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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Multiple benefits arose from last year’s drive to digital, including the increase in user data and more control over the user experience. But making the leap to capturing that data and enhancing control over the user experience is easier said than done.
It is this gap that led Quantum Metric to launch its platform for continuous product design. The product uses realtime data from digital customer interactions to inform the decision-making process. As a result, firms can maximize opportunities, find errors, measure engagements, and more.
Quantum Metric offers tools for a range of industries, including retail banking. Some of the company’s retail banking clients include Western Union, Bank of Montreal, Silicon Valley Bank, and Aspiration.
In the video below, Aspiration Chief Product Officer Jody Mulkey explains how his bank uses Quantum Metric to understand sticking points in its application process and better interpret how clients are using the bank’s tools.
Founded in 2015, Quantum Metric became a unicorn company earlier this year after raising $200 million in a Series B funding round. Because the company aids in the transition to digital, Quantum Metric came close to doubling both its staff and revenue in 2020.
Though there is no official word on a public offering, Quantum Metric appointed a new Chief Revenue Officer, Chief Financial Officer, and Advisory Board Member late last month. The new hires indicate the company may be poising itself for an IPO in the foreseeable future.
Quantum Metric is one of the demoing companies at FinovateEurope 2021, which will take place digitally on March 23 through 25. Register to watch the demo and network with the company during the event. Or, check out a recording of the demo on Finovate.com later this year.
With new vaccines helping stoke confidence in a post-COVID summer, if not spring, what has the pandemic – and the work-from-anywhere movement it accelerated – revealed about the security of our increasingly digital world?
What is the biggest takeaway from your report on fraud?
Christina Luttrell: As COVID-19 drove 84 million Americans online for services that were previously carried out in person, businesses faced an influx of new customers to onboard. In response, many appeared to loosen fraud controls in an effort to reduce friction and simplify onboarding, particularly for digital “newbies.”
With this loosening, combined with COVID-19 factors such as dispersed fraud teams, remote work, stimulus checks, and sophisticated phishing and synthetic identity fraud (SIF) schemes, it’s easy to understand why fraud attempts surged to a four-year high. Also not surprising is the emergence of mobile as the most targeted channel, evidenced by an astounding 89% increase in fraud attempts likely due to an increased reliance on mobile devices during the pandemic.
In the report each year, we’ve seen businesses struggle with the challenge of balancing fraud with customer friction. Businesses drive revenue by greenlighting customers, which includes removing barriers and minimizing effort during the onboarding process to avoid unnecessary “friction.” Yet they must do so while deterring fraud. This challenge is exacerbated by current events and the state of fraud and, as a result, verification of identities was cited as the top challenge to fraud deterrence among businesses. Many have come to the conclusion that, at its core, fraud is an identity problem and 86% firmly view digital identity verification is a strategic differentiator across all industries.
When it comes to the future, 79% of businesses expect fraud to increase in 2021. With the COVID-induced shift to digital, fresh collection of more Personally Identifiable Information (PII) from 2020 and potential economic conditions, this is likely to be a “bust out” year for fraud.
How quickly have fraudsters followed the migration to digital channels during the COVID-19 crisis?
Luttrell: From our study, The COVID-19 Effect on Identity, Fraud and Customer Onboarding, we know that between March and July of 2020, 37% of Americans online activated an online service that was done offline prior and 46% said they have used their smartphone more often to sign up or apply for a new service. As a result, one-third of businesses experienced a customer shift of 50% or more to digital channels. In 2020, the number of new accounts opened with a mobile phone increased 43%. Fraudsters tend to follow the masses and the money and, in 2020, as those consumers went digital, criminals were quick to follow, employing rapidly shifting tactics, which was reported as a top challenge to fraud deterrence for 40% of businesses.
Mobile fraud attempts surged 89% in 2020 with increases across all fraud types, from spoofing and cloning to porting. With more consumers relying on digital information sources and businesses sending a higher number of customer communications, 56% of businesses reported phishing attacks as one of the most prevalent forms of fraud in their industries.
The pandemic provided a prime opportunity for fraudsters to take advantage of distracted Americans, the increase in digital communication between businesses and consumers and government relief efforts. Our research shows that 84 million Americans reported experiencing a phishing attack attempt in the months following the pandemic’s start, with an average of four attempts per person between March and June.
How have cybersecurity professionals effectively responded to this shift?
Luttrell: It appears cybersecurity professionals responded rapidly to this shift as best they could, but COVID-related disruption and distraction, such as remote working and government relief checks, put a wrinkle in plans and added a new layer of complexity to fraud detection and the consumer experience. Fraud is an identity problem, making identity verification the essential “digital handshake” and element of establishing trust. We expect to see more companies rely on the orchestration of blanketed layers of identity attributes, artificial intelligence, and integrated verification methods to remove friction and deter fraud.
Successfully onboarding new customers and building long-term loyalty in today’s rapidly shifting fraud landscape will require businesses to act quickly. On the back end, they will need to understand how identity verification attributes are performing so they can make adjustments to attributes that pinpoint fraud on an extremely granular scale while streamlining the verification process for real customers.
What kinds of fraud are increasingly prevalent – especially compared to the pre-COVID-19 period?
Luttrell: Aside from COVID-related fraud, such as vaccination schemes, the fundamental methods of remain relatively unchanged. Instead, the shift has occurred in the sophistication and amount of fraud which, as I mentioned, is rising across the board compared to pre-COVID numbers.
Credit, debit, and prepaid fraud were reported as the most prevalent by 63% of businesses, followed by phishing, account takeover, ACH/wire and first-person fraud. ACH/wire fraud spiked by 15% – presumably because of rising P2P usage due to social distancing and first-party, specifically “friendly or know fraud,” increased 28%. This may be attributable to chargeback fraud schemes as many Americans were unemployed, underemployed or suffering in shape or form financially, thereby increasing their pressure and rationalization of committing fraud.
Your report mentions the issue of synthetic fraud in the PPP lending program as specific challenge. Can you elaborate on this problem and what should be done?
Luttrell: A range of fraud schemes were used to exploit PPP in 2020, one of the most concerning being synthetic identity fraud (SIF). According to McKinsey, this is the fastest growing type of financial crime in the U.S. A recent report by Aite Group revealed that among 47 financial institutions surveyed, 25% experienced an increase of 10% or more since the start of the pandemic. Our own research also underscores the SIF problem, which hit an all-time high, with a 43% increase in SIF reported by respondents to the IDology Fraud Report.
SIF continues to trouble businesses, especially given the challenges associated with decentralized fraud teams working from home and the need to interpret and apply once-in-a-lifetime changes in consumer behavior and the swings and noise they create. There are also the problems created by the never-ending stream of data breaches, and the use of personally identifiable information gathered from phishing attempts and other scams that continue to thrive in the COVID era.
To quickly issue PPP loans and prevent fraud, lenders should reconsider the importance of Know Your Customer (KYC) measures. Placing a focus on strong KYC is not only best business practice, it also will help lenders prevent fraud and maintain integrity. To easily and securely ensure a borrower is who they claim to be and provide a smooth experience while battling fraud, such as SIF, the identity verification process supporting KYC should include multiple layers, control of the entire identity verification process and the flexibility to make and automatically deploy configuration changes and machine complimented with human intelligence.
How would you characterize the business world’s response to these new threats, especially in financial services?
Luttrell: The business world, as a whole, responded admirably. Consider the massive logistical shifts that needed to happen in months, if not weeks, from the mass migration of working from home to customer engagement and the shift toward digital. On a human scale, it’s a breathless achievement. Eighty-seven percent of businesses feel their organization is equipped to some degree to make the necessary changes to stay ahead of rapid digitization and COVID-19 fraud trends, indicating they recognize and perhaps, have a higher than expected sense of confidence.
Although two-thirds of Americans feel companies could be doing more to protect their identities, confidence in organizations being able to protect their data actually increased in comparison to pre-COVID-19 levels. Our data shows that financial services organizations are stepping up, forecasting larger anti-fraud investments and budgets for 2021, and leaning into a multi-layered approach to identity proofing as well as using diverse sources and types of data. Eighty percent of financial institutions expect to increase budgets on fraud deterrence in 2021, with 45% saying significantly, more so than any other industry. Though the investment varies by sub-sectors such as fintech, lenders and prepaid, prepaid firms appear to be most aggressive.
How do you think the post-COVID cybersecurity landscape will differ from the pre-COVID cybersecurity landscape?
Luttrell: The cat and mouse saga continues and the chase maze has become significantly more complicated. The lesson for many, in hindsight, is that strong, thoughtful and comprehensive digital identity verification is mission-critical. The digital handshake is essential in establishing trust.
Fraud knows no borders and the world is small and inter-related, as is identity verification. Address verification as part of identities is not only critical for accurate verification, but also for the delivery of essential items and resources. Americans have migrated much of their lives to digital, forever.
Identity collaboration between businesses and with customers will be more sought after, and technology, such as artificial intelligence, will need to be supplemented with high-touch layers of human intuition, proactive detection, fraud expertise, and consortium intelligence from other organizations. This is especially important as COVID introduces novel fraud schemes that can fool pre-COVID identity proofing methodologies. As was the case with major events in the past, the outcomes and unintended consequences of the pandemic are unknown but we know that fraudsters are harvesting data, scheming, probing new defenses, partnering with nation states and utilizing artificial intelligence to scale fraud on a global basis.
AI marketing expert Micronotes recently launched a refinancing tool that will help consumers reorganize their debt, while enabling banks to lower their borrowing costs and boost customer retention.
The new tool builds on Micronotes’ ReFi solution it launched last June. The credit marketing automation suite enables banks to leverage AI to help their clients automatically identify refinancing opportunities for a range of consumer debt, including auto loans, personal loans, student loans, credit card debt, and mortgages.
With today’s advancement of ReFi, Micronotes is teaming up with Experian to leverage the firm’s database of consumer credit profiles. Experian will compare the bank’s current lending criteria to the consumer’s credit profile, and then synthetically refinance the customer’s existing debt held elsewhere while identifying other refinancing opportunities.
“We’re thrilled to partner with Experian to leverage artificial intelligence and data to help consumers lower their borrowing costs,” said Devon Kinkead, founder and CEO of Micronotes. “With an estimated $2 trillion in mispriced debt, during an era of persistently low interest rates, we help digital banking customers see where they’re overpaying interest that can be refinanced with a lender they know and trust — their primary financial institution.”
Micronotes’ personalization expertise comes in via the customer communication piece. The company will send the customer a message in the digital banking channel that informs them of the potential savings. Using Micronotes’ technology, the customer can respond to the message using preset, customizable quick-response buttons that range from “remind me later” to “chat with a banker.”
This quick-response messaging system is Micronotes’ bread and butter. The company was founded in 2008 to help financial institutions start conversations with their customers in a non-invasive way. At the company’s most recent Finovate appearance, FinovateSpring 2013, Micronotes showed off its cross-sell feature that uses predictive analytics to bring the branch sales process into the digital channel.
Headquartered in Boston, Massachusetts, Micronotes has raised $12.2 million.
Two years after its debut at FinovateMiddleEast, Kuwait-based financial services aggregator FinFirst is celebrating a 2020 that saw the company facilitate millions of dollars worth of financing applications since the launch of its financial services app last summer. The company, founded in 2015 by CEO Abbas Hijazi, unveiled a financial superapp that serves as a marketplace for banks and financial services companies to offer auto, personal, student, and healthcare loans, as well as credit cards and Buy Now Pay Later installment loans. FinFirst promises a secure and fast, 20-click application process that averages less than 10 minutes to complete.
FinFirst also announced this week that it has secured a total of $4 million in equity investment. The investors were not disclosed. Hijazi said the funding “demonstrates the level of confidence in the market for a product which is simply transforming the face of the financial services sector.”
Since it began offering services to the small business community in March of last year – just before the COVID-19 crisis hit – FinFirst has received $40 million worth of financing applications from SMEs. FinFirst also has received $7.7 million worth of consumer financing applications since it began offering consumer-based solutions in the fourth quarter of 2020.
The majority of FinFirst’s personal finance customers are pursuing consumer financing – approximately 60% – while auto financing represents the remaining 40%. The company reports a high 90% lead conversion rate on its superapp, making the platform an attractive option for FinFirst’s financial services partners.
“These first-year results stand us in good stead to build upon a solid foundation of strong business and consumer appeal, which is enhanced by the speed and ease of our digital application app,” explained FinFirst Chief Operating Officer Afrah Al-Hubail. She added that FinFirst plans to spend 2021 enhancing its offering, collaborating with financial services providers and fintechs, as well as forging more partnerships and adding new products.
Among the more recent alliances announced by FinFirst is its partnership with Kuwait’s Boubyan Bank. An Islamic digital bank with total assets of more than $17 billion as of 2019, Boubyan Bank has the National Bank of Kuwait as its major shareholder, and is regarded as one of the up-and-coming banks in the Gulf region. The institution’s CEO and Vice Chairman, Adel Al-Majed, was named Arab Banker of the Year 2020 by The Union of Arab Banks.
One of the top themes of 2020 was cybersecurity. The increase in online traffic, spurred by social distancing and stay at home orders, offered cybercriminals more hacking opportunities than in previous years.
This means that for fintechs like Dashlane, it’s time to shine. Dashlane was founded in 2009 and its password management technology has since gained a cult-like following.
The Dashlane app stores the user’s passwords and autofills the corresponding username and password on each of their accounts. In addition to account logins, the app can also help streamline the checkout experience by filling in forms with address and payment card information.
This week, the New York-based company made headlines with the announcement of its new CEO. Dashlane appointed JD Sherman to lead the company. Sherman, who is filling the shoes of former CEO Emmamuel Schalet, comes to the company with decades of experience from leadership roles at IBM, Akamai, and most recently HubSpot, where he served as President and Chief Operating Officer.
“The need for better security practices has become more important than ever for everyone, from individuals to small businesses and larger enterprises, especially with the increase of remote work across every industry,” said Sherman. “I’m thrilled to be joining the Dashlane team at a pivotal moment of growth, and look forward to working with this group of world-class security experts as we continue to build a simpler digital future for people and businesses through secure access.”
The change in leadership comes at a pivotal time for Dashlane as the company seeks to forge more enterprise partnerships. “This is about thinking about its next leg of our scaling strategy, more B2B monetization after being strong in B2C,” Sherman said in an interview with TechCrunch.
Sherman isn’t exaggerating about being strong in the B2C space. The company has scaled to 15 million users– up from 10 million users just two years ago. And since so much of consumers’ lives have moved online in the past year, this growth is expected to increase.
Dashlane has raised a total of $211 million after most recently pulling in $110 million in a Series D round led by Sequoia. While there is no word on an updated valuation for the company, Dashlane was last valued at $500+ million in 2019.
Dashlane’s Finovate debut was at FinovateFall 2012. The company also demoed at FinovateEurope 2013.
With bitcoin and cryptocurrencies enjoying renewed interest, it’s worth noting that many fintech fans encountered their first bitcoin-related businesses through Finovate conferences.
Here’s a look at some of the companies that have brought their bitcoin and crypto-powered innovations to the Finovate stage.
OpenCoin – FinovateSpring 2013 – The company now well-known as Ripple was introduced to Finovate audiences back in 2013. At FinovateSpring that year, Chris Larsen – CEO of a startup called OpenCoin – introduced its virtual currency and distributed open source payment network. Founded in 2012 and headquartered in San Francisco, California, Ripple currently has more than 300 financial institutions who leverage its RippleNet blockchain network to power real-time payments.
KlickEx – FinovateAsia 2013 – New Zealand-based KlickEx unveiled its asset-backed and algorithmic cryptocurrency for institutional and retail users at FinovateAsia in 2013. The company, founded in 2009, recently announced a partnership with the National Reserve Bank of Tonga to launch a new national payment system.
Coinbase – FinovateSpring 2014 – Among the bigger names in bitcoin and cryptocurrency to have demonstrated their technology at Finovate conferences is San Francisco, California-based Coinbase. Debuting at Finovate with its Instant Exchange in 2014, Coinbase has grown into one of the biggest players in the cryptocurrency market with more than 35 million verified users and more than $320 billion in total volume traded on its platform.
AlphaPoint – FinovateEurope 2015 – With more than $350 million in monthly trading volume and 20 digital currency exchanges operating in 15 countries, AlphaPoint is a leading fintech exchange platform provider for digital currencies. The company demoed version two of its digital currency exchange platform at FinovateEurope in 2015.
CoinJar – FinovateEurope 2015 – Australia’s largest and longest-operating bitcoin company, CoinJar demonstrated its platform at FinovateEurope 2015. The Best of Show-winning firm was the first in its market to offer a bitcoin debit card that enabled cardholders to use the cryptocurrency for everyday purchases.
Bitbond – FinovateEurope 2015 – Berlin, Germany’s Bitbond offers a global P2P bitcoin lending platform that enables anyone with an Internet connection to both get loans as well as invest their savings for interest. The company demonstrated its AutoInvest functionality, which facilitates and automates fund allocation in a portfolio, at FinovateEurope 2015.
itBit – FinovateSpring 2015 – New York-based itBit demonstrated its bitcoin trading platform at FinovateSpring in 2015. The company’s technology enables both institutional and retail investors to buy and sell bitcoin. Rebranded as Paxos in the fall of 2016, the company has since highlighted its work in private blockchains and distributed ledger technology.
Blockstack.io – FinovateFall 2015 – Best of Show winning Blockstack.io offers a hosted and licensed enterprise blockchain platform that enables financial services companies and others to build applications on their own private blockchain. The San Francisco, California-based company, founded in 2015, was acquired by Digital Asset Holdings for an undisclosed sum before the end of the year.
ArcBit – FinovateFall 2015 – With a pledge to leverage bitcoin and blockchain technology to bring banking to the underbanked, ArcBit, which made its Finovate debut at FinovateFall in 2015, offers a mobile wallet specifically designed to give bitcoin owners full control over their cryptoholdings.
Coinalytics – FinDEVr San Francisco 2015 – Our developers conference, FinDEVr is one way that many bitcoin and crytocurrency innovators were able to bring their innovations to the public. Coinanalytics, which offers an end-to-end intelligence platform for the bitcoin industry, is an example of the kind of company developing solutions to make bitcoin a better opportunity for payments, financial services, and IoT.
BlockCypher – FinDEVr Silicon Valley 2015 – Another alum of our developer’s conference, BlockCypher offers companies a cloud-optimized, enterprise-grade blockchain platform that enables them to build reliable blockchain apps. Headquartered in Redwood City, California, the company was founded in 2014.
Gem – FinDEVr Silicon Valley 2015 – Founded in 2014 and based in Venice, California, Gem demonstrated its API which provides a comprehensive security solution for bitcoin apps – without taking control over funds. With a few lines of code, Gem enables developers to provide an interface to their bitcoin apps that gives users better funding options.
Ledger – FinovateEurope 2016 – Headquartered in Paris, France and founded in 2015, Ledger designs trusted hardware solutions for bitcoin and blockchain apps. The company’s solutions, including the Nano X and Nano S, provide cryptocurrency owners with a secure, portable way to take and manage their digital assets wherever they are.
Stratumn – FinDEVr New York 2016 – Enterprise blockchain technology company Stratumn provides firms with the infrastructure and tools they need to to build, deploy, and run blockchain. The company presented the high performance, proof-of-existence engine of its development platform at our developer’s conference in 2016. Jerome Lefebvre took over as CEO of the company from co-founder Richard Caetano in the fall of 2019.
Plutus.it – FinovateEurope 2018 – London-based Plutus demonstrated its Tap & Pay and Debit Card solutions that enable consumers to pay with bitcoin or Ethereum at any contactless point of sale. Founded in 2016, the company currently supports more than 26,000 Plutus accounts and credits its users for acquiring more than $100,000 in rewards via its Pluton Rewards program.
Amber Labs – Finovate MiddleEast 2019 – Best of Show winner Amber Labs is a bitcoin exchange, wallet, and micro-investment app in one. Headquartered in Brisbane, Queensland, Australia, and founded in 2017, Amber Labs offers a mobile first, automated investment platform for retail customers looking to buy and sell bitcoin.
First things first: congratulations to SoFi. The financial services platform has earned a $8.65 billion post-money valuation after agreeing to a merger with Social Capital Hedosophia Holdings, a publicly traded special purpose acquisition company or SPAC that specializes in consumer-focused fintech businesses.
Now, what in the world is a SPAC? And why would merging with one be a sound route to the public markets?
A SPAC is pretty much as described. It is a corporation that is built specifically to buy other corporations. A SPAC, which has no other business operations, works by raising money via an initial public offering, and then using that capital to acquire other companies. These entities are taking advantage of the contemporary interest in the IPO market, leveraging demand for new companies – mostly in technology – into demand for firms betting on the ability to know which among these companies are longer-term winners.
The decision to merge with Social Capital – and to pursue this new route to going public – says a lot about the company initially known as “Social Finance” when it was founded almost ten years ago.
“SoFi is on a mission to help people achieve financial independence to realize their ambitions,” company CEO Anthony Noto said. “Our ecosystem of products, rewards, and membership benefits all work together to help our members get their money right.”
By giving its members a one-stop-digital-shop for financial services such as consumer financing, investments, and insurance, SoFi is well-positioned to take advantage of what Noto called “the secular acceleration in digital first financial services offerings.”
This momentum is in evidence within SoFi’s own ecosystem, as well. Social Capital founder and CEO Chamath Palihapitiya noted the “acceleration of cross-buying by existing SoFi members” as creating “a virtual cycle of compounding growth, diversified revenue, and high profitability.”
Speaking on CNBC, Palihapitiya compared SoFi favorably to Amazon and said that the company best represented the kind of banking solutions people want most. From its origins as a student loan refinancing company to its current incarnation as a diversified financial services platform, SoFi reported more than $200 million in total net revenue in Q3 2020 and is on pace generate $1 billion of estimated adjusted net revenue this year. Noto will continue as CEO of SoFi post-merger.
The deal comes just months after SoFi earned “preliminary, conditional approval” from the U.S. Comptroller of the Currency for a national bank charter. A bank charter, the company noted in the merger announcement, would lower the cost of funds and “further support SoFi’s growth.” In an interview with Yahoo! Finance, Noto explained that this was key to having the ability to provide lower interest rates to consumers and would drive innovations like SoFi Money, the company’s cash management account.
Another plum in the purchase is Galileo, a leading provider of customer-facing and backend technology infrastructure services for financial services providers that SoFi acquired last April. There are 50 million accounts on the platform.
From SoFi’s perspective, “deal certainty” was one of the reasons why the company took advantage of the SPAC route to the public markets rather than a traditional IPO. Palihapitiya is a veteran of the nascent SPAC craze, having taken a number of companies, including Virgin Galactic Holdings in 2019, public in this fashion.
Founded in 2011, the San Francisco, California-based company participated in our developers conference, FinDEVr New York 2017. At the event, SoFi teamed up with data platform Quovo to demonstrate their innovations in providing secure authentication for bank accounts. SoFi currently has more than 1.8 million members and has raised $2.5 billion in funding to date.
With $7.5 million in fresh capital and a green light from the U.S. Patent & Trademark Office for its “Credit Bureau 2.0” moniker, Finovate newcomer Trust Science enters 2021 even better prepared to fulfill its mission of empowering lenders who serve un- and underbanked communities.
“Between 64 million and 100 million Americans, adult consumers, cannot be scored for credit, or scored properly. In the world, it’s three billion adults,” Trust Science founder and CEO Evan Chrapko explained during his company’s Finovate debut in 2019. “We’re here to solve that problem and give deserving people the credit that they deserve.”
Founded in 2007 and headquartered in Edmonton, Alberta, Canada, Trust Science is part of the burgeoning subprime credit risk analysis industry. In recent days, Trust Science confirmed both that it has boosted its total capital to $11.5 million and that it had secured trademark approval for its AI-powered, dynamic credit scoring platform – Credit Bureau 2.0.
Trust Science’s platform leverages AI and machine learning to generate profiles that can be used to provide credit scoring for thin file and no-hit consumers. The solution uses alternative and unstructured data, such as the size and scope of social networks, message and data sentiment, and other factors to “expand the scorable universe” of potentially worthy borrowers and to provide better product fits for all customers.
Since its FinovateSpring appearance, Trust Science has forged partnerships with Inovatec Systems, Vergent Loan Management Software (formerly eSoftware Solutions), and was nominated as AI Company of the Year by the Canadian FinTech and AI Awards. Just under a year ago, the company hired former Equifax executive Jeremy Mitchell as its Chief Data and Analytics Officer. As part of his 20 years of experience in alternative data and analytics, Mitchell was part of the original development team that built VantageScore, a rival to the traditional FICO score.
“Trust Science is building solutions that benefit both the consumer and the lender,” Mitchell said when the appointment was announced. “This decade will see the world expect Alternative Data and AI to be harnessed for good, like Financial Inclusion.”
We cannot yet speak for the decade and alternative data. But we already know the role alternative data has played in supporting financial inclusion over the past year, as the health and economic consequences of COVID-19 have put severe financial stresses on small businesses, their workers, and their families.
Chrapko addressed this challenge – and opportunity – in a CEO Letter early last year as the lockdowns were taking hold across the world. “Individuals and businesses are already feeling financial shortfalls,” he wrote. “Lenders like you are going to need to make decisions about a growing number of individuals within the context of a volatile and uncertain market.”
With concerns over new, more contagious strains of the coronavirus forcing more lockdowns and social distancing, the pressure on lenders is not likely to relent any time soon. Leveraging alternative data – via partnerships with companies like Trust Science – may help them make more accurate, fairer, credit decisions to ensure that thin-file borrowers get the help they need and lenders take on only the risk they can afford.
Earlier this year banking technology company PlaidlaunchedPlaid Exchange, a new tool to facilitate open banking.
The new open finance platform offers banks a way to provide open banking connectivity to their clients while keeping their end customers’ data safe and giving them control of their data.
Plaid Exchange helps banks establish token-based API connectivity with the 2,600 third party apps in Plaid’s network. This single connection simplifies integration for banks, helping their clients connect with more third party providers securely. Plaid Exchange can help banks bring an API solution to market in 12 weeks.
A couple of weeks back, Plaid formed a key partnership to help it reach more banks to access the Plaid network. The company is working with Jack Henry & Associates to enable Plaid Exchange for banks on the Banno Digital Platform.
The deal helps Plaid reach more than 350 institutions currently using Jack Henry’s Banno Digital Platform. These financial institutions can benefit by offering their accountholders access to Plaid-powered fintech apps. Plaid has designed the integration process to be simple and Banno clients will be able to access the technology for free.
The deal with Jack Henry comes as an extension of the Plaid Exchange Partner Program, which is aimed to get banking platform providers, API management platforms, and software development companies on board to offer Plaid Exchange to their bank clients.
The network effects of the Plaid Exchange Partner Program will be a boon to the San Francisco-based company. That’s because the more banks Plaid partners with, the more attractive Plaid is to fintechs.
Plaid works with thousands of third-party fintech apps such as Transferwise, Betterment, and Venmo to connect with their users’ financial institutions. The company made headlines at the beginning of 2020 after it announced it had been acquired by Visa for $5.3 billion and made the news again after the U.S. Department of Justice filed a suit to block the acquisition last month.
Branded payments firm Blackhawk Network has always been busy over the holiday season. Between its gift cards, digital rewards, and prepaid cards, the California-based company has helped people embrace the spirit of giving.
And while Blackhawk Network is still helping fuel the gifting and rewards economy this year, it is moving to an even more 2020-friendly (that is to say, digital-first) approach.
Last week Blackhawk announced it has teamed up with Evite to power the digital greeting card and invitation company’s eGift card program. Evite users can now choose from more than 100 eGift card options from popular brands including Lowe’s, Red Lobster, and Old Navy.
“It’s no surprise we’ve seen the demand for virtual gifts and greetings skyrocket in 2020. Contactless gifting is now a must-have, especially with the holidays approaching,” said Evite CEO Victor Cho. “Adding an extra touch like an eGift card can help people create personal connections with family and friends that they haven’t been able to see. It also helps our users stay safe, creates maximum flexibility for gifters and receivers, and modernizes the 2020 gifting experience. Thanks to Blackhawk’s expansive network of eGift card choices, our users have a broad selection to choose from at the tip of their fingertips.”
Brett Narlinger, head of global commerce at Blackhawk Network, noted that Blackhawk has seen a 70% increase in eGift sales– all before the peak holiday shopping season.
In addition to its partnership with Evite, Blackhawk announced a new payment solutions suite called Pay4It that connects physical and digital payments. The suite helps merchants reach underbanked populations with the ability to add cash to a digital wallet, mobile app or account, or make payments for digital goods with cash. It also offers consumers more choices to pay by enabling additional digital wallets and transforming loyalty points and rewards into purchasing power. Finally, Pay4It brings the gift card mall to non-traditional locations and into the digital realm.
“Retailers’ and merchants’ businesses changed instantly this year, and Blackhawk has responded with a product suite that brings once-disparate physical, digital and stored value payments together, keeping brands and consumers connected in a seamless way,” said VP of Global Product Strategy at Blackhawk Network Helena Mao.
An alum of FinovateFall 2012, Blackhawk Network was founded in 2001 and was acquired in January of 2018 by Silver Lake and P2 Capital Partners in a deal worth $3.5 billion. The company works with more than 1,000 brands and card partners, is in more than 200,000 retail locations in 28 countries, and connects with more than 300,000,000 shoppers each week. Talbott Roche is CEO.
A turnkey digital bank-in-a-box that can be deployed in as little as 30 days? That’s the product of a new partnership announced this week between a pair of Finovate alums: data-driven financial wellness innovator Moven and digital banking services provider Q2.
“Working with Q2 allows banks of all sizes to accelerate their consumer facing digital offering,” Moven CEO and CRO Kesh Talwar explained. “Having a complete view of customer financial behavior, along with Moven’s data analytics, will increase contextual customer engagement. He added that better customer engagement will lead to “lower attrition rates, increased revenues and acquiring new customers digitally at a lower cost.”
Initially, the collaboration will focus on the integration of Moven’s data aggregation and savings tools with Q2’s cloud-based core processor, CorePro. This will enable them to offer banks and credit unions an instant deployment solution with real-time alerts and notifications, as well as account issuance for savings and demand deposits accounts. The offering also includes features such as instant external account verification, wishlist savings, and an emergency account.
“We are thrilled that Q2’s CorePro system was selected by Moven to power this initiative,” GM of Q2 BaaS Paul Walker said. “Now any bank can have its own Marcus or Chime in a matter of a few weeks.”
The partnership is the latest evidence of Moven’s shift toward leveraging its financial wellness and behavioral data technology and away from the direct to consumer / neobank model of years past. Fintech expert and advisor Bryan Clagett, who approached both Moven and Q2 over the summer to discuss compatibilities between the two firms, underscored the importance of this strategy. “Digital banking, as we know it, is evolving quickly,” he said “and bringing together fintechs organizations that have complementary competencies is key to the future of the financial services industry.”
Founded in 2011 and becoming a Finovate alum after its debut at FinovateEurope two years later, Moven announced a partnership with Saudi Arabia’s STC Pay this spring. The New York-based company has raised more than $47 million in funding, and includes TD Bank and SBI Group among its investors. Brett King is founder and executive chairman. In a statement, King highlighted the significance of his company’s partnership with fellow Finovate alum, Q2.
“We started as a challenger bank in the U.S. market before collaborating with banks and FIs around the world, so we understand what it takes in the post-COVID digital world to stand out,” King said. “The Q2 alliance is our first major core partnership in the U.S., and no doubt will set a steep benchmark for other providers in the space.”
Headquartered in Austin, Texas, Q2 has become one of the leaders in the embedded finance movement, offering a range of digital financial solutions for consumers, business clients, and fellow fintechs. The company won a Best of Show award at FinovateFall in September for its Partner Marketplace, an app store that is integrated within the client’s digital banking platform.
Q2 is publicly traded on the New York Stock Exchange under the ticker QTWO, and has a market capitalization of more than $5 billion. See them next week as the company returns to the Finovate stage to demo its latest technology at FinovateWest Digital.
Identity verification and authentication provider Onfido has provided a guiding light when it comes to digital identity in 2020 and the company’s Q3 sales results can back it up.
Onfido’s global sales increased 82% over the course of the third quarter. The company also doubled the number of sales from its 103 new clients. Overall, Onfido saw a 237% increase in U.S. sales during the third quarter and attributes the growth to new customers switching from other providers.
Aiding Onfido’s success is its decision to partner with Identity Access Management (IAM) companies to spur demand for enterprise-level customers. Some of the company’s marketing plays in this area include hosting an e-voting roundtable with Okta, integrating into Auth0’s Marketplace, and listing on the Salesforce AppExchange.
Additional key partnerships for Onfido this year include:
Alior Bank partnered with Onfido to power digital onboarding.
Hub City Media partnered with Onfido to resell and distribute Onfido’s identity verification and authentication services.
Deliveroo expanded its partnership with Onfido to accelerate its onboarding process for drivers.
Curve partnered with Onfido to enhance its Digital Identity and Know Your Customer (KYC) processes.
SwissBorg partnered with Onfido to provide a compliant customer onboarding experience.
Delfin Health partnered with Onfido on its app that predicts, monitors, and tests the health and safety of workforces.
MyCash partnered with Onfido to power digital onboarding.
Bondora partnered with Onfido to streamline its onboarding and KYC processes.
Voima Gold partnered with Onfido to allow customers to securely buy, sell, and store physical gold.
EstateGuru partnered with Onfido to automate KYC and AML compliance processes.
Onfido leverages the power of machine learning and AI to help companies cross-verify users’ identity documents with a live biometric of their face. The company can verify more than 4,600 document types from 195 countries.
“Our mission is to create a more open world, where identity is the key to access. This starts with widening access, creating opportunities for everyone to connect with the services they need and making sure that it’s as inclusive as it can be,” said Husayn Kassai, CEO and Co-founder of Onfido. “We made significant strides over the last quarter to make our product offering not only more conducive to enterprise-level organizations, but also fairer when it comes to verifying people from different ethnicities. We believe these changes will only accelerate our growth further.”
Onfido most recently showcased its technology at FinovateFall 2018, where it debutedFacial Check with Video. The tool, available via an SDK, prompts users to film themselves repeating numbers and performing randomized movements to ensure liveness and enhance identity verification.
