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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Open finance network Plaid is snapping up identity verification and compliance platform Cognito in a deal valued around $250 million.
Plaid’s “next major step” as a company is to help developers build onboarding experiences. And because identity is a huge piece in the onboarding process, Cognito’s technology will be key in the launch of the new tool. “This means simplifying every step of the consumer journey from their first interaction during signup, to the first magical moment delivered by that product – the first time sending money to a friend, or the first time trading a stock or cryptocurrency,” Plaid CEO Zach Perret said in a blog post.
Perret cited identity verification, account connection, and account funding as three parts of a complete onboarding experience. Currently, Plaid’s technology takes care of the latter two pieces but is missing identity verification technology. According to TechCrunch, Cognito’s technology will be available to Plaid’s 5,500 clients as an optional add-on. Plaid’s services range from a free option to a package that costs north of $500 per month.
Cognito’s technology verifies user identity by connecting their phone number with their traditional identity data such as name, date of birth, address, and social security number. The California-based company also helps businesses stay compliant by managing and automating their anti-money laundering and politically exposed person screening. Since it was founded in 2014, Cognito has verified 76 million users for 300 clients including Affirm, Brex, and Current.
Today’s news is another signal of expansion for Plaid, which partnered with Dwolla, Square, Checkout.com, Currencycloud, and Marqeta last October to move into account-to-account payments.
With $734 million in funding, Plaid helps 11,000+ FIs offer their customers access to third party financial services via a suite of APIs to connect consumers, financial institutions, and developers. Plaid also offers a suite of analytics products that provides further insights into transactions. The company was founded in 2013 and is headquartered in San Francisco, California.
Just when you might have thought that the momentum behind the Buy Now Pay Later phenomenon might be waning, banking software company Temenos announced today that it is launching its own BNPL offering.
Temenos brings its patented Explainable AI technology to the BNPL party with its Temenos BNPL. The company says that the new solution will give banks and fintechs new revenue opportunities, enable them to access new markets, and strengthen their relationships with both customers and merchants with its ethically-driven lending program.
“In an extremely competitive market, financial services providers need to evaluate new business models to drive revenue,” Temenos CEO Max Chuard explained. “As the strategic technology provider for over 3,000 banks worldwide, we are committed to empowering our clients to pioneer and adopt those new, profitable business models. Buy-Now-Pay-Later has shown the industry that we can come up with new solutions to old problems.”
Temenos BNPL brings transparency to the automated decision-making and credit offer-matching aspect of the Buy Now Pay Later process. Courtesy of embedded Explainable AI, the technology allows clients to pre-approve loan applications or offer variable installments in real-time, contingent on pre-determined criteria. The technology offers visibility into the credit decisioning and provides a recommended payment timetable during the application process so the borrower can be assured of being able to make the repayments as scheduled.
Temenos BNPL is core banking system agnostic – accessible via the Temenos Banking Cloud, which means that institutions and businesses can deploy the technology along with Temenos Transact or any other core banking system. In a statement, Temenos noted that one company – “a global payments provider” – went live with its own Temenos BNPL-based Buy Now Pay Later service and received 22 million loan applications in nine months. The product launch was reportedly the fastest and most successful in the company’s history. It was also especially popular with customers, 70% of whom are repeat users of the technology with 50% using the technology more than once within three months.
“(Buy Now Pay Later) has challenged the way we think about customer engagement, acquisition, and retention,” Chuard said. “We are very excited to launch this new solution to enable our clients to offer alternative financing that is fast, seamless, and scalable.”
Digital banking platform SoFi is leaving the ranks of its challenger banking competitors to become a fully fledged bank. The California-based fintech announced today it has received approval from the U.S. Office of the Comptroller of the Currency (OCC) and the Federal Reserve to become a bank holding company.
SoFi CEO Anthony Noto called today’s regulatory approval an “incredible milestone,” adding, “With a national bank charter, not only will we be able to lend at even more competitive interest rates and provide our members with high-yielding interest in checking and savings, it will also enhance our financial products and services to ensure they efficiently meet the needs of our members, business partners, and communities across the country, while continuing to uphold a high bar of regulatory standards and compliance. This important step allows us to add to our broad suite of financial products and services to better be there for our members during the major financial moments in their lives and all of the moments in between.”
The approval comes with one contingency. The OCC said that SoFi Bank may not engage in any crypto-asset activities or services. SoFi currently offers a crypto wallet and trading platform, but as it is held under SoFi Digital Assets, LLC, the OCC’s contingency shouldn’t be an issue.
This approval comes in the wake of SoFi’s proposed acquisition of Golden Pacific Bancorp, a Sacramento, California-based bank holding company with consolidated assets of $150 million. The deal, originally announced in March of last year, is set to close next month for $22.3 million.
After the acquisition closes, SoFi plans to maintain Golden Pacific’s community bank business and footprint, including its three physical branches. Additionally, SoFi will help Golden Pacific pursue its national, digital business plan by contributing $750 million in capital.
As with most digital banks, SoFi relied on partnerships with traditional banks to hold deposits, issue loans, and provide FDIC insurance. Until next month’s acquisition closes, SoFi’s partner banks include Bank United, National Association; MetaBank Sioux Falls, SD; HSBC Bank USA, National Association; EagleBank, Bethesda, MD; East West Bank, Pasadena, CA; TriState Bank Capital Bank, Pittsburgh, PA; and Wells Fargo Bank, N.A, Sioux Falls, SD.
SoFi Technologies will continue to be traded on the NASDAQ under the ticker SoFi, but it will become the parent company of SoFi Bank, National Association. SoFi was founded in 2011 and has a current market capitalization of $11.4 billion. The fintech went public last year after a SPAC merger with Social Capital Hedosophia Holdings V.
Courtesy of an investment from Thoma Bravo, personalization and customer-engagement solution provider for financial services companies Personetics has raised $85 million in growth funding. Updated valuation information was not disclosed.
Calling data-driven personalization and customer engagement “the battleground for financial institutions” worldwide, Personetics CEO and co-founder David Sosna said that banks and financial services providers are rightly moving toward a more proactive relationship with their customers. “Personetics provides financial institutions with the most comprehensive engagement platform on the market, enabling agility and differentiation with an agile delivery for quick business impact,” Sosna said.
Personetics’ technology boosts customer engagement by analyzing financial data in real-time, learning financial behaviors, anticipating needs, and then acting on the user’s behalf. The company’s enriched data, actionable insights, financial advice, and automated wellness solutions can be used by retail banks, small businesses, wealth management firms and others to increase digital customer engagement by as much as 35%, account and balance growth of 20%, and realize gains of 17% in the adoption of personalized recommendations and advice.
Making its Finovate debut in 2016 at FinovateEurope in London, Personetics raised more than $160 million in funding last year from investors including Viola Ventures, Lightspeed Ventures, Sequoia Capital, Nyca Partners, and Warburg Pincus. In the fall of 2021, the company announced a partnership with Europe-based financial services group KBC to increase customer engagement on the firm’s mobile app. Last spring, Personetics unveiled its patented, automated cash-flow based savings solution – Pay Yourself First – which has been integrated into U.S. Bank’s mobile app. Note that U.S. Bank won Best Customer Experience at the Finovate awards in 2019 for its mobile banking technology.
“Personetics’ PYF intelligent algorithms take the guesswork out of setting money aside for saving or investing and acts on behalf of customers,” Personetics President for Americas Jody Bhagat said. “It’s another example of how Personetics is helping financial institutions deliver hyper-personalized solutions for their customers, and bringing to reality its vision of Self-Driving Finance.”
FinovateFall Best of Show winner SpyCloud has launched its latest solution to combat online fraud. The SpyCloud Identity Risk Engine, unveiled this week, analyzes billions of data recaptured from the dark web to help businesses and financial institutions make faster, more accurate, real-time fraud mitigation decisions.
What’s unique about SpyCloud’s approach to fighting fraud is the company’s focus on identifying credentials that have been exposed during data breaches and are actively being traded in the criminal underground. These exposed credentials are sold to fraudsters on the black market or used by the hackers themselves to steal confidential information, access secure systems, or commit fraud. Because many of these sources of stolen credentials cannot be readily accessed by automated software tools or web crawlers, SpyCloud uses a combination of technical innovation and human intelligence to find and recapture data from online criminal communities. The company also gives businesses and financial institutions access to the kind of authentication systems that will help defend them against cyberattacks that leverage stolen credentials such as account takeover (ATO), identity fraud, and new account fraud.
With the release of its SpyCloud Identity Risk Engine, SpyCloud gives businesses in financial and ecommerce services actionable, predictive fraud risk assessments based on breach data and stolen credentials that have been recaptured from the dark web. The technology combats difficult-to-detect challenges including data harvested by malware and the use of synthetic identities. SpyCloud Identity Risk Engine also gives businesses insight into which customers have the highest risk of account takeover due to risk factors such as exposed credentials or weak password protocols.
Businesses place the Identity Risk Engine at their most critical points of potential fraud (i.e., at account opening, login, transactions, etc.). From there, all that is required is an API query using an email address or phone number. SpyCloud then scans billions of recaptured data points to deliver a risk score that enables businesses to make more accurate fraud decisions. SpyCloud has recaptured more than 145 billion breached assets, more than 30 billion email addresses, and more than 25 billion total passwords. The company’s technology collects 50+ breach sources every week.
Winner of Built In Austin’s Best Places to Work for a second year in a row, SpyCloud was founded in 2016 and made its Finovate debut one year later. The company was featured in Fast Company’s inaugural Next Big Things in Tech roster last fall and, in October, SpyCloud announced a partnership with Houston, Texas-based identity and access management solution provider Identity Automation to help schools fight ransomware threats.
“Preventing ransomware is possible by negating the top attack vector: credentials that have been exposed in data breaches,” SpyCloud SVP of Business Development Cassio Mello explained. “This service gives schools early identification of compromised accounts, enabling them to take action quickly and prevent cyber attacks that leverage recently-breached identity data.”
SpyCloud has raised $58.5 million in funding from investors including Centana Growth Partners, Microsoft’s Venture Fund M12, March Capital, and Silverton Partners. Ted Ross is co-founder and CEO.
Remember when Andreessen Horowitz’s Angela Strange said that every company will be a fintech company? Though there has been much debate over the now-infamous catchphrase, there is news this week from automaker Ford Motor Company that further proves its truth. Ford announced it has signed a five-year partnership agreement with ecommerce technology company Stripe.
Ford aims to leverage Stripe to scale its ecommerce capabilities. “Stripe’s platform will help us deliver simpler, outstanding payment experiences in any channel customers choose and scale improvements faster,” said Ford CEO Marion Harris.
Under the deal, Stripe will process ecommerce payments for Ford’s personal and commercial customers. Beginning in the second half of this year, Stripe will power vehicle ordering, reservations, digital functions, and charging services. Stripe’s payment services will also be brought into Ford’s tech stack as the automaker develops more ecommerce offerings.
Specifically, Ford will implement Stripe Connect, a set of programmable APIs that helps businesses facilitate purchases between third-party buyers and sellers, to scale new ecommerce services. Ford will use Connect to facilitate payments between customers and their local Ford or Lincoln dealer. Among Stripe’s other customers for its Connect tool are Squarespace DocuSign, Mindbody, and Jobber.
The deal comes at a time when shoppers are more willing than ever to try digital experiences. “During the pandemic, people got comfortable paying online for groceries, health care, even home haircut advice from barbers,” explained Stripe CRO Mike Clayville. “Now, they expect to be able to buy anything and everything online. Ford is making ecommerce possible, too, and scaling that strategy with Stripe’s help.”
Founded in 2010, Stripe has millions of customers. Today’s partnership with Ford, however, marks one of the biggest deals the California-based fintech has landed. During a funding round last March, Stripe’s valuation was boosted to $95 million, ranking it among the most valuable fintech startups.
Digital investment services and infrastructure company WealthKernelsecured $7 million in Series A+ funding to start the week. The round was led by XTX Ventures and featured participation from Digital Horizon, Big Start Ventures, and ETFS Capital. The U.K.-based company said that it will use the capital to fuel expansion across Europe.
“I’m incredibly excited to take this next step in WealthKernel’s journey,” WealthKernel CEO Karan Shanmugarajah said. “Our investors’ backing will not only help us bring our product to a wider audience and expand our platform, but also achieve our goal of becoming the leading provider of API-based wealth and investment infrastructure across Europe.”
WealthKernel offers businesses the building blocks they need to power their digital investment offering. From client onboarding and trading to portfolio management and custody, WealthKernel enables neobanks, roboadvisors, PFM apps, and embedded finance platforms to focus on building their brand and customer experience while leaving the heavy lifting to WealthKernel’s all-in-one investing API.
“We often describe what we do as the plumbing for wealth management companies,” Shanmugarajah explained. “The current industry is built on leaky legacy pipes and that leakage directly impacts the savings and pensions of millions of people, particularly those with smaller sums of money. Our mission is to enable the change that makes financial services and investing better for everyday people.”
This week’s Series A+ round is an extension of the company’s $6 million Series A round from 2020. In addition to supporting the company’s growth plans in Europe, the funding will enable WealthKernel to expand its investing infrastructure to accommodate intraday trading, as well. The company currently has $13.9 million in total equity funding according to Crunchbase.
A leading embedded investing solution provider in the U.K., WealthKernel’s platform supports more than 100,000 transactions a month, and more than 72,000 trades per month are executed using its technology. The company’s clients include U.K.-based financial coaching app Claro Money, Sharia-compliant ethical investment platform Wahed, and wealth management service provider Rosecut. More recently, WealthKernel has forged partnerships with GOODFOLIO, an ESG-based investment platform, and investment app Stratiphy, which offers personalized investment and trading strategies. WealthKernel was founded in 2015.
Yesterday, Mastercardunveiled two new clients for its Mastercard Track Business Payment Service. The New York-based payments giant announced that BMO and Moneris Solutions Corporation have joined Mastercard Track.
Mastercard launched the new service for Canadian businesses earlier this year. Mastercard Track creates efficiencies for business users by simplifying and automating the exchange of payments data between buyers and suppliers. The service seeks to modernize the $135 trillion B2B payments market.
“Current business payment processes often require manual reconciliation work that can be very labour intensive,” said Sasha Krstic, President of Mastercard in Canada. “The availability of Mastercard Track through our new partnerships with BMO and Moneris will help Canadian businesses gain freedom from an inefficient process by simplifying and automating the exchange of payments to make B2B payments work harder, faster and smarter.”
Using Mastercard Track will help BMO and Moneris modernize the business payments process for their customers. Ultimately, the service will free up working capital for businesses by offering them more control of their payments and helping them to optimize cash flow management.
Derek Vernon, Head of Payments Modernization of BMO’s North American Commercial Deposits and Corporate Card division said that the service “enhances the digital experience by offering a universal solution to simplify and automate B2B payments.” Specifically, Vernon noted that Mastercard Track will help reduce supplier friction and facilitate quicker speed-to-spend.
Mastercard is a public company listed on the New York Stock Exchange under the ticker MA. It has a market capitalization of $364 billion. Michael Miebach took the helm of the company as CEO in January of last year.
Latin American payments company EBANX is doubling down on its commitment to its business in Mexico, opening its first office in Mexico City and introducing a range of solutions designed to help Mexican companies offer new payment experiences for their customers in-country. These solutions include credit and debit cards, installments, OXXO and OXXOPay, SPEI, and digital wallets like Mercado Pago.
“The launch of these local solutions and the opening of the new office are part of our strategy for continuous growth in Mexico, a country where e-commerce is one of the most dynamic and relevant sectors,” EBANX co-founder and CEO João Del Valle said. “With these new initiatives, we became the ideal strategic ally to help e-merchants grow their operations in Mexico or other LatAm markets.”
For EBANX, bringing broader payment options to Mexican consumers is a way to better serve the country’s unbanked population. According to the Association of Mexican Banks, 53% of Mexican adults not have a bank account as of 2020. At the same time, the company’s own study on digital commerce in Mexico revealed that as much as 60% of the digital commerce in Mexico is conducted using payment methods ranging from digital wallets and cash vouchers to debit and credit cards. By enabling more merchants in Mexico to process both cash-based transactions as well as these methods preferred in digital commerce, EBANX believes it can help merchants in the country increase their reach and sales potential by 2x and increase their total addressable market faster.
Founded in 2012 and headquartered in Curitiba, Brazil, EBANX has been active in the Mexican market since 2015. Last year, the company grew the number of transactions processed in Mexico by 115%. Hibobi, SHEIN, Shopee, and Wish are among EBANX biggest customers in the country.
The acquisition is slated to take place in two parts. First, Itaú will acquire 50.1% of the share capital of Ideal, which was founded in 2019 and is one of the leaders in traded volume on the Brazilian stock exchange, B3. Second, the bank plans to execute its right to purchase the remaining 49.9% of the brokerage’s shares for approximately $117 million (R$651 million) securing control of the company. Stage two of the acquisition plan is reportedly not scheduled to take place for another five years.
“This investment materializes our mantra of client centrality because they are the ones who will get the most out of the transaction,” Itaú Unibanco president Milton Maluhy Filho said. “Ideal is going to help us expand and standardize the offer for different channels. Customers from various segments of the bank, such as iti, ion, or even Itaú Corretora, will be able to have access to the same products on whichever platform they prefer.”
The acquisition will add to the talent base for the 60-million customer financial institution, which bills itself as a digital bank with the convenience of physical banking. Ideal CEO Nilson Monteiro will continue to oversee operations at the company with Itaú serving essentially as one of Ideal’s financial institution clients. Itaú Unibanco’s Carlos Constantini, who runs Wealth Management and Services for the bank, underscored the importance of maintaining Ideal’s autonomy, citing the company’s market position and “well-defined strategy for its segment of activity.” Constantini added, “the company will play an important role in consolidating Itaú Unibanco’s investment ecosystem and maintaining our market leadership.”
Founded in 2008 via the merger of Banco Itaú and Unibanco, Itaú Unibanco is headquartered in São Paulo, Brazil. With total assets of more than $377 billion and 90,000 employees, Itaú Unibanco is the largest private sector bank in the country. The institution is publicly traded on the Brazilian stock exchange and has a market capitalization of $41 billion.
FinovateEurope 2022 is right around the corner. If you are an innovative fintech company with new technology to show, then there’s no better time than now and no better forum than FinovateEurope. To learn more about how to demo your latest innovation at FinovateEurope 2022 in London, March 22-23, visit our FinovateEurope hub today!
Here is our look at fintech innovation around the world.
A partnership between India-based private sector bank RBL Bank and Google will enhance the customer experience and potential for expansion for its digital platform Abacus 2.0.
FundThrough noted that the deal is designed to accelerate both its commitment to embedded finance as well as fuel expansion plans for the U.S. market. Specifically, FundThrough believes the acquisition of its American rival will enable it to increase its U.S. clientele by 2x, boosting the number of customers in the States who use its technology to turn unpaid invoices into access to working capital.
“We are committed to helping small businesses grow and thrive – especially those who sell to large customers where long payment terms and a lack of financing options stand in the way of growing a business,” FundThrough co-founder and CEO Steven Uster said. “BlueVine was one of our biggest competitors in the U.S. market, and through this acquisition we can fulfill our mission on a much larger scale.”
With growth of more than 10x since its founding in 2014 and 3x growth over the past year, FundThrough has scaled to process more than $120 million in funding each month. The company’s AI-powered funding platform, along with its partnerships with companies like Intuit and Enverus, has enabled it to cut the standard amount of time it takes for SMEs to get their invoices paid by as much as 97%.
Invoice factoring was BlueVine’s founding business – and the centerpiece of the company’s 2014 Finovate presentation. The company has grown significantly since then, adding a range of new financing solutions for small businesses and giving the Redwood City, California-based fintech the ability to choose which area of small business financing it will focus on going forward.
“Since launching BlueVine, we’ve been focused on the financial needs of small businesses and are very proud of what we’ve been able to accomplish,” BlueVine co-founder and CEO Eyal Lifshitz said. “As we evolve our products and services, we continuously examine how we can better serve our customers at scale. We determined that FundThrough is perfectly positioned to serve our factoring clients with the care and individual attention they need and deserve. Our factoring clients will be in great hands with FundThrough.”
As part of the acquisition, BlueVine’s invoice funding division employees will join the FundThrough team. The transaction will enable BlueVine to focus on other elements of its business including its BlueVine Business Checking, Payments, and Line of Credit offerings. Since inception in 2014, the Redwood City, California-based fintech has helped SMEs access more than $14 billion in financing.
Consumer credit reporting agency TransUnion is moving in the direction of Web3. The Illinois-based company announced this week it will bring off-chain consumer credit, identity, and compliance information to public blockchain networks.
The move is made possible via a partnership with Spring Labs, a company that offers decentralized infrastructure for credit and identity data. Spring Labs allows network participants, such as financial institutions, to share information about credit and identity data without needing to share the underlying data itself. Specifically, TransUnion will bring its VantageScore to Spring Labs’ ky0x Digital Passport, a tool that enables blockchain and smart contract applications to access off-chain data sources to create new, permission-controlled decentralized Web3 services and applications.
“We believe in the growth potential of DeFi,” said TransUnion President of U.S. Markets and Consumer Interactive Steve Chaouki. “Providing credit and identity data on-chain is a huge step towards improving the financial products available in the space. Working with Spring’s ky0x, we now have a solution for users to control and share their data on blockchain in a privacy-preserving way, enabling them to safely interact with a broader set of financial products.”
Transporting consumer credit data to the blockchain allows users to offer up information about themselves while maintaining privacy and anonymity of their identity. This secure data sharing allows users to access smart contract applications and helps DeFi and Web3 apps to scale.
Ultimately, the move should benefit both end users and lenders. By having their credit score available on-chain, users can receive better interest rates from DeFi lenders. Simultaneously, DeFi lenders can reduce their risk.
“Enabling access to an industry-standard, trusted credit risk score like VantageScore on-chain and in a consumer permissioned, anonymous way opens the door to greater growth and financial inclusion in the DeFi space,” said TransUnion SVP Consumer Lending Business Leader Liz Pagel. “Paired with ky0x’s AML and KYC capabilities, DeFi lenders can transact with confidence at lower rates, potentially paving the way for lending without the over-collateralization that is standard today.”
To be honest, there is a potential downside to this partnership. Traditional credit scores are prone to racial bias and have negative consequences for borrowers who have no established credit. By porting this imperfect risk underwriting model to the decentralized world, we may be doing ourselves a disservice.
A fundraising round of $1 billion has given Checkout.com a valuation of $40 billion, more than 20x the valuation the company earned upon its first fundraising three years ago. The investment takes Checkout.com’s total capital raised to $1.8 billion, and the company said that it plans to use the funds to support growth in the U.S. market, launch its marketplaces solution, and strengthen its position in Web3.
“At our core, we help enterprise merchants to navigate the complexity of moving money around the world, whether in fiat currency or bridging the gap to Web3,” Checkout.com founder and CEO Guillaume Pousaz said. “By combining an elegant technology stack with industry expertise and an ‘extra-mile’ approach to service over the past decade, we’ve built deep partnerships with some of the world’s most innovative companies.” Pousaz added that while he considered this week’s investment to be a “validation” of the firm’s work to date, “we’re still in ‘chapter zero’ of our journey.”
Investors in the Series D included Altimeter, Dragoneer, Franklin Templeton, GIC, Insight Partners, the Qatar Investment Authority, Tiger Global, the Oxford Endowment Fund and “another large west coast mutual fund manager.”
With customers ranging from Netflix and Pizza Hut to fintechs like Klarna, Revolut, and Coinbase, Checkout.com offers a full-stack online platform that makes payments easier for global businesses. Enterprise merchants that face significant challenges in moving money around the world have partnered with Checkout.com for its flexible, cloud-based payment platform that offers improved authorization rates, feature parity, and direct connection to local networks in key geographies and for all major alternative payment methods.
Looking forward, Checkout.com plans to launch a solution to service both marketplaces and payment facilitators later in 2022. The new offering will combine identity verification, split payments, and treasury-as-a-service functionality with Checkout.com’s Payouts solution, which helps companies send funds to both cards and bank accounts worldwide by way of a single integration. Checkout.com reports that both TikTok and MoneyGram have taken advantage of the service, with “billions of dollars in payout transactions” processed.
Headquartered in London and founded in 2012, Checkout.com spent 2021 opening new offices in six countries across four continents and making numerous major C-suite additions. These include a new Chief Financial Officer, a new Chief Technology Officer, and a new Chief Product Officer. The company announced an extension of its strategic partnership with JCB in September, and led a $110 million funding round for Saudi Arabian-based fintech Tamara in April.
