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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Blockchain-based money transfer platform Circle is making double headlines today. The U.S.-based company not only landed $25 million in funding, it also partnered with Genesis, an institutional trading firm offering two-sided liquidity for digital currency, including bitcoin.
Genesis parent company Digital Currency Group is the investor behind the $25 million. The investment is Circle’s first since August of 2018 and brings the company’s total funding to $271 million.
“Circle has been a pioneer in the digital currency market, building innovative products and services, and has consistently provided our industry with leadership on technology, standards, and regulatory policy,” said Genesis CEO Michael Moro. “With the rapid rise of USDC, we are clearly seeing mainstream momentum for digital currencies, and through this partnership with Circle we believe we can materially advance our shared mission of building a new global financial system.”
Circle will use the new funding to accelerate the adoption of USDC, a digital dollar stablecoin issued by regulated FIs, backed by fully reserved assets, governed by membership-based consortium Centre, and redeemable on a 1:1 basis for U.S. dollars. USDC has been gaining traction this year; earlier this month the cryptocurrency’s market capitalization crossed the $1 billion mark.
The investment will also provide a boost for Circle’s new Business Account and API products that the company launched earlier this year. These new services offer financial services companies a suite of APIs for USDC payments, facilitating the use of USDC in e-commerce, on-demand delivery marketplaces, digital gaming, internet services, P2P digital wallets, exchanges, B2B payments, challenger banks, trade finance, and digital asset lending and yield products.
“The partnership announced today between Circle and Genesis will bring to market solutions for businesses and developers who are seeking to generate strong positive yield from their own or customer USDC holdings, and access to USDC-based credit for businesses and merchants that are using USDC for treasury operations and business payments,” said Circle’s Josh Hawkins in a blog post announcement.
Digital Currency Group, which describes itself as the “epicenter of the bitcoin and blockchain industry,” has made 180 investments since it was founded in 2011. Digital Currency Asset Manager Grayscale and crypto news organization Coindesk are also Digital Currency Group’s subsidiaries.
Let’s face it, 2020 hasn’t been the year we were anticipating. We’re experiencing increased stress levels created by not only by fears of contracting a life-threatening virus, but also an economic downturn of unknown proportions.
And from a business perspective, stay-at-home orders and lack of childcare create a frustrating environment for co-worker communications. Not only that, but the lack of in-person meetings and a firm handshake makes it difficult to land partnerships.
Despite these (and many more) woes, here are a handful of silver linings:
Digital is working
Even for firms who have yet to implement it, the technology is available for them to create a fully-digital banking experience. While many of these capabilities have been around for awhile, we have now reached a point where consumers feel comfortable with interacting with tools such as remote onboarding, remote deposit check capture, and even chatbots.
Funding is on
At the onset of the public health crisis earlier this year, many prepared to say farewell to VC funding. And though funding has declined and valuations are stagnant, the fintech industry is still experiencing growth. So far this week alone, we’ve seen five fintechs raise $262 million in funding.
Fintechs are hiring
Layoffs and furloughs have taken place within the industry and there may be another round of layoffs in the future as the coronavirus drags on. However, we may ultimately see many of these employees shift to new positions. That’s because there are plenty of fintechs hiring. A search on Angel List reveals that more than 800 fintechs are currently seeking to fill roles. And the new remote working environment enables many companies to tap into global talent.
Partnerships are strong
Social distancing requirements may be preventing companies from gathering together in conference rooms and sealing a deal with a handshake. However, that doesn’t seem to be stopping fintechs from inking deals. Over the past month, we saw 10 major fintech-bank partnerships. Much of this collaboration was driven by the sudden need for traditional providers to digitize their offerings.
Transformation is mandatory
This point may seem like a strange silver lining. In fact, many may view mandatory transformation as more of a storm cloud, since fintech as an industry will not come through this crisis scot-free. Unfortunately, there will be cut backs and unplanned exits. Here’s the silver lining part– companies that fight to see the other side of the crisis will be better off for it. And so will their customers.
There’s no denying that challenger banks are one of the hottest things in fintech right now. The coronavirus has accelerated the need for a purely digital banking solution and this boost in demand has spurred an increase in the number of players in the space.
The newest challenger bank to enter the ring is Intuit-owned QuickBooks. The 28-year-old company is launching a business bank account called QuickBooks Cash. The new account will be promoted to QuickBooks’ existing user base of over seven million small businesses. The accounts boast a business bank account, debit card, an envelope budgeting tool, and cash flow management tools that work seamlessly with QuickBooks existing products, including payroll, payments, and accounting tools.
“QuickBooks Cash delivers what current business accounts don’t — a banking experience that enables small businesses to accept payments, pay teams and vendors — with automatic reconciliation for easy financial management,” said Rania Succar, Senior Vice President of QuickBooks Capital and Payments at Intuit. “Combining QuickBooks Cash with the powerful insights and financial management platform powered by QuickBooks, we are building a tool that accelerates the growth of small businesses. Companies that have more working capital can take advantage of more opportunities.”
QuickBooks Cash accounts will be backed by FDIC-insured Green Dot Bank and feature no balance requirements, a high-yield interest rate of 1%, billpay capability, cash flow planning tools, and more. Unlike most challenger banks which offer unlimited free ATM withdrawals, however, QuickBooks only allows four free withdrawals per month.
The new account, along with the corresponding tools, will roll out over the course of the next several weeks.
If deal-making is a sign of the health of an industry, then the fintech business – global public health crisis notwithstanding – may be doing better than some suspect.
The latest signs of hi-life from the nexus of finance and technology comes from the news released after hours on Tuesday that Enova International – an online financial services company that provides financing to non-prime borrowers and small businesses – has agreed to acquireOnDeck in a deal valued at $90 million.
“This strategic transaction, which brings together two FinTech leaders, is a great opportunity for customers, employees, and shareholders of both companies,” Enova CEO David Fisher said. “Together, our companies will be stronger because of the complementary strengths and synergies of our businesses.”
Fisher highlighted both OnDeck’s online SME lending business as well as its ODX bank platform as being able to increase Enova’s “scale and resources” and drive continued growth in the company’s portfolio. Enova has nearly seven million customers worldwide and has provided more than $20 billion in loans and financing since its inception in 2004.
Of the $90 million total deal value, $8 million will be paid in cash. OnDeck shareholders will get $0.12 per share in cash and 0.092 shares of Enova stock for each share of OnDeck they own. The deal is based on the implied price of OnDeck shares of $1.38, a 90.4% premium on its closing price of $0.73 per share on Monday, July 27. Enova’s Fisher will lead the combined company, with OnDeck CEO Noah Breslow assuming the role of Vice Chairman and taking a seat on the company’s management team.
Breslow expressed pride in the progress OnDeck has made since its founding in 2006, pointing to the $13+ billion in financing the company has provided small businesses over the past decade-and-a-half or so. He said the acquisition was “the right path forward for customers, employees, and shareholders” and posited that the combined entity would be an even more effective online lender and a more powerful ally to small businesses.
The acquisition has been approved by the boards of directors from both Enova and OnDeck, and is expected to close later this year.
When Bank Operating System creator nCinowent public earlier this month, we shared a feature on some of the other fintechs – Finovate alums all – that, like nCino, also hail from the state of North Carolina.
For those who may find North Carolina an atypical location for some of the country’s most innovative fintech companies, recall that many of these fintechs are benefitting from the proximity of the famous Research Triangle. This area of the state includes three universities – Duke University, the University of North Carolina at Chapel Hill, and North Carolina State University, and has had a reputation as a technology hotspot since the 1950s. Hall of Fame caliber technology firms from IBM to Cisco Systems to Red Hat have made “The Triangle” their home over the years, solidifying the region’s high-tech reputation and helping attract new generations of entrepreneurs and technologists.
Recently we learned of big news from one of the members of this new generation. Cognitect, which provides engineering and software development talent and technology to clients in industries ranging from health and science to fintech, announced that it has agreed to be acquired by long-time client Nubank, a financial institution based in Brazil.
Cognitect founder and President Stuart Halloway called the company’s relationship with Nubank “a spectacular success story” for its two signature offerings: Clojure – Cognitect’s general purpose programming language – and Datomic – the company’s transactional database. Nubank currently has 600 Clojure developers, running 2.5 million lines of Clojure code in 500 microservices on 2000+ Datomic servers. “Cognitect has been there every step of the way, helping Nubank’s developers translate Clojure’s ideas into business agility,” Halloway wrote at the company’s blog.
The acquisition, according to Halloway, will pave the way for bigger teams for both Clojure and Datomic – technologies Finovate fans were first introduced to via our FinDEVr developers conference in 2016. In that presentation – and in the company’s return to the FinDEVr stage the following year – the Durham, North Carolina-based company demonstrated how its solutions enable companies to have more control over and insight into their data – including the ability to conduct analytics on real-time information without hindering performance.
Nubank’s relationship with Cognitect in general and Clojure and Datomic in specific stems from the Brazilian neobank’s decision to use those technologies to provide a data infrastructure for its microservices platform. The result, for Nubank’s customers, has been greater clarity and complete history on transactions, as well as insight into the origins of suspicious cyber incidents or problems with data.
“Because we use Clojure and Datomic, we’ve built a tool that has already moved beyond what many of our competitors do, and our speed of innovation – new features, continuous deploys – increases with every passing day,” Nubank CTO and cofounder Edward Wible said in a statement. Founded in 2013, Sao Paulo-based Nubank is Latin America’s largest fintech with more than 20 million customers. Cognitect is the firm’s second acquisition of the year, having purchased software engineering company Plataformatec in January.
Going forward, Cognitect will benefit from the continued leadership in its Clojure and Datomic teams, and the company itself will remain a U.S. C corporation. Datomic customers will continue to receive professional services from Cognitect, though the company expects to transition away from general consulting development. Customers also will likely get the next Datomic feature “a bit sooner” Halloway added, pledging to users that “the resources behind (their) software are greater than ever before.”
It seems as if cryptocurrencies are starting to capture the attention of mainstream financial services providers. This week, Visa has shown to be no exception. The payments giant recently revealed plans to use cryptocurrencies into its traditional payments network.
In a blog post announcement, Visa said it has been working with Coinbase and Fold to “provide a bridge between digital currencies and [its] existing global network of 61 million merchants.” As a result of this collaboration, more than 25 digital currency wallets across the globe have linked up with Visa to enable consumers to spend their digital currency using a Visa debit or prepaid card.
“We believe that digital currencies have the potential to extend the value of digital payments to a greater number of people and places,” Visa said in a statement. “As such, we want to help shape and support the role they play in the future of money. We look forward to sharing more with you on this work in the months that follow.”
Visa is using its crypto partnerships to position itself as the preferred network for digital currency wallets. Not only this, but the company also launched a FastTrack Program that helps fintechs integrate quickly with Visa’s network. One initiative that has resulted from the program is Visa Direct, which helps consumers convert digital currency and push the funds to their Visa credentials in real-time.
This week’s announcement builds on Visa’s long-term plans for leveraging the blockchain and alternative currencies. The company has a dedicated team that has been researching uses for the blockchain for years. Currently, the team is working on facilitating offline digital currency transactions.
The investment will help the company to continue its international expansion – including the addition of new hires in the APAC region, the U.S., and in Australia. The company also plans to use the funding to fuel development of new products and functionalities, including a new payments solution.
“The prospect of transitioning to cloud native technology is now at the forefront of every major bank’s roadmap,” ThoughtMachine CEO Paul Taylor said. “Plans have been hastened in the wake of regulatory pressure, economic uncertainty, and the need to manage cost-income ratios.”
Thought Machine’s signature offering, Vault, is a modern, cloud-native core banking system designed for financial institutions burdened with legacy technology. Demonstrated at the company’s Finovate debut at FinovateEurope in 2018, Vault provides a secure, fast, and reliable end-to-end banking system that manages users, accounts, savings, loans, mortgages, smart contracts, and other financial products and services. By leveraging APIs and a microservice architecture, Vault is able to provide financial institutions with all the functionality necessary for bank operations. Currently geared toward retail and small business banking, the company plans to add both commercial banking and private wealth services “in the future.”
Named to the Tech Nation Future Fifty in March, and joining the Mastercard Start Path Programme in May, Thought Machine announced in June that its Vault platform was compatible with all major cloud infrastructure providers including Google Cloud Platform, Amazon Web Services, Microsoft Azure, and IBM Cloud. Founded in 2014 and headquartered in London, Thought Machine includes Atom Bank and Lloyds Banking Group among its partners.
To steal a line from Rob Base and DJ EZ Rock, when it comes to innovation in fintech, it takes two to make a thing go right. Whether the “thing” is an end-to-end digital transformation or creating the technology infrastructure to enable firms to build and market their own innovations, collaboration and partnership with fintechs increasingly seems to be the path that the most forward-looking banks and other financial institutions are pursuing.
With this in mind, here’s a look at some of the more interesting recent partnership announcements over the past month – with an eye toward what these collaborations might be saying about the near-term future of fintech.
DBS Bank: Headquartered in Singapore. Total assets of $420 billion (SGD 579 billion) in 2019. Largest bank in Southeast Asia. Operates in 18 markets around the world.
Objective: Faster “more cost efficient” financing for the 68,000+ SMEs on Infor’s Nexus network.
Royal Bank of Canada (RBC): Headquartered in Toronto, Ontario, Canada. Has 17 million clients in Canada, the U.S., and 34 other countries. Total assets of $1.2 trillion (1.49 trillion CAD) as of 2019.
Objective: The new build will allow the bank to develop “transformative intelligent applications” and to bring those solutions to market faster.
Orange: Telecommunications corporation headquartered in Paris, France. Fourth largest telecom in Europe and one of the ten largest in the world with 26 million customers. Total assets of $124 billion (€106 billion) and revenues of $49 billion (€42 billion) as of 2019.
Objective: Partnership will bring savings and micro credit services to underserved customers in Cote d’Ivoire, Burkina Faso, Mali, and Senegal.
Lloyds Banking Group Headquartered in London, U.K., Lloyds is the country’s largest digital bank with 16.9 million active customers online and 11.5 million on mobile. Founded in 1765, the bank currently has total assets of more than $1 billion (£833 billion).
Partner: Form3
Project: Along with partners Google Cloud and Microsoft, Form3 will help the U.K.-based bank “investigate and develop” a cloud-payments-as-a-service platform.
Objective: The collaboration, which also includes a minority equity stake in Form3, will simplify Lloyd’s payment capabilities and support enhanced data and new overlay services.
Banca Ifis: Specialty commercial and corporate banking firm for SMEs headquartered in Venice, Italy. The firm has more than 130,000 retail clients in the country, and online funding and deposits totaling more than $4.7 billion (€4 billion).
Objective: Raisin’s customers in Germany will gain access to deposit solutions available from Banca Ifis. The collaboration will enable German customers to take advantage of relatively higher interest rates available in Italy.
Other fintech/financial institution partnerships of note this month:
Global payments platform Paysafe announced its acquisition of online payments innovator Openbucks. Financial terms of the deal were not disclosed and the companies expect the acquisition to be finalized by the end of July.
Paysafe aims to leverage Openbucks to expand its cash alternative payment offering in the U.S. by tapping into Openbucks’ technology that allows consumers to pay online without a credit card.
“The cash alternative payment market is a thriving one and we are seeing increased demand from online merchants who want to enable gift cards as a payments solution in order to reach new consumers, particularly in sectors such as gaming, eSports and entertainment which are very much on the rise,” said CEO of Paysafe’s eCash division, Udo Mueller.
Openbucks maintains a network of partnerships with major retailers that enable consumers to purchase gift cards that can be redeemed at the company’s 500+ ecommerce merchant partners. Openbucks founder Marc Rochman expects the acquisition to offer a greater level of exposure to his company. “Now, with the full backing of a global payments provider,” he said, “we will be able to provide a world class alternative payment solution to thousands of additional online merchants.”
Openbucks was founded in 2011 and caters to underbanked shoppers, guaranteeing no fees to consumers. Since then, the company has raised $5.3 million.
Founded in 1996, Paysafe is a global payments innovator that offers both online and in-store payment solutions. Philip McHugh is CEO.
Alternative bank Revolut announced late last week that TSG Consumer Partners is the latest investor to join its Series D round. The $80 million investment from the VC firm takes the London, U.K.-based company’s total for the current round to $580 million. Revolut noted that its estimated $5.5 billion valuation in February remains the same.
Company founder and CEO Nikolay Storonsky told Silicon Republic that the additional funding was an instance of TSG Consumer Partners making an offer the company could not refuse. He said that Revolut was not seeking additional funding when the opportunity from TSG developed. “TSG approached us with an exciting proposition to work together,” Storonsky said, adding that the VC firm’s track record of working with “some of the most successful and innovative consumer companies in recent years” was a major plus for the partnership. TSG Consumer Partners has funded companies like BrewDog, Smashbox Cosmetics, and Vitamin Water.
With more than 12 million customers around the world, Revolut offers consumers a variety of banking and personal financial services including a digital bank account with PFM tools, P2P payments, and interbank exchange rate currency exchange. The accounts also come with a prepaid debit card, early payday for direct deposit customers, and stock trading tools.
A report earlier this year from PwC highlighted the “changing competitive landscape” for fintech and banking in Nigeria. For those looking to learn more about both the growing impact of technology in financial services in one of the major countries in Africa, as well as the challenge created by COVID-19, PwC’s review provides an comprehensive overview.
The report also concludes with nine recommendations the analysts believe would encourage continued growth in Nigeria’s fintech ecosystem. These recommendations range from making it easier to invest in fintech companies to encouraging partnerships and “strengthen(ing) the synergy between banks and FinTech players” in a mutually beneficial way.
Financial inclusion is a huge part of both the challenge of – and the opportunity for – fintech in Nigeria. The report notes that more than 30 million adult Nigerians do not have or use either formal or informal financial services products or solutions. This represents more than a third of the country’s adult population. And while the report points out that mobile money operators have been among the businesses to help bring more financial services to the underbanked, there are some fintechs that have taken up the cause of financial inclusion, as well. A trio of these companies are highlighted below:
Bankly is a cash digitization and savings platform that caters to Nigeria’s unbanked. The company provides a digital wallet that is secure, convenient, and accessible, and all users require in order to open an account is a phone number. Bankly leverages more than 2,000 agents across 29 of the country’s 36 states to scale the company’s offering.
In operation for just over a year, Bankly has already picked up recognition from the 2019 Innovating Justice Awards sponsored by the Hague Institute for the Innovation of Law. The company has also participated in the GreenHouse Capital accelerator program. Tomilola Adejana (CEO) and Fredrick Adams are co-founders.
Covr Branchless offers banks, insurance companies, and government agencies a suite of applications that enable them to leverage cloud, GPS, and mobile channels to conduct a wide variety of financial processes. Account opening, instant debit card linking, cash withdrawals, fund transfer, billpay, KYC validation and loan origination are among the operations enabled by Covr’s technology.
Covr is owned by Advancio Interactive, a Nigerian technology company focused on sustainable financial access that was founded by Olufisayo Oludare (Managing Director). Covr won Advancio first place at the Startup Istanbul Challenge in the fall of 2017, only the second Africa-based startup to do so.
FairMoney is a online micro lender that provides instant loans from N1,500 to N500,000 (approximately $4 to $1,300), with average loans of about N12,000 ($33-$35). Using the company’s Android mobile app, prospective borrowers apply for financing by answering a few questions and providing some basic financial information. The app analyzes this information – as well as the borrowers geolocation and other factors – to make a loan offer in a matter of minutes.
But what makes the company especially interesting is the fact that it is working to launch a challenger bank. FairMoney raised $11 million in Series A funding last fall for this purpose and plans to expand its offerings to include current and savings accounts.
Here is our weekly look at fintech around the world.
Central and Southern Asia
Reserve Bank of India (RBI) encourages government to incentivize the use of QR code transactions and promotes the adoption of open, interoperable standards.
Amazon to offer car and motorcycle insurance in India courtesy of partnership with Acko General Insurance.
National Payments Corporation of India (NPCI) facilitates recurring payments with its new UPI AutoPay feature.
Latin America and the Caribbean
Brazil’s Central Bank reverses course to authorize payments system involving WhatsApp.
Payscout teams up with Brazilian fintech Rede Celer to grow its payments business in the country.
Partnership between FacePhi and Naranja X will help bring biometric recognition technology to digital onboarding processes for firms in Argentina.
Asia-Pacific
Finovate: Ant Group’s Double IPO Listing Shuns U.S. Exchanges.
Trulioobrings its GlobalGateway identity verification technology to customers in Vietnam.
Crowdfund Insider takes a look at the impact of COVID-19 on fintech lending platforms in Indonesia.
Sub-Saharan Africa
Telco Orange and bancassurance company NSIA team up to launch Orange Bank Africa to serve underbanked communities in Abidjan and Cote d’Ivoire.
Vodacom partners with Ant Financial Services Group to bring Alipay services to South Africa.
Uganda-based digital cross-border money transfer startup Eversend raises $1 million via an oversubscribed Seeders crowdfunding campaign.
Central and Eastern Europe
Germany’s Scalable Capitallands $460 million valuation with new $58 million funding round.
Russian bank Tinkoffunveils new functionalities for its financial and lifestyle services voice assistant Oleg.
EstateGuru, a P2P lending platform based in Estonia, launches a new payment service in partnership with Lemonway.
Middle East and Northern Africa
Oman’s BankDhofar extends partnership with Diebold Nixdorf to improve the customer experience of its ATM network. Bank Nizwa, also based in Oman, announced an extension of its digital payments partnership with Mastercard.
Turkey-based online payments platform Mobilexpress secures $2 million in Series A funding.
Spotii, an e-commerce technology provider based in the UAE, unveils new deferred payment option.
Intelligent virtual assistance company Interactions launched a new product this week that aims to help accounts receivable management companies in their collections efforts.
The new product, Virtual Collection Agent (VCA), helps organizations with their collection efforts by– as the name suggests– providing a virtual agent to interact with the customer. The virtual agent creates efficiency for organizations by replacing human agents, creating scale, and automating negotiation.
Not only this, VCA is also beneficial to consumers. One in four consumers prefer interacting with a virtual agent when it comes to discussing uncomfortable financial information.
Piloting the new launch is ERC, a business process outsourcing service provider. “Over the past few years—and particularly in this pandemic—we recognized that automation was no longer a ‘nice to have’ in our industry, it was a requirement for addressing demand,” said ERC CEO Marty Sarim. “The response we’ve seen from both our customers and live agents has been encouraging, and the efficiencies we’ve been able to build into our business has put us in an extremely competitive position.”
Interactions’ other products include an intelligent virtual agent for customer engagement and a social listening and engagement tool that taps AI to to find and prioritize meaningful social posts, suggest responses, and gather insights.
Founded in 2004, Interactions facilitates one billion customer interactions per year across six different channels for large brands including Hyatt, Humana, LifeLock, and Mountain America Credit Union.
