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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Econans provides digital simulation and automated advice services for personal finances, generating more confident consumers, increased customer engagement, and better conversion rates for the banks.
Features
Easy to integrate, white-labeled, modular, and adaptive
Includes robot advice focused on life events
Proven to increase customer engagement and conversion rates for banks
Why it’s great This is a new generation of personal finance management tools with automated advice based on life events.
Presenters
David Klamer, CEO & Founder Klamer has a passion for intelligent software that solve human problems, and he is committed to delivering exceptional financial experiences. LinkedIn
John Nyström, Global Business Manager Nyström is passionate about personal financial management and has 17 years of experience working in banking, fintech, and financial advisory. LinkedIn
Quantum Metric‘s platform for Continuous Product Design gives business and technical teams a single version of truth that is fast, quantified, and based on what matters most — your customers’ perspectives.
Features
Reduce customer friction and optimise self-service funnels faster
Deflect inbound calls due to user friction with real-time customer rescue
Make data-driven decisions on what to prioritise
Why it’s great Build better digital products faster by giving business and technical teams a single version of truth that is fast, quantified, and based on what matters most, your customers’ points of view.
Presenters
Kevin Korpics, VP – EMEA & APAC Korpics joined Quantum Metric in 2016 to establish the EMEA team, extending a 20-year career spanning experiences at startups, big 5 consulting firms, and international enterprises. LinkedIn
Alex Thomson, RVP Sales – EMEA & APAC Thomson joined Quantum Metric in 2021 and is responsible for driving Quantum Metric’s EMEA go-to-market strategy, with 15 years of exec leadership experience in business development and operations. LinkedIn
Obsecure was established to help financial services organizations accelerate their digital-first strategy by enabling effortless and limitless digital services with the highest level of trust.
Features
Expand your digital services
Reduce fraud
Increase conversion
Why it’s great Obsecure uses privacy preserving face biometrics and innovative action capture techniques that ensure the highest level of safety and privacy with minimal friction to customers.
Presenter
Will Herlands, CTO Herlands has a Ph.D. in Machine Learning from Carnegie Mellon University. He is a MIT Lincoln Lab researcher focused on cybersecurity, AI, and robotics. LinkedIn
From its role as a digital currency innovator to its controversial, politics-free workplace stance, Coinbase continues to be one of fintech’s most compelling stories. And with the company moving ever closer toward a becoming a publicly-traded firm, attention on the San Francisco, California-based digital currency exchange only has intensified.
There may be no better example of this dynamic than an article published on Bloomberg.com this week headlined “Coinbase Is a $100 Billion Crypto Cult.” The author, Jared Dillian, is an investment strategist who wastes little time in letting readers know where he stands on a platform that “has frequent service outages, nonexistent customer service, and sky-high transaction costs.”
Nevertheless, as Dillian acknowledges, there are precious few alternatives for individual cryptocurrency investors. Moreover, much of his dissatisfaction seems to stem from an unfavorable comparison between Coinbase and discount stock brokerages – which have very different histories as well as very different ways of generating revenue.
As for the cult reference, that too has less to do with Coinbase and more to do with the author’s take on the contemporary enthusiasm/mania for cryptocurrencies. If you believe that investment in Bitcoin and other digital assets “has crossed over into religion territory” and represents “an investment cult,” then it is understandable to be critical of an institution that facilitates the behavior. But that, as Dillian indicates, is akin to blaming the store for selling picks and shovels to the gold miners.
What is Coinbase eight and a half years after its launch in 2012 (and six and a half after its Finovate debut)? Will its going public mark the beginning of a new era in digital asset adoption by institutions and individuals? Or, as has been the case in the past, will the news signal, if not an end, then at least a pause in what has been a surge in interest in cryptocurrencies since the spring of 2020?
Here’s what we know: Coinbase has filed with the SEC to go public by way of a direct listing, selling shares directly to the public rather than via a traditional IPO. The company will trade on the Nasdaq under the ticker COIN. In terms of the company’s current valuation, at its most recent funding in 2018, Coinbase was valued at $8 billion. More recently, Axios has reported that Coinbase was valued at $100 billion when it sold shares on the Nasdaq Private Market earlier this year.
Coinbase currently has 43 million verified users (up from 12,000 in 2012). The company has a lifetime trading volume of $456 million and currently has more than $90 billion in assets on its platform. In fiscal 2020, the company experienced trading volume of $38 billion more than double that of fiscal 2018. And perhaps most critically, Coinbase has begun to secure the kind of institutional support that both the company and the cryptocurrencies it manages need. The company reported having 7,000 institutional customers as of the end of 2020, a seven-fold increase over 2017. Revenue growth also has been strong for Coinbase, with the company achieving revenues $1.3 billion in fiscal 2020 compared to $533.7 million in fiscal 2019.
What does this mean for a publicly-traded entity? The best case for $COIN may rest in its ability to serve as a safer haven for crypto-curious investors who do not have the interest in analyzing – or even deeply understanding – individual digital assets. Coinbase could find itself serving a role, in the near-term, that might otherwise be played by a Bitcoin or cryptocurrency exchange-traded fund. And if we are still in the early days of the Digital Asset Age, that may not be a bad place to be.
First Boulevard, a challenger bank dedicated to serving the African American community, announced a $5 million seed funding round this week. Participating in the investment were Barclays, Anthemis, and a number of angel investors including actress Gabrielle Union and AutoZone CFO Jamere Jackson. Donald Hawkins, CEO and co-founder of the Overland, Kansas-based neobank, said that the funding would help First Boulevard build out its business marketplace of black-owned SMEs for its Cash Back for Buying Black program.
The capital will also enable the company to grow its team, its customer base, and its platform. Co-founded last August by Hawkins and COO Asya Bradley during the George Floyd/anti-racism protests of 2020, First Boulevard anticipates launching in Q3 of 2021. Among the neobank’s initial offerings will be a no-fee debit card, solutions to automate savings and wealth-building, as well as financial education resources.
As we noted last month in our Black History Month look at African-American based digital banks, the fledgling challenger bank already has forged an innovative partnership with Visa. First Boulevard will pilot a new suite of Visa’s crypto APIs that enable the trading and custody of digital assets.
“The First Boulevard mission is to help Black America build wealth,” Hawkins said last month when the initiative was announced. “We are thrilled to partner with the leader in digital payments, Visa, and leverage their crypto APIs to provide another channel for the Black community to access crypto as a new asset class that can help build Black wealth.”
First Boulevard’s participation in the cryptocurrency project is a reminder of the growing intersection between the African American community and digital assets. A growing number of black observers of and participants in the cryptocurrency space have advocated Bitcoin and other digital assets as a way for African Americans to achieve independence from a financial structure many believe is systemically stacked against them.
Europe’s most valuable fintech startup just got a lot more valuable.
Klarna announced on Monday that it has raised $1 billion in new funding and earned a lofty valuation of $31 billion. The company, which set out to raise $500 million in the just-ended round, credited investor demand for the exceptional amount raised. Klarna CEO Sebastian Siemiatkowski also cited strong growth in the U.S. as a reason why investor dollars are flocking toward his company.
“What definitely has accelerated and changed is the success in the U.S. market,” Siemiatkowski said. “Investors are seeing Klarna getting ahead of its competitors. I think that has changed the perspective and changed the view on our valuation.”
According to Siemiatkowski, investors are seeing Klarna as the king of an e-commerce wave that is making Buy Now Pay Later a mainstream financing approach. The reverse layaway strategy of enabling consumers to receive goods and services now and pay for them in equal installments over time has made BNPL the hottest new thing in online shopping. Klarna, which was founded in 2005 and made its Finovate debut seven years later, has been a pioneer in “after delivery payment” and other forms of consumer financing for years. This week’s financing is, in part, a recognition of this fact and a bet that, amid rising competition, Klarna will come out on top.
Right now, both Siemiatkowski and Klarna’s backers seem equally eager to take on legacy consumer financing options as well as Klarna’s BNPL rivals. Pointing out how the buy now pay later approach is fairer insofar as it makes the same offer to all consumers, Siemiatkowski adds, “There’s a number of investors out there that agree with us. They see that this credit card industry is actually at its core flawed and needs some innovation.”
In addition to using the new capital for acquisitions, the company is more interested in synergies that will “help people save time and money” than it is in purchasing rivals. That said, Siemiatkowski does have a few novel uses for at least some of the company’s new funding: Klarna will donate approximately $10 million to organizations that are dedicated to fighting climate change.
More than 30 current and new investors participated in Klarna’s latest fundraising, including Silver Lake, Sequoia Capital, BlackRock, and HMI Capital. Other investors included Singaporean sovereign wealth fund GIC and individual investor, rapper Snoop Dogg.
Headquartered in Stockholm, Sweden, Klarna claims 90 million users and 250,000 merchant partners around the world. The company is optimistic about its growth in the U.S., saying they expect it to overtake Germany as its biggest market by the end of this year. The company has inked partnerships with 20 of the top 100 brands in the U.S., and said it gained a million new customers a month in the States in the final quarter of last year.
FinovateEurope is taking place digitally on March 23 through 25, but we’re launching on-demand content a week before the event.
Starting on Monday, March 15, registered attendees will have access to hours of content, hosted on the new Totem platform.
Among these exclusive videos are our popular interview series where we ask our demo companies a series of 25 rapid-fire questions in under five minutes. Additionally, we’ll have content aimed specifically at young fintechs in our Startup Booster series. Some of these sessions include:
Ready to Raise Money? Here’s a Checklist. SixThirty Ventures Regional Manager EMEA Samarth Shekhar will present on how to find the right partner at the right price and how to avoid common pitfalls when meeting with investors.
Accelerating Growth This panel features accelerators from across the Europe. Each will give insights into how working with an accelerator can kick start your growth.
Brand Origin Story Time Marqeta CMO Vidya Peters offers tips on how to ensure your startup story and brand stand out from the crowd.
Know Your Customer NetGuardians CEO and Co-Founder Joël Winteregg explains how you can get to know your customer as you’re just starting out.
Tips & Tricks from a Sales Expert CurrencyCloud Sales Director Lauren Passey offers up a lesson in sales.
The seven-minute demos from each demo company will also be released early. This way you can watch, fast-forward, and rewind before the event even begins. And be sure to make note of your questions so that you can ask the demoers in person during the Q&A sessions that will take place during the live event.
And because we know you’re busy, we’ve made all of this content available on the event platform for two weeks after the event concludes.
There’s still time to book your ticket for FinovateEurope. Check out the main agenda to see the range of networking opportunities, keynote speakers, panel discussions, and more that we have planned.
Subscription management startup Subaio landed $5.9 million (€4 million) this week. The investment comes from newly established venture firm, Global PayTech Ventures, which ex-Mastercard President Javier Perez launched after stepping down from Mastercard at the start of this year.
Founded in 2016, Subaio has received two previous funding rounds. The first came from Nordea in 2018 and the second was from startup accelerator Plug and Play last year. Both rounds were undisclosed.
“There is a massive market demand within the payments ecosystem and the team has deep technical expertise and a great product that solves a problem for banks and consumers alike,” said Perez. “That is why they have a European market leading position within the subscription management space, and we will invest both capital, our payment expertise and network of global contacts to realize the company’s full potential.”
Subaio’s value proposition fits well into today’s economy, where the average consumer has between eight and 11 subscriptions. That’s because Subaio enables banks to help their consumers view, manage, and cancel their subscriptions with one easy-to-use interface.
Eight bank clients, including Nordea, ABN AMRO, and Lunar, are currently leveraging Subaio’s subscription management technology.
Subaio CEO and Co-founder, Thomas Laursen, sees today’s funding as a vote of confidence for the technology. “The fintech sector is flush with funding,” said Laursen. “Thus, raising capital is not about how much you raise, but who you raise it from. It was imperative for us to receive a smart money investment that can propel us to the next level. Partnering up with a capacity such as Javier Perez and his team at GPT with their unique insight into the paytech industry is about getting knowledge and network into our company.”
Zelf, a messenger-based challenger bank based in Latvia and focused on Generation Z customers, announced earlier this week that it has secured $2 million in pre-seed funding. The round was led by Austrian venture capital firm 3VC, and featured participation by Seed X, Hard Yaka, Goldfinger, and angel investor Chris Adelsbach.
The company, founded by CEO Elliot Goykhman, will use the capital to fuel growth and expansion throughout Europe, particularly in Spain, Germany, Poland, and Italy. Zelf also sees the funding as an opportunity to establish itself in the U.K. and the U.S., as well. Most recently, the company launched operations in France and said it has 13,000 people currently using its Zelf Cards there.
“We started building ZELF in 2018 with a vision of a cashless and contactless society of the future,” the Zelf Team noted on its blog in a look back at 2020. “and the shockwave of COVID-19 in 2020 proved that it was the right path not only businesswise, but also sadly healthwise.”
Zelf accountholders get a digital Mastercard and an IBAN account which can be used to send and receive money on instant messaging apps like Facebook Messenger, WhatsApp, Telegram, and Viber. Zelf also features an AI-powered voice interface that can be used to perform basic PFM functions like requesting money, sending invoices, and checking account balances.
“We are confident that our business model of eliminating cumbersome banking apps, as well as physical plastic cards, will prove to be the winning strategy,” Goykhman said.
This week’s Finovate Global Lists takes a look at the fintech industry in the Philippines. IBS Intelligence recently leveraged the Startup Genome’s Global Startup Ecosystem Report to analyze the adoption of digital financial services in the country and pick five companies to keep an eye on this year.
The Philippines, as the article noted, is an interesting case study insofar as the country’s capital of Manila has signficant English-speaking population and what IBS Intelligence called “a more western inclined culture” that is a “natural fit for the growth of fintech.”
Compared to larger neighbor Indonesia and smaller neighbor Malaysia, the Philippines is younger and has a faster growing population. The Philippines also has a marginally higher literacy rate, as well as higher real GDP growth and greater per capita mobile phone penetration (based on subscriptions).
Looking specifically at the country’s fintech industry, Startup Genome noted that fintechs comprise 15% of the startups in Manila, the Philippine capital. The report gave the country’s fintech market a transaction value of $10 billion in 2019 and anticipated a growth of 24% in 2020. Among the fintechs highlighted in the report are digital wallet and exchange Coins.ph (recently acquired by Indonesia mobility company Go-Jek for $72 million) and online financing platform for SMEs, First Circle.
In an economy that is taking place increasingly online, the recent boost in fraud has left many banks, fintechs, and retailers underprepared in the fight against bad actors.
In a recent conversation, I spoke with Neustar Senior VP Robert McKay, who offered his perspective on the increase in fraud, the use of device reputation tracking, and steps firms can take to minimize their shortcomings.
Catch us up on the current security landscape in fintech and banking
Robert McKay: The pandemic has forced almost all customer interactions with institutions to digital channels. While it offers a new level of convenience for customers, it has exacerbated an existing problem in these types of interactions – increasing ambiguity for seeking secure, trusted connections across anonymous interactions. Institutions and fintechs that deal with highly sensitive customer information have long struggled to properly authenticate the identities of consumers across these digital channels, and fraudsters have developed savvy methods to skirt some of the most prominent forms of identity authentication.
Trust is at the center of successful fraud mitigation. If you can trust, with a high enough level of confidence, that the person on other end of the device is who they claim to be, then financial institutions and fintechs can reduce friction and improve the experience for legitimate customers while limiting additional verification and fraud-fighting resources to suspicious interactions.
2020 disrupted every subsector of fintech. Talk to us about how it changed the online security realm.
McKay: McKinsey cited that the pre-COVID consumer adoption rates for performing balance inquiries and transactions in the digital channels in the U.S. was at 50% while adoption for more complex activities like new account openings or credit card applications was around 36%. Many institutions and fintechs had to quickly address this as consumer activity shifts boomed across digital channels in a ‘survive-or-die’ approach. The combination of branch closures and an under-preparedness for these digital shifts resulted in spikes in call volumes and wait times, for example.
This disruption also shown a light on the robustness of institution’s authentication processes. Throughout 2020, a commonly used method for mitigating fraud was device behavior analysis using device reputation tracking, which determines whether a device has been linked to fraud in the past. Today, fraudsters can easily bypass this method by constantly rotating out devices they use to commit fraud.
Fintechs and their business customers need to take a more comprehensive approach to consumer authentication, exploring who is behind the device rather than focusing exclusively on the device itself.
Discuss what device reputation tracking is and why it is no longer an acceptable form of fraud prevention.
McKay: Device reputation tracking is a method of fraud mitigation that gathers device fingerprints — a series of device characteristics – and assembles a view of that device’s previous association with fraudulent activity. It’s a simple, yet effective, method to catch basic forms of fraud. However, sophisticated fraudsters know this approach relies on backward-looking data, and avoid it by using multiple ‘burner’ devices to commit fraud. Once they complete their interaction, they’ll abandon that device and use a new device to continue their scam. New devices present a big question mark to device reputation solutions since, without past user data, it cannot indicate whether the new device can be trusted.
Additionally, knowing a device is connected to normal or safe behaviors is also not a failsafe solution. It only takes one time for a device to fall into the wrong hands to open the door to fraud.
What is the easiest way for a firm currently using device reputation tracking or fingerprinting to adapt to a more secure fraud prevention technique?
McKay: To adapt, firms should consider a device-based identity resolution technique that connects the device to what is known about a consumer with persistence, and then observe how this online/offline identity graph is honed through continued observations of digital interactions. These online/offline identity graphs should also draw upon historical behavioral data and device fingerprints as just one source element of a multilayered fraud-prevention approach.
Device-based identity resolution determines not only whether a device has been linked to unsafe behaviors in the past, but also whether the device is likely in the hands of the individual who owns it. Hundreds of signals in an array of combinations provide a clear direction to either proceed with the transaction or seek additional verification from the fraud team.
A robust, layered approach like this incorporates data that cannot be hacked and stops fraud in its tracks.
The digital identity conversation is hotter than ever. What are some new developments in this space that we should be paying attention to?
McKay: Consumers, especially digital natives, have developed high expectations for a frictionless customer experience. When considering fraud-mitigation tools, it is critical to remember that most consumers are not fraudsters. If businesses treat all customers as such, it will increase friction and drive good customers away. To provide a smooth customer experience while simultaneously reducing the risk of fraud, businesses need authoritative identity signals that enable them to accurately evaluate the degree of trust in digital interactions.
As fintechs look to accommodate an increasingly remote customer interaction model, it is even more essential to ensure the person on the other end of the interaction is who they claim to be.
What is the number one way you see financial firms fail in terms of security?
McKay: Firms often scrutinize and treat every interaction as possible fraud. This not only impedes the customer experience, but also spreads already thin fraud resources even thinner, leaving the business scrambling and that much more vulnerable to fraud.
Further impeding sound security and efficient fraud mitigation, many firms fail to make the connections across various customer touchpoints (e.g., digital, call center, in-person) and across different business units (e.g., credit card, retail, insurance) to gain the full view of a customer’s identity.
What is the best way for firms to fix this flaw?
McKay: Firms should seek out an identity resolution organization that can help form an identity graph with a singular view of a consumer against every touchpoint, and implement strong and silent authentication measures to automatically authenticate the great majority of interactions that are legitimate. This will allow firms to focus fraud-fighting resources and warranted consumer friction on the minority of interactions that truly represent potential fraud, instead of applying fraud fighting resources against every call center and digital interaction.
Banking technology innovator Backbase and customer service solutions provider Zafinannounced a partnership today.
The two Finovate alums teamed up to offer Backbase clients access to Zafin’s technology. Specifically, Backbase clients can use Zafin to send their end customers highly personalized products and offers with pricing models that are tailored to each recipient.
The personalization element is a key differentiator. In today’s digital-first banking economy, personalization is a crucial element to customer retention and loyalty.
“This new partnership with Zafin offers our clients yet another way to build hyper-personalized experiences for customers while helping to break away from the legacy systems that have historically slowed the pace of innovation, and we’re excited to see our customers benefit,” said Backbase CEO Jouk Pleiter.
Backbase was founded in 2003 and offers solutions for banks to better engage with their customers. Today’s move is a win-win; it not only enhances Backbase’s offerings, but also provides Zafin access to a host of new bank clients.
The Zafin partnership comes after a heavy month of news from Amsterdam-based Backbase. The company began February with an announcement that it was selected by TechCU to overhaul its members’ banking experience, followed by partnership announcements from Banesco Panamá, Basis Bank, an National Bank of Bahrain.
TreeCard offers a wooden Mastercard debit card and an app that enables users to track their spending and split bills. With backing from Mastercard’s network, TreeCard provides a debit account, with support for chip and PIN, as well as contactless and mobile payments. The card also can receive top-up funding from the user’s other bank accounts. Treecard pledges to spend 80% of its profits to financially support reforestation programs.
Additionally, TreeCard noted that the wood of a single tree – sustainably sourced cherry wood, the company disclosed – can produce more than 300,000 cards. So no need to call out the Lorax. These efficiencies and more (TreeCard’s cards use a core consisting of recycled plastic bottles, as well) are designed to ensure that the company is living up to its status as an “impact first business.”
“We wanted to create a financial product with a difference, one that was far removed from greenwashing and allowed customers to improve the impact of their spending without drastically changing their habits,” TreeCard CEO and co-founder Jamie Cox explained. “As a multi-stage fund, EQT Ventures’ presence across both Europe and the US provides the perfect springboard for us to launch into international markets.”
Also participating in this week’s funding were Seedcamp and Episode 1, along with angel investors including Matt Robinson (founder of GoCardless) and Charlie Delingpole (formerly of ComplyAdvantage). TreeCard said that it has a waiting list of more than 140,000 individuals interested in the card. The company is expected to make its wooden debit card available to consumers “in the next few months.”
