Robinhood Raises $3.4 Billion in Whirlwind Weekend Funding

Robinhood Raises $3.4  Billion in Whirlwind Weekend Funding

It looks like the Merry Men of Ribbit Capital have come to the rescue of the social trading app named after the mythological bowman who robbed from the rich to give to the poor.

Between the final trading days of January and the first trading day of February, Robinhood has raised a whopping $3.4 billion in convertible debt financing. The financing was provided to help the brokerage firm manage the tidal wave of activity that the platform experienced during last week’s trading moshpit in shares of heavily-shorted GameStop.

And with the additional participation from Little Johns and Friar Tucks like Iconiq Capital, Adreessen Horowitz, Sequoia, Index Ventures, and NEA, it looks like the social trading app for Millennials has more than picked up the requisite funding to continue its mission of serving its increasingly active trading and investing clientele. Note that Robinhood CEO Vlad Tenev said the company’s clearing house initially had requested $3 billion in margin deposits last Thursday, before lowering the requirement by more than 75% to $700 million.

“This funding is a strong sign of confidence from investors and will help us build for the future and continue to serve people through the exponential growth we’ve seen this year,” Robinhood’s blog read on Monday morning.

With more than 13 million users – and an alleged 600,000 new accounts added on Friday alone – Menlo Park, California-based Robinhood has become the face of retail trading in recent months. The company raised more than $1 billion in funding last year as a stimulus-fueled stock market – and an absence of opportunities for other financial-risk taking such as sports betting – helped drive short-term traders into the gamified, regular Joe-enabling, environment of Robinhood. The online trading and investing platform offers the ability to buy and sell stocks, exchange-traded funds (ETFs), options, gold, and cryptocurrencies including Bitcoin, Ethereum, and Dogecoin – all commission-free.

“We’re witnessing a movement of everyday people taking control of their own financial future, many investing for the first time through Robinhood,” the blog post continued. “With this funding, we’ll build and enhance our products that give more people access to the financial system.”

As the frenzy in trading over Gamestop shares grew, Robinhood came under pressure for its decision to restrict trading in the shares, as well as in a number of other stocks that had experienced similar spikes in activity. Although Robinhood’s actions were clearly permissible given its Term of Agreement, the episode further fueled the Us (retail trader) vs Them (Wall Street hedge fund) narrative that, ironically, Robinhood was founded to champion on behalf of the “Us.”

Ribbit Capital Managing Partner Micky Malka spoke to this irony in his comment about the funding. “Robinhood has served millions of people who have felt left behind by America’s financial system,” Malka said. “We’re confident that Robinhood will emerge stronger through this phase of growth and unprecedented demand.”


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NAB to Acquire Australian Smart Bank 86 400

NAB to Acquire Australian Smart Bank 86 400

National Australia Bank (NAB) announced its intention to purchase digital “smart bank” 86 400 today. The $664 billion (AUD$867) bank plans to spend $168 million (AUD$220) to purchase the digital newcomer.

Since it was founded in 2017, 86 400 accrued more than 85,000 customers, $375 million of deposits, $270 million in approved residential mortgages, and 2,500 accredited brokers.

NAB will integrate the digital bank into its in-house digital bank competitor, Ubank. Twelve-year-old Ubank, with 600,000 users, anticipates the acquisition will accelerate its growth. Specifically, Ubank cited benefitting from 86 400’s experience and technology platform.

“Bringing together UBank and 86 400 is consistent with NAB’s long-term strategy and growth plans and will enable us to develop a leading digital bank that can attract and retain customers at scale and pace,” said NAB Chief Operating Officer Les Matheson. “The combined business will deliver accelerated innovation and an enhanced customer experience to create a stronger and more competitive banking alternative for Australian customers.”

86 400 sought to be a “smart bank” and differentiated itself with a fee-free, transparent approach and local call center. The startup had raised $26 million (AUD$34 million) and had recently received its banking license.

The deal is pending regulatory approvals and is expected to be completed by mid-2021.


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Brazilian Challenger Nubank Hauls in $400 Million

Brazilian Challenger Nubank Hauls in $400 Million

Followers of Finovate Global, our weekly look at fintech innovation around the world, are likely familiar with the story of Brazilian challenger bank Nubank. But with news of the firm’s $400 million Series G round – announced today – we suspect there will be quite a few fintech fans brushing up on the fintech industry in Latin America.

Company founder and CEO David Velez said that the funding will help Nubank grow and diversify its client base, as well as fuel expansion. He added that bringing more products to market is key to becoming the kind of “full service financial institution for clients” that Latin American consumers need. Nubank currently offers a digital savings account, and a no-fee credit card, as well as personal loans. A recent acquisition of Brazilian broker Easyinvest last fall, Nubank’s third of 2020, suggests that investment products also may soon be among the challenger bank’s offerings.

Headquartered in Brazil’s largest city São Paulo, NuBank has earned a valuation of $25 billion with its latest investment. The Series G was led by GIC, Whale Rock Capital Management, and Invesco, and featured participation from existing investors Sequoia Capital, Tencent Holdings, Dragoneer Investment Group, and Ribbit Capital. The investment more than doubles Nubank’s previous valuation, based its July 2019 funding. The funding also takes the company’s total capital to $1.2 billion and places Nubank among the top five financial institutions in the region.

Nubank serves more than 34 million customers in Brazil and Mexico, and recently expanded to Colombia. The company is part of a growing neobank movement in the country – and the region – that is taking advantage of the inefficiencies of incumbent banks. This, in fact, was a major motivating factor for Velez, as he explained last fall announcing the move into neighboring Colombia.

“Nubank was born out of the conviction that through technology, design, data science and a customer-centric vision we could create a new generation of financial services that make people’s lives easier, with no complexity and no bureaucracy,” Velez said last fall. “All Latin Americans deserve a more simple, transparent and human banking experience. Today, I’m proud to announce the arrival of Nubank in Colombia, my motherland. Our goal is to have a positive impact in the life of millions.”

Founded in 2013, Nubank participated in our developers conference, FinDEVR New York in 2016. At the event, Nubank co-founder and CTO Edward Wible and Principal Software Engineer Lucas Cavalcanti dos Santos led a presentation titled, “Our Money, Our Rulebook,” that explained how they build an in-house accounting system based on functional programming principles. For the past two years in a row, Nubank has been named by Forbes magazine as the Best Bank in Brazil, and Fast Company has dubbed Nubank the “most innovative company in Latin America.”


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In the Battle for Direct Deposits, Plaid Stands with the Little Guys

In the Battle for Direct Deposits, Plaid Stands with the Little Guys

Plaid’s newest product is sure to make consumers happy and large banks slightly terrified. The company is tapping the power of direct deposits for its new launch, Deposit Switch.

The new offering, which goes live in beta today, does exactly as it sounds. It offers financial institutions and fintechs a tool to help end consumers easily change which account their paychecks are deposited into.

Switching the destination of direct deposits is a hassle for consumers, and generally requires manual paperwork that has to change hands between their bank and employer. Deposit Switch aims to end this headache. The company is relying on its instant switch method that connects a consumer’s payroll account directly through Plaid Link, the quick-start method to integrating with Plaid’s API.

For end users, the direct deposit switch can be done in four steps, as illustrated below:

deposit switch flow

“For financial institutions, high-friction onboarding experiences can lead to consumer drop-off and inactive accounts—and can ultimately prevent banks from becoming a consumer’s primary financial institution,” Plaid noted in a blog post announcement. “A significant opportunity exists for expanded innovation that leads to better consumer outcomes. Plaid can help by building the infrastructure that bridges the gap between financial institutions and payroll data, starting with direct deposits.”

In addition to giving consumers more control over their financial lives, Deposit Switch could also be a boon for smaller financial institutions (FIs) and fintechs. That’s because Deposit Switch is a new tool for them to win over consumer deposits.

Generally, banks use a high interest rate, a one-time bonus, or an enticing gift to incentivize their clients to change their direct deposit. These options are costly, And for smaller FIs and digital banks especially, may not be feasible.

Many digital banks are having difficulty boosting their total assets under management in the first place. This is due to two reasons 1) consumers use them as an “accessory” bank while storing and depositing the bulk of their money in larger institutions and 2) Many clients that use a digital bank as their primary financial institution may not have as much net worth and/or don’t receive as high a salary as those who choose to bank with traditional FIs.

Yotta, a fintech app that helps users build their savings, is one of the fintechs beta testing Plaid’s Deposit Switch. “Working with Plaid, we’ve made it faster and easier for customers to take the first step by establishing and funding their accounts with direct deposit,” said Yotta co-founder, Ben Doyle. “Yotta also integrates with Plaid Exchange, so customers can securely use their Yotta account with other fintech apps for digital payments, financial planning, investments and more. Fintech is the new normal for most Americans and Plaid helps Yotta meet customers where they are.”

So what about large, traditional FIs? Should they be worried that fintechs are making it too easy for clients to pour their paychecks into competing accounts? The short answer: yes.


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Ten Finovate Alums Join FedNow Instant Payments Pilot Program

Ten Finovate Alums Join FedNow Instant Payments Pilot Program

More than two years in the making, the FedNow payments initiative – launched by the U.S. Federal Reserve to accelerate payments and transfers – is picking up speed. The project currently has more than 110 banks, financial services providers, and other organizations slated to participate, and among them are ten Finovate alums.

“We’re gratified by the industry’s tremendous interest and willingness to devote time and energy to help us develop the FedNow Service,” Esther George, executive sponsor of the Federal Reserve’s payments improvement initiatives, said. George, who is also President and CEO of the Federal Reserve Bank of Kansas City, added that the pilot has had to “adjust” to accommodate greater than expected interest.

The idea behind the service is to expand the reach of instant payment services offered by financial institutions and enable businesses and individuals to send and receive instant payments, with full access to their funds within seconds. The FedNow Service will leverage the Federal Reserve’s FedLine network, which connects to more than 10,000 financial institutions directly or via their agents.

The pilot program is designed to review the technology’s features and functionality, assess the user experience, and greenlight the product for further testing and eventual general availability. Participating institutions will be retained, post-launch, to provide additional review and advice with regard to issues like adoption roadmap, industry readiness, and overall payments strategy.

“The FedNow Service marks a turning point in the industry’s move to making real-time payments a reality,” Booshan Rengachari, founder and CEO of Finzly, explained. Finzly is one of Finovate’s newest alums – most recently demoing its technology at FinovateWest Digital last fall – and is one of the participants in FedNow’s pilot program.

Rengachari further suggested that this “turning point” was a moment his company had anticipated. “We created our Payment Hub specifically to help FIs prepare and go to market faster with newer RTP networks,” he said. Finzly’s CEO added that this helps “address the challenges of offering single payment API for multiple payment networks without having to run disparate payment systems from multiple vendors.”

The 10 Finovate alums participating in the FedNow project are listed below.


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What’s Next for Roostify After its $32 Million Series C Round

What’s Next for Roostify After its $32 Million Series C Round

Digital home lending solutions provider Roostify landed $32 million in funding yesterday, bringing its total capital to $65 million.

The round was led by Ten Coves Capital, and included contributions from Cota Capital, Mouro Capital, Colchis Capital, Point72 Ventures, and JPMorgan Chase. The investment will help the San Francisco-based company make home lending faster and more transparent for all parties by leveraging AI.

The Series C funding comes at a time of growth for not only Roostify, but also the mortgage industry in general. The Mortgage Bankers Association (MBA) estimates that purchase originations will grow 8.5% to a new record of $1.54 trillion in 2021, thanks to low mortgage rates and low housing supply boosting demand.

Roostify has seen the effects of this growth. Last year, the company experienced a 250% increase in the number of applications submitted through its system and processed just under 1.5 million loan applications.

And while Roostify was prepared to handle both the volume and the demand for digital that came in 2020, many mortgage providers were not. “While the recent record-breaking origination volume was certainly welcomed, it also overburdened outdated mortgage lending processes and systems,” said Roostify Founder and CEO Rajesh Bhat. “We need to adopt a digital-first mentality that relies on technology-enabled transformation to solve real business problems. In order to thrive in a digital-first world, mortgage lenders need critical digital transformation initiatives, such as cloud-based technology, self-service solutions for consumers, and meaningful AI deployments.”

Founded in 2012, Roostify helps 200+ lending institutions collectively handle around $50 billion in loan volume each month.

As for what’s next, Roostify said it will continue to focus on leveraging data to transform the mortgage lending process. Key to this goal is the company’s partnership with Google Cloud AI. The two companies announced their collaboration last October in which Roostify began integrating Google Cloud’s Lending DocAI solution into its digital lending platform. As a result of Google Cloud’s AI and ML capabilities, Roostify’s digital lending tool now helps lenders analyze, categorize, and extract data from documents in an automized manner.

Despite the company’s growth, Bhat said that Roostify is “still in its infancy” in terms of its potential impact on the mortgage lending industry. “My team and I believe that it’s not enough to simply do digital lending better. We’re here to empower lenders to go beyond the efficiencies and cost-savings and forge a true connection with the end-user. We’re creating a world where financial success is possible for everyone, thanks to a simplified home lending experience.”


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Open Banking Innovator Token Scores $15 Million

Open Banking Innovator Token Scores $15 Million

In a round led by SBI Investment and Sony Innovation Fund, open banking payments platform company Token has raised $15 million in new funding. The Series B round also featured participation from existing investors Octopus Ventures, EQT Ventures, and Opera Tech Ventures, the VC arm of BNP Paribas. The company, which made its Finovate debut at FinovateSpring in 2015, now has $50 million in total capital.

“The market’s appetite for open payments accelerated dramatically last year as more merchants and payment providers have tuned into the cost and efficiency gains that they offer,” Token CEO Todd Clyde explained. “Token’s payment volumes have more than doubled every month since March and our platform is now processing live transactions through PSD2 APIs from over 600 banks in 14 countries across Europe.” He added that the investment was an affirmation that Token would continue to lead in the open payments space and will help fuel further development in the company’s technology.

An early innovator in the open banking payments space in the U.K., Token was one of the first companies in the U.K. to earn authorization from the Financial Conduct Authority (FCA) as a payment initiation and account information service provider (PISP, AISP). In 2018, Token was the first PISP to complete an end-to-end payment via a PSD2-compliant bank API.

“Token offers a credible alternative to card and wallet payments while helping merchants, PSPs, and banks offer streamlined UX’s that deliver better payment experiences for customers,” said Sony Innovation Fund Chief Investment Manager Gen Tsuchikawa. Token’s open payment and data services support the transition away from traditional payment methods and toward account-to-account payments. This not only helps lower the cost of digital payments; it also introduces a variety of use cases for open payments, from funding accounts and billpay to credit risk analysis and cash flow management. Combine this with what SBI Investment Director and Chairman Yoshitaka Kitao described as “Token’s unrivaled bank connectivity and depth in payment services” and you have a company Kitao called a “market leader” that “has continued to outperform the competition.”

Founded in 2015 and maintaining offices in London, San Francisco, and Berlin, Token brings Pan-European connectivity to more than 3,000 banks. The company’s partners include Sberbank, Konsentus, Caxton, and HSBC, which recently launched its online payment alternative, HSBC Open Payments.


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Cash Management Innovator MaxMyInterest Integrates with Redtail

Cash Management Innovator MaxMyInterest Integrates with Redtail

Cash management innovator MaxMyInterest has sealed a new integration deal with Redtail Technology, a leading client relationship management (CRM) firm. The integration will enable advisors and client service teams that rely on Redtail’s CRM to have one-click access to an onboarding solution that will give their clients access to preferred rates of up to 0.75% APY on their FDIC-insured cash deposits.

“We are excited to bring our cash management solution to Redtail users and honored to work with a company whose dedication to innovation in the advisor community matches our own,” MaxMyInterest Head of Partnerships and Business Development Michael Halloran said.

“Max provides advisors with a quantifiable value add by providing the ability to offer a high-yield solution for a typically overlooked and under-earning asset class,” Halloran added. “By integrating with Redtail, we are excited to help even more advisors grow their AUM, while their clients earn the highest yields in the market.”

A service of Six Trees Capital, MaxMyInterest made its Finovate debut at FinovateFall 2014. The company offers a way for individuals to optimize the interest they earn on their cash by providing a solution that automatically allocates cash balances to those banks offering the best interest rate at any given point in time. The technology ensures that balances are kept below the FDIC-insured limits at each institution, and features additional cash management functionality including monthly cash sweep and intelligent funds transfer.

Last year, MaxMyInterest announced an integration with Morningstar, combining its automated cash management technology with Morningstar ByAllAccounts’ data aggregation service. Last month, the company announced that veteran banking executive and fintech investor Jill Denham – founder and president of Authentum Partners – had joined MaxMyInterest’s advisory board.

“I see the MaxMyInterest team as true fintech innovators, dedicated to helping clients get the highest interest rates on insured deposits,” Denham said. “Their platform is notable in the manner in which the relationships they build between banks, depositors, and their financial advisors make all parties better off, and I’m excited to join and bring my expertise to their Advisory Board.”

Founded in 2013, MaxMyInterest is headquartered in New York City. Gary Zimmerman is CEO.

TrueLayer Taps the Power of Open Banking to Launch PayDirect

TrueLayer Taps the Power of Open Banking to Launch PayDirect

Financial app building platform TrueLayer has long been using the power of open banking to facilitate payment activities. Today, the U.K.-based company is taking another step to make the online payments experience even easier with the launch of a new payments product, PayDirect.

PayDirect combines open banking with Europe’s payment rails to offer a customizable solution for instant payments, instant payouts, and smoother payment reconciliation.

“PayDirect builds on our open banking expertise to streamline onboarding, pay-in and payout, to help operators deliver an experience that is fit for the digital age,” said the company’s Chief Product Officer, Ossama Soliman.

Because PayDirect relies on open banking and Europe’s fast payment rails, the solution circumvents many of the headaches associated with traditional card payments. Cards can expire, require manual entry, and are subject to spending limits. These hurdles generally result in an 85% success rate. PayDirect, in comparison, has a 96% success rate. PayDirect also eliminates chargebacks and reduces fraud by authenticating via biometrics directly with the consumer’s bank.

Here’s how the checkout experience works:

Financial services companies that use PayDirect benefit from a single interface for onboarding users, receiving instant deposits into their account, and providing instant withdrawals. Customers, on the other hand, benefit from low risk of fraud, faster refunds and withdrawals, less false positives during fraud checks, and a faster checkout experience.

Founded in 2016, TrueLayer is best known for its payments API that helps financial services companies provide online payments, bill payments, and account top-ups.

The company has offices in five countries across the globe, including London, Sydney, Milan, Hong Kong and Dublin. Francesco Simoneschi is co-founder and CEO.


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NCR Acquires Cardtronics in $2.5 Billion Deal

NCR Acquires Cardtronics in $2.5 Billion Deal

Cardtronics found itself at the center of a bidding war this past month, with NCR Corporation submitting the winning bid this week.

This comes after investment firms Apollo Global Management and Hudson Executive Capital initially agreed to buy the ATM operator last month. NCR agreed to a $2.5 billion deal, agreeing to purchase Cardtronics for $39 a share. This beat the bid from Apollo and Hudson, which totaled $2.3 billion at $35 per share. NCR was required to pay a termination fee of $32.6 million.

Cardronics CEO Edward H. West said that the deal is “a testament to the strength and value of Cardtronics, our talented team and customer base, and the complementary nature of our two businesses.”

NCR anticipates that Cardtronics’ Allpoint ATM network will complement its own payments platform and that combined they will connect retail and banking customers.

“This transaction accelerates the NCR-as-a-Service strategy we laid out at Investor Day in December, further shifts NCR’s revenue mix to software, services and recurring revenue, and adds value for our customers,” said NCR President and CEO Michael D. Hayford. “We have had a long-standing relationship with Cardtronics and its outstanding team… Simply put, we are better together.”

The deal, which has been approved by both companies’ Boards of Directors but is still subject to regulatory approvals and closing conditions, is expected to close in mid-2021. Once the deal is finalized, Cardtronics will become a privately held company.


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Financial Wellness App for Kids Goalsetter Secures $3.9 Million in Seed Funding

Financial Wellness App for Kids Goalsetter Secures $3.9 Million in Seed Funding

A black-owned, family-focused financial wellness app, Goalsetter, has raised $3.9 million in seed funding. The company said that the new funding will help it boost subscriber growth and enhance the Goalsetter offering, which includes a debit card (Cashola) and a financial literacy curriculum designed specifically for teens and youth.

The round was led by Astia, and featured participation from PNC Bank, Mastercard, US Bank, Northwestern Mutual Future Ventures, Elevate Capital, Portfolia Rising America, and Pipeline Angels, among other investors.

To be fair, “among other investors” is doing quite a bit of work. Goalsetter’s roster of angel investors is impressive, with National Basketball Association stars Kevin Durant, Chris Paul, and Baron Davis – as well as philanthropist Robert F. Smith, among the ranks. Also involved in the funding were actors Sterling K. Brown and Ryan Bathe.

Goalsetter, featured last fall as the Apple App of the Day, includes financial literacy modules that award users money for correctly answering questions on financial education topics (“Learn to Earn”), as well as a feature (“Learn Before You Burn”) that enables parents to freeze their child’s Goalsetter debit card if they have not completed their financial literacy lessons in a timely fashion.

Goalsetter is not only black-owned, it is female-run, as company founder and CEO Tanya Van Court underscored in the firm’s funding announcement. “As the only black-woman owned fintech company focused on the kid’s fintech space, we know how critical early finance education is to all kids in our country, and to black and brown kids in particular,” she said. Van Court emphasized the importance of raising children who are “smart spenders” rather than merely “conspicuous consumers,” and added that learning about financial education, saving, and investing are “the building blocks for achieving generational wealth.”

Founded in 2015 and headquartered in New York City, Goalsetter is partnered with Evolve Bank & Trust, which provides the company’s savings accounts. Goalsetter’s’ Cashola Prepaid Debit Mastercard is issued by MetaBank.


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Bryan Clagett Joins Moven as Chief Revenue Officer

Bryan Clagett Joins Moven as Chief Revenue Officer

Fintech veteran Bryan Clagett is making moves within Moven this year. Clagett was recently appointed Chief Revenue Officer of Moven after serving as an advisor to the New York-based company for six months.

“Bringing on Bryan was an essential next step in expanding our business maturity as we look to expand our U.S. market presence,” said Moven Founder Brett King. “Having worked on and off with Bryan for 10 years, I’m glad we finally snagged him at a time when our U.S. operations are accelerating rapidly and where COVID has created an extraordinary demand for digital differentiation in the retail digital banking space.”

Clagett’s fintech career started three decades ago, his most notable position being Chief Marketing Officer and Investor at Geezeo, where he served for ten years until the digital banking company was acquired by Jack Henry in 2019. During his tenure, Clagett helped Geezeo grow to more than 550 clients and achieve profitability.

Since his time at Geezeo, Clagett has served as an advisor to Conotext, Blip Labs, Procurity, and StrategyCorps.

“I’m extremely excited to join Moven to lead sales, marketing and partnership strategy as we evolve the company’s growth trajectory. Moven’s client-centric philosophy and emphasis on helping financial services via flexible and innovative, data-driven solutions made this a great fit for me. I’m looking forward to expanding into new markets, strengthening our relationships with our partners, and building the leading GTM function in our space,” said Clagett.

Moven’s appointment of Clagett comes after Moven made a major pivot in March of last year, dropping its B2C offering to focus on its enterprise arm that serves financial institutions. The new B2B approach has been flourishing in recent months, as banking-as-a-service tools have been gaining traction thanks to firms’ heightened focus on their digital presence.


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