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A look at the companies demoing at FinovateFall Digital on September 14 through 16, 2020. Register today and save your spot.
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The following is a guest post from John Mason, Senior Director at Zafin.
Open Banking in Australia kicked-off in earnest in July when it became mandatory for the country’s big four banks to share product reference data (including interest rates, fees and charges, and product eligibility criteria) with accredited data recipients, typically fintech companies who provide alternative products and comparison shopping services to consumers. Also, in July, the same big four started sharing their consumer customers’ data—specifically data associated with deposit, credit, debit and transaction accounts—with alternative providers as requested by the customer.
In an effort to anticipate what lies ahead for Australian banks and consumers as the country joins the worldwide movement to give consumers greater access to products and services that can improve their financial lives via Open Banking, we decided to take a look at an island nation more than 9,000 miles away, boasting 2.5x Australia’s population but just 3% of its land mass—the U.K.
The United Kingdom embarked on its own Open Banking journey almost exactly four years back. In August 2016, the United KingdomCompetition and Markets Authority (CMA) directed its nine largest banks to provide accredited fintechs with access to previously proprietary customer data (pending customer approval, of course) down to the transaction level for current accounts.
Here is what’s happened in the U.K. that may be instructive for Australia:
Consumer up-take for Open Banking capabilities is sizable. As of January 2020, according to the Open Banking Implementation Entity (OBIE), there are one million users of Open Banking services in the U.K., representing a two-fold increase in just six months’ time. Further, the ecosystem of regulated open banking service providers is expanding rapidly. As of May 2020, it stands at 249, up from 100 at year end 2018.
Open Banking’s impact on the payments arena is particularly notable, with 50,000 consumers turning to third party applications to make payments from their current accounts in the month of December 2019 alone.
Investment is strong and widespread. Tink, the open banking platform, surveyed almost 300 senior financial services executives about their Open Banking investments. Almost ¾ indicated that spend had risen year-over-year, while a third stated that their financial institution was spending €100 million or more on Open Banking initiatives, and half projected positive payback on capital invested in Open Banking in four years or less.
Despite strong adoption and investment, consumer awareness of Open Banking is low—perhaps pitifully so. In a 2019 study by Crealogix, two thirds of respondents had no idea what Open Banking was, much less its potential benefits.
Some banks see opportunity in the transition to Open Banking, whereas others view Open Banking as just another compliance obligation. One example of a visionary is Barclays, who empowered its U.K. customers to better manage their finances with the ability to attach non-Barclays accounts to its mobile app—taking a big and bold step forward to participate in the industry’s emerging platform economy.
Interest in the capabilities Open Banking enables varies substantially by different generational cohorts. For example, according to Crealogix research in the U.K., GenZs and millennials are twice as likely to adopt new open-banking capabilities and applications relative to baby boomers.
Many positives and much innovation notwithstanding, for the most part, Open Banking’s promise to drive positive changes for financial inclusion have not yet been realized.
Based on what we’ve observed in the U.K., here are three predictions for how we expect Open Banking to play out in Australia.
Some banks will respond with vision and vigor, delivering new experiences that resonate with their customers and create advantage in the marketplace.
Other banks will view a more open financial ecosystem as a threat and put their heads in the sand, leading to short term investment savings and long-term competitive disadvantages.
Investors—inside banks and outside in the broader fintech ecosystem—will bet on advancing technologies and evolving customer expectations by placing smart bets on future possibilities in the Open Banking arena.
While consumers may never know what Open Banking is, their desire to benefit from new and compelling digital banking services will ultimately lead the overall banking industry to a brighter future—in Australia and the rest of the world. As in the U.K., the advent of Open Banking in Australia will hasten progress, create opportunity and change an industry.
Here’s some acquisition news that slipped past our radar: CryptoNumerics, an enterprise software company based in Toronto, Ontario, Canada, was acquired by California-based, cloud data warehousing startup Snowflake last month.
And while terms were not disclosed when the deal was announced in July, Private Capital Journal reported that an IPO filing from Snowflake this week noted that the company had “acquired certain assets from a privately-held company for $7.1 million in cash.” Both companies have remained mum about the transaction; it is possible that Snowflake will be in a better position to discuss its recent activity, including its “business combination” after the company goes public in the next few months.
CryptoNumerics specializes in enabling businesses to create privacy protected datasets with quantifiable privacy risk. Founded in 2018, the company made its Finovate debut last spring at our west coast conference. At the event, company co-founders Holboke and Bhatti demonstrated CryptoNumerics’ CN-Protect technology that leverages differential privacy and AI to allow institutions to analyze consumer data while maintaining CCPA, GDPR, and HIPAA compliance.
Last fall, CryptoNumerics unveiled its Re-Identify solution, which enables companies to determine whether or not the identities of users in their datasets are secure. Based on CryptoNumerics’ CN-Protect, Re-Identity helps deal with a problem in typical de-identification techniques such as masking and tokenization which can fail to completely protect data.
“Our early enterprise customers are excited to partner with Cryptonumerics because we not only solve their privacy concerns but we also enable them to leverage their data assets to build cross enterprise models that create new revenue opportunities,” CryptoNumerics executive chairman and co-founder Ashfaq Munshi said.
CryptoNumerics has raised $2.5 million (CAD$3.3 million) in funding from 11.2 Capital, Data Capital Management, and Lux Capital. Last fall, the company was named one of Canadian Innovation Exchange’s top 20 most innovative startups in Canada.
The following is a sponsored blog post by Chris Papathanassi, Global Solution Lead, Lending with Finastra. Papathanassidiscussesthe two challenges facing lenders: data quality and ensuring a true “golden source” and leveraging real value through data connections. Find out more in the full report >>
Today, digital is the only way to do business. But even though everything they do can be expressed in ones and zeros, most financial service organizations simply aren’t set up to be truly digital. In the context of the current disrupted, volatile and remote-working global economy, doing digital brilliantly is now a matter of survival and urgency for many financial firms – no longer simply a ‘nice to have’.
Digital transformation is difficult for even the simplest business models, and in lending in particular, there is a real challenge. When it can take up to three months to get cash out of the door, it’s hard to see how any bank can keep up with the digital shift. There is a continued dependency in lending on paper documentation and face-to-face contact.
Despite this, the challenges of digitalization are more than balanced out by the potential benefits. You’re likely aware of a few of these already:
Increased efficiency – removing repetitive, non-value-added work and moving towards real-time processing
Personalization – delivering relevant customer service even in a socially-distanced context
Improved credit management – providing integrated, rules-based systems for greater decision speed and transparency
Proactive risk management – using APIs and platforms to “join up” the risk and sales processes
Self-service for corporates – providing a digital channel that empowers corporate customers
Unlocking the value of data – bringing data together from disparate sources so its true value as a commodity can be leveraged
So, what needs to happen for lending to get there?
One of the key issues is data quality and the “golden source”. The bespoke nature of lending makes it hard to maintain data quality and consistency. Lenders have their own individual nuances and conventions. And corporate borrowers that have lending relationships with many different organizations will download and manipulate data so it’s in a format they can work with.
As one major bank asked us: “How can we ensure what the source of truth is across different applications?”
What’s more, as data moves through different systems in a digitalized and connected world, it changes too.
This points to the second challenge, which is that digitalized lending data is only valuable when it can be connected to the other pieces of the puzzle, to provide the big picture lenders and borrowers need. Right now, firms are still downloading data into Excel, manipulating it, and re-sending it.
Digitalization plus API capabilities, however, makes it possible for stakeholders to see the same pieces of data in the same state. It’s this connectivity that is key to realizing the full benefits of digitalization and addressing the “source of truth” issue.
Digitalization also opens data to new technologies such as AI, machine learning, and robotic process automation, which can create new efficiencies and value for banks and customers. And for processes such as syndicated lending that have multiple players, it can be combined with cloud technology to enable more collaboration and better access to a single source of truth.
APIs in the cloud can make innovation more accessible to banks, overcoming the challenges of integrating in-house and external products. In essence, on platforms, banks have access to pre-integrated, interoperable solutions and better access to the broader financial services ecosystem, where they can explore innovations and consume them at speed.
This potentially changes the shape of the lending industry, opening up interesting questions. What do banks want to be? Leaders in the lending business or providers of specialist products? With digitalization both options are possible, creating an opportunity for lenders to add value and build their lending businesses – or to disintermediate healthily.
For the second year in a row, Deutsche Bank is teaming up with Google, Atos, TechQuartier to help make a difference for women in fintech. The bank announced the launch of its second Female FinTech Competition this week, featuring a spot in Atos’ Fintech Programme as the competition’s top prize.
“The Female FinTech competition is not only a wonderful opportunity to showcase technology talent, it is also a way for Deutsche Bank to engage and support a community of female founders and help foster innovation,” Global Head of Deutsche Bank’s Strategy & Innovation Network Gil Perez explained.
Fintech companies with a female founder – or with women in their top management – are encouraged to apply. The first prize – participation in the Atos FinTech Program – also features access to the FinHub, a fast-track onboarding program that connects companies with Atos’ network of financial services organization partners – and Atos Financial Services Sandbox – which makes it easy for fintech startups to combine their expertise to develop and test new ideas and solutions.
In addition to the first prize, other program winners will have the opportunity to access resources from both Deutsche Bank and Google Innovation, including the chance to work in Deutsche Bank’s Innovation Lab with the team’s experts and coaches.
The Female FinTech Competition is also in the market for coaches. Women interested in coaching program entrants are also encouraged to sign up and indicate their area of knowledge and expertise.
The deadline for applications is September 23, with applicants submitting their business cases by September 30. A short list of six finalists will be announced on October 15, with the winners announced on October 29.
“We still have a gender gap in the finance industry,” said Sima Ohadi, Chief Behavioral Officer at Odonatech and the program’s inaugural winner last year. “Yet the future looks bright in part thanks to initiatives like the Atos Female Fintech Competition. I participated as a co-founder of Odonatech in the Atos Fintech Competition last year, which helped me get to know some very ambitious and innovative women in this field.”
Small business financing and payments company Behalf has a new man at the top. The company announced that Rob Rosenblatt, who has been serving as Behalf president for the past six months, will now take over the role of Chief Executive Officer of the eight-year old firm.
“Consumers have enjoyed a broad range of financing solutions offered by retailers and e-tailers for many years,” Rosenblatt said in a statement. “Now is the time for every major business seller to make net terms and extended financing solutions available to their customers in order to facilitate commerce. Behalf is ideally suited to help accelerate the adoption of these solutions.”
Rosenblatt will replace company co-founder Benji Feinberg, who had served as the company’s CEO since its founding in 2012. Rosenblatt’s appointment will mean that Behalf’s customer-facing functions will be based in New York City, with the firm’s R&D capabilities continuing to be housed in Behalf’s offices in Ra’anana, Israel.
Before coming to Behalf in February of this year, Rosenblatt was Head of Lending and GM of Lending Operations for Kabbage. He was also previously Chief Customer and Chief Marketing Officer for Flywire. Rosenblatt is currently on the board of directors of prepaid card provider PEX Card.
Behalf helps small businesses manage cash flow and expenses by enabling them to quickly and affordably finance almost any business purchase. The company uses its own proprietary credit scoring methodology to guide its purchase financing, and pays vendors directly on behalf (hence the name) of small businesses while collecting repayments on behalf of the vendor. With Behalf, B2B sellers are able to get paid upfront, without needing to worry about credit risk, as well as enjoy larger average order sizes. Buyers benefit from ready access to financing, including avoidance of the financing fee if repayment is made during the grace period.
“There is real demand for Behalf’s financing solutions in B2B commerce,” Behalf Executive Chairman Michael Heller said. “Now is the ideal time for Rob and the entire Behalf team to seize the opportunity and focus on growing the company.” Heller is also an Operating Partner at Oak FT/HC and MissionOG.
Behalf has raised $310 million in funding from investors including Viola Growth, Spark Capital, MissionOG, Visa, and Sequoia Capital Israel.
The health crisis and economic environment have shaken up the fintech industry. Some of the trends we saw at last year’s event have been placed on the back burner because firms are not only cutting costs but also are enhancing their focus on serving customers in a new way.
So while this year’s FinovateFall trends assessment isn’t a completely new set of ideas, it certainly doesn’t mirror our forecast from the beginning of the year. As you may have guessed, every trend at this year’s conference will be filtered through a COVID-19 lens.
Here is what you can expect to see:
By the end of 2020, every product and service must be accessible online. A solid digital customer experience has become table stakes. Because of this, at this year’s show, you can expect to hear the term “digital transformation” in every session.
There’s something almost comforting about seeing AI as a top trend once again this year. While much of the world, the economy, and our working environments have changed, AI still brings technological advancements to every sub-sector in fintech. And since most services must take place 100% digitally, companies need every improvement possible to maintain superior customer service.
Again, since most of our interactions must take place remotely, we have to re-think and re-invent many of the ways we used to do business. Everything from internal communication and collaboration to customer authentication to payments must now incorporate remote-friendly practices.
Fighting fast-tracked financial crime
While security technology was already a hot topic in the pre-COVID environment, it is even more so now. Now that many employees are working from home, hackers have taken advantage of wifi networks with weak security standards. Aggravating the situation, hackers have implemented new phishing attacks that prey on human emotion to gather sensitive information.
Like AI, this is another trend that the industry had on its radar in 2019. It has now, however, been heightened by the onset of the public health crisis. Now that consumers of all ages are accessing products and services remotely, financial services companies have had to not only fast-track digital transformation efforts but also create new initiatives to serve customers that are not digital natives.
The “as-a-service” trend has been around essentially since the dawn of fintech. However, the offerings are starting to mature now with the onset of open banking; the increased flexibility; and mutual benefits across banks, third parties, and end customers.
Because challenger banks were born in the digital realm, they were practically made to serve customers during a pandemic. In addition to their digital expertise, many of them offer products and services for consumers facing economic uncertainty. And investors have taken notice, challenger banks have been some of the top recipients of VC funds in 2020.
Because most people are dealing with the realities of a remote working environment and living situations, communication is extra challenging right now. Along with technologies that enable face-to-face conversations via video, many financial services companies are taking a second look at chatbots, their phone-based customer service, and other channels. In the end, we will not see a single communication channel come out on top as the winning one. Instead, we’ll see multiple winners as different consumer groups find the channel that suits their preferences.
Marketing services company Kasasa is partnering with BSI Financial Services to provide a new mortgage loan product that community banks and credit unions can offer their clients.
The new offering, Kasasa Mortgage, helps small financial institutions compete with large banks by offering a unique loan product. What’s distinctive about Kasasa Mortgage is that it uses the Take-Back concept the company piloted in 2018. Every month the borrower has the option to overpay on their mortgage payment. If, at any time in the future, they need to access cash quickly, they have the option to take back any portion of the overpayment.
Making the new launch possible, BSI Financial will conduct the loan servicing on behalf of community banks and credit unions using the new product, Kasasa Mortgage.
“Through Kasasa’s partnership with BSI Financial, we are enabling a greater number of local financial institutions to help their borrowers better understand their mortgage loan and get out of debt quicker,” said Kasasa’s EVP of Product Management, Chris Cohen. “By offering the most consumer-friendly loan available today, community banks and credit unions can achieve higher yields without the additional risk and maintain their fair share of the market.”
Earlier this month Kasasa improved on its Take Back loan by integrating Carleton’s insurance and debt protection calculations to help tailor loan limits.
This November, 20+ startups and established organizations will demo their latest technology virtually at FinovateWest Digital. In these 10-minute showcases, you’ll have the chance to see how these services and solutions work and how they can benefit your business. Need to know more? All demoers will be available at virtual booths for Q&A and 1-to-1+ meetings.
Here’s a look at those already confirmed to demo from across the US and beyond:
The themes, trends and technologies from these companies encompass the new state of financial services in 2020:
Risk management connected to financial wellness, SMB financing, and intelligent data
Customer experience connected to call center contact, collaborative engagement, digital development, and balancing remote versus in-person support
Financial planning connected to fluctuating portfolio performance, employer benefits, and unemployment
Financial crime connected to growing corona opportunists
And much more. Click here to learn more about how their technology can help you spot opportunities for growth in your organization and run with that potential.
What have the companies that won Best of Show awards at last year’s FinovateFall conference been up to in the months since our New York show? With our autumn event less than a month away, we thought it would be a great time to check in on the nine companies that took home top honors this time last year.
BlytzPay – Integrated its digital payments technology with Dealer Management Systems (DMS) leader ABCoA Deal Pack. Announced strategic partnership with AFS Dealers.
Cinchy – Joined the 2020 MassChallenge FinTech Program in December 2019 along with five fellow Finovate alums. The program noted that 70% of the participants in its previous cohort launched a pilot or proof of concept within a year. Earned a $500,000 cash prize as one of the winners of the 2019 VentureClash competition. Raised $10 million in funding in May.
College Aid Pro – Partnered with Horsesmouth, a company that provides educational and marketing solutions for financial advisors and their clients. Announced collaboration with the American Institute of Certified College Financial Consultants. Teamed up with online student loan refinancing marketplace Credible.
ebankIT – Forged North American partnership with fellow Finovate alum Enterprise Engineering this spring. Announced updates to its multichannel banking platform.
Glia – Won Best of Show at FinovateEurope for a second year in a row. Integrated its technology with fellow Finovate alum Alkami’sOnline Banking Platform. Inked partnerships with 20 credit unions across the U.S.
MX – Topped 50,000 direct-to-bank API agreements to major financial institutions and fintechs. Launched data connectivity API, Path by MX. Named one of Inc. Magazine’s Best Workplaces 2020.
owl.co – Named one of Canada’s Most Innovative Tech Companies by the Canadian Innovation Exchange. Delivered $1 million in revenue within six months of launching.
Pinkaloo Technologies – Raised $1.25 million in funding. Joined Goldman Sachs-owned Ayco Marketplace for financial counseling and wellness services. Partnered with Eastern Bank to power its Give for Good charitable giving program.
Zogo Finance – Teamed up with fellow Finovate alum Bankjoy. Announced partnerships with 11 community banks and credit unions across 12 states. Surpassed 1,000,000 financial literacy modules completed.
FinovateFall Digital 2020 kicks off Monday, September 14 and continues through Friday, September 18 with hours of live and on-demand content. Visit our registration page today and join us for Finovate’s biggest, digital-first event to date.
A look at the companies demoing at FinovateFall Digital on September 14 through 16, 2020. Register today and save your spot.
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