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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
“Our mission is to help improve the financial futures of the next generation and we’re thrilled to have such a massive vote of confidence from investors, especially during Financial Literacy Month,” Step CEO and founder CJ MacDonald said. “Thirty-eight percent of teens say they lack the financial resources needed to achieve financial independence and this is a problem Step is well positioned to help solve as we educate millions of households every day.”
The round was led by General Catalyst and featured participation from an exceptionally diverse group of existing investors. This roster included Coatue, Stripe, Charli D’Amelio, The Chainsmokers’ Mantis VC, Will Smith’s Dreamers VC, Jeffrey Katzenberg’s firm WndrCo, actor Jared Leto, Franklin Templeton and NBA All-Star Stephen Curry. The investment takes Step’s total funding to more than $175 million.
In the time since Step launched in September of 2020, the company has amassed more than 1.5 million users of its financial wellness app. Step gives users a free, FDIC insured bank account, a secured spending card, and access to a P2P payments platform that enables users to send and receive money instantly. With 88% of the company’s users saying that Step is their first bank account, the platform claims that it is the only banking platform that enables youth to build a positive credit history before they reach 18 years old.
“For too long, conversations about money –– specifically how to manage it –– have been avoided despite what a critical role they play in shaping the future of the next generation,” actor, musician, and serial tech investor Jared Leto said. “Over twenty years ago, I set out to tackle this problem by starting a company in the space, so I’m excited to see Step addressing the financial literacy crisis head on with game-changing technology built to help young people learn about money in their digitally native environments.”
Step is headquartered in San Francisco, California, and was co-founded by MacDonald and Alexey Kalinichenko. The company’s financial solutions are backed by bank partner Evolve Bank & Trust.
Julie Muhn chats with Rita Martins, FinTech Partnerships Lead – Innovation Finance and Risk at HSBC about her experience as a woman in fintech, trends she’s seeing across the industry, and what can be done to encourage more female founders.
Tell us about yourself and your career path to your current role.
RitaMartins: My career started with an internship at Santander in Asset Management managing mixed portfolios. After a few months, a great opportunity came up to join the consulting world. Working at Ernst and Young and later at Accenture, I travelled the world driving large scale transformation projects and advising C-Suite on the applicability of new technologies in finance. During this time, I started diving into the fintech world and noticing first-hand how fintechs were making a difference in developing countries (despite challenging conditions, everyone had a phone and used it for payments).
In 2018 I moved to HSBC, where I currently Lead FinTech Partnerships for Finance and Risk. I am responsible for managing relationships with third parties and driving collaboration between fintechs and traditional financial services SMEs.
What trends are you seeing driving fintech this year? Are they different to previous years, or when you first started in the industry?
Martins: Nowadays, fintech companies are much more mature than when I started in the industry. Fintechs discovered where they can have an impact and when to partner with others in the market.
This year we continue to see fintechs emerging in the Artificial Intelligence (AI) and Cloud spaces. Additionally, there is a new trend in ESG (Environment Social and Governance), with many new fintechs researching and developing solutions in this space.
In your opinion, what is the secret to a successful partnership between bank and fintech?
Martins: There isn’t one factor but a combination of factors that lead to a successful collaboration. Before a partnership is created, both parties need to understand if their culture, goals, and strategy are aligned. An ideal partner will be someone who complements the other and brings new ideas to the table to ensure continued innovation.
After papers are signed, there needs to be an open and frequent dialogue to ensure issues are quickly solved, targets are met, and any changes needed are settled.
What is important to you to see from a fintech leader/ founder of a new start-up you’re looking to work with?
Martins: A fintech-bank partnership is much more than finding great technology; human interaction is vital. When looking for new partners, the fintech leader or founder is often the one representing the company, so in the initial discussions, we would be looking at a combination of factors:
1. Their knowledge of the technology and industry
2. Their values and how they connect with our team
3. How innovative they are and what new ideas they bring to the table
4. What their goals for the partnership are, and how flexible they are
Do you see many women leading fintechs or in senior positions? Is there enough diversity across the board in these roles?
Martins: No, there is still a noticeable lack of women and minorities in senior positions and even fewer women founders.
Typically, women who work in fintech will have roles in sales, communications, or marketing with a noticeable gap in the technology and senior roles.
So, what can the industry do to better encourage women to get involved with fintech?
Martins: I would challenge the industry to do more at the senior level. Those changes will empower young women to join the industry, retain existing leaders, and decrease the pay gap.
Two key areas that need immediate change are:
More investment needs to go into female-founded fintechs. In 2020, only 2.3% of VC capital went to female-only founded start-ups (according to Crunchbase)
Banks and fintechs boards and leadership need to be more diverse. In 2020 women represented only 14% of fintech boards (according to Oliver Wyman)
Listen to more from Rita as she looks back on her experience at FinovateEurope 2021 below
When it comes to European wealthtech companies, Nutmeg is the original gangster. The London-based company was founded in 2011 and demoed at FinovateEurope a year later in 2012.
Today, the company reached a milestone, topping almost $4.2 billion (£3 billion) in assets under management. The news comes after the company experienced a 72% year-on-year growth in assets under management in the first three months of this year.
Nutmeg has seen a 53% increase in the number of investors on its platform over the past year, and now counts 130,000 investors total.
The growth spurt can be attributed to a few things. First, the company brought on a new CEO, Neil Alexander, after taking a $30+ million loss in 2019. Another big factor in Nutmeg’s recent growth is the increased interest in investing during a low interest rate environment.
“While the last year has been financially difficult for many people, we have also seen many new and existing clients who have been fortunate enough to have more disposable income as a result of reduced expenditure on leisure, hospitality, commuting and holidays,” said Alexander. “Nutmeg has been a beneficiary of this shift, welcoming tens of thousands of seasoned investors wanting to take advantage of a digital-first wealth management service, along with first-time investors looking for the support they receive from our wealth services team in helping them to achieve their financial goals.”
Nutmeg offers ISAs, pensions, and general investment accounts. The firm offers a range of investment options including fully managed, fixed allocation, socially responsible. Earlier this year, Nutmeg partnered with J.P. Morgan Asset Management to offer a new investment option, Smart Alpha.
Smart Alpha combines Nutmeg’s core investment principles, ETF experience, and fractional investment expertise with J.P. Morgan’s in-house, multi-asset knowledge to provide investors a globally diversified, dynamic portfolio.
A look at the companies demoing at FinovateSpring Digital on May 10 through 13, 2021. Register today and save your spot.
FormHero is redefining the way people think about data. The company’s extensible, low-code platform makes capturing and sharing information as simple as having a conversation.
Features
Simplifies customer and employee experiences
Is flexible and can be integrated with existing processes
Dynamically collects data and outputs it to various formats
Why it’s great FormHero’s platform is an enterprise technology enabler that provides an easier path to digitization. It enhances or replaces legacy processes to create smart digital experiences for both employees and customers.
Presenter
Art Harrison, Chief Growth Officer & Co-Founder Harrison is Co-Founder and Chief Growth Officer of FormHero. He is a former software developer and entrepreneur now responsible for FormHero’s overall client growth and service delivery. LinkedIn
A look at the companies demoing at FinovateSpring Digital on May 10 through 13, 2021. Register today and save your spot.
Finalytics.aiis a platform that improves customer and member acquisition and retention for community banks and credit unions using data, machine learning, and dynamic content creation.
Features
Automates assessment of an FI’s digital practice to its peers
Generates growth for FIs through state-of-the-art technology
Improves customer retention with unique digital experiences
Why it’s great Finalytics.ai identifies digital best practices, accesses multiple data sources, and applies machine learning to create digital content unique to the needs of potential and existing customers and members.
Presenters
Craig McLaughlin, CEO McLaughlin has 20 years’ experience setting winning digital strategies for banks and credit unions as CEO of Extractable. He’s co-founded Finalytics.ai to address a whitespace in data and AI for banking. LinkedIn
Mark Ryan, Chief Analytics Officer Ryan is the data expert for banks and credit unions as it relates to digital acquisition and building relationship depth. He led analytics projects for Visa, Charles Schwab, and many banks and CUs. LinkedIn
A look at the companies demoing at FinovateSpring Digital on May 10 through 13, 2021. Register today and save your spot.
Faraday is the leading prediction cloud for financial brands, letting teams work smarter and grow faster by bringing data science into the systems they already know and love.
Features
Build to predict behavior, from acquisition to retention
Power your favorite systems with 60+ integrations and AI
Fully operational in 6 to 8 weeks, all ingredients included
Why it’s great Faraday lets you power your entire stack with AI that’s faster than hiring a single data scientist.
Presenter
Cory Albert, Director of Financial Services Partnerships Albert has a strong background in strategic software and marketing technologies. At Faraday, he helps clients implement custom AI capabilities to exceed their goals. LinkedIn
A look at the companies demoing at FinovateSpring Digital on May 10 through 13, 2021. Register today and save your spot.
Vymo helps drive efficiency throughout the sales funnel, giving organizations greater visibility and control into their sales processes and driving predictable revenue.
Features
Automated data capture for seamless sync with CRM
Contextual suggestions for advisors and relationship managers
Analytics and reporting for sales managers and leadership
Why it’s great Vymo can act as a stand-alone CRM but can also act as a layer of intelligence and automation on top of a pre-existing CRM.
Presenter
Yamini Bhat, CEO & Co-Founder Bhat is the Co-Founder and CEO of Vymo. She is recognized as a thought leader in driving sales transformation and new technology implementation for large enterprises. LinkedIn
A look at the companies demoing at FinovateSpring Digital on May 10 through 13, 2021. Register today and save your spot.
Coconut Software is a leading customer engagement platform for financial institutions that want to improve the digital and physical engagement of their staff and customers.
Features
Reduce time to organize meetings between staff and customers
Capture interest as soon as a customer takes action
Increase engagement with customers through the buyer journey
Why it’s great By providing technology that elevates the customer experience while improving operational efficiencies, Coconut’s solutions consistently improve satisfaction scores, decrease churn, and increase sales.
Presenter
Andre Doucette, Senior Solutions Engineer Doucette is a Senior Solutions Engineer at Coconut. He works closely with our customers to make sure our solutions are a good fit to solve their business needs. LinkedIn
In what the Miami, Florida-based fintech called a “landmark” fundraising, NYMBUS announced today that its new credit union service organization (CUSO) has secured $20 million in funding from VyStar Credit Union. The investment is the largest ever fintech funding round on behalf of a credit union.
“VyStar understands the challenges faced by the credit union industry, and we work diligently to identify the right partners like Nymbus that can deliver the disruptive solutions needed to help them thrive in today’s competitive environment,” VyStar EVP & Chief Operations Officer Chad Meadows said.
Founded last month, Nymbus CUSO was launched to help connect credit unions with fintechs to enable them to take advantage of new offerings that enhance services for customers and provide new growth opportunities for businesses. Former president and CEO of Partners Federal Credit Union, John Janclaes has been named President of Nymbus CUSO, and will lead the organization in its mission to serve as a “digital advocate for credit unions.”
“Based on the overwhelming response that Nymbus CUSO has already received in the market, we clearly address an overlooked opportunity for helping credit unions play to their strengths and make serious growth gains without breaking technology budgets,” Nymbus CEO and chairman Jeffery Kendall explained. “We’re thrilled to collaborate with VyStar in the effort, which is now accelerared with this considerable investment.”
The 16th largest credit union in the U.S., with assets of more than $10.8 billion, VyStar Credit Union is based in Jacksonville, Florida and serves more than 750,000 members from the 49 contiguous counties of North and Central Florida, as well as 10 counties in Southern Georgia. VyStar CU opened its 60th branch in February and, in March, announced that it had agreed to acquire Heritage Southeast Bank based in Jonesboro, Georgia.
“Today’s record investment speaks volumes to the confidence VyStar has placed in this new CUSO,” VyStar Chief Member Experience Officer Joel Swanson said in this week’s funding announcement. “Nymbus has come up with an entirely new approach for credit unions to innovate quickly for members that incorporates a truly sustainable growth strategy.”
Nymbus made fintech headlines just last week with news of a $15 million investment round led by Financial Services Capital. The round nearly doubled the FSC’s total investment in Nymbus and gives the firm more than $98 million in total capital raised. Nymbus began the year with the appointment of three women – Trish North, Michelle Prohaska, and Crina Pupaza – to C-level, executive positions. Founded in 2015, Nymbus most recently demoed its technology at FinovateFall in 2019.
Greenlight, a company that provides financial services technology for kids, announced today it has landed $260 million in funding. Today’s investment nearly doubles the Georgia-based company’s valuation, boosting it up to $260 million.
The Series D round, which brings Greenlight’s total funding to more than $550 million, was led by Andreessen Horowitz with participation from existing investors TTV Capital, Canapi Ventures, Wells Fargo Strategic Capital, BOND, Fin VC, Goodwater Capital. New investors Wellington Management, Owl Ventures, and LionTree Partners also participated. Andreessen Horowitz General Partner David George will join Greenlight’s board of directors.
As for Greenlight’s valuation, the company saw an increase from $1.2 billion to $2.3 billion over the course of six months.
Greenlight will use today’s funds to add more services to its platform, increase its distribution partnerships, and expand to more geographies to ultimately reach more families. Additionally, the company will use the investment to increase its human resources, with a plan to add 300 employees over the next two years.
“Our vision at Greenlight is to create a world where every child grows up to be financially healthy and happy,” said Greenlight Co-founder and CEO Tim Sheehan. “Today’s financing will enable us to bring even more value to families as we continue to introduce new innovative products that shine a light on the world of money.”
Founded in 2014, Greenlight offers a money management platform for families that helps three million parents and kids gain skills to manage their earnings, savings, spending, giving, and learn to invest via a debit card, companion app, and educational resources.
Greenlight has struck a chord with its family-based finances approach. In the past year, the company has more than tripled its year-over-year revenue, more than doubled its users, and doubled its workforce. Earlier this year, Greenlight launched a new products, Greenlight Max, which helps kids research and invest in stocks with parental approval.
“The demand for Greenlight’s family finance solution continues to grow,” said Greenlight Co-founder and President Johnson Cook. “With the support of our investors, we look forward to empowering even more parents to raise financially-smart kids.”
In a round led by Tiger Global, financial services and technology company Brex has raised $425 million, boosting its valuation to more than $7.4 billion.
“Our investors – new and existing – believe in our team, our business model, our product vision, our customers, and the future of Brex,” company co-CEO Henrique Dubugras said. “We are delighted to have them on board for the next phase of our journey.”
Speaking of the next phase, today’s investment comes as the company, which began with a corporate credit card product for venture-backed startups four years ago, announced the launch of a new all-in-one finance platform. The new offering combines spend management technology with billpay in a single dashboard and will be available for $49 a month. The platform facilitates responsible employee spending via corporate and vendor cards, eliminating the need for expense reports and personal reimbursements. Business owners can also easily track spending across business divisions to better understand spending trends by department, merchant, account, as well as by individual employees.
“Growing and maintaining a business should not depend on how good a small business owner is at managing their finances,” Brex CTO Cosmin Nicolaescu said. “Our all-in-one finance solution gives business owners peace of mind, and the time back to do more of what they love and remember why they started their business.”
In addition to this news, the fact that Brex applied to establish a “Brex Bank” earlier this year suggests that the company also could be en route to offering FDIC insured products to small businesses without requiring an intermediary bank as a partner.
“Brex Bank will expand upon its existing suite of financial products and business software, offering credit solutions and FDIC insured deposit products to small and medium-sized businesses (SMBs),” the company noted in February. “Brex and Brex Bank will work in tandem to help SMBs grow to realize their full potential.”
Located in San Francisco, California, Brex includes ecommerce platforms like Cheers and Dr. Squatch, accounting companies like Pilot and Kruze, and startups like Hourly and Bounce among its customers. Founded in 2017, Brex enables companies in a variety of industries to better manage their finances via a combination of payment and cash management solutions. In the first quarter of this year, Brex reported customer growth of 80% and total monthly customer addition gains of 5x. The company said that 45% of its customers are currently small and medium-sized businesses.
“Brex is building the future of finance for the next generation of businesses,” Tiger Global partner Scott Shleifer said. “We are excited to partner with them as they continue growing rapidly, innovating their product offerings, expanding their customer base and leading an industry that is dominated by incumbents.”
Also participating in this week’s Series D round were new investors TCV, GIC, Baillie Gifford, Mardrone Capital Partners, Durable Capital Partners LP, Valiant Capital Management, and Base10. Existing investors Y Combinator Continuity, Ribbit Capital, DST Global, Greenoaks Capital, Lone Pine Capital, and IVP were also involved in the investment.
One of my favorite sayings about digital banking is that the largest branch in the world is now in your pocket.
The retail banking customer journey has become more complex than ever before. Each day, clients are moving between a number of devices, which means that banks need to find new ways to study, monitor, view, and study the cross-device journey, especially on mobile devices.
It goes without saying that, for traditional retail banks, Covid-19 accelerated the shift to digital. But in-person branch use was already declining before that.
The good news for retail banks? Current federal regulations mean that elements of the in-person experience will remain important, so branches aren’t disappearing entirely. In addition to finding ways to boost in-person engagement at branches, retail banks have the extra challenge of offering omnichannel digital experiences that are on par with those offered by the latest fintech startups, like Robinhood, as well as other household apps, such as Amazon, Airbnb, and Twitter.
The boom in fintech, and especially the rise of neobanks like Chime and Ally, means that more clients are choosing banks that don’t offer in-branch services, where customers get the typical one-on-one service from a teller. Popular peer-to-peer and peer-to-business payments services such as Venmo, PayPal, Square, and CashApp have put additional pressure on retail banks to offer standout mobile experiences.
As traditional banks look to remain competitive with fintech startups, they will need to offer digital experiences that streamline everyday banking processes. Clients want to open new accounts, apply for credit cards, and deposit mobile checks with as few clicks as possible, and directly from their mobile devices.
Fintech startups have a leg up on retail banks because they offer fewer services and leverage the most advanced cloud technology. Many retail banks are burdened by legacy platforms, outdated processes that slow things down, and poor alignment within the organization.
Many banking clients miss the benefits of in-person engagement, especially seeing a friendly face at their local banking branch. Retail banks can approximate the friendliness of in-person service by doubling down on their digital channels, which means offering applications with intuitive user interfaces and user experiences. Above all, people want simplicity, transparency, and speed.
Banks and other financial institutions have the added burden of navigating complex federal regulations. These institutions are responsible for safeguarding clients’ money and remaining compliant with both local and federal laws. A few small errors can not only break trust with clients, but lead to millions of dollars worth of fines.
As banks double down on digital channels, they need to introduce the perfect amount of user friction for tasks such as opening accounts, filling out loan applications, and transferring funds. One small click can lead to major problems or misplaced funds, so making clients re-enter passwords or confirm transactions can build major trust.
On the other hand, too many steps in a workflow leads to abandoned applications, lower conversion rates, and frustrated customers. Worse yet, clumsy designs and technical errors often make it impossible for clients to complete tasks without assistance from a call center. There will always be technical errors, and to solve this, banks can put clients in contact with agents by providing pop-ups that include a direct phone number or a chat window when a problem arises.
Once banks have the basics down, they can invest in hyper-personalization, which helps clients feel more connected to their products. Erica, Bank of America’s Voice Assistant, has helped revolutionize the mobile banking experience. The AI-powered chatbot helps clients answer pressing questions about their banking needs, making it easier for them to find answers for common questions.
As retail banks rebound from the Covid-19 pandemic, they will need to engage in data-driven design thinking to ensure that each digital product decision benefits clients. That is why we have built the Quantum Metric platform, which helps retail banking teams act with more agility. Our methodology, known as Continuous Product Design, helps teams from across an organization align on the product decisions that will have the greatest impact on customers and the business’s bottom line.
In today’s digital-first world, retail banks need to identify problems before they impact a large segment of users, as well as anticipate potential issues as before they happen. That’s why our platform offers real-time analytics and anomaly detection technology. Our platform can help digital teams at retail banks pinpoint a broken button that causes conversion rates to plummet, pinpoint fraudulent activity from bots (e.g., too many login attempts), and much more.
Once retail banking teams get a handle on their omnichannel experience, they can begin expanding into other services and offering additional resources, such as financial education resources. The move to digital provides ample opportunities for diversification. Now banks need to use data-driven design thinking to determine what’s next.
