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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Insights-led customer engagement platform MoEngage made its Finovate debut at FinovateFall 2019 in New York. Three years later, the company returned to the Finovate stage for FinovateEurope 2022 in London. At this year’s conference, MoEngage demonstrated its full-stack solution featuring customer analytics, automated cross-channel engagement, and AI-driven personalization.
“71% of banking customers expect to receive personalized digital offers yet banks fail to do so because they have data silos,” MoEngage Senior Director Saket Toshniwal said during his demo at FinovateEurope in March. “We are here to solve that (problem), leveraging MoEngage.”
Founded in 2014, MoEngage enables hyper-personalization at scale across multiple channels including mobile, email, SMS, web, on-site and in-app messaging, and more. The MoEngage platform leverages AI-powered automation and optimization to enable brands to analyze behavior and serve consumers with personalized communications at every stage of engagement.
“Using MoEngage technology to create effective campaigns based on customers insight will increase your engagement, increase retention, and definitely increase your revenue,” Toshniwal said.
And while MoEngage’s return to the Finovate stage was certainly a big deal for the company, we’re willing to bet that the $77 million raised at the end of May represents an even bigger deal for the San Francisco, California-based firm. The Series E round, led by Goldman Sachs Asset Management and B Capital, represents the third round of funding raised by MoEngage in the past year. The company secured $23.5 million in July 2021 and another $30 million in December of that year.
Also participating in the round were existing investors Steadview Capital, Multiples Alternative Asset Management, Eight Roads Ventures, and Matrix Partners India. MoEngage said in a statement that it would use the new capital to deepen its presence in the U.S., Europe, Asia, and the Middle East, as well as fuel its expansion into new markets in Latin America and Australia. The investment also will give MoEngage the ability to pursue strategic acquisitions that would extend the platform’s capabilities and bring greater value to users.
“Our rapid growth and the leadership position is a validation that consumer brands today are moving beyond campaign-centric tools and adopting an insights-led multi-channel approach to customer engagement,” MoEngage CEO and co-founder Raviteja Dodda said when the Series E was announced. “We now have over 1,200 customers in 35 countries and more than 650 employees across our offices in the U.S., U.K., Germany, UAE, India, Indonesia, Singapore, Vietnam, Malaysia, Philippines, and Thailand.”
Specifically the partnership will seek to develop “quantum-hybrid” solutions to solve problems in consumer loyalty and rewards, cross-border settlement, and fraud management. The two companies will use D-Wave’s annealing quantum computers and quantum hybrid solvers through the Leap quantum cloud service to deliver real-time access to quantum applications powered by Mastercard’s network.
“People expect hyper-personalized experiences,” Mastercard Chief Innovation Officer Ken Moore said. “Quantum computing’s unique ability to analyze huge numbers of potential combinations can deliver optimal solutions that will improve efficiency and provide choice.” Moore said that the partnership will explore applications of quantum computing technology that offer “practical, real-world” solutions in financial services.
The world’s first commercial supplier of quantum computers, D-Wave is the only firm building both annealing quantum computers and gate-model quantum computers. D-Wave’s technology has been used to solve challenges in a wide range of fields including logistics, drug discovery, cybersecurity, and financial modeling. Founded in 1999 and headquartered in Burnaby, British Columbia, Canada, D-Wave has partnered with firms such as NEC Corporation, Volkswagen, Lockheed Martin, and the University of Southern California. PSP Investments, Goldman Sachs, and BDC Capital are among D-Wave’s investors.
“D-Wave and Mastercard have a shared vision of harnessing the power of technology to positively affect business and society,” D-Wave CEO Alan Baratz said. “This alliance supports that vision by delivering quantum innovation that will tackle increasingly complex problem sets across applications like loyalty programs, fraud management and anti-money laundering in financial services and, ultimately, unlock more value for customers.”
Wealth management solutions provider Orion Advisor Solutions has closed two acquisitions in recent weeks.
The Omaha, Nebraska-based fintech closed its acquisition of CRM company Redtail Technology in June, and finished its acquisition of investment and trading platform TownSquare Capital in July. Terms were not disclosed about either transaction.
Orion Advisor Solutions made its Finovate debut in 2019 at FinovateFall, demonstrating its trading and rebalancing platform, Eclipse.
Wealthtech innovator Orion Advisor Solutions has recently closed a pair of acquisitions. Both deals are designed to help Orion expand its wealth management business and give financial advisors a “single-source solution to prospect, plan, invest, and achieve,” said Orion founder and CEO Eric Clarke.
At the beginning of the month, the Omaha, Nebraska-based company announced that it has completed its acquisition of investment and trading platform TownSquare Capital (TownSquare). Terms of the transaction were not disclosed, but the acquisition will add $6 billion in turnkey asset management program (TAMP) assets to Orion’s wealth management platform.
Post-acquisition, TownSquare will continue to operate as a standalone entity, serving as an indirect subsidiary of Orion Advisor Solutions. Headquartered in Provo, Utah, and founded in 2016, TownSquare offers custom investment solutions for institutions, wealth advisors, accounting firms, high net worth individuals, and banks.
“Combining TownSquare with Orion’s wealth management and advisor technology capabilities brings tremendous value to financial advisors and their clients,” Orion Chief of OCIO Services Kurt Brown said. “With the full weight of Orion’s resources and relationships behind us, we can continue providing best-in-class investment strategies to the advisors and clients we serve.”
Orion’s TownSquare announcement comes just one month after the wealth management firm reported that it has completed the acquisition of web-based client relationship management (CRM) software company Redtail Technology. Announced this spring, the combination of the two firms will provide financial advisors with a range of technology and outsourced solutions to help them serve their clients better. Specifically, the integration of Redtail’s CRM technology into Orion’s open architecture will give advisors a foundational tech stack courtesy of an integrated “most-in-one” platform that is built around a CRM hub.
“Redtail joining Orion will greatly benefit financial advisors who seek an integrated suite of technology to grow their businesses,” Orion’s President of CRM Brian McLaughlin said. “We aim to solve some of advisors’ tech integration challenges by bringing together the technology pieces they need to be successful and freeing advisors up to spend more time engaging with their clients and prospects in meaningful ways.”
With Redtail on board, Orion gained insights into more than $3 trillion in assets under management. Before closing its deal with Redtail, the company had been serving 4.7 million technology accounts and supported more than 2,300 independent advisory firms representing $1.9 trillion in assets under administration and $60 billion of wealth management assets.
Founded in 1999, Orion Advisor Solutions made its Finovate debut at FinovateFall 2019. At the event, the company demoed its fully-integrated trading and rebalancing platform, Eclipse. The technology leverages ASTRO’s institutional-grade portfolio optimization engine to create custom Direct Indexing products, as well as provide advisors with client-specific overlays to strategies that feature custom ESG solutions.
Blackhawk Network and Klarna have teamed up to bring Klarna’s alternative payment solutions to customers shopping with physical merchants.
The partnership comes as consumers show greater interest in using Buy Now, Pay Later payment options at retailers such as grocery stores, as well as for services.
Among Finovate’s earliest alums, both companies made their Finovate debuts in 2012: Klarna at FinovateSpring, Blackhawk Network at FinovateFall.
Branded payments provider Blackhawk Network and ecommerce innovator Klarna have forged a new partnership that will make it easier for consumers to use Klarna’s interest-free alternative payment offerings with brick-and-mortar merchants. Specifically, consumers will be able to use payment alternatives including Buy Now, Pay Later at physical retailers in Blackhawk’s U.S. network ranging from grocery stores to electronics shops to beauty salons.
“During a time of strained budgets and increasing costs, our partnership with Klarna is a significant development for retailers and grocers who are focused on meeting the needs of consumers and enabling them to shop how they want, where they want,” Blackhawk Network Head of Global Commerce Brett Narlinger said. “With Buy Now, Pay Later on a major growth trajectory, the collaboration between Blackhawk and Klarna will provide innovative purchasing options for consumers and retailers.”
The partnership demonstrates the growth in use cases for Buy Now, Pay Later by including both consumer staples like groceries as well as services such as beauty salon visits. In its 2021 Shopping Pulse Report, Klarna noted that not only are grocery stores among the most frequently shopped categories in physical stores, but also that 64% of the report’s respondents would use Buy Now, Pay Later to purchase groceries if the service were available.
“While online retail is on the rise, consumers today still value the in-store experience and expect the same level of service and convenience everywhere they shop,” Klarna Head of North America Kristina Elkhazin said. “We are proud to partner with Blackhawk, an industry leader and pioneer, to integrate its in-store capabilities with Klarna’s in-store payment solutions to make this new commerce and shopping opportunity for retailers across all categories a reality.”
The partnership follows news of Klarna’s launch of a new Loyalty Card feature in its app. The additional functionality, which comes courtesy of Klarna’s acquisition of mobile wallet provider Stocard last year, enables users of the app to store and access their physical loyalty cards as digital cards. The feature supports more than 8,000 loyalty reward programs around the world.
Blackhawk Network most recently made fintech headlines with its partnership with LibertyX. The collaboration, announced in June, will enable consumers to use their LibertyX accounts to purchase bitcoin at participating U.S. retailers such as Fresco y Más, Tops, and Winn-Dixie. A part of the NCR Corporation, LibertyX operates one of the oldest and largest retail networks of bitcoin ATMs, cashiers, and kiosks in the U.S.
All-in-one card issuer and program management platform Highnote has teamed up with fellow Finovate alumPlaid. The new partnership will enable frictionless money transfers for card solutions powered by Highnote. The company will leverage Plaid’s account auth and balance solution to enable its customers to seamlessly make their transactions without needing to worry about account or routing numbers. Highnote customers will also be able to use Plaid Link to instantly authenticate cardholder accounts and then automatically create a Highnote Processor Token to enable fund transfers between card accounts and external bank accounts.
Here are three things you need to know about Highnote and its partnership with Plaid.
Highnote helps open finance work for embedded finance
Companies have pursued embedded finance as a way to expand or re-envision their business models. Those businesses that seek to make card issuance a part of their business face challenges in terms of providing a secure, frictionless user experience. Courtesy of Highnote’s partnership with Plaid, businesses will be able to instantly authenticate cardholder accounts, and end users will be able to easily authenticate with their financial institutions and choose which accounts to use for payments.
Removing friction is key to enhancing the customer experience
Helping customers – individuals or businesses – get from point A to point B quickly is the most immediate way for businesses to show they have their customers’ interests – and their time – top of mind. Highnote’s partnership with Plaid is all about removing friction and creating seamless experiences for customers of all kinds. By automating and making instantaneous operations such as account authentication and bank verification, the partnership between Highnote and Plaid is one small step for money movement, and a large leap in the direction of making financial services more accessible and convenient.
The collaboration with Plaid is Highnote’s newest strategic partnership
Highnote – in collaboration with Mastercard – began the year helping business credit platform Tillful launch its Tillful Card. This spring, Highnote announced a collaboration with GoDo as the company introduced its GoDo Card designed to bring earned wage access to underbanked workers.
“We built Highnote to enable companies like GoDo to create truly unique and game-changing payment solutions for their customers,” Highnote co-founder and CEO John MacIlwaine said. “The earned-wage-access market needs modernized payment solutions that can power innovative digital experiences and we’re here to deliver that.”
Highnote made its Finovate debut earlier this year at FinovateSpring in San Francisco. At the event, Highnote demonstrated the developer experience on its cloud-native, GraphQL API-based issuer-process platform. The company also showed how the platform’s interface gives customer management teams control over the payment transaction lifecycle, as well as provide access to transaction processing data.
Headquartered in San Francisco, California, Highnote has raised $54 million in funding. This include a $42.5 million Series A round closed in September of last year.
Modern core processing provider Zeta appointed FIS Veteran Karla Booe as Chief Compliance Officer.
Booe has spent more than 27 years working at FIS, where she served as Deputy Chief Compliance Officer.
Zeta was voted Best of Show at FinovateWest Digital 2020.
Modern core processing provider Zeta is introducing a fresh face this week. The California-based company recently brought onFIS Veteran Karla Booe as Chief Compliance Officer.
Booe will drive regulatory compliance programs for Zeta’s U.S. based clients from her office in Little Rock, Arkansas. She has spent the past 27+ years working at FIS, where she most recently served as the company’s Deputy Chief Compliance Officer.
Commenting on Booe’s appointment, Zeta CEO and Cofounder Bhavin Turakhia said, “She will further our already strong commitment to regulatory risk and compliance.”
“There has been little-to-no tech innovation with regard to the management of regulatory risk compliance for credit cards in the last decade,” said Booe. “I am excited to help drive that change for Zeta’s clients. Zeta’s mission to provide next-gen capabilities to banks so they can launch products, programs, and innovations faster are underscored by a technology framework and by design principles that will completely change the processing landscape.”
Zeta, which was voted Best of Show at FinovateWest Digital 2020, offers modern core and processing for banks and embeddable banking for fintechs. Earlier this year, Zeta received $30 million in new funding, bringing its valuation to $1.5 million.
Utility data aggregator Urjanet has been acquired by energy technology company Arcadia.
Urjanet made its Finovate debut last fall at FinovateSpring 2021.
Terms of the deal were not disclosed. Atlanta, Georgia-based Urjanet facilitates access to data from more than 6,500 utility, telecom, and cable providers around the world.
Here’s some big news from a Finovate newcomer that slipped beneath our radar in the wake of FinovateSpring this year. Urjanet, a leading utility data aggregator that made its Finovate debut last May, has been acquired by energy technology company Arcadia.
Terms of the deal were not disclosed. The deal will integrate Urjanet’s global data access with Arcadia’s data and API platform, Arc. This will enable Arc to serve as a universal software layer for the “zero-carbon economy.”
“Without data access, it will be impossible to meet the urgency and size of the climate crisis,” Arcadia CEO Kiran Bhatraju said. “Through our combined capabilities, Arc will help companies in every industry plan for and act on their climate responsibilities, pulling forward a zero-carbon future.”
Urjanet, founded in 2010 and headquartered in Atlanta, Georgia, is the world’s leading utility data aggregator. The company enables businesses to securely access consumer-permissioned data from more than 6,500 utility, telecom, and cable providers in 47 countries. Urjanet accesses more than one million utility bills a month and flows $150 billion in utility spend through its platform. With 50,000 connected utility accounts around the world, nearly a third (30%) of the Fortune 500 utility bills are captured with Urjanet’s technology. Bhatraju said that the integration with Arc will enable Arcadia’s platform to include more than 95% of all residential and commercial accounts in the U.S., as well as data from 9,500 electric, water, gas, and waste utilities globally. More than 1.35 million utility accounts around the world will be connected courtesy of the acquisition.
“Urjanet and Arcadia have long known the same secret: that on-demand, high-fidelity energy data is key to rapid decarbonization,” Arcadia’s Bhatraju wrote when the acquisition was announced earlier this year. “By integrating Urjanet’s global data access, Arc, Arcadia’s industry-leading data and API platform, becomes a universal software layer for the zero-carbon economy with the ability to serve all customers – residential and commercial – across the globe.”
At its Finovate appearance last May, Urjanet showed how its technology could be used to boost financial inclusion and expand credit access. The company partnered with Equifax to launch a new Payment Insights solution that enables banks and lenders to use utility payment history to help establish worthiness for loans.
More recently, Urjanet launched its new flagship platform, Utility Cloud, which provides easy and automated access to credentialed utility account information. Unveiled in April, Utility Cloud provides universal access to utility data, delivering sustainability reporting, energy consumption, utility bill data, and bill images on-demand. This allows businesses to become more energy-efficient, reduce energy spending, and produce quality, aggregated data for ESG reporting.
“Going forward, our customers’ data will be available on-demand in one central location, simplifying their utility data access even more. “Urjanet CEO Sanjoy Malik said. “This one-of-a-kind platform will help organizations streamline very manual and expensive business processes associated with organizing bills from all over the world.”
Envestnet acquired revenue management and hosted fee-billing solutions company Redi2 Technologies.
Envestnet will use the buy to modernize its billing, accounting, and back office capabilities.
Terms of the deal were not disclosed.
Financial wellness technology firm Envestnetannounced its 16th acquisition today. The Chicago-based company announced it has purchased revenue management and hosted fee-billing solutions company Redi2 Technologies. Terms of the deal were not disclosed.
Founded in 2002 and headquartered in Massachusetts, Redi2 offers a revenue management platform tailored to financial services companies. The tool offers fee calculation, invoice creation, payouts and accounting, and billing compliance. Among Redi2’s products are Revenue Manager, which provides client revenue accounting and billing services for asset managers; Wealth Manager, which delivers multi-party billing and payouts for broker-dealers and asset managers; and BillFin, which offers advisory billing and invoicing for financial advisors.
Envestnet will use Redi2’s technology to modernize its billing, accounting, and back office capabilities. The company anticipates the additional expertise will drive client engagement and ultimately boost revenue.
“Redi2 is a pioneer and innovator in the cloud-based delivery of wealth and investment management billing software, making them an ideal partner as we continue to strengthen our financial wellness ecosystem,” said Envestnet Executive Vice President of Business Lines Tom Sipp. “This acquisition enhances our strategic enablement of service and data, and over the next two years will create operating leverage by bringing Envestnet and Redi2’s administrative, revenue, and billing services together.”
Envestnet was founded in 1999. The company’s most noteworthy acquisition was its purchase of Yodlee in 2015. The Yodlee acquisition broadened Envestnet’s wealthtech offerings, launching it into the world of open finance. Envestnet is a publicly-traded company on the New York Stock Exchange under the ticker ENV and has a market capitalization of $4.66 billion.
Bank payments company GoCardless has announced its intention to acquire open banking platform Nordigen.
The Latvia-based fintech, a Finovate alum since 2018, connects to 2,300 banks in Europe and the U.K. via its free API.
Terms of the acquisition, which is expected to close later this summer, were not disclosed.
Bank payments company GoCardless has announced its intention to acquireNordigen, an open banking platform based in Latvia. GoCardless will integrate Nordigen’s open banking connectivity into its account-to-account network. Terms of the acquisition were not disclosed. The acquisition is expected to close later this summer.
“The Nordigen acquisition will take us to the next level,” GoCardless co-founder and CEO Hiroki Takeuchi said. “By intelligently combining free, state-of-the-art open banking connectivity with deep payment expertise, we can now offer open banking-as-a-service to any developer, partner, or fintech.” Takeuchi added that the acquisition will “lead to experimentation … that will create even more compelling use cases.”
Nordigen leverages open banking to help banks and lenders make more creditworthy loans. The company offers solutions that automate income and liability verification, and provides critical insights into prospective borrowers from account data for scoring models. Nordigen offers high-performance analytics including transaction categorization, feature engineering for credit modeling, and the capacity to generate risk scores from account data. Operating in 13 countries and partnered with more than 50 banks and lenders around the world, Nordigen connects to more than 2,300 banks in Europe and the U.K. via its free API.
“Our mission at Nordigen is to help companies around the world adopt and use Open Banking to enable greater financial transparency and financial inclusion,” Nordigen CEO Rolands Mesters said in a statement. “We share GoCardless’ enthusiasm for the growth of Open Banking and are excited to partner with people who not only share our passion for disruptive innovation in financial services, but who will also help us bring Open Banking freely to a much wider audience.”
Acquisition talk has not slowed down Nordigen, which has forged partnerships at an impressive pace this year alone. In June, Nordigen announced that it was working with Sherpa CRM, Landlord Fusion, HES FinTech, BUNNI, and Acounto. Already this month, Nordigen reported that it has expanded its collaboration with Latvian financial services company AS DelfinGroup.
Founded in 2016, Nordigen made its Finovate debut in 2018 at FinovateFall in New York. The company returned to the Finovate stage the following spring for FinovateEurope in London. Prior to the acquisition announcement, Nordigen had raised $4.2 million in funding from investors including Black Pearls VC and Superangel.
Tel Aviv, Israel-based ThetaRay announced a partnership with Brazil’s Travelex Bank.
Travelex Bank will deploy ThetaRay’s transaction monitoring and sanctions screening solution, SONAR, to enhance its ability to combat money laundering.
ThetaRay made its Finovate debut in 2015. The company has raised more than $112 million in funding.
Transaction monitoring technology provider ThetaRaywill help Brazil’s biggest FX specialist, Travelex Bank, enhance its transaction monitoring and sanctions screening capabilities. Travelex Bank will deploy ThetaRay’s SaaS-based anti-money laundering solution, SONAR, to provide both domestic and international transaction monitoring, as well as real-time sanctions screening for international payments.
Travelex Bank Chief Compliance Officer Célia Pizzi highlighted ThetaRay’s ability to meet the institution’s transactions monitoring and sanctions screening needs with a single platform. “ThetaRay’s SONAR will enable us to expand our product services portfolio and improve customer service while improving our overall AML operations,” Pizzi said. “SONAR will provide higher efficiency and secure risk coverage, enabling new businesses and lines of revenue.”
SONAR leverages an advanced type of AI, “artificial intelligence intuition,” that gives banks and financial services institutions a risk-based approach to effectively identify suspicious transactions and individuals. Without bias or thresholds, SONAR provides a comprehensive profile of customer identities across cross-border transaction paths that leads to a quick and accurate identification of money laundering threats. According to ThetaRay, SONAR offers a 95% detection rate and a 99% reduction in false positives when compared to rules-based AML solutions.
“Travelex Bank represents a new generation of global institutions that is readying its money transfer and payment infrastructure for changing conditions,” ThetaRay CEO Mark Gazit said. “Travelex is a provider that looks to the future and prioritizes trust, confidence, and quality.”
Travelex Bank represents international exchange corporation Travelex in Brazil (along with the brokerage Travelex Confidence). The bank provides a wide variety of services including international remittances, imports and exports, crypto exchange transactions, registration services, and more. The firm’s adoption of SONAR, in addition to bolstering its AML capabilities, will also enable Travelex Bank to offer new, compliant products and services.
A Finovate alum since 2015, ThetaRay has spent much of this year forging partnerships with a number of fintechs and banks. In March, ThetaRay announced a partnership with Dubai-based Mashreq Bank and teamed up with fellow Finovate alum Payoneer. Also this spring, the Tel Aviv, Israel-based company reported that it had selected sanctions screening firm Screena as its screening solutions partner, and had partnered with omnichannel money movement platform Qolo to provide transactions monitoring.
With more than $112 million in funding, ThetaRay includes Benhamou Global Ventures, Jerusalem Venture Partners (JVP), and ABN AMRO Ventures among its investors.
Chicago, Illinois-based CIBC Bank USA has announced a partnership with Finovate newcomer, Velocity Solutions.
CIBC will leverage Velocity Solutions’ Akouba Digital Lending Platform to lower costs, better manage risk, and increase per-loan profitability.
Velocity Solutions made its Finovate debut in the fall of 2021. The company acquired the Akouba platform in 2018.
CIBC Bank USA has chosenVelocity Solutions’Akouba Digital Lending Platform to support its small business banking division. The Chicago, Illinois-based commercial bank, founded in 1989 as The PrivateBank and Trust Company, will leverage Akouba’s cloud-based SaaS platform to lower the cost, time, and risk associated with the loan origination process. At the same time, the platform will help boost the profitability of every loan made.
“We’ve made tremendous progress with the platform since we acquired Akouba in June 2018,” Velocity Solutions EVP of Product Management Mike Triggiano said. “We’re continually refining the platform and adding new features and functionality. It’s been a thrill to enhance Akouba’s industry-leading technology over the past two years, and the opportunity to add CIBC Bank USA to our growing list of clients is definitely one of the most exciting milestones in Akouba’s history to date.”
Added to Velocity Solution’s product suite four years ago, Akouba is designed to accelerate loan origination for both retail and commercial lending. The only small business loan origination platform endorsed by the American Bankers Association (ABA), Akouba reduces end-to-end time, streamlines operational processes, and helps increase profits. The platform does all this while giving financial institutions the ability to retain control over the decision, pricing, credit policy, risk metrics, and loan amounts, as well as the borrower experience.
“At CIBC, we are building an innovative, relationship-focused bank,” CIBC Bank USA President of Retail and Digital Banking and Head of U.S. Strategy and Administration Brant Ahrens said. “Akouba gives our small business clients the ability to seek financing on any device at any time in any place that is convenient for them.”
Velocity Solutions made its Finovate debut at FinovateFall in New York last September, where the company demoed its Akouba platform. In the months since, Velocity Solutions has introduced a number of new solutions including VelocityConnector that enables efficient and secure API connections between banking data systems; its VelocityScore feature, which helps indicate the ability of accountholders to repay loans; and its Consumer Liquidity Engine, which makes a range of flexible overdraft options and affordable short-term loans available to bank and credit union customers and members.
Founded in 1995, Velocity Solutions is headquartered in Fort Lauderdale, Florida. Christopher Leonard is CEO.
Intelligent identity solution provider Sontiq has issued a new report on security in financial services.
The report, 2022 Digital Safety and Security Report for Financial Services, underscores the importance of engaging customers and members in the fight against cyberfraud.
Sontiq made its Finovate debut in the fall of 2021 and was acquired a few months later by TransUnion for $638 million.
Intelligent identity security firm Sontiq has warned that the growing sophistication of cybercriminals and increased awareness and concern over the challenge to digital security from the public have created both new challenges and new opportunities for financial institutions. In a new report, the 2022 Digital Safety and Security Report for Financial Services, Sontiq highlights the way cybercriminals have leveraged advanced technologies – including automation and AI – to achieve what Sontiq called a “historic level of data compromise” in 2021.
“Consumers are increasingly anxious about cyber threats, but feel unprepared to take action or deal with the fallout,” Sontiq SVP of Enterprise Risk Solutions Al Pascual said. “Notably, they don’t want generic security advice. Financial institutions can combat increased identity risks with personalized, self-service tools that are seamlessly embedded into the digital banking experience.”
Here are some of the key takeaways from Sontiq’s report.
Financial institutions must understand the threat landscape
“What consumers, organizations, and the media often misunderstand,” the report noted, “is that the data breaches with the greatest impact on individuals are often not the high-profile ones that capture headlines.” Sontiq’s research distinguishes between high-profile breaches at institutions like Facebook/Meta and LinkedIn and high-risk breaches at companies like Gallagher and Waste Management. This is because “high-risk” breaches, while involving fewer victims, tend to involve compromises of more valuable personally-identifiable information compared to “high-profile” breaches.
Synthetic identity fraud is a bigger threat than identity theft
A growing number of financial services companies are recognizing the challenge of synthetic identity fraud, with Sontiq observing that 72% of financial services firms believe that synthetic identity fraud is a “much more pressing issue” compared to traditional identity theft.
Why so? And what’s the difference?
Traditional identity theft involves stealing a real person’s PII (personally-identifiable information) and using that data to engage in criminal activity. And make no mistake: traditional identity theft is still an issue, costing $24 billion in losses and victimizing more than 15 million individuals in 2021. Synthetic identity fraud, by comparison, involves a blending of both real and fictitious information. This enables the fraudster to create a completely new, made-up identity that can then be used to fraudulently open accounts, and apply for loans and credit cards. A newer arrival on the cybercrime scene, synthetic identity fraud also comes at a significant cost. The Federal Reserve has estimated that synthetic identity fraud losses have climbed to $20 billion, making it the “fastest growing financial crime.”
Personalized, proactive identity protection gives financial institutions the opportunity to differentiate themselves
In its report, Sontiq makes it clear that consumers are uncertain about who to turn to in the event of a security breach. “Nearly half of Americans,” the report notes, “say they would not know what to do if their identity was stolen.” Because of this, more than half of American fraud victims (54%) have indicated that they believe their financial institution can play a major role in helping them “navigate and resolve their identity fraud issues.” Breach victims across generations – under 35, between 35 and 54, and over 55 – all turned to their financial institutions for assistance in comparable numbers (50%, 48%, and 44% respectively).
This has resulted in a significant growth in the identity theft protection services market. Analysts project that this market will grow at a compound annual growth rate of 9.4% over the next 10 years.
There are a variety of ways that financial institutions can seize this opportunity by deploying better anti-fraud tools and partnering with fintechs and cybersecurity specialists. But key to all of these efforts, according to Sontiq, is customer engagement. Educating financial services consumers on what to do to enhance their own online security – and what to do in the event of a security breach – is critical. Also important is the role of empowerment, and helping consumers understand what they can do to enhance their own defense against fraud.
“Getting consumers to adopt a self-service approach to identity protection also has the potential to help a financial institution better invest resources,” the report noted. “Informed, engaged customers who actively protect their identities become potent allies – finding fraud earlier and reducing overall risk to them and the financial institution.”
Download the free white paper to read the full report.
Sontiq made its Finovate debut at FinovateFall 2021. At the event, the Nottingham, Maryland-based company demonstrated its BreachIQ solution. BreachIQ identifies and diagnoses a consumer’s security breach history to provide personalized, protective actions the consumer can take to improve financial health and enhance security. The technology effectively leverages AI to turn ID fraud risk into a consumer financial health opportunity.
Launched in 2019, Sontiq was formed when EZShield acquired identity theft protection provider IdentityForce. Last spring, Sontiq announced its acquisition of Breach Clarity, a post-breach fraud specialist and Finovate Best of Show winner. In October 2021, Sontiq itself was acquired by fellow Finovate alum TransUnion for $638 million. In a statement, TransUnion said that Sontiq’s identity security technology compliments its own digital identity assets and solutions.
“TransUnion is committed to empowering consumers to shape their financial futures,” TransUnion President of U.S. Markets and Consumer Interactive Steve Chaouki said. “With Sontiq, we will ensure that consumers and businesses have a comprehensive set of tools to protect the financial profile they have built.”
