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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Most of us probably don’t spend our entire workday thinking about what the future holds. Fortunately, there are a handful of people who specialize as futurists, studying what’s next for humanity.
I had the opportunity to pick the brain of one such person, Nancy Giordano, last week after watching her keynote presentation at FinovateWest.
In our conversation, Giordano explains the four awakenings shaping our future, describes the productivity revolution, and examines the meaning of leadership vs. what she calls leadering. She also takes a look at COVID’s impact on the future and offers up practical next-steps for both companies and individuals.
Check out our conversation below to hear her thoughts:
There may not be snow in Africa this Christmastime, but there will be cross-border payments.
PayPal-owned money transfer service Xoom announced today that customers can send money transfers to consumers in 12 Africa-based countries.
The expansion focuses on facilitating remittances to underbanked consumers. Xoom customers in the U.S., Europe, and Canada can now send funds directly to mobile wallets of users in Burundi, Cameroon, Ghana, Kenya, Madagascar, Malawi, Mozambique, Rwanda, Tanzania, Uganda, Zambia, and Zimbabwe. Xoom will add more countries to this list next year.
“Sending money to Africa through traditional channels has always been expensive. We wanted to help bring down the cost and speed up the process to boost financial inclusion,” said Xoom VP and GM Julian King. “There is nowhere else in the world that moves more money on mobile phones than Sub-Saharan Africa. While there are only five bank branches per 100,000 people as of 2019, there are 1.04 billion registered mobile money accounts in Sub-Saharan Africa.”
Today’s launch is an enhancement of Xoom’s existing offerings in Africa, which already enable money transfers for cash pick-up, direct bank deposits, and mobile reloads to 41 countries in Africa.
Xoom’s money transfer service not only minimizes fees, but also increases transparency surrounding fees. While the cost of sending $200 to the Sub-Saharan African region averaged $18 in 2018, Xoom’s rate to send funds to a mobile wallet in Zambia, for example, is $0.99 when sent with a debit or credit card and free when sent via a bank transfer or the user’s PayPal balance.
This lower cost helps promote financial inclusion, drive economic growth, and lift underserved communities out of poverty.
Jon Stein has long been a prominent figure in the U.S. fintech sector. Betterment, the wealthtech company he launched in 2008, has grown to help 500,000 users manage a total of $25 billion in assets.
Not only did Stein build a successful fintech company, he also helped kick off the entire wealthtech subsector within fintech. Today, the New York-based company’s founder announced he is handing over the company — and the legacy– to Sarah Kirshbaum Levy.
The move comes after Stein spent time during quarantine reflecting. He ultimately came to the realization that, as he said, “the best way to achieve our mission might be to invite a successor to lead Betterment in the next phase of growth.”
Kirshbaum Levy comes to Betterment after serving as Chief Operating Officer at Viacom Media Networks, the parent company of brands such as Nickelodeon, BET, and Comedy Central. She started working under Stein as a consultant, building out the company’s 2021 plans. Today, as Kirshbaum Levy takes the reins as CEO, she will not only guide Betterment toward a future of growth but also prepare the company to go public.
Stein will continue to hold a seat on Betterment’s board and will support Kirshbaum Levy by offering help with recruiting, investor relations, telling the company’s story, and upholding the company culture and values.
“Due to good fortune and intense effort in a most challenging year, the company has never been in a stronger position. Each line of business is reaching new heights in 2020. We’re beating targets, well-capitalized, with wind at our backs. It’s a good time to hand over the reins,” Stein concluded.
Subscription management platform provider Zuora is partnering with payments infrastructure player Stripe this week.
Through the partnership, Zuora has integrated Stripe into its subscription offerings to enable its 1,000 clients to enhance their payment capabilities. Zuora customers can now access Stripe’s payment tools from the Zuora platform.
“Winning subscription companies want to use the best technologies to build a competitive advantage,” said Zuora Chief Product Officer Chris Battles. “We’re thrilled to work with Stripe in an ecosystem of new world partners that helps to optimize and automate processes throughout our customers’ journey in the Subscription Economy.”
Some of the advanced capabilities include:
Integrated payment processing capabilities into the Zuora platform, including fraud detection, AI-enhanced payment retries, and payment processing capabilities.
Increased payments flexibility so subscribers can pay when, where, and how they choose across a range of subscription options.
A modern ecosystem that can scale to meet clients’ global growth.
Zuora has more than 1,000 clients, including Box, Ford, Penske Media Corporation, Schneider Electric, Siemens, Xplornet, and Zoom. The company’s platform helps firms manage recurring subscription business models and serves as a hub to automate the entire subscription order-to-revenue process across billing and revenue recognition. Zuora was founded in 2007 and is headquartered in California.
Valued at $36 billion, Stripe helps businesses of all sizes with finance and treasury management functions.
“Stripe’s mission is to grow the GDP of the internet, and this partnership with Zuora extends that goal by giving Zuora users access to the full capabilities of Stripe payments,” said Stripe’s Chief Business Officer Billy Alvarado. “With the internet powering a rapidly growing portion of the global economy, it’s never been more important to provide subscription businesses with the economic infrastructure they need.”
Some might use the term “dumpster fire” to describe 2020. And while it certainly has been a difficult year full of change, loss, separation, and frustration, there have been some silver linings.
One of those bright spots is the acceleration of digital transformation that has taken place across the tech industry. The trends we predicted last December seem like small goals compared to what many organizations were able to accomplish this year.
We’re now faced with another year of uncertainty, not knowing what 2021 will bring. And while it is probably more prudent to make industry predictions in three-month increments, here’s a broader view that assesses some of the larger trends we expect to see take shape over the next 12 months.
Embedded Banking
Embedded banking, and more specifically embedded payments, began taking off this year. To be clear, embedded payments has been around for awhile now. The concept began as a way for customers to pay for a purchase without having to leave the merchant’s site or app.
However, companies are beginning to perfect the customer experience to such an extent that the customer doesn’t experience friction related to the payment. In these cases the payment process is so deeply integrated into an app that the customer doesn’t have to put extra effort into making the payment.
The classic example of embedded payments is Uber. A customer takes a cab ride and arrives at their destination without having to fumble around with their payment card. With Uber, when a customer arrives at their destination, they know that they have paid for the ride but they don’t have to make any extra effort to finalize it or even need to think about it at all.
When software providers can achieve an experience where the customer doesn’t have to think about the payment (but, of course, makes the payment anyway), they will not only have created a better customer experience but also will be able to close more sales.
Open banking in the U.S.
Open banking has already taken off in Europe and is making progress in Australia and Canada, as well. The U.S., however, has been slower to enact regulation.
Helping to drive progress toward an open banking future in 2021 and beyond, the Consumer Financial Protection Bureau (CFPB) issued an advanced notice of proposed rulemaking (ANPR) that requests information from the public on how consumers’ access to their financial records should be regulated.
Essentially, the ANPR serves as a first step in creating formal regulation in the U.S. around open banking. This– along with other factors such as an increase in digital use among consumers, a general recognition that screen-scraping techniques are harmful, and an increase in third party fintech apps– have primed the pump for open banking to take shape next year.
Automation
We’ve reached a point with AI where Robotic Process Automation (RPA) can help businesses effectively scale their operations. On the business side, we can expect to see increased automation in lending decisioning, communication and workflow tools, customer service, billing, invoicing, accounting, and investing. In fact, almost any business operation that lacks the ability to process information fast enough is a good candidate for automation.
End consumers can expect to see more benefits from automation, as well. More and more fintechs are working to optimize savings and investment opportunities for their clients. Take, for example, Wealthfront’s self-driving money concept. The roboadvisor wants to make money management effortless for customers by optimizing the use of each of their paychecks to pay bills, top up their emergency fund, and efficiently allocate the remainder into investments.
Banking-as-a-Service
This trend seems a bit meta, as many of the clients for banking-as-a-service tools are they themselves banks. It may prove difficult to explain to a fintech outsider why a bank would want to launch a challenger bank (the answer: to compete with banks!).
Despite this, however, banking-as-a-service sits at the core of fintech. Banks and fintechs focus on their core competency and integrate solutions from third parties into their own.
There are two major drivers that are transforming this historically vanilla concept into one of next year’s hottest fintech trends. The first is the push toward open banking. As explained above, there is more data being created in the digital realm than ever and, because of this, consumers want to share their data across platforms. This interoperability is altering customer demand and incentivizing fintechs to integrate additional functionality into their existing services.
The second driver is the sudden increase in the number of challenger banks. Late last year and into 2020, we have seen not only a record number of challenger banks launch, but also a record amount of VC funding allocated to challenger banks. While most consumers are maintaining their relationships with their traditional bank, they are also opening accounts at challenger banks such as Chime and N26.
These digital-first banks often have attractive features such as credit building tools, early paydays, and fee-free overdrafts. To compete, some banks are launching challenger banks of their own. Enterprise technology company Moven and digital banking services provider Q2 recently partnered to create a “bank-in-a-box” concept that aims to help banks improve their digital offerings and retain their digitally savvy customers.
Honorable Mention
Aside from this list, there are two items that deserve honorable mention. The first is buy now, pay later technology. The trend is currently on fire but will likely fizzle out after consolidation takes place. The second trend, Central Bank Digital Currencies (CBDCs), is on the opposite side of the spectrum. As China initiates the launch of its country’s own CBDC there has been a lot of hype about the concept. However, we are likely still three to five years out from the U.S. making any significant progress toward a CBDC so all talk about the subject will be just that– talk.
Restaurant payments and analytics innovator Upserve is the latest company to be acquired by point of sale (POS) and ecommerce solutions firm Lightspeed.
The $430 million purchase was announced earlier this week, marking Lightspeed’s 10th acquisition since it was founded in 2005. The deal comes on the heels of Lightspeed’s November purchase of ShopKeep that is anticipated to close for $440 million.
“Lightspeed is quickly emerging as a world-leading commerce platform for SMBs and partnering with them to deliver data-based insights through a single digital hub was a natural choice,” said Upserve CEO Sheryl Hoskins. “Together we look forward to empowering North American restaurateurs to deliver superior guest experiences and make them wildly successful.”
Lightspeed anticipates the acquisition will accelerate product innovation and boost its analytics commerce platform. The company’s purchase of Upserve will also help Lightspeed reach an additional 7,000 U.S.-based clients in the hospitality industry.
Originally founded under the name Swipely in 2009, the company rebranded to Upserve in 2016 to reflect the company’s focus on the restaurant industry.
Upserve has raised a total of $40.5 million from 14 investors, including Greylock and Vista Equity Partners. From October 2019 to October 2020, the company recorded approximately $40 million in revenue.
PhonePe is selling a $700 million stake in its company to existing investors, including Walmart, which led the financing round. The digital wallet and online payments company will use the funding to distance itself from Flipkart, which Walmart purchased in 2018. As part of the deal, Flipkart’s ownership of PhonePe will drop from 100% to 87%, according to TechCrunch.
India-based PhonePe anticipates that the $700 million in capital– along with independence from parent company Flipkart, which operates an ecommerce division– will help boost its growth in the ever-growing digital payments arena.
Further cementing PhonePe’s independence, the company has appointed its own board of directors, including PhonePe Founder and CEO Sameer Nigam and former Flipkart executive Binny Bansal.
“We are really excited to have access to dedicated long-term capital to further our ambitions in the financial services distribution sector as well as creating large innovative growth platforms for India’s micro, small, and medium enterprises,” said Nigam.
Founded in 2015, PhonePe is estimated to be worth around $5.5 billion. The company anticipates it will be profitable by 2022 and plans to go public in 2023. PhonePe currently has 100 million active users and recorded almost one billion transactions on its platform in October.
Lloyds Banking Group is making instant, cross-border payments possible, thanks to a partnership with global secure financial messaging services provider SWIFT.
The U.K.-based bank announced it is the first bank to go live with SWIFT’s gpi Instant Connection, a new service that helps consumers and businesses send money in seconds across the globe.
gpi, which stands for Global Payments Initiative, was launched in 2017 to facilitate international payments. Since then, SWIFT has amassed more than 4,000 financial institution clients who collectively use gpi to send more than $300 billion each day in more than 150 currencies.
“At Lloyds Bank we strive to continually evolve and create innovative solutions for our clients,” said Ed Thurman, Managing Director and Head of Global Transaction Banking at Lloyds Banking Group. “The gpi Instant service is set to be a game changer in cross-border payments and we are very excited to be the first bank globally to offer the service here into the U.K.”
The new service leverages SWIFT gpi, SWIFT’s high-speed cross-border rails, and connects with a country’s own real-time infrastructure. In Lloyds’ case, SWIFT gpi is connecting with the U.K.’s Faster Payments, the region’s own real-time payments initiative.
“We developed gpi Instant with our community through responsible innovation and equal emphasis on four core needs — speed, security, transparency and compliance,” said David Watson, Chief Strategy Officer at SWIFT. “We look forward to continuing our work with market infrastructures and financial institutions to bring the benefits of seamless cross-border payments to customers across the globe.”
The launch with Lloyds comes after SWIFT tested out the service earlier this year in a pilot with Lloyds, Barclays, Commonwealth Bank of Australia, DBS, Wells Fargo, and BBVA. The real-time payments capabilities are part of SWIFT’s new strategy to retool cross-border infrastructure to facilitate instant and frictionless transactions.
Branded payments firm Blackhawk Network has always been busy over the holiday season. Between its gift cards, digital rewards, and prepaid cards, the California-based company has helped people embrace the spirit of giving.
And while Blackhawk Network is still helping fuel the gifting and rewards economy this year, it is moving to an even more 2020-friendly (that is to say, digital-first) approach.
Last week Blackhawk announced it has teamed up with Evite to power the digital greeting card and invitation company’s eGift card program. Evite users can now choose from more than 100 eGift card options from popular brands including Lowe’s, Red Lobster, and Old Navy.
“It’s no surprise we’ve seen the demand for virtual gifts and greetings skyrocket in 2020. Contactless gifting is now a must-have, especially with the holidays approaching,” said Evite CEO Victor Cho. “Adding an extra touch like an eGift card can help people create personal connections with family and friends that they haven’t been able to see. It also helps our users stay safe, creates maximum flexibility for gifters and receivers, and modernizes the 2020 gifting experience. Thanks to Blackhawk’s expansive network of eGift card choices, our users have a broad selection to choose from at the tip of their fingertips.”
Brett Narlinger, head of global commerce at Blackhawk Network, noted that Blackhawk has seen a 70% increase in eGift sales– all before the peak holiday shopping season.
In addition to its partnership with Evite, Blackhawk announced a new payment solutions suite called Pay4It that connects physical and digital payments. The suite helps merchants reach underbanked populations with the ability to add cash to a digital wallet, mobile app or account, or make payments for digital goods with cash. It also offers consumers more choices to pay by enabling additional digital wallets and transforming loyalty points and rewards into purchasing power. Finally, Pay4It brings the gift card mall to non-traditional locations and into the digital realm.
“Retailers’ and merchants’ businesses changed instantly this year, and Blackhawk has responded with a product suite that brings once-disparate physical, digital and stored value payments together, keeping brands and consumers connected in a seamless way,” said VP of Global Product Strategy at Blackhawk Network Helena Mao.
An alum of FinovateFall 2012, Blackhawk Network was founded in 2001 and was acquired in January of 2018 by Silver Lake and P2 Capital Partners in a deal worth $3.5 billion. The company works with more than 1,000 brands and card partners, is in more than 200,000 retail locations in 28 countries, and connects with more than 300,000,000 shoppers each week. Talbott Roche is CEO.
Taking the opportunity to seize a fresh start that comes with a new year, Facebook’s Libra Association has rebranded to Diem Association.
The group chose the name Diem, which is Latin for “day” to signal a new day for the association. The rebrand will not change the mission of the organization, which is to build a safe, secure, and compliant payment system. The move will, however, serve as a way of “reinforcing its organizational independence.”
“The Diem project will provide a simple platform for fintech innovation to thrive and enable consumers and businesses to conduct instantaneous, low-cost, highly secure transactions,” said the Diem Association’s CEO Stuart Levey. “We are committed to doing so in a way that promotes financial inclusion – expanding access to those who need it most, and simultaneously protecting the integrity of the financial system by deterring and detecting illicit conduct. We are excited to introduce Diem – a new name that signals the project’s growing maturity and independence.”
As Levey suggests, the new name serves as a way for Diem to distance itself from Facebook, which initiated the association in June of 2018. This isn’t the first time the group has attempted to disassociate itself with Facebook. In May, the association changed the name of the Diem digital wallet from Calibra to Novi.
In addition to the rebrand, the Diem Association and its subsidiary that serves as the regulated payment system operator, Diem Networks, is reinforcing its ranks. The group has appointed Dahlia Malkhi as the Association’s Chief Technology Officer, Christy Clark as Chief of Staff, Steve Bunnell as Chief Legal Officer, and Kiran Raj as Executive Vice President for Growth and Innovation and Deputy General Counsel.
The news of the new hires comes on the heels of the company’s appointment of James Emmett as Managing Director, Sterling Daines as Chief Compliance Officer, Ian Jenkins as Chief Financial and Risk Officer, and Saumya Bhavsar as General Counsel.
Regardless of today’s seemingly upbeat news, Diem is still currently in limbo. The association is still waiting on regulatory approval, including a payment systems license for the operational subsidiary of the Association from the Swiss Financial Market Supervisory Authority (FINMA).
Venture investing platform OurCrowd is taking home an investment of its own this week. The Israel-based company announced today it received $60 million in capital from Japan-based ORIX. The investment brings OurCrowd’s total funding to $172 million.
The goal of the funding and strategic partnership is to bring opportunities for Israel-based startups in the Asia region and will strengthen trade between the two regions.
“We are excited about investing in OurCrowd, Israel’s most active venture investor and one of the world’s most innovative venture capital platforms,” said ORIX UK CEO Kiyoshi Habiro. “We intend to be active partners with OurCrowd and help them accelerate their already impressive growth, while bringing the best of Israeli tech to Japan’s large industrial and financial sectors.”
Today’s deal isn’t the first time OurCrowd has made Japanese ties. Last year the company teamed up with Toyota Tsusho Corporation, a Japanese general trading company, to scout for startups that support autonomous driving industry.
OurCrowd was founded in 2013 and offers a platform that allows its 58,000 users to invest in 220+ pre-vetted startups and 23 venture funds. Jonathan Medved is CEO.
One of the most compelling aspects of Finovate conferences is that they help you keep up with the latest trends in the industry. And with changes happening at such a fast pace these days, there’s never been a more important time to stay informed.
Fortunately, we’ve done the hard work for you and picked out a few trends to keep your eye on at FinovateWest next week, November 23 through 25.
COVID aftermath
No, we’re not over the pandemic, but we are starting to see the effects of long-term economic consequences. You can expect to hear panelists and presenters discuss strategies to deal with the long term impacts of COVID across a range of subsectors.
Harnessing AI
Despite (or maybe because of) the turbulence brought on in 2020, AI remains a top trend. With companies more focused than ever on their digital strategy, it’s a good time to think about the benefits of incorporating AI into not only your core offering, but also your back office tools, customer experience, and more. At FinovateWest next week AI will be one of the top areas of discussion.
Customer experience
This is yet another trend heightened by the recent pandemic. With so much of the customer experience taking place in the digital realm, it can be difficult to craft the perfect offering for all users. Many of the conversations taking place at FinovateWest will center around the customer.
The discussion sessions will take place throughout the three-day event, which goes live at 9 am Pacific on November 23. The fully digital conference will host keynote speakers, expert panelists, and some of the hottest companies in fintech as they demo their newest technologies. We’ve also carved out plenty of time and space for you to network with your fellow attendees. There’s still time to book your ticket so don’t delay!
