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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
From digital transformation and payments to customer experience and the future of finance, the Finovate Podcast is a great way to hear from some of the most innovative talents in fintech.
Finovate VP Greg Palmer talks with Nate Gibbons of QuickFi on reimagining business financing and successfully managing rapid growth. Demo video.
Greg Palmer sits down with Tom Baran of 9Spokes on open banking and personalization in the SMB space. Demo video.
Greg Palmer interviews Jens Hinrichson and Robert MacDonald of 1Kosmos on the future of password-optional authentication. Demo video.
Greg Palmer talks with Deepak Jain of Wink on the future of biometric payments. Demo video.
Greg Palmer chats with Maya Mikhailov of SAVVI AI on on no-code AI solutions you can implement right now. Demo video.
The Federal Reserve launched its instant payments service, FedNow, today.
The new service enables businesses and consumers to send and receive money in real-time, 24/7/365.
FedNow puts the U.S. on par with countries like the U.K., Brazil, and India, as well as the EU, which have offered real-time payments for years.
The long-awaited launch of instant payments in the U.S. is here. The Federal Reserve introduced its FedNow instant payments service today. The new system enables businesses and consumers to send and receive money in seconds. FedNow is also available 24/7/365 and recipients get full access to sent funds immediately.
Funds can be transferred from person to person, from consumers to businesses, and from businesses to each other. There are currently 35 banks and credit unions participating in the program. A growing number of fintechs have also expressed their readiness to participate in the service. These companies include Finovate alums ACI Worldwide, Aptys Solutions, Finastra, Finzly, FIS, Fiserv, Jack Henry, and Temenos.
Federal Reserve Chair Jerome Powell praised the launch of the new offering. “The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient. Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck, or a company to instantly access funds when an invoice is paid.”
The potential impact of FedNow on businesses and consumers is significant. Not only will the everyday business of payments become faster and more streamlined, but also the rise of just-in-time access to paychecks and invoices will benefit both workers and small businesses. The service also helps smaller banks and financial institutions, enabling them to access and offer real-time payments without having to partner with larger, competing FIs for the service.
Check out our conversation from last fall with Bernadette Ksepka. Ksepka is Assistant Vice President and Deputy Head of Product Development with the FedNow Service.
Stocks might be soaring over the summer. But the headlines of late have been filled with dour reflections over fintech investment in the first half of 2023. The first half of the year – and the second quarter in particular – have been tough on fintechs seeking funding. But here are five reasons why fintech funding in the second half of 2023 – and beyond – is likely to be better than the first half.
The first half was pretty bad
One of the reasons why the second half of the year might see higher levels of fundraising in fintech is because the first half has set a fairly low bar. In its analysis of H1 fintech investment this year, S&P Global Market Intelligence noted that Q2 2023 was the “slowest quarter on record over the past two and a half years” in terms of deal count. In the U.S., H1 funding was down 28% from the previous year. Declines in the U.K. were even more severe, with H1 2023 trailing H1 2022 by a whopping 83%.
S&P Global Market Intelligence was careful to add that while the slowdown in investment impacted the first half significantly, the declines began late last year rather than at the beginning of this year. And while the report writers expressed anxiety over the continued low deal count, the report did note approvingly overall deal value growth, the potential for a stabilization in interest rates, and the underlying robustness of digital trends in financial services as factors that support a recovery in the second half of 2023.
About that recession
Despite layoffs in the tech sector and high-profile tremors in the banking industry like the collapse of Silicon Valley Bank, the widely anticipated recession – and its accompanying 5%+ unemployment rates – has yet to occur in the U.S. or Europe. As economic confidence grows, and the date for a potential economic slowdown gets pushed further into the future by economists, investors are likely to feel more comfortable putting capital at risk.
In addition to the potential for moderation on the interest rate front mentioned above, S&P Global Market Intelligence also highlighted the fact that many venture capitalists remain “flush with cash.” According to Pitchbook, the money available for investment by venture capital is at an all-time high of more than $279 billion for U.S.-based funds alone. That capital will only remain on the sidelines for so long.
Curbed enthusiasm
The popular embrace of emergent GenerativeAI solutions helped give the technology industry writ large a boost at a time when the focus was on shrinking workforces and a sense of stagnation in terms of post-smartphone innovation. At the same time, the strong but relatively muted response to Apple’s metaverse-manifesting VisionPro suggests that market for innovation is still strong, but it may be a little more sober than it’s been in awhile.
This could be a particular benefit for fintech companies where the solutions and services are geared toward clear human challenges in a way that some other areas of technology are not (more on this later). As investors return to the market in search of promising startups, those companies in industries with proven ways of using enabling technologies like automation and machine learning could see early interest.
More tech layoffs, More tech companies
It can be a delicate point. But in the same way that companies like Facebook and YouTube emerged from the wreckage of the dot.com bust, and Airbnb and Uber (and Finovate!) were born out of the ashes of the Great Financial Crisis, one door closing in the economy often signifies the opening of another. The talent that is leaving some of the biggest and most successful technology companies in history is likely to go on to launch and staff the next round of big, successful technology companies. Savvy investors know this, and will be watching to see who ends up where, and what they are up to.
Work the problem, people
One thing that I appreciate about Finovate conferences – and all similar events, to be honest – is that they are a live, in-person reminder that there are people – many of them younger than you and me – who are enthusiastically pursuing solutions to problems in their lives, the lives of their friends and loved ones, as well as the communities they belong to and care about. They tend to not have a lot of time for fear, doubt, or lamentations about what can’t be done. Instead they are more likely to embrace the old motto: lead, follow, or get out of the way.
As long as there individuals who need help sending money to relatives overseas, families struggling to save for the future, businesses looking for ways to make their services both more profitable and available to more customers, there will be fintech innovators building solutions for them. And few people know that better than the investors whose vision and commitment has help make and will continue to help make those solutions possible.
CRIF and Know Your Customer have developed a new system that uses real-time registry connections to automatically retrieve documents and map shareholders. The solution provides a centralized place to integrate data from multiple official sources which enables PAOB to streamline the onboarding process for its clients. In addition to leveraging automation to lower costs and reduce the amount of manual labor involved, the new offering supports on-going monitoring requirements, as well. Both CRIF and Know Your Customer offer a wide range of compliance solutions: CRIF provides a portfolio of business data and intelligence, including credit and ESG data. Know Your Customer provides real-time registry connections, Ultimate Beneficial Owner mapping across borders, and modular workflow capabilities.
Ivan Chow, Head of Strategy & Partnerships at PAOB highlighted the challenges facing regional SMEs in the immediate, post-COVID economic environment. Chow noted that the re-opening of places like Hong Kong is not only likely to feature increased business activity, but also increased demand for operating capital financing. “The partnership with CRIF and Know Your Customer will further enhance our customer-centric experience to the SME customers,” Chow said.
The partnership between CRIF and Know Your Customer extends back to 2021. The two companies announced a global commercial partnership in August of that year to help financial institutions pursue their digital transformation objectives. The alliance will combine CRIF’s KYC data offering with Know Your Customer’s platform to facilitate digital corporate onboarding for financial institutions. The agreement also featured a strategic financial investment in Know Your Customer. The amount of the investment was not disclosed. The company said the capital will help it further develop the AI and automation features of its technology.
Founded in 1988, CRIF is headquartered in Bologna, Italy. The company operates in more than 40 countries and includes more than 10,000 financial institutions and 600+ insurance companies among its customers. CRIF made its Finovate debut at FinovateEurope in 2014.
We’re excited to announce that the shortlist for the Finovate Awards 2023 has just been announced.
This is the fifth annual Finovate Awards, and the bar to become a finalist has never been higher. We saw a huge number of high-quality nominations, and that’s reflected in the quality of the finalists.
There are 25 categories in this year’s awards including Best Embedded Finance Solution, Executive of the Year, Best Digital Bank, Best Fintech Partnership, plus many more.
Winners will be chosen by a panel of esteemed industry judges. Take a look at the full judges’ lineup here.
This year we won’t be having a physical awards ceremony, but winners will be announced through digital channels and at the second day of FinovateFall in September.
If you have any questions about the awards, please let us know awards@finovate.com.
Linqto has revamped its brand identity and has rolled out new capabilities to enable investors to buy and sell their holdings in real time.
The new feature comes after a recent bill passed by the House Financial Services Committee revamped the list of accredited investor certifications.
This marks the company’s second rebrand, after it first pivoted in 2020 to serve individual investors.
Investment platform Linqto has rolled out a two-fold announcement today. Not only has the California-based company has revamped its brand, but it has also added new capabilities to enable investors to buy and sell their holdings.
At its core, Linqto helps accredited users invest in unicorns before they go public. The platform opens up a ground floor opportunity, with the minimum investment starting at $5,000. The expanded capabilities launched today transforms Linqto into a more holistic platform, allowing users to control and manage their assets in real-time.
“The first generation of Linqto’s platform made private equity investing simple and accessible for accredited investors, and we are now entering a new phase which also makes these investments liquid,” said Linqto Chief Product Officer Patty Brewer. “The expanded platform allows accredited investors to cost-effectively build and manage their own diversified portfolio of private equity investments. Linqto is demystifying the private markets by providing endless opportunities to achieve financial goals.”
Today’s announcement comes after a recent bill passed by the House Financial Services Committee revamped the list of accredited investor certifications. The update further democratizes access to the private market.
“Now we’re doubling down on our core mission of helping accredited investors identify the private companies and industries they’re most interested in and providing real-time liquidity as a bonus,” said Linqto CEO Bill Sarris.
The rebrand marks the second change in the company’s brand identity since it was founded in 2010 as a digital banking technology company that provided software-as-a-service to fintechs. In 2020, two years after Linqto acquired investment trading platform PrimaryMarkets for $33 million, the company pivoted to serve as a direct-to-consumer investment platform.
Since then, Linqto has amassed 150,000 members across 110 countries and has facilitated $220 million in investments across almost 50+ portfolio companies.
PayNearMe has integrated Cash App Pay into its app.
The move allows PayNearMe’s end users to pay their bills using their Cash App accounts.
The native integration helps users make payments within the app without having to manually re-enter their card or bank details.
Cash payments platform PayNearMeannounced it is adding more payment options today by natively integrating with Cash App Pay. The California-based company is leveraging Block-owned Cash App Pay’s technology to allow its users to pay their bills using their Cash App accounts.
“We are excited to be early to market with Cash App Pay, a payment type that is growing in popularity,” said PayNearMe Chief Product Officer John Minor. “By offering Cash App Pay, we’re enabling our clients to provide their customers with more payment options and greater convenience.”
By natively integrating Cash App Pay, PayNearMe’s end users can make payments within the app without having to manually re-enter their card or bank details. The seamless user experience keeps users’ sensitive information secure while enabling them to complete transactions in a few taps. Payments made using Cash App Pay are saved alongside all of the user’s other transactions in a single ledger.
Cash App was founded in 2013 as a peer-to-peer-payment platform. The company has since become a more robust, banking-like platform that enables users to hold funds, spend their money using a QR code or cash, invest, manage their Bitcoin, and file their taxes. It has built up its user base to 53 million monthly active users.
PayNearMe focuses on serving un-and-underbanked populations with its cash-based billpay tools. The company partners with more than 40,000 retail stores, including 7-Eleven, Walmart, and Family Dollar, to allow businesses to offer their users cash payment options.
PayNearMe launched a product called MoneyLine in 2021. MoneyLine allows gaming and sports betting operators to offer a payment gateway, hold deposits, make payouts, and more. Including a fresh $45 million round earlier this year, PayNearMe has raised $118 million in funding since it was founded in 2009.
Accounts payable and receivable platform Nook has partnered with Currencycloud.
Nook will leverage Currencycloud’s APIs to help its customers manage payments with international suppliers.
Currencycloud has been a Finovate alum since 2015. Visa acquired the company in 2021.
Accounts payable platform Nookannounced a new partnership with Currencycloud. Nook will leverage Currencycloud’s APIs to enable its customers to manage the full-life cycle of supplier payments. This will help Nook better serve companies who must make multiple transactions and manage other inefficiencies when working with international suppliers.
“The seamless integration with Currencycloud has strengthened our value proposition as an end-to-end accounts payable solution, and has helped us to expand our addressable market to include businesses that need to pay suppliers in multiple currencies,” Nook co-founder and CEO Joe Lines explained.
Nook offers an integrated accounts payable and accounts receivable platform that enables businesses to process, approve, and pay invoices without having to login to their bank or accounting program. The platform features auditable integrated approval workflows, and payments are integrated with both the company’s bank and ledger. The company noted that its platform has enabled users to complete their accounts payable 50% faster than before using the technology.
Currencycloud Chief Revenue Officer Nick Cheetham said that the partnership with Nook was a “perfect example” of how companies can leverage innovation to thrive in the payments space. Calling the support of companies like Nook a part of Currencycloud’s identity from the beginning, Cheetham added “We are eager to see how the platform can expand their customer base and further disrupt the market by integrating our seamless cross-border payment capabilities.”
Currencycloud demoed its technology on the Finovate stage for the first time at FinovateSpring 2015. In the eight years since, the company has grown into a financial infrastructure and enterprise-class solution provider for any business that needs to move money across borders. With nearly 600 employees, Currencycloud maintains offices in New York, Amsterdam, Singapore, Cardiff, and London. The company has processed more than $75 billion in payments and transferred payments to more than 180 countries around the world.
Last month, Currencycloud announced that it was working with Australian multi-asset broker ACY Securities. Currencycloud began the year with a pair of new partnerships: teaming up with Hong Kong-based remittance company Windsor First and venture capital platform Vauban in January. Visa acquired Currencycloud in 2021 for $912 million (£700 million). Mike Laven is CEO.
“Global fintech funding nearly halves to $23B in H1 2023”
“North American Startup Funding Fell Across All Stages in Q2”
“Most Active Investors Pare Dealmaking in First Half of 2023”
These are some of the recent headlines from sources such as Crunchbase News and S&P Global Market Intelligence. While there was some real enthusiasm around Generative AI as the summer began, the reality is that technology investors remain cautious in the face of inflationary fears, higher interest rates, and a number of high-profile blowups in some of the more speculative areas of technology. This challenge has been especially acute in fintech. Not only have concerns over COVID-era overinvestment and “malinvestment” been loud in this space, but also fintech has more direct exposure to some of the economic discontents mentioned above.
The retrenchment in fintech funding was in evidence during Q2 2023 for our Finovate alums, as well. Over the quarter, ten alums raised more than $209 million. This makes Q2 2023 one of the lowest quarters in terms of equity capital raised by our alums in many years. Note that two of the nine alums that reported receiving investment dollars in April, May, and June – Agent IQ and EverC – did not disclose the amounts of their fundings. Nevertheless, this quarter’s total is a clear reflection of the relative tepid investment climate across technology writ large.
Previous quarterly comparisons
Q2 2022: More than $984 million raised by eight alums
Q2 2021: More than $2.8 billion raised by 14 alums
Q2 2020: More than $975 million raised by 15 alums
Q2 2019: More than $1.8 billion raised by 29 alums
Q2 2018: More than $1.5 billion raised by 26 alums
The biggest fundraising alum of the quarter was NYMBUS. The company enables financial institutions to digitally transform their operations through a variety of solutions including SmartCore, SmartPayments, and its standalone digital bank alternative, SmartLaunch. Founded in 2015 and headquartered in Jacksonville, Florida, NYBUS made its most recent Finovate appearance at FinovateFall 2019.
Top Equity Investments
NYMBUS: $70 million
PayNearMe: $45 million
BioCatch: $40 million
Other big alumni fundraisers in Q2 2023 were PayNearMe and BioCatch, which raised $45 million and $40 million, respectively. PayNearMe is a three-time Finovate Best of Show winner, making its Finovate debut back in 2010. The Santa Clara, California based fintech offers a cash payments platform that facilitates online purchases and billpay.
Headquartered in Tel Aviv, Israel, BioCatch demoed its technology at FinovateFall in 2014. Since then, the behavioral biometrics innovator has grown into a major player in the advanced fraud protection industry. The firm continuously protects more than five billion sessions per month and serves more than 250 million users around the world. In 2022, BioCatch prevented more than $2 billion in fraud losses.
Here is our detailed alum funding report for Q2 2023.
April: More than $35 million raised by three alums
If you are a Finovate alum that raised money in the second quarter of 2023 and do not see your company listed, please drop us a note at research@finovate.com. We would love to share the good news! Funding received prior to becoming an alum not included.
Earnest and Nova Credit are partnering to launch International Private Student Loans.
Earnest is tapping Nova Credit’s Credit Passport to leverage consumer-permissioned, cross-border credit data.
The solution is currently available to international students from India, Mexico, Canada, and South Korea.
Student loan refinancing site Earnest has teamed up with Nova Credit to launch International Private Student Loans. The new tool enables select international students to access flexible loan options, competitive interest rates, and personalized repayment terms tailored to their needs.
Offered by Earnest, International Private Student Loans will leverage Nova Credit’s Credit Passport solution that taps into consumer-permissioned, cross-border credit data. With Credit Passport, borrowers can share their credit information from their home country when they apply for a loan. Nova Credit will share the borrower’s credit history with Earnest and offer a relevant score corresponding to that history.
“We believe that access to credit should be borderless, and financial barriers should never hinder someone’s pursuit of education or opportunity,” said Nova Credit CEO Misha Esipov. “The U.S. is home to nearly one million international students who not only fill our universities with the brightest minds from around the globe but also bring those lessons to accelerate our economy for generations. By partnering with Earnest, we can provide more students the financial access they need to arrive and thrive.”
International borrowers that are eligible will have access to Earnest’s loans without needing a cosigner on the loan. Currently, the International Private Student Loans product is available to international students from India, Mexico, Canada, and South Korea pursuing a Master in Business Administration, Master of Laws/Juris Doctorate, or Master of Science in Engineering program at select schools. The loans can be used for tuition, housing, living expenses, and other education-related costs.
Nova Credit was founded in 2016 with an aim to extend credit to an entirely new set of potential borrowers– immigrants. In addition to the company’s Credit Passport solution, Nova Credit offers Cash Atlas, a tool that analyzes bank transaction data to provide lenders with a Fair Credit Reporting Act consumer report and generates a borrower risk profile to assess their affordability and ability to pay.
Nova Credit also offers a direct-to-consumer tool that provides new-to-country borrowers access to a marketplace where they can browse and apply for credit cards, phone plans, and loans using their foreign credit history.
San Francisco-based Earnest was founded in 2013 and offers student loans, personal loans, student loan refinancing, and marketplaces for tuition insurance, student credit cards, and home equity lines of credit.
Today’s news isn’t the only development in the international student lending space this month. Last week, global payments platform Flywire announced it had teamed up with Tencent’s fintech arm, Tencent Financial Technology, to help Chinese students pay for education abroad.
Consumer loyalty app loyalBe is transferring its user base to consumer rewards and payments app Cheddar.
The move comes as the Ireland-based company pivots from B2C to B2B.
Headquartered in Belfast and founded in 2018, loyalBe launched in Dublin in 2021.
“We literally give you free money for buying stuff you were going to buy anyway,” declares the Twitter page of Irish consumer loyalty app, loyalBe. The message is likely to remain the same. But today we learned that the focus has changed. LoyalBe has forged a strategic partnership with consumer rewards and payments app Cheddar. As part of the partnership, loyalBe will transfer its user base to the London-based company as part of its pivot from B2C to B2B.
LoyalBe CEO Cormac Quinn said that the decision to become a B2B business reflected “a thorough evaluation of our market positioning and long-term growth potential.” Quinn added that the pivot will enable the company to pursue more effectively the “democratization of frictionless reward programs in the marketplace.”
LoyalBe customers will receive instructions on how to transfer their rewards to Cheddar via email and in-app notification. The size of loyalBe’s customer base was not available.
LoyalBe was founded in 2018. The company raised $130,000 (£100,000) in seed funding from Techstart Ventures a year later. By 2020, loyalBe had secured a partnership with Visa as part of a strategy to expand beyond its local market in Northern Ireland. More investment followed in 2021. The company locked in more than $948,000 (£725,000) in funding from both Techstart Ventures and new investor Co-Fund NI. Later that year, loyalBe launched in Dublin, the capital of the Republic of Ireland.
“We are delighted to introduce loyalBe in Dublin,” Quinn said when the launch was announced. “This gives local businesses the chance to compete with the larger brands and attract footfall with powerful, data-driven insights and tailored promotions for their top customers.”
Serving small businesses was always a major part of what loyalBe is all about. LoyalBe provides a digital loyalty solution that gives businesses and consumers an alternative to traditional paper loyalty cards. Via a smartphone app and a direct link to the consumer’s bank card, loyalBe’s technology makes the rewards process seamless. LoyalBe also enables merchants to leverage payment data to boost customer engagement and provide more personalized rewards and offers.
What does this mean for the company as a fully B2B enterprise? “We have always been driven by our mission to provide every merchant with a powerful tool to help them attract and retain the best customers,” Quinn said. If nothing else, that effort will benefit from a new focus courtesy of the company’s latest move.
Cheddar CEO Tariq Zaid co-founded the U.K.-based company in 2020. The bank account-powered rewards app enables users to earn up to 35% cashback at major brands.
Back off blockchain! And move over metaverse! The future tech on the minds of many innovators in fintech and financial services is quantum computing.
Quantum computing leverages the concepts of quantum mechanics to make complex computations that would be very difficult – if not impossible – for traditional, non-quantum computers. Quantum computing provides exponential increases in processing speed, boosting computational power and benefiting fields from risk modeling to natural language processing. Businesses can deploy quantum computers to provide enhanced cybersecurity with complex, hard-to-hack algorithms. And it is easy to see how quantum computing would fit comfortably in a world of increasingly sophisticated machine learning and AI. In fact, based on a forecast by Boston Consulting Group, the quantum computing industry is expected to be worth $850 billion by 2035. This is the year when the consultancy believes the technology will have “matured.”
But, as we’ve learned from our forays into cryptocurrencies and the metaverse, the devil is in the deployments. We need to see use cases in order to understand and invest in whatever role a new technology might play in our lives. Quantum computing has not done as well on this front as Generative AI has, of late. But there are signs that financial services in particular remain interested in quantum computing. And the fruits of those investigations may arrive sooner than we think. Last month, HSBC and Quantinuum announced a “series of exploratory projects that exploit the potential near- and long-term benefits of quantum computing for banking.” The joint statement highlighted cybersecurity, fraud detection, and natural language processing” as areas of emphasis.
And just this week, Truist Financial, one of the top ten commercial banks in the U.S. announced that it has joined IBM’s Quantum Accelerator program. The program will enable participants in financial services to build skills in quantum computing. For its part, Truist is focused on exploring potential use cases for the technology in consumer banking.
“Quantum computing has the potential to transform how we do banking and solve complex problems,” Truist Chief Information Officer Scott Case said. “IBM is a leader in quantum computing and their collaboration and expertise will be invaluable to ensure we are able to leverage these new technologies to the fullest potential.”
IBM Iaunched its Quantum Accelerator program in September 2021. The program is designed for organizations that are both “quantum curious” as well as those already looking to develop real competency in quantum technology. The accelerator gives participants access to the company’s quantum computing systems, as well as IBM’s quantum computing experts.
In turn, IBM joined Truist’s Innovators in Residence initiative. This initiative is designed support collaborations between IBM and startups in fintech and financial services.
Meanwhile, Japanese megabank MUFG is putting its money to work to bring quantum computing to the banking and financial services industries. The bank has purchased an 18% stake in a quantum computing startup called Groovenauts, a stake that reportedly cost the financial institutions “billions of yen.”
Based in Japan, Groovenauts specializes in a computing process known as “quantum annealing.” This technology involves finding an optimal answer based on a massive number of combinations. To this end, Groovenauts connects companies with quantum computers owned by various research institutions, blending data processing technology with AI to enable businesses to more readily take advantage of quantum computing.
MUFG’s investment is the first direct investment in quantum computing by any of Japan’s three large megabanks. MUFG is specifically looking to use quantum technology to mitigate risk in financial derivative trading and asset risk management. The bank also believes that quantum computing will help it achieve significant operational efficiency gains.
