fintech headlines again. Today, the drugstore chain and challenger bank Chime have partnered to allow Chime customers to deposit cash at Walgreens’ brick-and-mortar locations.
Customers can deposit their cash for free at 8,500+ Walgreens locations. In its announcement, Chime makes the comparison between Walgreens locations and bank branches, mentioning that the new partnership offers more walk-in locations than users have with any bank in the U.S. Also worth noting is the fact that 78% of Americans live within five miles of a Walgreens store.
“We know having access to a physical location for cash deposits is important to our members, and until recently, the options have been limited,” said Chime Co-founder and CEO Chris Britt.
Chime users can make deposits by handing the Walgreens cashier their cash and their Chime debit card. Once the cashier loads the funds into the user’s account, the money is available immediately. Customers are limited to three $1,000 cash deposits each day and $10,000 each month.
Chime’s Walgreens partnership adds to the company’s existing cash deposit capabilities. Customers can also deposit cash at 75,000+ other retail locations including Walmart, CVS, and 7-Eleven, though these stores charge a loading fee of anywhere from $3 to $5. Partnerships with pervasive retailers such as these are key for Chime, since many of the challenger bank’s users receive earnings and tips in cash.
Today’s news comes as Walgreens itself is entering the alternative banking arena. The company announced earlier this year it is partnering with InComm and Mastercard to launch a new bank account offering with a debit card that will pair with a mobile banking app and in-person service at Walgreens locations.
Chime was founded in 2013 and has since risen to the top of challenger banks in the U.S. The company has 20 million customers and boasts a valuation of $25 billion (though the accuracy of that number has been disputed).
