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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Ohio-based KeyBank made its sixth acquisition today. The bank purchased Banking-as-a-Service company XUP, a platform that helps banks take control of the merchant experience. Terms of the deal were not disclosed.
Founded in 2018, XUP connects merchants, third party financial service providers, and acquirers across channels to help banks offer a more integrated and seamless payments experience. KeyBank will use XUP’s technology to improve its embedded banking strategy and improve the user experience for its commercial users. The bank describes the move as the “next step in providing digital innovation at scale.”
Today’s news is only the latest development in the relationship between KeyBank and XUP. The bank contributed to XUP’s $3 million Seed round closed in February and the two were strategic partners. According to KeyBank, XUP helped accelerate the volume growth of its merchant payments capabilities. The bank now counts 150 million card transactions each year, accounting for $13.6 billion in annual card volume.
“We’ve long embraced the software innovation that’s sweeping through the financial services industry, and the acquisition of XUP allows us to continue to be a leader in this space,” said KeyBank’s Head of Enterprise Payments & Analytics Ken Gavrity. “XUP’s highly experienced team has accelerated us on the journey to build connectivity across our systems, our partners, and our customers, to make it easy to do business with Key.”
XUP will continue to operate as its own entity and support its customer base. “Our end-to-end software solutions, combined with Key’s scale and deep financial services expertise, will perfectly blend to provide clients a best-in-class payment experience,” said XUP President Chris May.
KeyBank was founded in 1825, has $187 billion in assets under management, is headquartered in Cleveland, Ohio, and has 1,000 branches across the U.S. The bank’s other acquisitions include AQN Strategies, Finovate alum HelloWallet, First Niagara Financial Group, EverTrust Financial Group, and Leasetec. Among the company’s strategic partners are AvidXchange, BillTrust, and Bill.com.
EarlyBird, a mobile investing app for children and their families, has raised $4 million in seed funding today. Alexis Ohanian’s Seven Seven Six led the round, which featured strategic participation from Gemini’s Frontier Fund, Network Ventures, Rarebreed Ventures, and other angel and VC investors. The company will use the capital to continue building its solution, add to its engineering, product, marketing, and operations teams, and introduce new features – including the ability for users to invest and gift assets other than stocks and ETFs, such as cryptocurrencies.
The investment takes the company’s total funding to more than $7 million, having secured funding previously in November and January of last year.
Using a collaborative approach to next-generation wealth building, EarlyBird enables parents to set up an investment account, select from a number of diversified portfolio options, and begin making investments on behalf of their child. The platform also empowers members of a child’s extended network of family, friends, and others to contribute to the account (“gifted capital” EarlyBird calls it). Whether celebrating birthdays, holidays, or other occasions, these contributions are not only unique gift options, they also help young people begin to learn about the importance of investing and building wealth over time. The technology also has a feature that enables contributors to add a video or photo commemorating the gift.
“EarlyBird started with the vision to create an accessible way for all families to begin building wealth for their children, and to do so with the support, love, and contributions of their broader communities,” EarlyBird co-founder and CEO Jordan Wexler said. “Since our launch, we’ve seen incredible growth, adoption, and excitement from families with a wide range of financial knowledge and backgrounds. Seven Seven Six and all of our new partners recognize the importance of financial access and approachability in investing, and we’re thrilled to have them on board as we continue to take flight.”
Headquartered in Chicago, Illinois, and founded in 2019, EarlyBird recently announced a partnership with Benjamin Talks, a youth-oriented financial education platform launched by co-founders Nikki Boulukos and Carissa Jordan last fall. The collaboration will bring Benjamin Talks content to EarlyBird’s newsletter series “The Weekend Worm” which offers stock market news in an approachable way that parents can share with their children. This spring, EarlyBird introduced its Gifts for Good program. Starting this April, EarlyBird selected up to three “extraordinary kids between the ages of 3 and 12 years old to support and invest in.” With an eye toward young people showing achievement in areas such as music and the arts, athletics, academics, and “special acts of kindness,” EarlyBird will provide a gift investment of $250 to each child selected to seed their investment accounts.
“Investing tools are only available to families with investing knowledge and experience building generational wealth,” EarlyBird COO Caleb Frankel said in a statement accompanying today’s investment news. “We have a bold vision to make investing available for everybody. We are driving wealth creation not within the system of today, but for the world of tomorrow.”
Merchant services aggregator and mobile payments company Square is making online merchants’ lives easier with a new launch today.
The Square Photo Studio app helps sellers take high-quality pictures of merchandise and sync them to their online store.
The app, which is available to both Square sellers and anyone with a Square Online Checkout link, guides merchants through easy-to-follow prompts to help them take the best photo. The photo studio automatically isolates the product from the background then helps users stylize the photo with backgrounds, shadows, and colors.
Once the seller has optimized their photo, they can connect their images to the corresponding items in their Square catalog or create a new item. After merchants list items in the catalog, they can start selling immediately.
“It’s no secret that products with professional-looking photos perform better than those without,” said Head of eCommerce at Square David Rusenko. “Unfortunately, the cost, skill set, and labor involved with taking those photos was often prohibitive. Now, with Square Photo Studio, sellers can give their items the look of a professional photo studio shoot from the comfort of their home, the office, or on the go.”
The Square Photo Studio app is available to everyone in the Apple App store, which creates a lower barrier to entry for anyone who wants to sell physical goods. Because the app is very accessible and easy-to-use, it has the potential to increase the number of transactions from Square sellers.
Ozow, a payment gateway based in South Africa, has secured $48 million in Series B investment in a round led by Chinese fintech Tencent. The funding boosts the company’s total capital raised to more than $51 million. The company said the funding will be used to promote fintech regulation – particularly open banking – to help more people gain access to payment services. The new capital will also enable the seven-year old fintech to enter new markets throughout sub-Saharan Africa and add employees. Namibia, Ghana, Kenya, and Nigeria are among the countries Ozow is currently targeting for expansion.
Co-founded by current CEO Thomas Pays, Ozow enables consumers to pay for transactions directly from their bank accounts. This kind of service has special potential in a country like South Africa where only 20% of those who have bank accounts have and use credit cards. Ozow has six million users of its technology and Pays claims that the company is adding 140,000 users and processing $100 million in transactions every month.
Also participating in Ozow’s latest round were Endeavor Catalyst and Endeavor Harvest Fund.
Using Ozow is straightforward. Consumers choose Ozow as a payment option when making purchases either online or in-person. Then they select their bank, log in with their online banking credentials, and allow Ozow to automate the actual payment process. Free to use for individual consumers, merchants are able to use Ozow’s platform for free for the first 12 months – or a maximum of $65,000 in processing value each month. In order to receive payments, merchants only need a bank account and a smartphone or similar device. Ozow includes Vodacom, MTN, Takealot, and Uber among its enterprise clients.
Pays said that his team had been “engaging with Tencent” since the spring, and that the company understood “the scale and opportunity” available in investing in a company like Ozow.
“It’s an honor to bring on board Tencent, Endeavor Catalyst, and Endeavor Harvest Fund,” Pays said in a statement. “This is a validation of our role in transforming the banking industry through the development of innovative, convenient, and more inclusive payment solutions for everyone.”
Here is our look at fintech innovation around the world.
The Finovate Team was saddened to hear of the passing of Brandon Dewitt, co-founder and Chief Technology Officer of MX. He was 38.
In a letter to company employees, MX CEO Ryan Caldwell, who co-founded the firm with Dewitt in 2010, wrote of his colleague’s “brilliance, boundless positivity, wonderful wit, and ability to be joyous and grateful, regardless of what challenges he faced.”
Diagnosed with Stage IV cancer in 2016, Dewitt was a staple of MX’s participation at Finovate events, including leading the company’s most recent Best of Show winning demo at FinovateFall in 2019. But it may have been his presentation at Finovate’s developers’ conference, FinDEVr Silicon Valley 2016, that left the most indelible impression on so many of us. After a discussion of the company’s latest innovation, Dewitt retold the story of his battle with cancer, the way his teammates at MX rallied in support, and why he wanted to discuss this topic with our Finovate/FinDEVr audience.
What I want to say to every developer that’s here today, every entrepreneur that’s here to today, every builder that’s here today is about the seemingly impossible, certainly improbable, but necessary. I want you to know that we wake up every single day and say ‘but necessary.’ We know as an organization what our task is: to be ‘but necessary’. And I want to challenge every developer out there in saying, ‘are you working on something that is necessary?’
You may be thinking, ‘man he went from talking software to talking cancer and scared it me’ …” Dewitt conceded. “But if you look at the leading causes of death of humans, in the top ten is suicide … And if you look at the leading causes of suicide, one of the leading causes of suicide is financial stress. The World Health Organization considers financial stress one of the most significant problems facing mankind.
So what we’re doing here today and what you wake up and do on a daily basis, can be part of the solution to a very, very solvable problem. And so I want to challenge you not only as organizations, not only as builders, but as humans. Are you waking up every single day and doing something that is necessary? And if you’re not, there’s tons of organizations that are out in that hallway that have a booth set up that are doing something that is necessary, that is finding a way to change the world that is necessary for the future of humanity, and I would encourage you to check them out.
Our thoughts and deepest condolences are with Brandon Dewitt’s fiancé, Kara, as well as his family, friends, and his teammates at MX.
Buy Here, Pay Here (BHPH) crowdsourced securitization firm Agora Data is coming out with a new financing tool this week. The Texas-based company is introducing a reducing interest rate line of credit for BHPH dealers and small-to-mid-size finance companies to offer their sub-prime borrowers more vehicle financing options.
With the new reducing rate line of credit, the interest rate decreases over time. The loans also come with other advantages not typically found with traditional financing options, including no personal guaranty or recourse, flexibility to draw cash as needed, and no origination or unused line fees.
“With AgoraCapital, we remove the obstacles dealers confront in traditional lines of credit and empower them with the same secret sauce enjoyed by larger national dealer groups,” said Agora Data CEO Steve Burke. “Agora’s innovative, best-in-class financing options and robust data analytics are leveling the playing field for an underserved and underbanked industry.”
Agora Data was founded in 2017 and its team of auto retail, finance industry experts, and top data scientists leverage AI to bring BHPH car dealers a simplified experience when it comes to selling auto loans. Agora Data aids dealers in selling their auto loans to banks, finance companies, hedge funds, and private equity firms. The selling tool groups all firms’ offers together and analyzes each one in order to provide the dealer with the most competitive offer.
In addition to the selling service, the company offers AgoraInsights, a product that helps dealers maximize portfolio performance, reduce risk, and manage cashflow. “Agora is already making a positive difference for the BHPH industry by helping our members strengthen their financial footing and realize unprecedented growth, knowledge, ability to compete and ultimately build wealth,” added Burke.
News about auto financing has consistently appeared in the fintech headlines since the beginning of the COVID pandemic. However, while Agora Data’s announcement is aimed at auto financing for the underbanked community, most of the news we’ve seen in this sector has focused on digitizing and managing the loan application portion of auto loans and refinances. One such company, MotoRefi, partnered with SoFi in April of this year and received $45 million in funding in May.
In an extension of its $200 million Series E financing round, digital payments company Airwallex has secured an additional $100 million in funding. The extension came from Lone Pine Capital and featured the participation of existing investors such as 1835i Ventures and Sequoia Capital China. Now standing at $300 million, Airwallex’s latest funding gives the company a valuation of $5.5 billion. The company has raised a total of $802 million.
“As we approach our sixth anniversary, we want to continue to connect entrepreneurs, business builders, and makers with opportunities in every corner of the world,” co-founder and CEO of Airwallex Jack Zhang said. “This new capital injection will allow us to do just that, fueling M&A opportunities that will accelerate our global expansion plans, pursuing our mission to empower businesses to grow without borders.”
Headquartered in Australia, Airwallex offers a financial infrastructure and platform that enables businesses to manage payments online. The company’s business accounts allow businesses to transfers funds worldwide to more than 130 countries in 31 currencies, at a cost of 0.4% to 1.0% above the interbank FX rate. Airwallex’s business accounts connect seamlessly with online stores such as eBay, Shopify, and PayPal, as well as with accounting packages like Xero, and enable firms to issue virtual “borderless” payment cards to their employees.
Airwallex’s funding comes as the company reports a 1.6x year-over-year revenue increase for Q3, along with annualized revenue of more than $100 million. Launching its virtual employee cards in Hong Kong and the U.K. this past quarter, Airwallex also secured licenses to operate in both Singapore and Malaysia.
“Receiving this approval reflects our robust policies, compliance framework and risk management systems we have put in place,” Zhang said when Airwallex received its Major Payment Institution License by the Monetary Authority of Singapore (MAS) earlier this month. “We will continue to work closely with regulators and partners to ensure we facilitate a safe, effective, and transparent way to manage their cross-border financial transaction needs.”
Founded in 2015, Airwallex has recently announced partnerships with Australian digital brokerage company Stake and travel lifestyle brand Cathay. In October, the company was named to the 2021 CB Insights Fintech 250 list for the fourth consecutive year.
The modern world has witnessed three major economies. First, there was the industrial economy in which people earned money through physical activity. Then came the consumer economy in which people made money performing services. Next, the knowledge economy enabled people to earn money through leveraging intellectual capital and insight.
In these past few years, we’ve been witnessing the birth of the creator economy, a new economy fueled by social media platforms and video sharing. This new working order democratizes the ability for anyone to become a celebrity. Here’s a look at four key facts of this new economy.
Who
While many consider the creator economy to be limited to YouTubers and Instagram influencers, it actually has a wider breadth. In essence, everyone with an online presence is a creator, since we are all making content and sharing it online in some form.
A more exclusive definition of a creator is anyone who monetizes content online. This represents not just social media influencers, but also includes those who create and sell NFTs, ebooks, podcasts, digital art, etc.
Because there are such low barriers to entry in the creator economy, even kids can do it. In fact, one of the most famous YouTube creators is Ryan, an 11-year-old with 30.9 million subscribers who posts videos of himself playing with toys. Ryan is reportedly worth $32 million.
The participation of kids in the creator economy is influencing how younger generations view their future. According to a recent study, one third of kids between ages eight and 12 want to be either a YouTubber or Vlogger when they grow up.
Size
The current size of the creator economy is over $100 billion and growing. YouTube alone expects a $30 billion stream of revenue by the end of 2021. Of the 50 million people that consider themselves a creator, around two million of these are professionals making six-figure salaries.
Where’s the money?
Just like other economies, one of the ways that creators are recognized for their contributions is by getting paid. While this payment used to come from ads, branded content, or sponsorships, today’s monetization looks different. That’s because, instead of relying on third party sponsorships and brands to receive payments, creators now receive payments via subscriptions, tips, and even by payments directly from the user.
One of the latest examples of this is TikTok, which recently introduced the concept of in-app tipping. Users with more than 100,000 followers can apply to begin receiving tips from their fan base. When they receive a tip, 100% of the compensation goes to the creator; TikTok doesn’t take a commission.
Creators aren’t just getting paid in dollars. Owners and creators of non-fungible tokens (NFTs) receive payment in cryptocurrencies in exchange for their work. For more on how NFT compensation works, check out our piece 7 Things to Know about the NFT Craze.
How to leverage the opportunity?
The most important part about the creator economy for banks and fintechs is knowing how to leverage the opportunity. The future of this economy is unlike any we’ve ever seen in that payment and monetization may not rely on traditional banking infrastructure. In fact, many participants’ future revenue will be decentralized.
What we know for sure, however, is that personalization and customer experience matter and will continue to reign, even when payments are thrown off the rails. Many digital banks are already capitalizing on this opportunity. Just take a look at Nerve, a bank for musicians; Karat Financial, a bank for digital creators; and Willa, an invoicing tool for creators.
These financial services firms are different from banks in that they understand the unique challenges that come with being a creator. For example, creators experience many of the same difficulties as the self-employed, such as difficulty qualifying for a loan. They also often times have lumpy cashflow and need help with budgeting and financial planning.
There is still time for traditional banks to come up to speed in the creator economy. The key to serving this unique customer base will be to expand your existing resources for self-employed customers by offering new services such as revenue-based financing and on-demand wage access. As with most things in today’s digital banking era, the only way to properly serve this new user base will be through partnerships.
U.S. Bank has agreed to acquire San Francisco, California-based expense and travel management company TravelBank. Financial terms of the transaction were not disclosed, but one outlet, Skift, has said that the deal was valued at $200 million.
“We are focused on giving businesses more confidence, control, and convenience in managing payments and expenses,” U.S. Bank Vice Chair of Payment Services Shailesh Kotwal said. “TravelBank will help us accelerate these efforts.”
Founded in 2016, TravelBank offers an all-in-one solution for expense and travel management. Relying on a single platform, reporting model, and subscription price, TravelBank helps employees and businesses control and track expenses, automate traditionally manual processes, streamline both approvals and reporting, and remain compliant. With more than 20,000 customers, TravelBank claims to have reduced business travel spending by its clients by 30% on average, while simultaneously boosting employee morale with a user-friendly design and a travel rewards program. Ahead of this week’s acquisition, the company had raised $35 million in funding from investors including Dreamers VC and DCM Ventures.
“We created TravelBank to provide a single experience for expense reporting and travel management,” co-founder and CEO of TravelBank Duke Chung explained. “Our combined offering with U.S. Bank will be the most comprehensive expense, travel, and payment management solution in the industry.”
Skift further reported that Chung will “move over to the bank” post-acquisition, while TravelBank will continue to support its existing clients.
The acquisition is the fruit of a partnership between the two companies that extends back to September of 2020. In the fall of last year, U.S. Bank integrated TravelBank’s travel and expense management platform into its U.S. Bank Instant Card. The collaboration enabled program administrators to issue Instant Cards directly from their expense management platforms.
With nearly 70,000 employees and $567 billon in assets, U.S. Bancorp is the parent company of U.S. Bank National Association. Headquartered in Minneapolis, the bank serves millions of customers, both in the U.S. and around the world, with a variety of services including consumer and business banking, payments, corporate and commercial banking, wealth management, and investments.
U.S. Bank demonstrated its Card-as-a-Service (CaaS) solution at FinovateFall 2021 in September. The technology enables companies to leverage API integration to extend corporate credit digitally and create a custom virtual payment experience in their ecosystem.
MoneyLion made a move today that will help it catch the eye of prospective customers and retain its existing ones. The digital bank acquired MALKA, a creator network and content platform, to help it better engage with consumers and connect with communities.
MALKA was founded in 2012 and works with creators to develop content across digital mediums including advertising campaigns, original branded content, e-gaming livestreams, podcast series, feature length documentaries, sports representation, and marketing. One of MALKA’s differentiating factors is that it maintains a talent base of 170 employees in-house in order to maintain relationships instead of working with different freelancers on different projects.
MALKA will help MoneyLion, which already offers MoneyLife content, in its mission to become a daily destination by bringing evergreen content to educate, inform, and support customers’ financial decisions. Ultimately, integrating MALKA’s content into MoneyLion will support the digital bank’s marketing and brand-building efforts.
“Through this acquisition, which we anticipate will be accretive and cash flow positive in 2022,” said MoneyLion Co-Founder and CEO Dee Choubey, “we will now be able to fully leverage MALKA’s capabilities so that the MoneyLion brand can truly live wherever our customers are investing their attention.” CMO Bill Davaris added, “This fundamental shift will allow us to own and not rent the relationships we are cultivating with new and existing MoneyLion customers.”
At face value, a tie-up between a digital bank and a content creation company seems a bit odd. The acquisition, however, can be seen as MoneyLion simply buying its own creative marketing and content department. No matter how you look at it, the acquisition is a hat tip to the new creator economy and speaks to how content-driven today’s consumers are.
MALKA will operate independently from MoneyLion and the company’s Founder and CEO Louis Krubich and Co-Founder and President Jeff Frommer will continue to lead daily operations. “This partnership will allow us to exponentially grow our creator network and engage with millions of more fans,” said Krubich.
MoneyLion launched in 2013 and offers a full-service platform that delivers mobile banking, lending, and investment solutions. Earlier this year the company teamed up with Zero Hash to launch the ability for users to buy, sell, and hold cryptocurrencies. The company went public on the New York Stock Exchange in September via a SPAC merger with Fusion Acquisition Corporation.
Analytics and decision management technology company FICOlaunched a loan origination tool called FICO Originations Solution that automates the entire customer journey leveraging the FICO platform.
The cloud-based tool leverages FICO’s enterprise intelligence network to streamline and personalize loan originations. The new tool helps financial services providers do two key things. First, it helps remove friction from the customer experience. Second, it empowers loan originators by helping them make more precise origination decisions and better manage risk, ultimately helping them grow more profitable portfolios.
This enhanced decision-making is thanks in part to FICO’s data library that offers lenders access to 130+ global data sources. The ever-increasing data source helps firms make faster and better customer decisions.
The FICO Originations Solution starts with a completely digital onboarding experience. The tool considers an organization’s goals, including the types of borrowers they want to attract, their ideal conversion rate, and profitability goals. FICO offers simulation capabilities to test the user experience to determine if decreased friction results in increased fraud or if changing an application question increases the conversion rate.
FICO Originations Solutions’ customers have access to FICO’s suite of tools that includes interactive messages, fraud prevention capabilities, and pricing optimization.
“Financial services providers today need data-hungry, analytics-ready, agile, extensible systems in order to compete in a digital-first economy,” said FICO VP and Head of Product Management Tim Van Tassel. “FICO Originations Solution, Powered by FICO Platform provides the digital and analytic sophistication that enables financial institutions to offer the safety, convenience, and personalization that customers look for during the account opening process through their chosen channel, while closely managing customer-level risk.”
FICO was founded in 1956 and is headquartered in California. The company is best known for the consumer FICO score that is calculated based on information in credit reports maintained by Experian, Equifax, and TransUnion. The company also offers fraud and compliance as well as debt collection and recovery solutions.
Alternative credit provider and digital bank Upgradeannounced a $280 million investment this week. The Series F round brings the company’s total funding to $600 million and boosts its valuation to $6 billion, which is almost double its last valuation of $3.3 billion in August.
The round was led by Coatue Management and DST Global with participation from Dragoneer Investment Group, Gopher Asset Management, G-Squared, Koch Disruptive Technologies, Old Well Partners, Ribbit Capital, Sands Capital, Ventura Capital, and Vy Capital.
Upgrade was founded in 2016 and offers a variety of low-cost personal loans and credit cards that come with rewards ranging from Bitcoin cashback to 3% cashback. Earlier this year the company debuted a checking account with a debit card that pays 2% cashback for common expenses.
The company differentiates its card, which is issued by Sutton Bank, from traditional credit cards by combining monthly charges into installment plans that the borrower repays over 24 to 60 months. Upgrade structures the repayment this way to get its users into the habit of paying down their balance every month and avoid getting trapped in a continuous cycle of debt.
The funding news comes four months after Upgrade closed its $105 million Series E round. Company CEO Renaud Laplanche said that the round “demonstrates Upgrade’s rapid growth and commitment to delivering innovative financial products that benefit consumers.”
The “rapid growth” Laplanche references has been seen in recent acclamations. Earlier this year the Financial Times selected Upgrade as the fastest growing company in the Americas and the Nilson Report recognized the Upgrade Card as the fastest growing credit card in America, placing Upgrade among the top 50 U.S. credit card issuers.
Since launching its credit card in 2017, Upgrade has delivered $10 billion in total credit to customers via the company’s credit cards and loan products. The majority of this credit has been issued this year alone; the company is on track to deliver $8 billion in credit in 2021.
Upgrade is headquartered in California with an operations center in Arizona and a technology center in Canada. The company is partnered with Cross River Bank and Blue Ridge Bank for credit lines and banking services, NYDIG for Bitcoin rewards, and Sutton Bank for card issuance.
