This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.
Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
When Lending Club was founded in 2007, the startup aimed to serve as a place to help borrowers avoid dealing with banks. In a somewhat ironic move today, that same startup is becoming a bank itself.
The move is made possible through Lending Club’s acquisition of Radius Bank, an online-only community bank founded in 1987 with more than $1.4 billion in assets.
It’s a logical purchase. Both Lending Club and its U.S. competitor Prosper have struggled with the classic chicken and egg conundrum– they can’t lend money to borrowers without investors ready and willing to lend, and they can’t find people willing to lend without enough qualifying borrowers. By becoming a bank, Lending Club has now adopted a pool of borrowers while having access to customer deposits to lend to those borrowers.
The deal is subject to regulatory approval and is expected to close in 12 to 15 months.
Radius President and CEO Mike Butler called the acquisition “a perfect marriage.” He added that, “with LendingClub bringing the leading digital asset generation platform, and Radius contributing a leading online deposit gathering platform,” they are set up for “long-term success.”
“This is a transformational transaction that allows us to reimagine banking in a way that is free from legacy practices and systems and where the success of LendingClub is aligned with the success of our customers,” said Scott Sanborn, CEO of LendingClub.
Lending Club isn’t the only alternative lender with aspirations to become a bank. U.K.-based P2P lender Zopa is currently working on launching a bank of its own and small business lender On Deck Capital plans to seek out a bank charter this year.
Fraud detection and prevention company Breach Clarity announced this week it has developed a new platform to help financial service providers offer personalized protection for their customers.
The machine learning-powered platform, dubbed Breach Clarity Premium for Financial Services, offers two sets of tools, one for the financial services company and one for the end consumer.
“Financial institutions are in a bad spot when it comes to data breach fallout,” said Breach Clarity founder Jim Van Dyke. “These breaches, most of which they have zero control over, are coming fast and furious, yet the actual damage can take years to occur. We first developed Breach Clarity to help the consumer fight back against the routine theft of their personal information. Now, we’re equipping their financial providers with much greater intelligence to help them strengthen everyone’s financial health.”
Founded in 2019, Breach Clarity analyzes data breaches, scores them in real-time based on 1,000 factors, and offers ideas for protective measures. The database behind the consumer-facing tool includes more than 4,000 data breach incidents, a number that grows by 50 each week.
Breach Clarity Premium for Financial Services has multiple benefits for financial services and their customers. The new tool details the most effective actions both parties can take, based on the information that was compromised, to mitigate loss in the event of a breach. The offering also enables consumers to search for data breaches that impact them without leaving their bank’s website or mobile app.
Breach Clarity is headquartered in Walnut Creek, California. Van Dyke recently demoed Breach Clarity at FinovateFall 2019 in New York.
The company that has helped bring fintech innovation to e-commerce with its mobile point-of-sale (mPOS), card reading solutions now offers merchants a card of their own.
SumUp announced this week the launch of the new SumUp Card. In partnership with Mastercard, the new card will make business payments easier for merchants, giving them both faster access to their funds, as well as enhance their ability to monitor their accounts.
When merchant cardholders accept payments via their SumUp readers, the payments will now flow directly to their SumUp Card. The card guarantees next-day payouts including on weekends, has no upfront cost or monthly fee, and offers free overseas payments. Available initially in the U.K., Italy, Germany, and France, the SumUp Card will be expanded to other markets over the course of the year.
The card comes in the wake of consultations with the company’s SME partners, as well as a successful beta-test with more than 25,000 merchants. The partnership with Mastercard reprises a collaboration the two firms undertook last summer which was designed to boost the number of electronic payment acceptance locations in 27 markets in Europe. The company noted in its statement that the card makes SumUp a more comprehensive solution for SMEs by facilitating “both the making and taking of payments.”
“Since launching our first reader, we have been dedicated to empowering merchants so they can focus on making their business as successful as possible,” SumUp co-founder Marc-Alexander Christ said. “We had this in mind when we designed our latest product, with the SumUp Card being a smart solution so we can continue being the driving force behind small businesses across the globe.” He referred to the new offering as “a small card for big ideas.”
SumUp was founded in 2001. The small business payments facilitator offers a variety of solutions that provide merchants with inexpensive payment acceptance options wherever their business is. The U.K.-based company has raised more than $425 million in total funding, most recently securing €330 million ($356 million) in debt financing. An alumni of FinovateEurope 2013, SumUp forged a partnership with German challenger bank Penta in December, and collaborated with U.K. challenger bank Starling Bank in July.
Read more about challenger banks in Europe in our recent features on top challenger banks in Germany and how venture capital is impacting the growth of the industry across the continent.
As Finovate goes increasingly global, so does our coverage of financial technology. Finovate Global is our weekly look at fintech innovation in developing economies in Asia, Africa, the Middle East, Latin America, and Central and Eastern Europe.
Central and Eastern Europe
Dusseldorf, Germany-based apoBank partners with Avaloq.
German challenger bank N26 announces withdrawal from the U.K. market.
Sifted highlights the “fastest growing fintech startups in Germany.”
Middle East and Northern Africa
A partnership between Moven and STC Pay seeks to launch a new challenger bank in Saudi Arabia.
The biggest bank in the country by assets, the National Bank of Egypt (NBE), has joined the RippleNet payment network.
Wamda interviews more than 600 startups as part of its examination of pre-seed startups in the MENA region.
Central and Southern Asia
Uber establishes its Uber Money team at India’s Hyderabad Tech Centre.
Deal Street Asia looks at how fintechs in India are re-invigorating banking.
BusinessWorld reviews ways fintech in India can help “bridge the gap” between banks and the public.
Latin America and the Caribbean
In a round led by DOMO Invest, Brazilian P2P marketplace IOUU locks in $1.3 million in its latest funding round.
Chile-based investment platform Fintual teams up with Invermerica in new foray into Mexican market.
Brazilian fintech Bloxs Investimentos raises $690,000 in new funding to build out its collective investment platform.
Asia-Pacific
Vietnam’s central bank refuses to cap foreign ownership of e-payment companies at 49%.
Fintech News Singapore features “6 Agri-Fintech Startups in Asia to Follow in 2020.”
Thailand-based “crowdfunding bonds” fintech PeerPower announces pre-Series A round funding.
Sub-Saharan Africa
Nigerian fintech Aella Credit secures $10 million in debt financing.
CNBC Africa looks at how fintechs can help South African consumers avoid “credit traps.”
VentureBurn highlights the work of South African financial inclusion specialist Meerkat.
It’s a big week for Flywire. The global payments platform made a dual announcement yesterday that it closed a round of funding and sealed the deal on an acquisition.
The $120 million in funding brings Flywire’s total raised to $260 million. Goldman Sachs led the Series E round. The Massachusetts-based company will use the funding to digitize payments across education, healthcare, and travel.
“We are thrilled to lead the Series E round for Flywire”, said Ashwin Gupta, Managing Director at Goldman Sachs’ Merchant Banking Division. “They bring together a unique blend of a payments network, platform and vertical-specific solutions to completely digitize the payments experience for their clients across industries. We look forward to continuing to help accelerate Flywire’s growth.”
Along with the investment news, Flywire unveiled that it has acquired healthcare billing and payment solutions company Simplee for an undisclosed amount. The acquisition blends Flywire’s tech platform with Simplee’s solution that focuses on patients and providers. The combined companies power four of the top ten U.S. healthcare systems and together process $10 billion+ in payments per year.
“Flywire is uniquely built on a global payments network, which is the cornerstone of how we move billions of dollars across 200+ countries and 150 currencies, and an industry-leading payments platform” said Flywire CEO Mike Massaro. “This digital foundation enables us to develop vertical-specific applications that make payments more efficient and cost-effective for our global clients. The Simplee acquisition improves patient engagement and healthcare affordability and extends these capabilities to a broader customer base.”
Flywire, which originally launched has peerTransfer in 2009, has processed $12 billion+ in payments for 2,000 clients. The company has office locations at its headquarters in Boston, as well as Chicago, London, Manchester, Valencia, Shanghai, Singapore, Tokyo, Cluj, and Sydney.
Payment processing company Cloverannounced a new capability for dine-in restaurants to offer their guests. The Fiserv-owned company launched Scan to Pay, a tool that enables diners to pay for their meal at their table without the help of their server.
Available on Clover Dining, Scan to Pay prints a QR code on the customer’s itemized bill. Once guests scan the code with their iPhone they can pay via Apple Pay without opening a separate payment app. After the transaction is complete, the server sees a notification on their Clover terminal that their customer has paid. This allows the customer to leave the restaurant without further interaction.
“As restaurants look for new ways to adapt to consumer trends and offer quality dining experiences, Scan to Pay puts the power of when to pay and leave into the hands of the restaurant guest, creating a better dining experience and reducing extra tasks for servers,” said John Beatty, co-founder of Clover. “Scan to Pay represents another step forward for Clover as we continue to build out our core technology capabilities and provide additional solutions that can help merchants grow their businesses and delight their guests.”
Restaurants using Clover Dining can access Scan to Pay without additional cost, though they are charged card not present (CNP) rates for Scan to Pay transactions.
While the potential user base is limited to iPhone users and further limited to those that have set up ApplePay, the user base for payment services such as Scan to Pay is growing. 9to5Mac recently reported that Apple Pay is used for 5% of card transactions across the globe. And by 2025, that number could reach 10%.
Clover was founded in 2010 and was acquired by First Data in 2013. First Data, in turn, was acquired by Fiserv in July of last year. Clover, which demoed at FinovateSpring 2012, offers a range of card present and CNP technologies and processes more than $100 billion in payment volume each year.
Digital banking and client lifecycle management solutions provider Fenergobrought in $80 million in funding today, bringing its total raised to $155 million and boosting its valuation to $800 million.
The funds come from new investor ABN AMRO Ventures and existing investor DXC Technology, which have taken a 10% stake in Fenergo. “We are very happy to add Fenergo to our investment portfolio,” said Hugo Bongers, Director at ABN AMRO Ventures. “This investment will contribute to ABN AMRO’s strategic priority to build a future proof bank and fight financial crime. We are impressed with the management team and solution Fenergo offers. In addition, this gives us additional exposure to a group of tier one investors.”
Fenergo will use the funds to bolster its products and hinted that the money will also fuel future company and product acquisitions.
Founded in 2009, Fenergo aims to help financial institutions revamp their client onboarding process by creating a seamless user experience while maintaining regulatory compliance. Demand for the company’s modern onboarding tools can be seen in the growth of its bottom line; last year, Fenergo grew its revenue by 21%.
The Dublin-based company boasts 70 clients, including two of its investors, ABN AMRO and BNP Paribas. Also on the list are ANZ, PNC, Banc of California, National Australia Bank, Canadian Imperial Bank of Commerce, UBS Asset Management, Anglo Gulf Trading Bank, Royal Bank of Canada, First Abu Dhabi Bank, Tricor, Exos Financial and Mizuho.
Mastercardannounced today it has received approval from the People’s Bank of China (PBOC) to set up a domestic bankcard clearing institution in China. PBOC has given Mastercard, along with its partner NetsUnion Clearing Corp (NUCC), one year to begin clearing activity in China.
This move comes after a long period of restricted payment card operations in China. For the past ten years, foreign payment card companies could only tap into China’s credit card market via partnership with state-run UnionPay.
“China is a vital market for us and we have reiterated our unwavering commitment to helping drive a safer, more inclusive and seamless payments ecosystem for Chinese consumers and businesses,” said Mastercard President and CEO Ajay Banga. “We remain focused on working with the Chinese government and local partners to grow the overall payments infrastructure.”
According to Bloomberg, which estimates the payments market in China to be $27 trillion, the country has 8.2 billion bank cards in circulation 90% of which are debit cards.
Thanks to a recent trade deal with the U.S., China has ended the monopoly of state-run payments and so far has already opened its doors to American Express and PayPal after the payments company took a 70% stake in China-based GoPay.
For all the excitement about challenger banking ex-U.S., there may be more going on in the alternative banking scene in America than many think.
Mobile banking company Varo Money, for example, announced this week that it has received approval for deposit insurance from the Federal Deposit Insurance Corporation (FDIC). This is a significant step on the company’s journey toward obtaining a national bank charter and moves Varo to the final stage of the approval process, the company said in a statement.
Varo Money CEO Colin Walsh said that the goal of earning a license to operate nationally was “part of Varo’s vision from the very beginning.” Walsh noted that the bank charter would help Varo also meet its goal of boosting financial inclusion. “Becoming a fully chartered bank will give us greater opportunity to deliver products and services that positively impact the lives of everyday people around the country,” he said.
Founded in 2015 and headquartered in San Francisco, California, Varo Money offers a mobile banking account with high-yield savings, direct deposit, and no account fees. The company had a big 2019 – forging partnerships with Galileo Processing, Socure, Cachet Financial, Bancorp Bank, and iHeartMedia in the second half of the year alone. Varo also raised a significant chunk of change in 2019 – picking up a $100 million investment from Warburg Pincus, Gopher Asset Management, and The Rise Fund that drove the company’s total capital to more than $178 million.
En route to earnings its national banking charter, Varo still needs to complete certain organizational requirements, as well as meet terms of both the OCC’s (Office of the Comptroller of the Currency) and the FDIC’s Federal Reserve membership. The company said that once it earns its charter it will expand its offerings to include products like credit cards, loans, and savings solutions.
Top U.K.-based challenger bank Starling Bank raised $77.5 million (£60 million) from existing investors Merian Global Investors and JTC.
Today’s investment brings Starling’s total funding to $417 million (£323 million).
“The support of our existing investors represents a huge endorsement of our business strategy, as we continue to ramp up our growth,” said Anne Boden, Starling Bank founder and CEO. “We’re constantly innovating and have big ambitions to turn Starling into a world-leading digital bank.”
Starling will use the funding to support “rapid expansion” efforts and to create products and services that compete with traditional financial institutions. Helping motivate its employees to push for this expansion, the bank is awarding shares to its staff.
“We could not do this without the support of our 800 employees, who work so hard to provide a better banking experience for our customers, giving them more control over their finances. So I’m thrilled to be giving shares to them,” said Boden.
Since launching its banking app in 2017, Starling has amassed 1.25 million accounts and holds $1.61 billion (£1.25 billion) in assets under management. The bank was founded in 2014 and is headquartered in London with offices in Southampton, Cardiff, and Dublin.
Blockchain-powered payments platform Paystand has raised $20 million in Series B funding. The investment, which the company will use to grow its products and services, as well as sales, marketing, and engineering teams, featured the participation of both new and existing investors.
“We made a promise to reboot commercial finance because it’s insecure, inefficient, and built on trustless networks and technology,” Paystand CEO Jeremy Almond said. “Today markets another step towards realizing that vision and transforming enterprise finance.”
Paystand seeks to do for complicated commercial payments what Venmo has done for P2P transactions. By digitizing and automating a company’s cash cycle, Paystand’s payments-as-a-service platform helps businesses become more capital efficient, streamlines back office operations, and allows them to offer innovative payment experiences.
Paystand participated in our developer’s conference, FinDEVr Silicon Valley, in 2014. With offices in both Scotts Valley, California, and Guadalajara, Mexico, the company has added 80 new large enterprise customers in the last 24 months.
Last week we shared news of FinovateEurope alum Opentech and its partnership with Mastercard.
Now we can add that Swiss Bankers Prepaid Services has teamed up with Opentech to launch its latest money sending service, Send. The new offering is based on Opentech’s OpenPay Send solution which, as we learned last week, leverages the Mastercard Send platform to give users a convenient, “use-case agnostic” way to transfer money to locations around the world.
Swiss Bankers’ Send can be readily activated after a quick KYC process that only takes a few minutes via the mobile app. The solution is is available to all Swiss citizens who are Swiss Bankers cardholders.
Highlighting the rise of P2P payments as a preference for both domestic and international payments, Swiss Bankers CEO Hans-Jorg Widiger praised the partnership with Opentech. “Seizing this opportunity is a crucial step for us to remark and consolidate our positioning as a customer-driven, trustable and innovative company,” he said. “With Send we faced this challenge, relying on our long-dated partnership with Mastercard and Opentech to provide our customers with a distinctive solution in line with our quality standards.”
Fiserv Partners with Hong Kong Digital Bank Pioneer ZA Bank – ZA Bank, will use the company’s VisionPLUS global payment software, which supports the entire card payment lifecycle from origination and issuance to settlement and customer service.
Worldline to Acquire Ingenico in $8.6 Billion Deal – The combination of Worldline and Ingenico will create the world’s fourth largest payment services provider with 20,000 workers in 50 countries serving nearly one million merchants and 1,200 financial institutions.
Also on Finovate.com
Everything Fintech at Davos 2020 – We combed through the agenda to bring you a view of the discussions through a fintech lens. Here’s a summary of some of the most interesting fintech-related topics covered at the global event.
Finovate Launches New Gender Diversity Stream at FinovateEurope – FinovateEurope is innovative for us in a number of ways. This year we will debut our Women in Fintech stream.
Fintech and the Case for Senior-Based Solutions – Ensuring that the online and mobile worlds are a safer place for seniors is one of the important contributions that technology can make.
Can Amazon Help Goldman Sachs Get its Groove Back? – According to reporting in both the Financial Times and on CNBC, Amazon and Goldman Sachs are discussing a partnership that would enable the investment bank to offer loans directly to merchants via Amazon’s platform.
Business spending and expense management platform Divvy is opening up new financing possibilities this week for its business clients with the launch of Divvy Capital.
The new funding option is done via invoice financing. Divvy enables its business customers to “float” their invoices for terms of one, two, or three months. Repayment is straightforward and there is a single, flat fee with APRs ranging from 10.8% to 11.4%.
The Utah-based company describes the new offering as a “flexible, lightweight” funding option that is separate from the Divvy Credit Card, which gives businesses both a physical and virtual Mastercard that offers 1% cash back plus 15% to 50% off select travel expenses.
https://youtu.be/2yVnRpFNrmo
Since all of Divvy’s current business clients are automatically pre-approved, there is no need to wait on credit approvals and funds are disbursed in near-real time. The company has been testing the new financing model for the last six months and it is now opening it up to its wider customer base.
“Divvy Capital is our most important public move in that direction,” the company stated in its press release, adding, “but stay tuned—2020 is full of many more big announcements to come.” A look at the Divvy Capital page reveals that the company is planning to launch short-term loans of up to $50,000 for terms of up to 12 months and and option that allows businesses to float a portion of their credit card balance for a fixed fee.
