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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
What happens when you combine two of fintech’s hottest trends– buy now, pay later (BNPL) and banking-as-a-service? Afterpay is about to find out.
That’s because the Australia-based company has inked an agreement with Westpac to become the bank’s first client for its digital banking-as-a-service offering. The deal will allow Afterpay to offer WestPac checking accounts, savings accounts, and cash flow management tools to its 3.3 million Australian customers.
Afterpay will make the new banking products available in the second quarter of next year.
“The platform allows us to combine our banking experience with the innovation of our partners to support new customer experiences,” said Westpac CEO Peter King. “We look forward to working with Afterpay to deliver new products and services.”
By selling a banking-as-a-service offering, Westpac is finding a way to work alongside third party fintechs. Instead of competing with them, the bank will not only profit from them by selling its banking-as-a-service tools, but also acquire additional client accounts in the process.
Founded in 2014, Afterpay helps merchants to allow shoppers to pay for their purchases in four interest-free installments over a short period of time. The service is offered by more than 50,000 retailers across the globe and is used by more than 9 million shoppers. The company is listed on the Australian Stock Exchange under the ticker ASX and has a market capitalization of almost $29 billion. Anthony Eisen is CEO.
Today’s news comes a week after the Australian Transaction Reports and Analysis Centre (Austrac) cleared Afterpay from anti-money laundering accusations.
A new merger in the payments space will bolster the accounts receivables and payments solutions available to small and medium businesses. Versapay, a customer-centric order-to-cash solution provider based in Canada, announced this week that it has completed its merger with Twinsburg, Ohio-based, payment services provider Solupay. The combined entity will operate as Versapay in name and will be led by the company’s current CEO Craig O’Neill.
Financial terms of the deal were not disclosed. But the merger does include a pair of Solupay subsidiaries: payment processors ChargeLogic and 2CP. Solupay’s technology simplifies payment acceptance, provides click-to-pay invoicing, and automates AR processes, and will give Versapay additional opportunities to serve its SME customers.
“Simplifying invoice presentment and reducing the cost of accepting digital payments are the building blocks for a customer-centric order-to-cash process,” O’Neill said. “We’re excited to welcome the complimentary capabilities of the Solupay team and its innovative integrated payments and AR automation technology as we seek to better serve businesses through their digital payments transformation.”
Founded in 2006 and headquartered in Toronto, Ontario, Canada, Versapay has a worldwide network of 8,000 customers and 50,000 users, accounting for $10 billion in payment volume a year. The company’s solutions help businesses accelerate cash conversion, automate manual processes, as well as reduce costs and boost efficiency.
Versapay was acquired by Great Hill Partners in February in a deal that valued the company at $96 million (CAD $126 million).
Accounts receivable automation company Billtrust announced today it agreed to a merger with South Mountain Merger Corporation, a publicly-traded special purpose acquisition company (SPAC).
The combined entity, which will operate under the name BTRS Holdings Inc., will be a publicly traded company with a value of approximately $1.3 billion. BTRS is expected to trade on The Nasdaq Stock Market under a new ticker symbol.
Billtrust’s management team, which is led by Flint Lane, Founder and CEO, Steve Pinado, President, and Mark Shifke, CFO, will continue to lead the Company.
“As we begin our journey as a public company, we are thrilled to partner with the South Mountain team and know we will benefit from their extensive industry experience,” said Lane. “We believe accounts receivable (AR) is ripe for innovation, and together we will continue to invest in opportunities to scale the business, growing both organically and inorganically, as we seek to tackle the large total addressable market. As a leader in AR automation, we believe Billtrust is well-positioned to own a disproportionate share.”
Founded in 2001, Billtrust and has since worked to create a suite of solutions that simplify and automate B2B commerce through cloud-based software and integrated payment processing solutions. In 2018, the company launched its Business Payments Network (BPN). The network connects buyers, suppliers, and financial institutions to simplify and streamline electronic payment acceptance.
The transaction is expected to close in early 2021 and is subject to stockholder approval and closing conditions.
Cloud banking technology provider Thought Machine has been tapped by U.K.-based Curve to power its new buy now, pay later (BNPL) offering that allows customers to pay for purchases in installments.
The new product, Curve Credit, allows users to spread their payments over three, six, or nine month periods. Thanks to Thought Machine’s core platform and Curve’s Go Back in Time technology, credit can be applied both retrospectively and prospectively.
The retroactive payment functionality will rely on the smart contracts product-building system in Vault, Thought Machine’s cloud native core banking engine.
“Thought Machine is the only technology that allows us to deliver the flexibility and manageability we desired for our customers,” said Head of Curve Credit Paul Harrald. “Curve Credit’s ethos is about responsible lending and responsible borrowing. Alongside Curve OS, this three-way dynamic will be able to give each customer the clearest possible terms via a simple and beautiful product and experience.”
Founded in 2014, Thought Machine provides core banking technology for tier one banks, neobanks, and fintechs across the globe. The company counts Lloyds Banking Group, Standard Chartered, Atom bank, Monese, and SEB among its clients. Thought Machine’s funding total was boosted to more than $148 million in July of this year after the company closed a $42 million round.
Curve, which landed a partnership with Samsung Pay in August, enables users to consolidate all of their cards onto a single smart payment card. The company was founded in 2015 and has raised just over $74 million.
Two of the biggest phenomena in fintech worldwide: the rise of open banking and the growth of digital-first (and digital-only) banking, continue to make an impact on fintech as well. One example of that is today’s news that NYMBUS has partnered with PeoplesBank to help the Massachusetts-area financial institution launch its digital-only extension, ZYNLO.
“Only NYMBUS provided us a comprehensive strategy to quickly introduce a new digital-only effort,” PeoplesBank Brian Canina, Chief Financial Officer said. “Backed by and running in parallel to our established institution with 135 years of experience in creating satisfied customers, ZYNLO delivers the ideal combination of digital banking convenience and security that today’s consumers depend on.”
PeoplesBank’s new offering is a no-fee savings account that includes features like Zyng, a round-up savings benefit that rounds up debit card purchases to the nearest dollar and adds the difference to the customer’s ZYNLO account. The company is currently offering a 100% round-up match for the first 100 days, with a 10% match on debit card transactions afterwards. ZYNLO also offers Early PayDay and daily balance and payment alerts, and all deposits are insured via FDIC and DIF.
Today’s news represents an extension of the partnership between the two companies. At the beginning of the year, PeoplesBank announced that it would deploy NYMBUS’ SmartMarketing and SmartOnboarding platform to boost revenue growth and enhance customer engagement. With more than $3 billion in assets under management PeoplesBank is the largest community bank in Western Massachusetts, with 20 banking centers in Massachusetts and Connecticut.
Founded in 1885 and headquartered in Holyoke, Massachusetts, PeoplesBank recently announced that its latest new branch in South Hadley will feature VideoBanker ITMs, a combination of an ATM and a virtual teller that Canina said mitigates the need for drive-up teller windows. The innovation became a necessity when the municipality issued a zoning restriction that required the new branch building to be located closer to the street, making a traditional drive-up window problematic.
Most recently demonstrating its SmartLaunch digital banking solution at FinovateFall last year, NYMBUS has since inked partnerships to deploy the technology with Centier Bank, BankMD, and Pacific National Bank. Over the summer, NYMBUS secured $12 million in growth funding, taking the company’s total capital to more than $45 million. That same month, NYMBUS added Jim Modak as President and Chief Financial Officer.
In September, the company named former Kony DBX DVP and General Manager Jeffery Kendall as CEO. Kendall replaced former CEO and company founder Scott Killoh, who will continue with NYMBUS as executive chairman of the company’s board of directors.
Lending and marketing automation platform CuneXusannounced this week it has agreed to an acquisition by CUNA Mutual Group. Terms of the deal were not disclosed.
CUNA began its relationship with CuneXus in 2017 when its venture capital entity, CMFG Ventures, became an early-stage investor in the Santa Rosa, California-based company.
“We are continuing our journey into a more diverse, digital-first world,” said Robert N. Trunzo, president and CEO of CUNA Mutual Group. “Our company is committed to using technology to enhance consumers’ access to financial solutions that work for them and create a more equitable financial system and society. This is a top priority for all of our core businesses.”
CuneXus works with more than 140 financial institutions to help lenders maximize customer relationships by offering turn-key access to its application-free consumer lending tool, cplXpress. The company helps banks offer pre-approved, “click-to-accept” consumer loans to customers that are personalized to appear where and when they need them.
“CuneXus is on a strong growth trajectory, and adding their expertise and product solution to our company portfolio allows us to maximize its growth potential and enhance our long-standing efforts to make a brighter financial future accessible to everyone,” Trunzo added.
Founded in 2008, CuneXus has raised $6.7 million.
“We are genuinely excited to join the CUNA Mutual Group family,” said CuneXus CEO Dave Buerger. “Our capabilities and culture align very well, and we believe we can greatly enhance CUNA Mutual Group’s digital evolution in the lending space.”
For workers in the gig economy, getting paid as quickly as possible is a critical way to manage – to say nothing of survive on – an often-irregular source of income. And with the onset of the COVID-19 crisis, even those working in the traditional, 9-to-5 economy are feeling new levels of financial anxiety.
Responding to this challenge is Clair, a New York-based startup founded last year by Nico Simko (CEO), Erich Nussbaumer (CPO), and Alex Kostecki (COO). The social-impact fintech believes that workers should have access to their wages, without any additional fee or charge, at the end of the work session rather than at some arbitrary point in the future. This week, the company announced a $4.5 million seed fundraising that will help it fulfill its mission of enabling workers to “freely access money they’ve already earned,” said Simko in a statement.
“There are more payday lenders than McDonald’s in the U.S. that charge on average more than 300% annual interest on loans,” he said. “So we have one simple vision: it’s time for change.”
The round was led by Upfront Ventures and featured participation from Founder Collective and Walkabout Ventures. Also involved in the investment were Michael Vaughan, former COO of Venmo, and Paul Appelbaum, founder of Seamless. Combined with $55,000 in pre-seed funding the company picked up in the fall of last year, Clair’s total capital adds up to over $5 million.
Clair combines digital banking functionality – complete with savings account and debit card – with an Instant Pay Access feature that mitigates the temptation workers may feel to resort to high-interest payday lenders. Workers at participating businesses sign up for the service as they would for direct deposit. Once onboarded, they can request free advances on a portion of their earned income via the Clair app (or a partnering app). The advance is loaded onto a Clair debit card and the amount is deducted from the worker’s account on the subsequent payday.
According to Clair, Instant Pay Access provides a reduced reliance on payday loans and more income security in the event of emergency for workers, and turnover reduction and lower check printing costs for businesses. Upfront Ventures partner Aditi Maliwal, who sits on the Clair board of directors, praised the company’s business strategy of avoiding high customer acquisition costs by “creating a product embedded in other services that workers already use.” Simko echoed this point, highlighting not just Clair’s value to SME payroll operations, but also the value that fintechs bring to small businesses more generally.
“With small business employees making up nearly 50% of the country’s workforce, employers often don’t have enough scale to offer better benefits on their own, so they look towards their software providers,” Simko said. “By enabling these providers, we are bridging a gap and empowering them with functionalities their users want.”
Stripe has been partnered with Nigeria-based Paystack for quite some time, even leading Paystack’s Series A financing round in 2018. Today Stipe unveiled it is taking things a step further.
The San Francisco-based company has agreed to acquire Paystack for an undisclosed amount. Additional terms of the deal were not disclosed but Stripe made it clear that Paystack will operate independently, growing its operations in Africa and adding more international payment methods.
“This acquisition will give Paystack resources to develop new products, support more businesses and consolidate the hyper-fragmented African payments market,” said Matt Henderson, Stripe’s business lead in EMEA. “We can’t wait to see what they will build next and how their growth can turbocharge the African tech ecosystem.”
In the video below (which is well-worth watching) Paystack Co-founder and CEO Shola Akinlade describes how the company got its start and why it chose to align with Stripe.
Stripe will eventually embed Paystack’s capabilities into its Global Payments and Treasury Network (GPTN), a platform that moves money across 42 countries.
Paystack, which counts 60,000 business clients and processes more than half of all online transactions in Nigeria, plans to expand across Africa. The company recently launched a pilot with businesses in South Africa.
As for Stripe, today’s move furthers its geographic expansion efforts that have been on the rise as of late. In the past year-and-a-half the company has added 17 countries to its platform. Stripe Co-founder and CEO Patrick Collison told TechCrunch that there is “enormous opportunity” in Africa. “In absolute numbers, Africa may be smaller right now than other regions, but online commerce will grow about 30% every year. And even with wider global declines, online shoppers are growing twice as fast. Stripe thinks on a longer time horizon than others because we are an infrastructure company. We are thinking of what the world will look like in 2040 to 2050.”
Stripe recently closed a $600 million round of funding and is valued at $36 billion.
SoFi has spent the past few years broadening its focus. What launched as an alternative lending company has emerged as a platform that provides a deeper breadth of banking services including insurance, checking accounts, credit score monitoring, investing, estate planning, and small business financing.
After building all of these tools, SoFi began focusing on building something different– community. The fintech offers a membership program with a range of perks including career coaching and financial planning.
Today, the company is leveraging its community in the launch of social trading and investing features. The new capabilities allow users to share their investment portfolios and discover and follow the holdings, watchlists, and activity of fellow members who opt in to the feature.
“According to SoFi’s research, about 70% of SoFi Invest member respondents indicated that they regularly (at least weekly) discuss their investments with family members, peers, or colleagues,” said SoFi CEO Anthony Noto. “Our new social investing features not only help us live up to our name of Social Finance, but provide ways for investors to see specifically what members on the platform are doing with their investment decisions, discover new investment ideas, and see how they stack up in their investing performance. Given the importance of investing early and consistently, we are thrilled to be able to provide a more informative, engaging, interactive mobile investing experience rooted in building better investing habits.”
To encourage social interaction, SoFi’s new tools allows users to comment on and react to the others’ trades and compare their performance on dynamic leaderboard.
For privacy purposes, participation is optional and members are not automatically enrolled. Additionally, the amounts of investment portfolios are hidden from other users.
If you’ve studied fintech for any length of time this should sound familiar. U.K.-based eToro launched its CopyTrading platform in 2011. This social investing platform is different from SoFi’s in that it pays top investors when others copy their trades.
When it comes to payment and savings account services designed for minors, most large banks have stayed on the sidelines. In fact, much of the development has come from fintechs that layer kid-friendly tech on top of existing bank accounts.
This bank-fintech partnership is exactly what Chase is relying on for its new bank account for kids that it is launching this week in collaboration with Greenlight, a company that provides financial tools for children. The new offering, Chase First Banking, aims to help parents manage allowances, complete and check off chores, monitor spending, and help kids save towards a goal.
“Families are juggling so many more responsibilities today than ever before,” said JPMorgan Chase Head of Digital for Consumer and Community Banking Allison Beer. “To help, we’ve made it easy for parents to manage kids’ allowances, keep track of chores and teach important financial skills from within the Chase Mobile app.”
The accounts have three features that encourage kids to earn, spend, and save. The Earn function allows parents to set allowances and assign chores and allows the child to check off when each chore has been completed. The Spend tool provides kids with their own prepaid debit card that they can use to shop at stores that their parents have approved. Parents have ultimate control of the card and can lock or freeze it at any time. The Save function helps the child set aside money toward a goal and allows parents to move funds, as well.
Chase First Banking accounts, which are aimed at grade school children, are available for free to Chase retail deposit account customers. The bank already offers checking and savings accounts tailored to high school and college-aged users.
Founded in 2014, Greenlight competes with startups such as Oink and FamZoo. In addition to the Earn, Spend, and Save features offered with Chase, Greenlight’s B2C offering, which costs $5 per month, also offers a Give tool and will soon launch an Invest feature. The company rebranded earlier this year which helped it double its growth and set it on track to double again by the end of the year. Late last year Greenlight raised $215 million. The company is valued at $1.2 billion.
When we asked a dozen-odd fintech founders and CEOs what they thought was a bigger deal: AI or Bitcoin, during our FinovateFall 25 in 5 Q&A series, the number of respondents more excited by the former than the latter was sizable. But bitcoin fans made their preference known, suggesting that the brightest days for cryptocurrencies were definitely still ahead of us.
We suspect those bitcoin bulls were buoyed by this week’s news that digital payments company Square has invested $50 million in bitcoin. The approximately 4,709 bitcoins purchased by the San Francisco, California-based company represent a fraction of Square’s total assets – around one percent, as of the end of Q2 2020 – but it is not the first time the company has expressed interest in the cryptocurrency. Via its Cash App, Square has offered bitcoin trading since 2018, and a year later, the company launched Square Crypto, a unit dedicated to supporting open source work on bitcoin. But this week’s investment marks the firm’s first financial investment in BTC.
Square CFO Amrita Ahuja explained the investment in part by expressing optimism about bitcoin’s adoption worldwide, saying that it has “the potential to be a more ubiquitous currency in the future.” Ahuja added that Square anticipated participating in the adoption of bitcoin “in a disciplined way.”
It is likely worth noting that Square founder and CEO Jack Dorsey is a big supporter of bitcoin. In 2018, Dorsey said he believed bitcoin – or a similar cryptocurrency – would become the world’s single currency at some point in the not-too-distant future. CNBC’s coverage of Square’s investment noted that other tech-savvy fintechs, such as Chamath Palihapitiya’s Social Capital use cryptocurrencies like bitcoin as a hedge.
As the Black Lives Matter-inspired social justice movement swept through the Western world this summer, corporations went into overdrive with efforts to show their support for ending racial discrimination. Many of these initiatives were outwardly directed toward potential customers, potential future employees, investors, the media, the public at large … But many of these attempts to show support were more inwardly directed, with companies encouraging their own workers to make their concerns with regard to social justice issues known – even, if not especially, in the workplace.
Unique among this trend was Coinbase, whose CEO Brian Armstrong not only took a different tack to politics in the workplace, but also put the company’s money behind its Keep Your Politics to Yourself policy. Armstrong made headlines weeks ago when he wrote in a blog post that, because Coinbase was a “mission-focused” company, “We don’t engage here when issues are unrelated to our core mission, because we believe impact only comes with focus.” Moreover, he added that if employees disagreed with Coinbase’s policy of leaving politics at the front door, he was happy to offer them a relatively generous severance (including up to six months of pay depending on tenure) if they decided to leave.
“Life’s too short to work at a company that you are not excited about,” Armstrong wrote, requesting his employees decide whether to stay or go by the end of September. And with Armstrong’s Wednesday deadline come and gone, it appears that 60 workers, approximately 5% of the Coinbase’s workforce, have taken the deal.
The move has been controversial, with others in the technology community – including Jack Dorsey of Square and Twitter – suggesting that a healthier environment could be achieved if companies like Coinbase embraced the challenge of these kind of conversations. But, at this point, Armstrong seems at a minimum happy that the policy did not result in what would have easily been the worst possible outcome. “I’ve heard a concern from some of your that this clarification would disproportionately impact our under-represented minority population at Coinbase,” Armstrong wrote in a follow-up blog post. “It was reassuring to see that people from under-represented groups at Coinbase have not taken the exit package in numbers disproportionate to the overall population.”
It will be worth watching to see if other companies – in or out of tech – take a similar strategy.
Venmo is one step closer to being a full-service bank competitor with today’s news. The PayPal-owned company is rolling out a credit card offering that is available to select customers starting this week.
The Visa-branded card, which is issued by Synchrony Bank, offers many features one would expect to pair with a mobile-first account, such as an app-based virtual card for online shopping, tools to track spending and rewards, and the ability to pay off the card balance from within the app. The cards, which pander to a mostly millennial user base, also offer five unique color designs.
One feature specific to Venmo’s new credit card is the use of a QR code printed on the card. Similar to Venmo accounts, users can scan their friends’ unique QR code to send or request money. This QR code technology, along with an embedded RFID chip that enables users to tap to pay, provides an (almost) contactless payments.
Another unique feature is the way the Venmo card handles rewards. Instead of offering a pre-determined rewards category or even allowing users to choose which category they’d like to receive rewards for, Venmo rewards consumers based on the categories in which they actually spend.
To do this, the company separates customers’ spending into categories such as dining, travel, bills, health and beauty, grocery, gas, transportation, and entertainment. Venmo rewards users 3% cash back for purchases made in the category in which they spend the most, 2% cash back for purchases in the second-highest spending category, and 1% cash back on everything else. The rewards cash is automatically transferred to the user’s Venmo account at the end of each period.
The card adds to Venmo’s existing offerings, including a robust P2P payments ecosystem and its Mastercard-branded debit card launched in 2018. Venmo plans to market the new credit card to its 60 million active users, a built-in audience comprised of its target market.
