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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
PayPalannounced plans today to acquire Japan-based Paidy, a payments company with a buy now, pay later (BNPL) offering that facilitates transactions for both merchants and consumers. The deal is expected to close for $27 billion (¥300 billion) in the fourth quarter of this year.
PayPal’s purchase will work alongside its existing ecommerce business in Japan, which is the third largest ecommerce market in the world. Paidy will also expand PayPal’s capabilities, relevancy, and distribution in Japan’s domestic payments market.
“Paidy pioneered buy now, pay later solutions tailored to the Japanese market and quickly grew to become the leading service, developing a sizable two-sided platform of consumers and merchants,” said VP and Head of Japan at PayPal, Peter Kenevan. “Combining Paidy’s brand, capabilities, and talented team with PayPal’s expertise, resources, and global scale will create a strong foundation to accelerate our momentum in this strategically important market.”
Paidy was founded in 2008 and enables its six million registered users to make purchases online without the use of a debit or credit card. Instead, Paidy operates on a BNPL model by billing customers for all purchases at the end of each month. Payments can be made via bank transfer or in-person using cash at a convenience store.
This model works not only for ecommerce purchases, but also for brick-and-mortar transactions. The company’s Paidy Link tool was launched earlier this year and allows customers to link digital wallets, including PayPal, to make purchases using the digital wallet but make payment via Paidy. For PayPal, Paidy’s model that circumvents credit and debit card rails is a good thing. It enables PayPal to own the payment flow (and the revenue that comes with it).
“Paidy is just at the beginning of our journey and joining PayPal will accelerate our plans to expand beyond ecommerce and build unique services as the new shopping standard,” said Paidy President and CEO Riku Sugie. “PayPal was a founding partner for Paidy Link and we look forward to working together to create even more value.”
Sugie, along with Paidy Founder and Executive Chairman Russell Cummer, will continue to lead Paidy, which will continue to operate and maintain the brand.
Paidy marks PayPal’s 23rd acquisition, following Honey in 2019 and Curv and Happy Returns in 2021. The purchase of Paidy, with its BNPL capabilities, hints at PayPal’s evolution into becoming more of a holistic shopping platform.
Even though super apps aren’t common in the U.S. or Europe, most everyone in fintech across the globe is familiar with them. Super apps serve as a one-stop shop that allow users to access multiple services from a single place.
In Asia, the hot spot for super apps, users are able to use super apps for everything from ordering groceries to hailing a cab to managing their finances. Apps including WeChat, AliPay, Paytm, and Grab are commonplace across Asia. In fact, WeChat has more than 1.2 billion monthly active users; 78% of people in China between the ages of 16 and 64 are using WeChat.
It is the “super” nature of these apps that makes them so successful; they are a platform and do not just fulfill a single purpose. With a combination of in-house technologies and third party integrations, the apps serve a range of consumer needs. Many super apps began with only a single purpose, accumulated a large number of users, and then began adding new capabilities.
What does it take to become a super app? Starting with a massive user base helps, and providing a range of tools for everyday tasks and activities will help keep those users coming back. Below are 10 common capabilities of successful super apps.
Social
As the popularity of WeChat has proven, social tools are sticky. Building communication, collaboration, and sharing capabilities into an app not only builds a user base, but also creates a community around a brand.
Ecommerce
Shopping is taking place increasingly online, which means that ecommerce purchases are becoming a large part of consumers’ everyday lives.
Food delivery
Everybody needs to eat. And between online grocery orders and takeout meal deliveries, super apps can help users meet this need.
Transportation services
Just as important as having food and online purchases delivered is having the means of getting from one location to another. Included in this category are ride hailing services, car sharing services, and bike or scooter sharing services.
Personal finance
Another one of life’s essentials is managing finances. From budgeting for daily expenses to planning for retirement, banking and finance tools are key components of a super app.
Travel services
Offering travel services, such as travel insurance, concierge services, and rental car discounts, is commonplace for many financial services companies. Super apps offer more robust capabilities, however, such as flight comparison and booking tools, train schedules and ticketing services, and hotel booking capabilities.
Billpay
Paying bills is a regular occurrence for most people, so including utility billpay and a mobile top-up feature will give users yet another reason to log into a super app on a regular basis.
Health services
The healthcare industry is fragmented. So providing health services, such as appointment booking, tele-health calls, records management, general health information, and ask-a-nurse services in a single place provides a lot of value for end users.
Insurance
Similar to the health industry, insurance comes with a lot of moving pieces. Offering a digital lock box with insurance cards, contact information, coverage options, and payment history is a valuable tool that can help keep users organized.
Government and public services
Rounding out the list of life’s necessities in the digital realm are government and public services. Super apps can host social security cards and information, public transportation payment options, and library card information.
Germany-based Rydannounced this week it has received $11.9 million (€10 million) in funding for its technology that allows users to pay for vehicle fuel via their mobile app.
The investment, which marks the first time Ryd has received funding, comes from BP Ventures, the investment arm of British Petroleum. As part of today’s announcement, BP Ventures’ Managing Partner Daniela Proske will join the Ryd board.
Ryd offers a digital payment solution that enables drivers to pay for fuel, electric vehicle charging, and car washes without leaving their vehicle by using the company’s mobile app or with an integration with smart car systems. “This new payment form is much faster, easier, and more comfortable,” said Ryd Founder and Chairman Oliver Goetz, “Ryd is on its way to lead this movement in Europe.”
Goetz called BP “the perfect addition” to the company’s existing network of service stations and added that it completes Ryd’s ecosystem with strategic partners in finance, automotive, and energy sectors.
Ryd plans to use the funding to fuel expansion and deliver digital payment options for BP customers across Europe. The company’s payment technology is currently accepted at 3,000 service stations across seven countries in Europe.
BP will use the strategic relationship to expand its BPme digital fuel payment app into more European countries. The app currently works in the U.K. and the Netherlands. “In-car digital payments are an integral part of the seamless and convenient experience that customers increasingly expect at our retail sites,” said BP SVP of Mobility and Convenience for Europe and Southern Africa Alex Jensen. “Ryd’s technology can help deliver just that, and for an increasing range of services. Our investment and partnership will help BP provide these digital services more widely across Europe, making our customers’ experience easier and more enjoyable.”
The first BP filling stations are expected to go live with Ryd in the fourth quarter of this year.
Insurtech company Blueprint Title recently raised $16 million, bringing its total funding to $24.5 million. Forte Ventures led the Series B round.
Blueprint Title launched in 2017 to tackle title insurance, a type of insurance that protects prospective homeowners from being sued for a claim against the home from before the purchase was finalized. These “clouds” can arise from back taxes, liens, conflicting wills, and other unresolved issues.
The title insurance market in the U.S. is small, however. Blueprint Title CEO Steve Berneman estimates that the market is comprised of four companies with 90% of the market share.
Blueprint Title offers an API that allows customers to search new transaction submissions, pull information about in-process deals, and view real-time updates when there’s a change in title status. Built for secure collaboration, the company’s portal enables document uploads and status updates that keep everyone up-to-date.
Blueprint Title is part of a wave of neoinsurance companies, a term coined by TechCrunch to describe digital-first insurtechs such as Metromile, Roots, and Trov. Blueprint Title’s model is slightly different than these three companies, however, in that it operates on a B2B model instead of marketing directly to consumers. The company’s client base is comprised of real estate investors, lenders, proptech companies, and home builders.
Blueprint Title is currently licensed in 26 states and operating in 19 states.
Payments technology company InComm and online billpay platform doxo are partnering this week to enable doxo users to pay bills using cash.
doxo is leveraging InComm’s VanillaDirect retailer network that contains more than 60,000 brick-and-mortar locations including chains such as Dollar General, Family Dollar, and participating 7-Eleven stores.
“Our cash payment network is perfectly aligned with doxo’s vision of empowering consumers to improve their financial lives,” said InComm Payments SVP of Business Development Tim Richardson, adding, “and in this instance providing their users with a simple and convenient experience for making cash payments to household billers in an extensive network of retail locations across the United States.”
To pay their household bills using cash, doxo users select the pay with cash button in the app. Cash-paying users will receive a barcode on their mobile app that they scan at the participating retailer’s point of sale, which will charge them the correct amount for their selected bill. Once the customer pays their bill, the biller receives the payment instantly, just as they would with a credit card, debit card, or checking account payment.
The new billpay method not only helps underbanked consumers, it also benefits the billers. Just over 13% of utility bills in the U.S. are paid using cash, which incur more processing costs than digital payments. The added capability will also give doxo a boost by offering utility companies a greater incentive to join doxo’s network of more than 100,000 billers.
Founded in 2008, doxo offers a mobile app that enables its five million users to manage and pay all of their bills from a single place. The company’s doxoPLUS offering provides credit protection and identity theft protection. doxo also offers late fee protection, a feature made possible thanks to a 2019 partnership with Plaid.
Headquartered in Seattle, Washington, doxo has raised $18.8 million in funding from investors including Sigma Partners, Bezos Expeditions, and Mohr Davidow Ventures. Steve Shivers is CEO.
After recently receiving $450 million in funding, digital trading and brokerage company DriveWealth is now worth $2.85 billion. The investment brings the company’s total funding to $551 million.
The Series D round was co-led by Insight Partners and Accel and included a follow-on investment from Fidelity International Strategic Ventures, Base 10, FTX, and FlightDeck. Greyhound Capital, Softbank Vision Fund, and Point72 Ventures also participated.
The New Jersey-based company will use the new funds to become the forefront of embedded investing technology for global digital wallets and brokerages. Specifically, the investment will help DriveWealth hire new employees, make acquisitions, and form partnerships. The funds will also be crucial for the company as it seeks to expand its products and services, including launching a self-clearing product.
“We are in the early innings of a worldwide retail investing revolution,” said company Founder and CEO Bob Cortright. “Our goal is for DriveWealth to be the partner of choice to deliver the embedded investing experience of the future. This new capital and investor engagement will accelerate our global expansion plans in order to become the world-class, exchange-like technology company that powers tomorrow’s investing products.”
Julie Coin and Robert Cortright founded DriveWealth in 2012 with the goal to democratize investing across the globe. Via its API, the fintech helps companies make investing friendly for inexperienced investors with fractional trading, enabling users to begin investing with as little as $1. DriveWealth’s API also allows clients to provide non-U.S. citizens with access to U.S. markets.
DriveWealth’s clients include Revolut, Hatch, MoneyLion, and Sharesies. Through partnerships like these, the company’s technology reaches investors in 153 countries.
Nerve differentiates itself by serving a unique customer segment– independent musicians. Available in both English and Spanish, the mobile bank helps musical artists “build stronger communities and sustainable careers” to help them manage their finances and plan for the future.
Co-founded by fintech veterans John Waupsh and Ben Morrison, Nerve is partnering with Piermont Bank to offer FDIC-insured business debit and savings accounts that will help users separate business and personal finances. The mobile bank also provides artists streaming and social follower data, access to 55,000 free ATMs, and free instant payments to other Nerve accountholders. Unique to Nerve is the bank’s private networking feature that helps professional musicians discover others in their field, network, and collaborate.
“Financial empowerment for musicians means giving them a banking platform that understands their unique needs with the tools to help them better manage their money,” said Waupsh. “Musicians and bands at all stages of their development need smart financial management, access to the real-time data that drives their business, not to mention two-minute digital account opening, and collaboration and business banking features to run their brands effectively.”
In addition to providing musicians with banking tools, Nerve is also piloting a music streaming app called Nerve FM. The app allows creators to earn subscription revenue from their audio and video content. Musicians keep up to 80 percent of the revenue generated from subscribers who stream their music. The best part is that the musicians get to keep all the user data as well. Move over, Spotify.
Nerve launches in the U.S. on September 15. You can catch Waupsh on stage at FinovateFall next month speaking on the neobanking panel on September 13. Register today or check out the FinovateFall homepage to learn more.
Mobile payments company BOKUannounced its expansion beyond carrier billing today with the launch of M1ST, a mobile payments network.
M1ST, also known as Mobile First, features 330+ mobile payment methods, including mobile wallets, direct carrier billing, and real-time payments schemes. The payment methods reach 5.7 billion mobile payment accounts across 90 countries.
“Today, we’re launching the M1ST Network to enable global merchants to acquire, monetize, and retain mobile-first consumers,” said BOKU CEO Jon Prideaux. “For merchants to capitalize on the massive potential of mobile-first consumers, they need to accept the payment methods they have and prefer, which are increasingly behind glass screens, not rectangular pieces of plastic.”
The new network, which runs via a single integration, is a solution for the currently fragmented mobile payments space. The technology circumvents many hurdles that come with with payments, including the myriad of tax and legal regulations associated with different geographies.
With M1ST, merchants receive a single, global settlement which eliminates the complexity of local taxes, foreign exchange, and cash repatriation. Additionally, BOKU’s payment licenses enable merchants to accept regulated payments in nearly 50 countries.
BOKU’s new launch comes at a good time in the payments space. As consumers continue transitioning to digital banking and transaction methods, many are becoming increasingly comfortable with digital payments via mobile wallets.
Founded in 2008, BOKU offers digital customer acquisition, customer onboarding, and mobile user authentication tools. The San Francisco-based company currently serves more than 600 global merchant partners and processes $9 billion in payments every year.
The following is a guest post by Todd Thomas, who has been in financial services for more than 20 years.
According to data from the Urban Institute, the median FICO credit score for Hispanic consumers is about 75 points lower than the median white consumer’s. The median credit score for Black consumers is more than 100 points lower than the median white consumer’s. And the approximately 10% of American adults without usable credit files are disproportionately people of color.
These racial, demographic, and geographic disparities are rooted in “historical inequities that reduced wealth and limited economic choices for communities of color,” according to the Urban Institute. It notes that subprime borrowers can pay $3,000 more in interest and fees on a $10,000 car loan over four years.
This unequal status quo has advocates calling for a more objective approach to consumer risk modeling. Innovators have created new technologies and data sources that could do just that.
The following four consumer risk modeling innovations are poised to disrupt the current credit scoring regime to varying degrees. Collectively, they could change the concept beyond recognition and eventually render obsolete what we think of today as “credit scoring.”
1. Forward-Looking Changes to Current Scoring Models
The most recent changes to the FICO scoring model, collectively known as FICO 10 and FICO 10T, are iterative rather than transformational updates. In other words, they don’t radically alter the calculation of credit scores.
But FICO 10 and 10T hint at the direction traditional credit scoring models are moving — and what they might have to do to remain relevant in the future as more disruptive innovations take hold.
FICO 10 and 10T pay closer attention to consumers’ credit mix in the context of their overall debt loads. Specifically, they penalize consumers who take out new personal loans to consolidate existing debts, then continue racking up debt on those current trades (most often, credit cards).
Essentially, they aim to reward good credit behavior(paying down debt) and discourage risky habits (living beyond one’s means).
2. Cash Flow Modeling
Another recent FICO update attacks credit scoring discrepancies more directly. The UltraFICO score — a joint venture between Fair Isaac Corporation, Experian, and Finicity — pulls in noncredit data to provide a more accurate and fair picture of consumers’ credit risk. Cash flow monitoring includes cash flow in a bank account and payment history.
By incorporating banking information, such as account balances and account age, UltraFICO supports credit scoring for about 15 million people who don’t have enough credit history to have traditional credit scores. Unfortunately, those people are disproportionately lower-income and POC — those most likely to be left behind by the credit scoring status quo.
UltraFICO is an example of cash flow modeling. Long used by business lenders, cash flow modeling is working its way into the consumer credit mainstream thanks to adoption by fintech lenders like Accion, Brigit, and Petal.
According to an analysis by FinRegLab, “the predictiveness of the cash flow scores and attributes was generally at least as strong as the traditional credit scores and credit bureau attributes,” suggesting it’s a reliable complement to or replacement for traditional scoring. And cash flow modeling is more equitable than conventional scoring, according to FinRegLab’s data.
3. International Credit Scoring and Risk Modeling
The current credit scoring regime also explicitly discriminates based on nationality. Non-U.S. nationals who come to the United States don’t have the requisite credit history to qualify for FICO scores. They’re essentially invisible to lenders that rely on FICO scores to make lending decisions.
Fortunately, border-based barriers to international credit scoring are already crumbling, thanks to global consumer credit risk models like Nova Credit. As more U.S. lenders begin to trust and adopt these models, new arrivals to the U.S. and Americans relocating abroad could find it easier to obtain credit without traditional country-specific credit scores.
4. A Post-Credit-Score World
Finally, noncredit and not-only-credit scoring models like FICO XD hint at what’s possible in a truly “post-credit-score” world.
FICO XD does not rely entirely — or even principally — on credit bureau information. The model pulls data from property records, leasing databases, and noncredit contracts like utility agreements to develop a comprehensive picture of a consumer’s likelihood of default.
According to Fair Isaac Corporation, FICO XD can produce FICO scores for up to 70% of previously unscorable consumers, including many historically disadvantaged demographic groups.
Final Thoughts
This is an exciting time for consumer risk modeling. From incremental changes to existing models (FICO 10, UltraFICO) to more radical shifts (cash flow modeling, FICO XD) that could supplant credit scoring entirely, we’re seeing a wave of innovation unlike any since the early days of modern underwriting.
These innovations can reduce long-standing credit scoring disparities and produce more accurate consumer credit risk models. But they offer no guarantees. Their actual impact on consumer finance will depend on who wields them and how.
Todd Thomas has been in financial services for more than 20 years.
Financial data and infrastructure platform Plaidannounced today that it received an undisclosed amount of new funding from J.P. Morgan Private Capital Growth Equity Partners and Amex Ventures, which first invested in the California-based company in 2016. The new round boosts Plaid’s total funding somewhere north of $724 million.
In a statement, the company said that today’s investment will help it “further accelerate efforts to meet rising consumer demand for digital finance; a shift powering the rapid growth of Plaid’s diverse customer ecosystem.”
The funds are an add-on to the company’s $425 million Series D round announced in April. While that investment valued Plaid at $13.4 billion, today’s new funds do not alter the valuation.
This may be J.P. Morgan’s first investment in Plaid, but the two have been data partners since 2018. There is also a storied history between Plaid and J.P. Morgan CEO Jamie Dimon. Earlier this year Dimon cited Plaid as an example of a company that improperly uses client data. However, Dimon did not cite any specific scenarios to back up his accusation.
Plaid was founded in 2013. The company builds APIs to connect consumers, financial institutions, and developers. Plaid also offers a suite of analytics products that provides further insights into transactions. As the rise of open finance in the U.S. has begun to impact firms both in and out of fintech, Plaid is on its way to becoming a household name.
“While we’re still in the early innings of the digital transformation in financial services,” said Plaid CEO Zach Perret, “we’re excited to work with the thousands of banks, fintechs and non-financial institutions in our network to create what’s next.”
In the latest fintech tie-up, Paysafe has acquiredSafetyPay. The all-cash transaction marks Paysafe’s 13th acquisition and is expected to close for $441 million in the fourth quarter of this year.
Paysafe aims to leverage Florida-based SafetyPay, which has locations in 16 countries– 11 of which are located in Latin America– to boost its own presence in that geography.
SafetyPay was founded in 2006. The company enables users to make online cash payments, bank transfers, and cross border transactions without a payment card. The company’s network includes more than 380 banks and it works with 180,000 brick-and-mortar locations as cash collection points.
U.K.-based Paysafe was founded in 1996 and offers similar payment services as SafetyPay, including an online cash payments tool. Paysafe also provides digital wallets, standalone and integrated point of sale tools, and a digital marketing marketplace where advertisers can acquire new customers, monetize their traffic and generate revenue through partnerships.
Once the acquisition closes, the SafetyPay team will work as part of Paysafe’s eCash and online banking solutions group. SafetyPay CEO Gustavo Ruiz Moya will become CEO of eCash for Latin America and Global Head of Open Banking.
Paysafe’s previous acquisitions have greatly increased the breadth of its services. The company’s brands include Income Access, Paysafecard, Paysafecash, Neteller, Petroleum Card Services, and Skrill. Among Paysafe’s clients are MindBody, RentMoola, Policy Expert, and Amilia.
For several years now, there has been a rise in the number of digital banks taking on traditional banks, vying for a share of their client base. In the past couple of years, however, we’ve seen a slight twist in this trend.
These digital banks are taking personalization to the next level, and many have launched with the purpose of fulfilling the unique needs of niche subsets of the population that each share similar needs and struggles. Notably, these digital newcomers are generally not a solution looking for a problem; they are truly meeting unmet needs of previously ignored client bases.
Built for “x”
There are endless examples of these digital banks built for “x.” However, here are a few that Nymbus Board of Directors Member Rilla Delorier highlighted in her keynote at FinovateSpring:
Sable, banking services for immigrant employees and international students who may lack a social security number
Hitched, an app that helps newlyweds manage their funds together
Convoy, payment and money management services to meet the needs of long-haul truckers
Blueprint, banking services for contractors
Gig Money, money management tools to help gig workers smooth cash flow
Access, a banking platform that provides capital to black-owned businesses
This concept of niche banking isn’t new. Many community banks and credit unions launched to serve unique populations such as teachers and military families, but have since expanded their membership to serve the needs of a broad population. The continuous call for personalized products and services in the banking sector, however, combined with the lack of action from traditional banks, has inspired a new rank of fintech nerds to develop and launch not just clique-specific services, but clique-specific banks.
Sticking power
These newcomers have struck a nerve with users, especially those who were previously underserved. That’s because they not only make banking products accessible, they do so in a language that each unique consumer group understands. For example, the website may provide multiple language options or leverage visual/video tools to better communicate with customers from different backgrounds.
Furthermore, digital banks are providing products and services tailored to the unique needs of these groups. If the customer base notoriously struggles with making ends meet, for example, the bank might offer an early pay option that fronts their paycheck a week-or-so in advance. Or, in an example of a gig worker-specific bank, the bank may provide a tool that helps smooth out the user’s cashflow to ensure they don’t overspend on a month when their income is higher than average.
This segmentation goes beyond what traditional banks, who serve users based on geography, have previously offered. “If you think about defining community based on geography, where you live doesn’t really determine what your financial needs are,” Delorier explained in her keynote.
Given this hyper-personalization, expect that this new form of digital banking is here to stay. That said, traditional banks still have a the opportunity to stay in the game.
How it will work alongside traditional banks
What should the role of traditional banks be amid all of this? In short, the answer is that banks will be expected to collaborate with new digital banks and standalone technology providers. As Alyson Clarke, Principal Analyst and Forrester Research said in her presentation at FinovateSpring, “In the era of open finance, no bank will succeed alone.”
Banks need to become comfortable with collaboration, partnerships, and coopetition. Clarke recommends that banks build multiple routes to market, partner where they are weak, and specialize in what they are good at. “What we do know is that most banks will have a stark choice: own customers or power finance. But in the future, few will do both,” Clarke concluded.
What will traditional banks’ response be?
Both Delorier and Clarke recommend banks do one thing: rethink. That is to say, banks should rethink their digital transformation, rethink policies and procedures around credit decisioning and membership criteria, and rethink customers and markets.
What this looks like will vary among organizations, but banks can start by conducting research to discover unmet customer needs, incorporating diversity into their workforces in order to represent a wider range of customer segments, and leveraging technology partners.
“It’s not about following your established business models and delivering digital technology with agility. That’s not good enough anymore,” said Clarke. “You have to rethink customers and markets, rethink your consumers and what they need and invest ahead of that change to be more responsive.”
