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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Whatever benefits the challenger bank revolution may bring to retail banking customers, the opportunities these neobanks provide to small businesses may be even more significant. In fact, there is a growing cadre of digital-first challengers who have decided to put innovating on behalf of small business banking at the top of their priorities.
One such company is Wise, a BBVA-backed challenger based in San Mateo, California, that announced the release of its premium checking account in the U.S. this week. The new offering, available for $10 a month, enables businesses to earn up to 1% APY on deposits through a combination of a 0.5% base APY and an additional 0.1% for every $1,000 purchase using a Wise debit card. Accountholders get 25 free ACH deposits and 25 free outgoing bank transfers a month, as well as additional payments services. Among the functionalities to be added are remote check deposit, the ability to send digital checks and international wires, and support for Quickbooks.
The new offering comes in the wake of the company’s first major fundraising: a $5.7 million seed round in April led by Base10 Partners and featuring the participation of several other investors including Abstract Ventures and Backend Capital. The company told TechCrunch earlier this year that it has 1,000 business customers, with average workforces ranging from 2 to 10 employees, and “between $500,000 and $5 million in ARR (annual recurring revenue).”
Finovate audiences met Wise last year when the company made its Finovate debut at our September conference in New York. At the event, Wise co-founders Arjun Thyagarajan (CEO) and Suresh Venkatraman (CTO) demonstrated the company’s “small business banking-in-a-box” solution, and previewed additional products and services for small businesses including payments and invoicing.
From left: Wise co-founders Arjun Thyagarajan (CEO) and Suresh Venkatraman (CTO) at FinovateFall 2019.
Thyagarajan founded Wise after a stint managing product for Mojio, a platform for connected cars. Before that he was a classic serial entrepreneur, launching a personal organizer (LivingOrganized), and a pair of password management platforms (TeamsID and Gpass). But a sense that he wasn’t “doing what I really wanted to do” led him to leave the “hot startup” in search of what he called “problems that needed solving.”
“My explorations led me to FinTech and I was pleasantly surprised with the rapid advancements in technology transforming the financial industry, especially in banking and payments,” Thyagarajan wrote on the company blog last summer, looking back on his decision to launch Wise. “It got me thinking: what if we could build a banking product that can deliver on the promise of putting the customer first … And solving real world problems.”
Thyagarajan’s reflections are similar to those his co-founder Venkatraman, who in a companion post observed that Wise’s own experience as a small business trying to secure quality banking services was vindication of the company’s mission.
“The day started innocently enough as we walked into a local bank with all our paperwork in hand,” he wrote. “That was the beginning of a chase around Silicon Valley to find a bank that would take our money and open up an account. Banks would reject us for all sorts of reasons or just ignore us.”
These days, with an new offering, a big investment and a major banking partner in BBVA in hand, it looks like the fintech world might be ready to wise up.
Point of sale financing is all the rage in fintech right now. Consumers are looking to continue buying habits despite lower income and merchants are vying for ways to boost consumer spending.
So when it comes to one of the biggest online merchants launching a buy-now-pay-later offering, its a big deal. It is, anyway for Citi, which struck up a partnership with Amazon this week to provide a buy-now-pay-later option for Citi credit cardholders.
The tool is called the Citi Flex Plan and offers Citi credit cardholders a way to pay for larger purchases over time. Loan terms range from three to 48 months with terms ranging from 6.74% APR to 8.74% APR depending on the amount financed. Borrowers face no credit inquiries, no incremental fees, and are not required to fill out a formal application.
“Amazon is one of the most popular destinations for our customers to shop and redeem ThankYou Points,” said CEO of Citi U.S. Consumer Bank Anand Selva. “We want to meet them where they are with another instant, convenient and easy payment option.”
Essentially, Citi cardholders have two forms of credit in one when they shop on Amazon. How do the logistics work? When they place their order, the total purchase amount will be deducted from their available credit. The monthly payment– the amount that varies based on the purchase price– is due to Citi at each billing cycle.
After Citi initiated a partnership with Google in 2019 and yesterday’s news of six more traditional banks following suit, today’s announcement comes as no surprise. Challenger banks are on the rise, and consumers are opening new accounts with these alternative banking providers at a faster rate than before.
By providing its customers with the new buy-now-pay-later option, a traditional financial services provider such as Citi is appealing to the lower income group that is most attracted to challenger banks. The bank is also helping to position its card at the top of consumers’ virtual wallets when they shop at Amazon. This is key since more than one-third of active Citi cardmembers made at least one purchase on Amazon in the past year.
Additionally, partnering with a big tech company helps Citi align more with the tech side of banking. And indeed, the bank has been closer to the forefront of fintech than many of its rivals. At our developers conference Citi showcased its developer hub and sandbox.
When Bank Operating System creator nCinowent public earlier this month, we shared a feature on some of the other fintechs – Finovate alums all – that, like nCino, also hail from the state of North Carolina.
For those who may find North Carolina an atypical location for some of the country’s most innovative fintech companies, recall that many of these fintechs are benefitting from the proximity of the famous Research Triangle. This area of the state includes three universities – Duke University, the University of North Carolina at Chapel Hill, and North Carolina State University, and has had a reputation as a technology hotspot since the 1950s. Hall of Fame caliber technology firms from IBM to Cisco Systems to Red Hat have made “The Triangle” their home over the years, solidifying the region’s high-tech reputation and helping attract new generations of entrepreneurs and technologists.
Recently we learned of big news from one of the members of this new generation. Cognitect, which provides engineering and software development talent and technology to clients in industries ranging from health and science to fintech, announced that it has agreed to be acquired by long-time client Nubank, a financial institution based in Brazil.
Cognitect founder and President Stuart Halloway called the company’s relationship with Nubank “a spectacular success story” for its two signature offerings: Clojure – Cognitect’s general purpose programming language – and Datomic – the company’s transactional database. Nubank currently has 600 Clojure developers, running 2.5 million lines of Clojure code in 500 microservices on 2000+ Datomic servers. “Cognitect has been there every step of the way, helping Nubank’s developers translate Clojure’s ideas into business agility,” Halloway wrote at the company’s blog.
The acquisition, according to Halloway, will pave the way for bigger teams for both Clojure and Datomic – technologies Finovate fans were first introduced to via our FinDEVr developers conference in 2016. In that presentation – and in the company’s return to the FinDEVr stage the following year – the Durham, North Carolina-based company demonstrated how its solutions enable companies to have more control over and insight into their data – including the ability to conduct analytics on real-time information without hindering performance.
Nubank’s relationship with Cognitect in general and Clojure and Datomic in specific stems from the Brazilian neobank’s decision to use those technologies to provide a data infrastructure for its microservices platform. The result, for Nubank’s customers, has been greater clarity and complete history on transactions, as well as insight into the origins of suspicious cyber incidents or problems with data.
“Because we use Clojure and Datomic, we’ve built a tool that has already moved beyond what many of our competitors do, and our speed of innovation – new features, continuous deploys – increases with every passing day,” Nubank CTO and cofounder Edward Wible said in a statement. Founded in 2013, Sao Paulo-based Nubank is Latin America’s largest fintech with more than 20 million customers. Cognitect is the firm’s second acquisition of the year, having purchased software engineering company Plataformatec in January.
Going forward, Cognitect will benefit from the continued leadership in its Clojure and Datomic teams, and the company itself will remain a U.S. C corporation. Datomic customers will continue to receive professional services from Cognitect, though the company expects to transition away from general consulting development. Customers also will likely get the next Datomic feature “a bit sooner” Halloway added, pledging to users that “the resources behind (their) software are greater than ever before.”
You’ve probably heard that cryptocurrency exchange platform Coinbase is considering going public later this year or early next year.
But this likely won’t be a traditional fintech IPO. That’s because the California-based company’s culture is rooted in the blockchain, a technology that embraces alternative finance. Furthermore, Coinbase would be the first major U.S. cryptocurrency exchange to go public, and the fintech community will be paying close attention to the outcome.
That said, there are some roadblocks Coinbase may encounter on its journey to Wall Street.
First, in order to go public, the transaction would need to be approved by the U.S. Securities and Exchange Commission (SEC). The hurdle here is that while the SEC has issued guidance on cryptocurrencies, labeling them as securities that are subject to regulation, the organization hasn’t issued guidelines on specific coins, except for a few. In fact, many mainstream financial institutions are wary of cryptocurrencies and see them as a tool for money laundering and illicit activities.
Coinbase will also need to decide how it will be listed. The company can either undergo a traditional IPO that caters to Wall Street investors, take a direct listing approach, or go public via a token offering on the blockchain. While involving the blockchain may be a logical approach for a blockchain-based company, it may cause difficulty, as even a hybrid model would need to be approved by the SEC.
Coinbase must also balance the cryptocurrency market itself. As Laura Shin points out in her podcast Unconfirmed, Coinbase will likely try to time its public debut with the cryptocurrency market, which is known for its volatility. Debuting during a dip in the cryptocurrency market may result in Coinbase receiving a lower-than-expected initial stock price.
What do mid-tier and boutique banks need in order to enhance their ability to onboard new customers quickly and efficiently? What solutions are available to enable them to remain compliant with an ever-changing set of regulations while at the same time keeping up with even faster changes in customer expectations? And how has the global health pandemic made these challenges all the more complicated for financial institutions of all sizes?
We caught up with James Follette, Head of North American Sales and Global Head of Commercial, Business, and Retail Banking with Fenergo. A Finovate alum since 2012, the Dublin, Ireland-based company specializes digital transformation, customer journey, and client lifecycle management (CLM) solutions for banks and other financial institutions.
Finovate: Fenergo secured a major investment earlier this year – the largest in the company’s history, I believe. What was the significance of this fundraising in terms of helping Fenergo reach its goals for 2020 and beyond?
James Follette: Fenergo received $80 million in funding from DXC Technology and our client, ABN AMRO at a valuation of just under $1 billion, so it was of huge significance for the business. Both firms’ pedigrees, deep experience and industry knowledge made them the ideal investment partners for Fenergo. Apart from the continuous enhancement of our product, the funding will go towards recruitment and growth initiatives.
Finovate: The company just released a cloud-based version of its CLM solution, Fen-Xcelerate. What does the technology do? Who does it do it for? And why make the solution available now?
Follette: Fen-Xcelerate is a lower cost, cloud-based SaaS version of Fenergo’s client lifecycle and journey management (CLM) solution. It is tailored specifically to mid-tier, community and boutique commercial, business and retail banks seeking to accelerate digital transformation, so they can offer digital services and open accounts remotely.
Fenergo launched Fen-Xcelerate in response to a growing demand amongst mid-tier and boutique banks for a digitally enabled CLM solution that could be up and running in weeks. This cohort of banks, heavily reliant on manual processes for onboarding and compliance, were also looking for an off-the-shelf solution that was plugged into Customer Relationship Management (CRM), data and screening providers such as Salesforce, Microsoft, Refinitiv and RDC, at a price point more suited to their budgets. Fen-Xcelerate addresses these challenges, enabling banks to more readily step up and support businesses and the community in their hour of need.
Finovate: What is required on the bank’s part in terms of deployment and integration? How much work and how much time is involved?
Follette: With minimum customization, Fen-Xcelerate can be deployed in six to twelve weeks. It removes the need for banks to spend time and resources plugging into services such as Salesforce, RDC and World-Check One. As a result, banks can very quickly switch to a digital onboarding and client journey management model, while performing client due diligence (CDD) for KYC and Anti-Money Laundering (AML) compliance, digitally and seamlessly. Deployment will typically be carried out by Fenergo’s professional services team.
Finovate: The combination of rapid technological advancement, accelerating customer expectations, and ever-changing regulatory obligations can create a challenging environment for mid-tier business and retail banks. How does Fenergo, both specifically with Fen-Xcelerate and more generally, help these FIs successfully navigate this territory?
Follette: Many mid-tier commercial, business and retail banks lack the wholistic solution required to offer digital services and open accounts remotely, while being able to meet regulatory obligations and detect financial crime. With Fen-Xcelerate, mid-tier and boutique banks can benefit from Fenergo’s deep financial services heritage and best-in-class CRM, data, screening and identity and verification (ID&V) integrations in one solution. Validated by the industry, Fen-Xcelerate can be quickly deployed to digitalize account opening while delivering a seamless customer experience and regulatory compliance across 100+ jurisdictions and offering access to Fenergo’s community of global banks and regulators. By leveraging Fen-Xcelerate, the goal posts for digitalization within these banks could move from months to just weeks.
Finovate: This territory has become all the more complicated with the global public health crisis – and the economic consequences of fighting it. What has Fenergo done to help its customers and partners manage this challenge specifically?
Follette: Our community of clients, partners, regulatory and financial services experts means that we are very tuned in to the needs of the industry. We are continuously enhancing our solution according to the rapidly evolving technology and regulatory needs of financial institutions – and today is no different. Many of our clients have had to pivot to a remote account opening model overnight, this is why we brought forward the launch of Fen-Xcelerate. Banks need to be up and running with a client onboarding and journey management solution very quickly, so that they can provide support to their customers when they need it most.
Finovate: This year Fenergo has introduced its remote account opening solution, partnered with the likes of IBM, PwC, and Aviva, and of course, released Fen-Xcelerate. What can we expect to see from Fenergo in the second half of 2020?
Follette: We are experiencing very high demand and have signed 16 new clients since the beginning of the year. The second half of the year will be spent doubling down on supporting our clients in their digital transformation journeys, as they navigate uncertain territory.
We generally think of healthcare workers, grocery store employees, delivery drivers, and other essential workers as the main heroes of the coronavirus public health crisis. However, there’s one company worth mentioning that has risen to “hero” status for small businesses across the U.S.
That company, Lendio, has been serving small businesses since it launched in 2011 by matching small businesses in need of funding with lenders. After the coronavirus hit and the U.S. Small Business Administration passed the CARES Act and Paycheck Protection Program (PPP), Lendio became a critical resource for merchants across the nation.
After seeing the mass confusion around different types of relief programs and their application requirements, Lendio quickly created a COVID-19 Relief hub on its website to educate business owners, help them apply for funding, and match them with one of its 300 lender partners.
Since April, Lendio has facilitated $8 billion in PPP loan approvals. The company has also helped more than 100,000 small businesses receive approval for PPP loans of an average size of $73,000. This is a massive increase in production for the Utah-based company which, prior to PPP, had facilitated $2 billion in loan approvals since it began operations nine years ago.
The 100,000+ PPP applications Lendio facilitated offered the company a large amount of data (and insight) into the applicants. The company published an analysis of that data last week. Here are some of the findings:
States in the Pacific region received 25% of PPP approvals, while those in the Mountain region received only 9%.
States in the Northeast and Pacific regions saw the highest average loan size ($80,518 and $79,507, respectively). The average loan size is lowest in the South Atlantic ($64,064).
Women business owners made up 32% of applicants.
Businesses in urban areas received 30% of the loans applied for, while suburban businesses received 28%, and rural received 39%.
As for what business owners can expect next, just as with the virus itself, the battle has not been won. “I think the next big market mover is going to be the realization that the PPP program actually had an enormous impact,” Sanders Morris Harris CEO George Ball in an interview with Yahoo Finance. “It worked. It kept the patient alive. But the half-life of the forgivable loans to small businesses comes up pretty soon, comes up mid-July to August.”
Today is Canada Day, which commemorates the date in 1867 when three provinces – Nova Scotia, New Brunswick, and the Canada Province (now known as Ontario and Quebec) – united to form a single nation. And while the global public health crisis may limit the holiday’s typical parades, cook-outs, fireworks demonstrations, and concerts, rest assured that Canadians all over the world will find a way to celebrate what is colloquially – if a bit inaccurately – referred to as “Canada’s birthday.”
With this in mind, the Finovate blog sends a hearty “Happy Canada Day!” to the dozens of Canadian fintechs that have demonstrated their innovative solutions at our conferences over the past decade-plus.
Predictive analytics innovator Stratyfy is one of ten companies selected to participate in the incoming cohort of FIS’ 2020 Fintech Accelerator program.
“The ten companies selected for the fifth year of FIS’ Accelerator program bring a wealth of promising ideas and technologies,” FIS Chief Growth Officer Asif Ramji said. “We look forward to working with these firms to bring their ideas to life.”
Joining Stratyfy in the program are:
Cirrus Secure
Cobbler Technologies
Dasceq
Mall IQ
Sequretek
Silot
Surfly
TrustStamp
XpenseOne
Seven of the companies in the cohort have headquarters in the United States. Of the others, Sequretek is based in Mumbai, India; Silot in Singapore; and Surfly in Amsterdam, The Netherlands. And after four years in operation, the accelerator, in partnership with The Venture Center, will conduct its fifth program virtually due to the challenges of the global public health crisis.
In addition to being entirely virtual, this year’s program will run for 18 weeks instead of the usual 12 weeks to allow for increased mentoring and training time. The program will culminate with a Demo Day technology presentation on October 14th. Participating startups will also receive a monetary investment; the amount was not disclosed.
Executive Director for The Venture Center, Wayne Miller, pointed to the program’s success in empowering startup companies and helping improve access to financial services and technology. “With our partners at FIS and the State of Arkansas, we’re honored to be a part of bringing cutting-edge technologies to the places and people who need them, particularly in this moment of monumental technological advancement,” Miller said.
The news comes in the wake of Strayfy’s announcement of a new strategic partnership with Innovesta Technologies. The two companies are collaborating on a machine learning solution that will help businesses better measure the risk of and opportunity in non-public companies. The partnership combines Stratyfy’s decision engine and advanced machine learning technology with Innovesta’s comprehensive data assets to deliver real-time insights into the forces that impact business performance.
“Models built from historical data offer little help during an unprecedented health and economic crisis like the current global pandemic,” Stratyfy co-founder and CEO Laura Kornhauser said when the partnership was announced in May. “Achieving an inclusive global financial recovery requires robust risk management strategies, and those strategies necessitate an understanding of the unique challenges being faced by every business. Stratyfy’s decision management solutions will leverage Innovesta’s trustworthy data to directly address this need.”
Founded in 2016, Stratyfy is headquartered in New York City. The company was named one of the world’s 100 most promising startups to watch last year by CNBC.
Facial recognition may be the hottest form of biometric authentication. But it’s far from the only – or even the most effective – biometric authentication method for all instances. In fact, as far as Redrock Biometrics is concerned, a superior alternative may lie in the palm of your hand.
“The PalmID solution far outperforms competitive touchless technologies, such as facial recognition, in terms of accuracy and reliability,” Redrock Biometrics co-founder Hua Yang said in a statement announcing the company’s latest partnership a few weeks ago. “It is the best available solution for touchless identity management, authentication and security.”
Founded in 2015 and headquartered in San Francisco, California, Redrock Biometrics is the developer of PalmID, a palm-scanning authentication solution that provides accurate, robust, no-additional-hardware-required biometric authentication via camera-bearing devices – ranging from smartphone, tablets, and laptops, to payment terminals (including ATMs), IOT devices, and even cars.
And at a time of social distancing and a preference for as much contact-free activity as possible, authentication technologies like PalmID are likely to be seen as increasingly attractive options. Add to this the challenge of face-based authentication in a world of mask-wearing employees and consumers, and the case for palm-based authentication becomes all the more compelling.
Identity management solution provider Q5id is the latest company to deploy Redrock Biometrics’ technology. Q5id, based in Beaverton, Oregon, announced last month that it would integrate PalmID into its biometric enrollment and authentication solutions. Q5id works with institutions in multiple verticals, including financial services, telecommunications, education, and e-commerce, to provide identity verification services via multi-factor authentication, live video, and active voice authentication. The fact that palm-scanning technologies are particularly hard to fool, according to Q5id chairman and CEO Steve Larson, is one of the reasons why the company partnered with Redrock. The solution’s high accuracy rate – and lack of a hardware requirement (compared to fingerprint scanners, for example) were additional selling points for the technology.
Redrock Biometrics’ PalmID works with both standard RGB and infrared cameras. The company notes that from a distance of approximately six inches, the average smartphone, laptop, or ATM camera can capture a good quality image of the unique skin patterns of the users palm. The captured image then undergoes a two-step process. First, the PalmID Capture Module uses machine learning technology to convert the RGB video input stream into a palm image that is ready for authentication. Second, the PalmID Matching Module, in real-time, matches the captured image against stored references. The technology uses proprietary algorithms to test images against large databases of palm images to prevent false positives.
PalmID has also been deployed recently to help provide an identity verification solution for mass transit and payments. The company partnered with FalconPro Technology in May, adding its PalmID software to a FalconPro camera module to create a simultaneous palm print and palm vein image capture. The goal is to create a large-scale authentication solution; pilot projects using the technology will be conducted in both the payments and public transit industries, according to FalconPro Technology CEO Xun You. FalconPro is a founding member of the Chinese Automatic Fare Collection System Association, and provides QR-code based digital ticketing systems for rail systems throughout China. The company sees its partnership with Redrock as potentially enabling it to “expand (its) product offering beyond barcode technology.”
Also this year, Redrock Biometrics forged a partnership with passwordless authentication solution provider HYPR, which will add the company’s PalmID technology to its platform. Redrock has also waived the license fee for its PalmID software for all essential businesses using the technology during the global public health crisis.
“COVID-19 quarantine made us acutely aware that touching devices represents a threat to our lives,” Redrock co-founder Lenny Kontsevich said. “People become touch-phobic and their faces are covered by masks, which creates a need for a touchless palm solution.”
Not that we didn’t see it coming, but the National Bureau of Economic Research officially declared yesterday that the U.S. entered into a recession in February.
With the market volatility over the past few months, many investors have attempted to assess how the changes will impact their retirement plans. Seeing the need to offer peace amid uncertainty, Personal Capital made a move last month to help investors prepare their portfolios for the worst.
The company added a new tool, Recession Simulator, to its dashboard. The feature helps its U.S. users illustrate the effects that historical recessions would have on their portfolio. Currently the Recession Simulator allows users to mimic returns of the DotCom crash of 2000 and the Financial Crisis of 2008.
“With uncertainty around the market’s performance and overall economy, we want to continue to be a catalyst for providing individuals the necessary tools and insights to best position themselves to reach their financial goals under volatile market conditions,” said Personal Capital EVP for Advisory Service, Kyle Ryan.
The retirement dashboard also incorporates expected return and volatility, annual savings, income events, spending goals, retirement spending, social security, and tax rules for taxable, tax-deferred, and tax-free investment accounts. My favorite aspect of Personal Capital’s retirement tool is that it allows users to generate different scenarios to simulate retirement income under multiple circumstances. It helps users to easily compare situations such as: What if there is a recession every 10 years? What if I sell my rental property at age 50? What if I pay for a child’s tuition?
The new Recession Simulator tool is the result of a company-wide hackathon, and according to Personal Capital’s recent survey, it comes at a good time. The survey found that around 40% of people indicating they were planning to retire within the next 10 years have decided to delay their retirement. It also uncovered that around 77% of the respondents who are at least 10 years away from retirement expressed some concern about COVID-19’s impact on their retirement goals.
A Finovate alum since 2011, Personal Capital has amassed $12.3 billion in assets under management since it was founded in 2009. The company has 24,000 investment clients across the U.S. and 2.5 million registered users of its free financial planning tools.
We caught up with Uri Rivner, co-founder and Chief Cyber Officer of BioCatch, a leading cybersecurity firm that provides behavior-based authentication and threat detection solutions to banks, e-commerce platforms, as well as mobile and web applications.
We wanted to learn how the company, founded in 2011 and headquartered in Israel and New York, has fared in the wake of its major $145 million spring fundraising. We also wanted to hear about the new cybersecurity environment brought on by the global public health crisis and what BioCatch is doing to help institutions manage this challenge.
Finovate: You are one of the founders of BioCatch, and your current role with the company is Chief Cyber Officer? What does this role entail within the company?
Uri Rivner: I was actually head of new technologies at security giant RSA when, in 2011, a foreign state hacked into RSA. It was one of the most famous hacking incidents in history, and following that I was on the look for new technologies that can help the industry against cyber attacks and online fraud. BioCatch, then a very young company, came to us at RSA to present the tech, which sounded really sci-fi. I was impressed and introduced them to industry players who all said that if this was working as advertised, this is a game-changing technology.
At some point the founders of BioCatch asked me to join as a co-founder and help them build the business. I joined mid-2012 as VP of Cyber Strategy. My current role as Chief Cyber Officer is to identify new cybercrime business problems the technology can address, and provide internal and external thought leadership on the role of behavioral biometrics in digital transformation and fighting online fraud.
Finovate: When we last shared BioCatch news with our readers, it was in April on the heels of the company’s $145 million fundraising. How big of a moment was that for BioCatch?
Rivner: It was a major milestone. A vote of confidence that showed us how well the market appreciates what we have accomplished. We’ve taken a scientific field in cognitive studies, something that was working in the lab, and made it extremely practical for use in solving the biggest issues in online fraud across dozens of banks, credit card issuers and companies outside the financial sector, protecting over 100 million online and mobile users. We’ve tackled issues that were initially deemed impossible to solve. And we’ve done all of that with very happy customers and a highly scalable product. It was a proud moment, but at the same time also a commitment to work very hard to justify the trust of our new investors!
Finovate: What has BioCatch been up to in the weeks since then – specifically, how has the COVID-19 crisis impacted the work your company does?
Rivner: Our team has shifted to a work from home model; it was done quite efficiently, and we experienced no issues in continuing to serve customers. We run in the cloud, and there was no interruption to the service. The customers also moved to the same mode of operation.
Finovate: Let’s talk about some of the new security challenges that have developed during the pandemic. It seems like there are fraud “hotspots” everywhere: COVID aid/relief fraud, the security issues of Work From Home, and the potential for identity crime in any track and trace program. Can you talk a little about the cybersecurity landscape in the era of COVID-19?
Rivner: If I had to pick one community that is definitely going to thrive during a global virus outbreak, it’s online fraudsters. They have a golden opportunity to scale their operations while entire companies move their fraud operations and analytics teams to a work from home model, which is not an easy process for, say, a major bank. Here are some of the trends to watch for:
Stimulus Fraud
American taxpayers get a direct deposit to their bank account using the information included in the last tax return they filed. If they haven’t filed a tax return for 2019 yet, it’s then a race with the fraudsters, who will try to beat them to it and provide a falsified tax return including a bank account that they control. This means the stimulus deposit will go to the bad guys. There are many people who do not file tax returns and go to a website where their information is validated and a check is sent to their address. That’s an easy venue for identity thieves who can obtain full identity records for all U.S. citizens in the dark web. Fraudsters are also impersonating small businesses to apply for stimulus loans using similar methods. In short, it’s a fraudster’s heaven.
Account Opening Fraud
The most scalable fraud operation is opening credit card or personal loan accounts. All you need is to buy a bigger list of stolen identity records, and have a team of people opening accounts in other people’s names. Identity theft is reported to sky-rocket, and it can be quite dangerous, especially if it’s a new digital service that is launching these days. If a new digital service is targeted by a massive campaign, there will be more fraud applications than real applications – that’s disastrous. Traditional defenses such as checking KYC (know your customer) data and device recognition no longer hold, and new technologies such as behavioral biometrics are used to stop such fraud campaigns and reduce false rejections due to high security bars.
Corona Tracker Rogue Apps
Cyber space is teeming with coronavirus scams. The most dangerous scams are the ones that manage to trick users into downloading rogue apps onto their mobile device. They’ll look like useful tools that alert you when a coronavirus carrier is in your immediate vicinity or providing CDC-approved virus contagion maps. But, in reality, they’re after your mobile banking app and mobile e-commerce purchases.
Social Engineering… From ‘Your Bank’
“Hey, we’re your bank, and wanted to reach out! The branch is closed, so we’re the friendly help desk. We’ve noticed some issues in your account, and would like to help you sort it out. Can you please install this utility to help us run some tests remotely?” You know the rest of this story.
Uri Rivner demonstrating BioCatch’s Passive Biometrics/Invisible Challenges technology at the company’s Finovate debut in 2014.
Finovate: Earlier this year you were part of a conference presentation that highlighted the importance of machine learning and AI in fighting fraud. What about these enabling technologies is so beneficial when it comes to cybersecurity?
Rivner: My lecture talked about how Sherlock Holmes managed in A Case of Identity to identify an imposter based on a dozen or so “features” related to the typewriter they used to type love letters. Machine Learning can instantly look at thousands of features, resulting in an extremely accurate model that predicts fraud and can adapt itself when cyber criminals change their strategy. At BioCatch we have over 2,000 such features – and not even good old Sherlock could have managed that many in his identity model!
An important consideration though is that some machine learning models are a black box and don’t really provide insights into why a certain action is risky. BioCatch, for example, uses Explainable AI models to make sure customers can get the reasons why a score was high, as well as many negative and positive behavioral factors observed during a session.
Finovate: What can we expect from BioCatch over the balance of 2020? Has the global health crisis made it more difficult to have visibility into the second half of the year?
Rivner: Fraud isn’t going away and, in fact, we anticipate a surge in account takeover activity as criminals scale up their cash-out operations. They already have the data they need to steal more money, but they need to scale their infrastructure. Think of mule accounts for moving money out of victim’s account. The crisis makes it easy to recruit mules in work-from-home scams, and to open bogus bank accounts to which stolen money can be moved. Right now criminals are busy doing just that, preparing for a big wave of attacks that is likely to focus on real-time payments such as the relatively new Zelle infrastructure in the U.S., or similar services elsewhere. So demand for a frictionless control that stops fraud and highlights genuine behavior is going to increase.
Wealthfront has been around the proverbial fintech block a few times. The San Francisco-based wealthtech company launched near the dawn of fintech under the name KaChing in 2008 and demoed its investment platform at the second-ever Finovate conference in 2009.
Given its time in the space, Wealthfront is well-positioned during this pandemic. The legacy fintech benefits from a strong customer base, name recognition, and profitability. So when the pandemic hit and many firms were struggling with customer service or the transition of working from home, Wealthfront didn’t miss a beat.
Its secret weapon? Scalability. As Wealthfront’s client base has grown to almost 400,000 users, the company has relied on automation to ensure a high-quality customer experience. “Automation has been a key product principle at Wealthfront from day one,” said Wealthfront Founder and Chief Strategy Officer Dan Carroll in a blog post. “If we can’t automate a service, we won’t build it. When a client needs to email or call us, we consider that a failure in our product and work to build an automated solution.”
Instead of customer service representatives, Wealthfront refers to its team members as Product Specialists. The 12-person team is comprised of licensed financial advisors who are each responsible for fielding client questions and tracking and relaying customer feedback to the company’s product development team. Using these techniques, Wealthfront has been able to scale to 30,000 clients per specialist.
And while some banks were closing down call centers and struggling with customer hold times ranging from 30 minutes to three hours, Wealthfront’s team of 12 Product Specialists weren’t overburdened. To get ahead of the projected spike in client inquiries, the team moved to individual remote work settings and composed a list of questions they anticipated from customers. With the help of the company’s content team, the specialists deployed in-app pop-ups that offered answers to potential questions and provided advice to help clients navigate volatile markets and the CARES Act.
So what’s next for Wealthfront? “While banks grapple with something as basic as streamlining customer service, we’re working on the future of financial services — something we call Self-Driving Money,” Carroll said. The new product will automate users’ recurring transactions including billpay, savings, and goals. “Our ultimate vision is to optimize your money across spending, savings, and investments, putting it all to work effortlessly.”
