What My First Ride in a Tesla Told Me About the Future of Innovation in Banking

I was pretty excited for my first ride in my nephew’s brand new Tesla. The car was a major upgrade from his previous vehicle: a Jeep with “character” that had both broken down and been broken into a few times too many. His visit – and the Tesla’s – also marked the first time my wife and I would have company over for dinner since the COVID-19 pandemic struck, so there was more than a little to look forward to.

And while the Greek burgers were good and the tzatziki and baklava even better, my ride in the brand new Tesla was … kinda underwhelming.

Admittedly the experience as a rider in a Tesla is not identical to the experience as a driver. But as I slowly emerged from my initial shock at the lack of ornamentation, the absence of anything even resembling a full service dashboard and began to appreciate the machine’s unnaturally silent acceleration, its “It’s-All-on-the-Tablet” functionality, and “front trunk,” it dawned on me just how dramatically Tesla had reduced the driving experience to its most essential features and then turned them up to eleven.

What does this have to do with banking?

My Tesla experience reminded me of the challenge of distilling customer experience into its most necessary aspects. This is what drives innovation in everything from PFM apps that provide account balances without requiring login to mobile brokerages that cut out the stock market’s most hated middle man – commissions. Yet what is a trifle to one customer can be a can’t-do-without attraction to another. In the same way that I found myself in my nephew’s Tesla actually missing the dials, buttons, and other dashboard gizmos that had once defined automotive technological sophistication, so will many consumers find the leanness of new digital banks, for example, and perhaps even the trend away from what might be called “the human touch” in financial services to be a less appealing customer experience rather than a more fulfilling one.

In this way, I wonder if it is helpful to think of two innovation tracks for banks and financial services. One track is the one we spend most of our time reading and thinking about in fintech circles: the digital-first if not digital-only mobile bank that caters to the young, the mobile and, ironically, to both the hyper social connected individual and the asocial consumer who believes that automated checkouts at the grocery store are the best thing since sliced bread. Here the innovations are mostly technological, leveraging AI, machine learning, Big Data, and other leading technologies to provide more data, more services, faster, with a premium on seamless, frictionless, no frills interactivity.

But there is – or at least could be – another bank. And while it is digital, as well, and provides many if not most of the same basic financial services as any other bank, this bank focuses more on responding to the personal and social worlds of its customers. This bank puts financial inclusion and wellness at the center of its mission, sponsoring and providing educational opportunities for members of the local community – including their children who are likely getting precious little financial education in school. In-person credit counseling and financial planning would also be a good fit for an institution like this, which would play a role in the private sphere of a community that is similar to the role a local library or post office plays in the public sphere. At more advanced levels, coursework and training for individuals looking for careers in financial services could be offered, as well.

Not necessarily 100% or exclusively brick and mortar, this truly community-based financial institution would provide a customer experience that would be very different from its all-digital cousin, but one that could be just as innovative by using technology to make finance and financial services easier to understand and easier to incorporate constructively in the average working and middle class person’s life.


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Entersekt and NuData Security Bring Behavioral Analytics to Real-Time Risk Scoring

A new partnership between device identity and authentication innovator Entersekt and fellow Finovate alum NuData Security will integrate the latter’s NuDetect behavioral analytics solution into Entersekt’s Secure Platform (ESP) to provide real-time, seamless identity verification.

“By combining our leading techniques, we unlock new ways to remove friction for users interacting online, on web or mobile,” Entersekt Chief Strategy Office Dewald Nolte said. “The combination is like none other on the market, in usability and security, and is another exciting leap forward in our mission to make the digital world safer and more user-friendly.”

NuDetect leverages both device-based and behavioral data to identify and distinguish legitimate users from potential fraudsters in real-time. The technology features an additional level of protection, a step-up authentication process, involving an in-app push prompt, FIDO-certified security key, or other option, which can be triggered in higher-risk circumstances. The result is a fast, secure, digital identity authentication experience that verifies legitimate users whether logging in, creating an account, or completing a transaction seamlessly.

“By adding behavioral analytics to the Entersekt Secure Platform,” NuData Security SVP Michelle Hafner said, “we provide an additional layer of protection while simultaneously reducing friction and improving the customer experience.”

The Entersekt Secure Platform helps businesses ensure rapid deployment and integration of Entersekt services such as Transakt for digital security and authentication, Connekt for digital payments enablement, and Interakt for non-app-based authentication. The platform enables banks and other large companies to better identify their customers’ specific needs, engage them effectively with smart messaging (and accurately with robust authentication), and empower them to get more done with less effort.

Headquartered in Cape Town, South Africa, and founded in 2008, Entersekt began this year working with Netcetera to help the company provide enhanced authentication technology to card issuers in Germany, Austria, and Switzerland. This summer, Entersekt announced a successful technical integration with Huawei Mobile Services, and released its updated security guidance for financial institutions in light of new digital security threats with the onset of the public health crisis.


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Challenger Bank Current Taps InComm for Cash Deposits Solution

Current, a challenger bank focused on underbanked consumers, locked in a partnership with InComm, a prepaid solutions company.

By teaming up with InComm, Current will allow its 1.4 million accountholders to deposit cash to their Current account at select physical retail locations.

The new solution is powered by InComm’s Vanilla Direct platform, which will leverage a barcode on the Current app. While visiting one of 60,000 participating retail chains, including 7-Eleven, Dollar General, and Family Dollar, accountholders can give the cashier their cash deposits. The cashier, in turn, scans the barcode on the customer’s Current app, and the cash is delivered to their account.

“Our VanillaDirect mobile barcode solution is perfectly aligned with Current’s vision of bringing financial services to its customers, and in this instance providing their customers with a simple and convenient experience for making cash deposits in an extensive network of retail locations across the United States,” said Tim Richardson, Senior Vice President at InComm.

Traditionally, users at online-only banks deposit cash via ATMs. This solution, however, may not be appealing to underbanked users. Additionally, it would require Current to form ATM network partnerships.


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Plaid Makes the Case for Real Time

If the future is digital –which it is– then the future must also be in real time. And while our industry typically thinks about real-time in terms of payments, there’s one fintech that’s working to bring information into the real time realm.

Banking technology company Plaid is launching instant account activity today. The new release allows financial institutions on Plaid Exchange to send user-permissioned transactions data to Plaid developers within seconds of the user’s activity. As a result, the consumer receives an up-to-date picture of their finances.

During a time when many consumers are working in the gig economy and budgeting for their expenses on a day-by-day basis, having the most recent information about their account balances is critical and could make the difference between overdrafting or staying afloat.

“Instant, real-time data has become standard for consumers today and it’s a critical piece of information that our users need to make sound financial decisions,” said Atif Siddiqi, CEO of Plaid client, Branch. “Plaid provides our users with the most current picture of their transaction history, empowering their daily financial decisions.”

Today’s development is the latest in a string of updates for Plaid, which recently launched Plaid Exchange, an open finance solution that offers banks a way to provide open banking connectivity to their clients while keeping their clients’ data safe and giving them control of their data.

Last week, the company announced an addition to its suite of payment products with the launch of standing orders in the U.K. With standing orders, end users can make recurring payments with a single authorization for things like gym memberships and rent payments.

Plaid is an alum of Finovate’s developer conference. In 2014, the company’s CEO and co-founder, Zach Perret, showcased the Plaid API for financial institutions.


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Finzly Teams Up with Derivative Logic

A new partnership between digital banking solution provider Finzly and independent hedge advisory firm Derivative Logic will help regional banks better serve their commercial borrowers.

“We see our mission as helping community banks and credit unions better compete in the marketplace by offering services and capabilities on par with – and even exceeding – those of much larger institutions,” Finzly CEO and founder Booshan Rengachari said. “By partnering with an industry leader like Derivative Logic, our financial institution customers, and their own commercial borrowers, benefit from access to world-class hedge advisory services that are proven to positively impact their balance sheets.”

Finzly’s open, cloud-based bank operating system, BankOS, enables financial institutions to integrate and offer a wide variety of third-party services. Courtesy of this partnership with Derivative Logic, the company will enable banks to offer interest rate hedge capabilities to their commercial clients. Derivative Logic Managing Director Jim Griffin called these services “a true strategic differentiator for banks and credit unions” when it comes to attracting commercial customers.

“Through our partnership with Finzly, we help small-to-mid-size financial institutions overcome the complexity of offering these capabilities as we advise and assist our bank customers with pricing, swap documentation, compensation plans, negotiations with dealers, hedge accounting as well as assist with borrower-facing processes,” Griffin said.

Finzly’s partnership announcement is only the latest in headline-making news from the Charlotte, North Carolina-based fintech. Since its debut at FinovateFall a year ago, the company has partnered with a regional bank in California to drive the institution’s international banking services, teamed up with Arvest Bank to streamline the Arkansas-based community bank’s trade finance operations, and announced the availability of its contactless consumer digital account opening solutions.


See Finzly for yourself as the company returns to the Finovate stage for FinovateFall Digital, September 14 through 18. Visit our registration page today and save your spot for our latest all-digital fintech event.

August M&A Highlight Reel

Many analysts predicted the latter half of 2020 would be flush with M&A deals. As the economic effects of the pandemic begin to take their toll, some fintechs are more open to exiting earlier than they had planned.

Additionally, volatile stock market conditions are making IPOs less appealing. This may be what swayed Kabbage, which had long-been rumored to IPO after becoming an early fintech unicorn, to agree to be acquired by American Express.

These factors have made August, which is typically a very sleepy month for fintech news, into a busy time for M&A activity. Here’s an aggregation of some of the top deals this month.

  • Apple acquires Mobeewave
  • Metro Bank to buy Ratesetter for up to $16 million
  • Paya and FinTech III agree to merge under the name Paya
  • Euronext completes the acquisition of VP Securities
  • Intercontinental Exchange agrees to acquire Ellie Mae for $11 billion
  • American Express to acquire Kabbage
  • Tandem Bank acquires Allium Money
  • Xero acquires invoice financing company waddle for $80 million
  • FTX acquires Blockfolio for $150 million
  • WorldRemit to acquire Sendwave for $500 million
  • Railsbank to buy Wirecard’s U.K. division
  • NerdWallet purchases U.K.-based Know Your Money

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NerdWallet Goes International with U.K. Know Your Money Acquisition

What catches your eye when it comes to fintech headlines? A big IPO? A major venture capital investment? Or a huge move on the M&A front?

For those whose eyebrows bounce highest when a major acquisition is the talk of the day, one reason why is that acquisitions often but not always signal a major recognition of value in both an individual company and in a line of business. If a venture capitalist investing in a startup is putting its money where its mouth is, then an incumbent acquiring a startup is putting its business where its mouth is, and that’s a moment worth paying attention to.

In this context, NerdWallet’s decision to acquire U.K.-based Know Your Money – announced over the weekend – is a testament to the way personal finance comparison platforms are helping consumers navigate the world of loans, mortgages, and small business banking. A financial service price comparison site in operation for fifteen years, Know Your Money helps consumers in the U.K. by providing deals on financial products and services from brands ranging from Virgin Money and Funding Circle to ANNA and Countingup.

“Recently, the volatility of the stock market, unemployment, and plunging interest rates have consumers facing financial challenges they’ve never dealt with before and searching for content and products to help them navigate their new normal,” NerdWallet CEO Tim Chen said. “Because of this, there has never been a better time to expand the reach of our financial guidance and grow our business, and there is no better place to start than the U.K.”

Terms of the acquisition were not disclosed. But NerdWallet’s interest in expanding to the U.K. likely comes as welcome news to a financial services community that has seen a number of fintech departures from the country in 2020. To this end, post acquisition, the Know Your Money team will become a NerdWallet subsidiary, with all of the company’s executive and workers remaining with the firm. Know Your Money is the premier financial services website in the U.K. with more than five million consumers and 1.2 million businesses using its platform.

San Francisco, California-based NerdWallet was founded in 2009 and has raised $105 million in funding from investors including Camelot Financial Capital Management and IVP. Know Your Money is the personal finance company’s second acquisition; NerdWallet purchased retirement planning firm aboutLife in 2016. NerdWallet boasts 160 million users and annual revenues of more than $150 million.


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PayPal Gets in on the Buy Now, Pay Later Game

The buy now, pay later (BNPL) trend has been accelerating since the beginning of this year, and today PayPal announced plans to get in on the action.

The payments giant is releasing Pay in 4, a short-term payments installment product for U.S. customers. When consumers opt to use Pay in 4, merchants receive payment upfront, and the buyer pays for the purchase over the course of a six week period. PayPal takes on the credit risk.

Consumers can use Pay in 4 for transactions between $30 and $600. Purchases do not incur interest and buyers can set up automatic repayments. Additionally, there are no fees for the buyer or the merchant.

“In today’s challenging retail and economic environment, merchants are looking for trusted ways to help drive average order values and conversion, without taking on additional costs. At the same time, consumers are looking for more flexible and responsible ways to pay, especially online,” said Doug Bland, SVP of Global Credit at PayPal. “With Pay in 4, we’re building on our history as the originator in the buy now, pay later space, coupled with PayPal’s trust and ubiquity, to enable a responsible and flexible way for consumers to shop while providing merchants with a tool that helps drive sales, loyalty and customer choice.”

Today’s release is the newest in PayPal’s line of Pay Later tools. The company’s other financing options include PayPal Credit, a line of credit with built-in promotional offers, Easy Payments, a BNPL service available in the U.S. and U.K. PayPal also offers Pay Later tools across the globe in Germany, France, Australia, Canada, Spain, and the Netherlands.

After the BNPL trend began burgeoning earlier this year, PayPal has joined the likes of Affirm, Sezzle, Klarna, and even Goldman Sachs, as well as a handful of others in offering BNPL options to online shoppers. The popularity of these services is attributed to an uptick in unemployment brought on by COVID-19. Not only are consumers making less money, some have maxed out their credit cards and are seeking alternative ways to keep afloat.

Pay in 4 will be available in the 4th quarter of this year.

NYSE to Let Companies Raise Funds through Direct Listings

In a new process called primary direct floor listing, the U.S. Securities and Exchange Commission (SEC) recently implemented a rule that will help companies raise capital through direct listings.

A direct floor listing will enable companies to issue new shares to the public via an auction that matches buy and sell orders, establishing the company’s offering price. This process differs from the traditional direct floor listing method, which was exclusive to existing investors and did not allow the company itself to raise funds via the offering.

The new listing method serves as an alternative to the traditional initial public offering process and eschews formal marketing and shareholder lock-up. Additionally, the new process doesn’t require underwriters to price shares.

“Allowing for multiple pathways for private companies to achieve exchange listing would encourage more companies to participate in public equity markets and provide investors a broader array of attractive investment opportunities,” explained a commenter to the SEC’s rule change.

In some ways, direct floor listings will benefit the company, rather than the shareholders. For example, after going public, first day gains will go to the company itself, rather than new investors.

Minimum market value requirements for direct floor listings, which are imposed to ensure sufficient liquidity, are $100 million and, for primary direct floor listings, $250 million. This is more than double the minimum value requirement for IPOs, which is $40 million.

According to the Financial Times, two technology companies have already expressed a desire to take advantage of direct listings. Both Palantir and Asana have filed paperwork with the SEC for direct listings.


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Getting to Know You… Virtually

Ever wonder what your favorite fintech CEO’s first job was? Or if they would rather invest in gold or bitcoin? Or what their best Halloween costume was?

While those are questions may have come up during a casual networking session, face-to-face (or mask-to-mask) networking isn’t possible this year, so it may be difficult to have such casual banter. Fortunately, I have two pieces of good news for you.

First, FinovateFall Digital, taking place September 14 through 18, is offering as much quality networking time as possible during the event. We’re offering lots of ways to communicate with your fellow audience members. And if you’re not a social butterfly (or if you prefer PJs over a polo shirt), you can make your opinion heard through polls or communicate via chat.

The second piece of good news: we’ve started a video series called 25 in 5 where we ask 25 questions to demo companies and they answer them all within 5 minutes. It is not only a great way to get to know the company, but also serves as an introduction to a CEO and the culture they’ve built.

Interviewing Glance CEO Tom Martin

All of the 25 Questions interview videos will be available as exclusive, on-demand content within the FinovateFall Digital event platform. If you’re registered, keep an eye out for early access to schedule meetings and curate your event-day agenda with the sessions that most interest you.

And don’t worry about missing out. There’s still time to register, and with no need to buy a plane ticket and book a hotel room, FinovateFall is more accessible than ever.

See you in the networking hall!


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FinovateFall Digital 2020 Sneak Peek: Nacha

A look at the companies demoing at FinovateFall Digital on September 14 through 16, 2020. Register today and save your spot.

Nacha’s Phixius is a platform for securely exchanging payment-related information utilizing technology and rules within a network of credentialed service providers.

Features

  • Enable electronic payments while maintaining control of data
  • Leverage an API based data exchange with no bi-lateral agreements
  • Benefit from a trusted provider, rules-based network

Why it’s great
Phixius enables the secure exchange of payment-related information utilizing technology and rules within a network of connected service providers.

Presenters

Peter Tapling, Technology Advisor
Tapling serves as Technology Advisor to Nacha, is Managing Director of PTap Advisory, and Board Member of the U.S. Faster Payments Council.
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Eli Polanco, CEO & Founder, Nivelo
Polanco is CEO and Founder of Nivelo. Earlier, Polanco was an Executive Director at J.P. Morgan leading various R&D initiatives related to digital payments.
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FinovateFall Digital 2020 Sneak Peek: DQLabs

A look at the companies demoing at FinovateFall Digital on September 14 through 16, 2020. Register today and save your spot.

DQLabs is an AI/ML augmented data quality platform that provides a simple way for organizations to handle issues around data quality, governance, curation, and master data management effectively.

Features

  • Discover trustable high quality data in minutes using AI/ML
  • View a unified platform for data management needs
  • Conduct data ingestion, catalog, profiling, curation, governance, and MDM– all done in a few clicks

Why it’s great
DQLabs helps you to manage data smarter and automatically learns and improves data quality as business strategy shifts. Say bye to rules, ETL, and workflow. Welcome into the AI/ML world of data management.

Presenter

Raj Joseph, CEO
Joseph is a thought leader and visionary in the fields of modern data management and augmented analytics, and has two decades of experience around data science, AI/ML and enterprise data solutions.
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