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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Chinese conglomerate Ant Financial has purchased a minority stake in Sweden’s e-commerce payments innovator Klarna. The terms of the investment were not disclosed, but the company said that the funding amounts to a 1% stake in Klarna. The most recent assessment of Klarna, based on a $460 million funding round in 2019, puts the company’s valuation at $5.5 billion.
“Alipay, and the wider Alibaba Group, have truly set the global pace on retail innovation and the app economy,” Klarna CEO Sebastian Siemiatkowski said. “We are delighted in this confidence shown in Klarna in defining the future of payments and shopping and are very much looking forward to working together further in the future.”
The investment comes as a tonic in the wake of Klarna’s first annual loss of $113 million in 2019. It also represents a deepening of the partnership between the two firms that will make more of Klarna’s buy now pay later solutions available to consumers and merchants in the Alibaba ecosystem. This includes more integration between Klarna and Alibaba’s Alipay which, via AliExpress, Alibaba’s retail online marketplace, leverages Klarna’s e-commerce solution.
“At the heart of this cooperation between Klarna and Alipay is a shared ambition of innovating truly superior shopping experiences and creating destinations of inspiration for consumers across the world,” Siemiatkowski said.
More than 200,000 merchants and e-commerce platforms around the world are powered by Klarna technology. The company’s partners include IKEA, Adidas, Spotify, and Expedia Group, among many others, and in 2019 alone, Klarna added more than 75,000 new merchants to its platform. Founded in 2005 and a Finovate alum since its debut at FinovateSpring in 2012, Klarna has 2,700+ employees and is live in 17 countries. Late last month, the company announced that Klarna had reached the seven million customer milestone and 1.6 million app downloads.
Investment research firm Morningstar announced today it has agreed to acquire PlanPlus Global, a Canada-based financial planning software firm that was founded in 1990.
The Chicago-based company is eyeing PlanPlus Global not only for its financial planning and risk profiling software but also for its geographic location. Morningstar, which just months ago agreed to buy Australia-based AdviserLogic, has been seeking to expand its financial planning services to advisors across the globe.
Morningstar Canada President and CEO Scott Mackenzie said, “This is an investment for growth in the financial-planning arena, and we look forward to the rich expertise and long-standing relationships PlanPlus Global employees will bring to the Morningstar family.”
Morningstar will offer PlanPlus Global’s FinaMetrica Profiler as a standalone product but will also integrate it into its existing solutions, including Morningstar Advisor Workstation and Morningstar Enterprise Components. Morningstar will also use PlanPlus Global’s financial-planning solution, ProPlanner, to bolster its current offerings in Canada.
“When it comes to finding a large, strategic fintech partner that can help us scale our solutions in the marketplace and enhance the value to our users globally, Morningstar is the perfect fit,” said Shawn Brayman, founder and CEO of PlanPlus Global. Brayman and his team of 40 employees will join Morningstar’s workforce of 5,230.
Terms of the deal, which is expected to close next quarter, were not disclosed.
Digital financial services company Wirecard is partnering with Xolo (formerly LeapIN) this week to offer a more robust set of banking services for gig economy entrepreneurs.
Under the agreement, Xolo, a platform that helps entrepreneurs launch and run micro-businesses, will bolster the banking and accounting tools on its existing platform. The company will leverage Wirecard’s banking license to allow its 30,000 users to open a business bank account online within 48 hours, receive a debit card, and monitor their banking, tax, and compliance activity.
The move targets gig economy workers, an underserved segment of the population that is growing at 17% per year with an estimated value of $204 billion in 2018.
“This new partnership marks a significant step for Xolo as we strive to establish a new virtual nation for freelancers and solopreneurs,” said Allan Martinson, Xolo CEO. “With the addition of Wirecard’s pioneering digital banking solution, we will continue to build out our vision for enabling millions of micro-businesses to get to market quicker and without the bureaucracy.”
Xolo’s news follows a recent announcement last month from U.K.-based Wollit, which raised funding for its platform that helps gig economy workers smooth out their fluctuating cashflow. There is a significant lack of services for this consumer segment across the globe, but startups and challenger banks have been slowly filling the gaps that banks have left open.
Google Cloud has unveiled its latest data center and announced that PayPal will be among the first to move key components of its payments infrastructure to Google’s cloud region. The news is the latest example of a partnership between the two technology giants that extends back at least as far as 2017, when PayPal became an authorized payment method for Android Pay (which later became Google Pay).
The new cloud region, Google’s 22nd globally, will be based in Salt Lake City and is designed to provide customers in the western U.S. with better, more reliable cloud services.
“When it comes to processing a financial transaction, security and speed count,” PayPal VP for Employee Technology & Experiences and Data Centers Dan Torunian said. He added that Google Cloud will provide PayPal with the “security, quality, and velocity” it needs, particularly when it comes to managing seasonal payment transaction volume surges and keeping regional expansion costs low.
In fact, PayPal reportedly chose Salt Lake City in part for low-latency access to its own data center, which will make it easier for PayPal to commit additional resources to the cloud over time. The partnership will also allow PayPal to establish a migration pattern that can be used to convert more on-premises infrastructure to the Google Cloud – at the Salt Lake City data center or to any other Google Cloud platform region.
More than 300 million consumers and merchants in 200 markets use PayPal’s payments technology for financial services and commerce. The San Jose, California-headquartered company began the year forging a strategic partnership with UnionPay International that will boost its merchant and consumer business in the Chinese market. PayPal reported adding more than 37 million net new active accounts last year, processing “nearly $200 billion” in total payment volume in the fourth quarter alone.
Two of the biggest themes in fintech – digital identity and the rise of fintech in Central and Eastern Europe – meet in the latest announcement from biometric authentication specialist and Finovate Best of Show winner iProov. The company’s facial recognition technology now makes it easier for users of SK ID Solutions’ Smart-ID Service in countries like Estonia, Latvia, and Lithuania to renew their accounts without having to visit a physical bank branch.
“This is a major development for all digital identity providers,” iProov CEO Andrew Bud said. “Estonia has proved, for the first time, that a remote, automated, biometric ID verification service can deliver the highest possible levels of security.”
Recognized as equal to a handwritten signature throughout Europe, Smart-IDs enable users to authenticate themselves and provide permissions online using a smartphone app. iProov’s facial recognition technology adds a three-second scan to compare the image of the user to the image on their presented ID document to help defend against fraud and identity theft.
Smart-ID also leverages NFC-based ReadID document verification technology from InnoValor.
Financial crime risk management innovator Featurespace will be helping Enfuce combat fraud and money laundering courtesy of a newly announced partnership. Enfuce, a financial services firm based in Finland, will use Featurespace’s ARIC Risk Hub to enhance its ability to protect its customers from fraud and financial crime.
“Our clients deserve industry-leading services that allow them to freely and fully concentrate on the success of their core business, without worrying about ever-evolving fraud,” Enfuce co-founder and chair Monika Liikamaa said.
ARIC Risk Hub offers real-time transaction monitoring for fraud and financial crime, enabling institutions to identify and act against anomalous and potentially dangerous behavior as it occurs. The technology also reduces the number of false positives by as much as 70%, keeping anti-fraud processes efficient. Featurespace introduced its fraud-fighting technology to Finovate audiences at FinovateEurope 2016.
Here is a round up of recent news from our Finovate alumni.
Sezzleunveils new logo along with its first annual report.
Flybitsexpands its executive team in New York, Toronto, the U.K., and Dubai.
Yseop and Automation Anywhere join forces to scale intelligent automation.
Lighter Capitalappoints Kevin Fink at CTO and Patricia Elliott as CSO.
InCommlaunches Roblox gift cards in France and Germany.
Finovate Alum Features and Profiles
Revolut’s $500 Million Round Boosts Valuation to $5.5 Billion – Global financial platform Revolut has secured its place as the U.K.’s most valuable fintech.
Dealing with Deepfakes in Fintech – The fintech industry is ripe with security firms, such as iProov, that use AI to combat both video and audio deepfakes with anti-spoofing technologies.
Envestnet | Yodlee Acquires Indian Data Aggregator FinBit.io – Envestnet | Yodlee has acquired another asset in its strategy to further grow and develop its data aggregation and analytics business.
Meet Sonect: Cash Network Builder, Finovate Newcomer, Best of Show Winner – What’s better than having a large pizza with all your favorite toppings delivered to your front door? How about a side order of cash, saving you a trip to the ATM or bank branch?
Azimo Taps Ripple for Cross-Border Payments to the Philippines – Fueling these payment transfers is Ripple’s On-Demand Liquidity (ODL) solution that uses XRP to source liquidity and complete money transfers within three seconds.
Lendio Lands $55 Million to Match Small Businesses with Lenders – The investment more than doubles the company’s previous funding, bringing its total to $108.5 million.
SheerID Expands Identity Marketing Platform – The move enables brands to identify and acquire new customers across the globe.
Customer segmentation identification company SheerIDlaunched its Employment Verification tool today in 191 countries. The move enables brands to identify and acquire new customers across the globe.
SheerID’s segmentation tool enables companies to identify consumer subsets such as military members, students, and teachers to help personalize communications and increase customer acquisition via gated, personalized offers for different employee groups. Today’s geographical expansion of SheerID’s technology will help brands build their acquisition efforts on a global scale.
Along with employment verification, SheerID has updated its age range verification tool, which is available in 23 countries. With this offering, brands can more efficiently target consumer groups such as seniors and young adults.
“With this latest expansion of verification types, we’re making it easy for brands to extend their identity marketing campaigns beyond the U.S. and personalize offers in new ways, to new potential customers,” said Jake Weatherly, SheerID CEO. “The opportunity to use personalized offers to acquire consumer tribes is endless, and this latest expansion is yet another step forward in meeting customer demand.”
SheerID leverages 9,000 data sources and 1.3 billion identity attributes. Among the company’s clients are Amazon, Lowe’s, Spotify, and T-Mobile. SheerID, which recently showcased at FinovateSpring 2019, has raised $96 million since it was founded in 2011.
With more than $1.1 billion (€1 billion) provided to small businesses in the U.K. and Germany, London-based SME lender iwoca announced today that it has received $109 million (€100 million) in debt financing from Insight Investment. The new capital will help iwoca continue its work in funding entrepreneurs in Germany.
The investment takes iwoca’s total debt and equity financing to more than $550 million (€500 million). The company, one of the largest fintech SME lenders in Germany, plans to double its workforce in the country to 100 employees and will use the funds to help scale its loan book to give institutional investors more opportunities to participate in the SME credit market.
“More than 90% of companies in Germany are small businesses, yet many of them suffer from poor access to finance as traditional lenders can’t support them the way they need it,” iwoca CEO and co-founder Christoph Rieche explained.
“Our mission is to change that. With Insight Investment we have found a very agile and responsive partner that complements our mission-driven way of working. They provide the perfect basis for us to enter a new phase of growth in Germany,” Rieche said.
Iwoca has gained more than 50,000 customers since offering its first loan in 2012, and lent more than $1.1 billion (€1 billion) to U.K. and German-based businesses. The company offers short-term financing of up to £200,000, and only charges interest – starting at 2% a month – for the days the borrower actually has the money. Iwoca also makes it easy for companies to apply for a top up in the event that additional financing is required, enabling their credit to grow along with their businesses.
The company partnered with German business banking platform Penta late last year, enabling the challenger bank to launch its credit solution. We took a look at challenger banks in Germany as part of our FinovateEurope coverage this month. Last summer iwoca launched a pair of real-time loan integrations with U.K.-based financial marketplaces Funding Xchange and Funding Options.
Among the first fintechs in the U.K. to leverage open banking to offer a lending API, iwoca has been named to the Deliotte Fast 50 and was recognized by cloud accounting platform – and Finovate alum – Xero as its Financial Services App of the Year in 2018 and its Emerging App Partner of the Year in 2017.
Online marketplace for small business loans Lendiolanded $55 million in combined debt and equity funding today. The investment more than doubles the company’s previous funding, bringing its total to $108.5 million.
The equity portion of the Series E round was led by Mercato Partners’ Traverse Fund, which contributed $31 million, and included contributions from existing investors Napier Park Financial Partners, Comcast Ventures, Blumberg Capital, Stereo Capital, and Runa Capital. Signature Bank led the debt facility with $24 million.
Founded in 2011, Lendio serves as a matchmaker that connects small businesses seeking funding with its network of over 75 lenders. Since Lendio launched at FinovateSpring in 2011, the Utah-based company has funded more than 100,000 loans totaling $2 billion. Over the past two years, Lendio has seen an average year-over-year growth rate of 75%.
CEO Brock Blake called today’s investment a “significant milestone” for the company. “With these funds, we are strongly positioned to grow our existing platform as a trusted loan facilitator that supports both lenders and borrowers, while building out a range of new integrated lending services that get the right loans into the right hands at the right time.”
Lendio will use today’s investment to increase the scope and precision of its flagship loan marketplace; expand lender services functions, which provide lenders access to a white-labeled online loan application; and enhance its small business bookkeeping platform, Sunrise by Lendio. The company launched Sunrise last year after acquiring online bookkeeping startup Billy. The new service aims to help Lendio’s small business clients manage their cash flow and monitor their overall financial health.
“Lendio’s ability to combine data analytics with the human touch to connect small businesses quickly and precisely with ideal lending partners has made all the difference in its success,” said Ryan Sanders, senior investor at Mercato Partners Traverse Fund. “Lendio uniquely solves the problem of inefficient capital for small businesses by bridging lenders and borrowers. They are able to connect both sides and facilitate loans faster and more effectively between small business owners and lending institutions. Lendio’s impressive growth is a result of its technology-backed personalized service which has created a loyal and growing following in the industry.”
Digital money transfer service Azimoannounced today that it has partnered with fellow Finovate alum and blockchain payment solutions company Ripple to power cross-border payments to the Philippines.
Fueling these payment transfers is Ripple’s On-Demand Liquidity (ODL) solution that uses XRP to source liquidity and complete money transfers within three seconds. This time reduction results in a 40% to 60% cost savings over the traditional method that requires businesses to hold cash in pre-funded accounts. ODL has proven especially useful for international payments in emerging markets. The technology is currently available in the U.S., Mexico, Australia, Europe, and the Philippines, with plans to expand across APAC, EMEA, and LATAM.
Azimo, which plans to expand its use of ODL to more markets in 2020, opted to start with the Philippines because it is one of the top remittance destinations. In 2018, the region received $34 billion in remittance payments.
Ripple’s ODL
“We’ve been interested for a long time in the potential of digital assets like XRP to make cross-border payments better for customers,” said Azimo CEO Richard Ambrose. ”Ripple’s ODL solution has significantly reduced the cost and delivery time for cross-border transfers, and our customers are seeing the benefits. As more banks and financial institutions use ODL, we believe it has the potential to replace current methods of foreign exchange trading and to reduce settlement time to close to zero.”
Founded in 2012, Azimo has amassed one million customers. The company facilitates money transfers from 25 countries to more than 200 regions across the globe.
Ripple has 300+ customers in more than 45 countries and six continents. The company’s flagship global blockchain network, RippleNet, facilitates faster and cheaper payments in 40+ currencies.
Continental challenger banks like N26 may be pulling away from the U.K. market. But that is only creating room for newcomers like London’s social payments app B-Social which has raised $10 million (£7.8 million) en route to its transformation into Kroo, a fully-licensed bank.
The funding, part of a seed round, brings the company’s total capital to more than $17.8 million (£13.25 million). Participating in the round was Karlani Capital’s Rudy Karsan, along with additional undisclosed investors.
“Our seed 2 funding round is another key milestone towards building the greatest social bank on the planet and changing the relationship people have with money for good,” B-Social CEO Nazim Valimahomed wrote on the company’s blog. He noted that B-Social has signed up more than 9,000 users and will soon introduce functionality to enable account funding via bank transfer. Valimahomed also added that the company plans to double the size of its team at its headquarters in Holborn.
Most significantly, the investment will help B-Social as it transitions into becoming a bank, to be called Kroo. Valimahomed said that the company is currently in the final, pre-application phase for obtaining a U.K. banking license and hopes to finish the application process “in the very near future.” He referred to the rebrand as a change to an “exciting new brand that fully embodies who we are – intuitive, talented, empowering, social, and collaborative.”
Founded in 2016, B-Social helps users manage shared expenses. The company’s app, available in both iOS and Android, supports bill splitting and group expense tracking, and instant payments between B-Social account holders. The solution also comes with a contactless debit Mastercard that can be used, fee free, both at home and abroad wherever Mastercard is accepted.
Global financial platform Revolut has secured its place as the U.K.’s most valuable fintech. The London-based company secured a $500 million investment, bringing its total funding to $836 million.
With this, Revolut’s valuation tripled, escalating to $5.5 billion. As a comparison, digital bank Monzo was valued at $2.6 billion last year. Revolut’s funding was led by U.S. investor Technology Crossover Ventures while a handful of undisclosed existing investors also contributed.
The funding will be used to enhance Revolut’s customer experience, grow its workforce, and create new products that entice users to log into their accounts more frequently. As a part of this, Revolut will use the funds to enhance Premium and Metal subscription account offerings. These paid products are not only a significant part of Revolut’s business model, they also show huge promise, growing by 154% last year alone.
“We’re on a mission to build a global financial platform – a single app where our customers can manage all of their daily finances, and this investment demonstrates investor confidence in our business model,” said Revolut CEO and founder Nik Storonsky. “Going forward, our focus is on rolling-out banking operations in Europe, increasing the number of people who use Revolut as their daily account, and striving towards profitability.”
Revolut employs 2,000 people across 23 global offices. The company counts more than 10 million customers and has processed one billion transactions worth $130 billion since it was founded in 2013.
The company has seen significant success since its early days. Just last year Revolut increased customer growth by 169%, boosted the number of daily active customers by 380%, and saw year-over-year financial revenues grow by 354%. The company aims to continue this growth by launching lending services for retail and business customers, extending high interest savings accounts beyond the U.K., improving customer service, and rolling out banking operations across Europe.
There is not much fintech to come out of the state of Wyoming (a quick search on Crunchbase yields 28 results). Today, however, one more startup is added to that mix.
That’s because Avanti Financial, headquartered in Cheyenne, Wyoming, announced plans to launch a bank to serve the digital asset industry. The company recently applied to obtain a bank charter from the Wyoming Division of Banking under the Cowboy State’s special-purpose depository institution (SPDI) law.
If Avanti’s application is approved by the state of Wyoming, the startup will begin operations in early 2021.
Avanti seeks to fill the gap where traditional U.S. financial institutions fall short. In many cases, institutional customers that use digital assets lack a place to engage in payment, custody, securities, and commodities activities.
Founder and CEO Caitlin Long said, “A crucial step in the digital asset industry’s evolution is the formation of a new bank dedicated to bridging digital assets with the U.S. dollar payments system in a compliant manner, and the provision of custodial services that meet the strictest institutional standards.” Long added that Avanti’s launch will “unlock many new products and services around digital assets that only a regulated U.S. bank can provide directly.”
Avanti, which recently landed an undisclosed amount of seed funding, is partnering with Blockstream, a Canada-based group that creates “products and networks that make financial markets more efficient.”
Dr. Adam Back, Blockstream CEO and co-founder, said, “This partnership combines the best in Bitcoin applications with the optimal regulatory vehicle for delivering products and services to institutional customers that require regulated providers. Blockstream’s platforms fit well with Wyoming’s property-rights centric digital asset laws, which will enable Avanti to introduce products into U.S. dollar markets that do not exist today.”
