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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Last week for Earth Day we talked about the different ways that the fintech industry is responding to the climate challenge. Since then, there’s been even more news on that front – in this case from a pair of banks that are giving their customers the ability to contribute personally to climate sustainability.
BMO Harris Bank’s policy will enable cardholders in the U.S. to donate up to 500 of their accumulated points to Conservation International. Donating points is easy; cardholders can sign up for the program via BMO Digital Banking on their mobile app or online, then select the credit card account from which the points will be donated.
“Being part of Mastercard’s Priceless Planet Coalition is just one of many actions BMO is taking to support a sustainable future,” BMO Financial Group Head of North American Personal and Business Banking Ernie Johannson said. “What we do today will determine how our world looks tomorrow. In addition to BMO’s own bold actions to grow the good, we are proud to invite customers to join us and to make action as easy as redeeming their card points. Together, our efforts can make a big impact toward sustaining a healthy environment.”
Carbon tracking, as we mentioned last week, is among the more popular ways that fintechs and financial services companies have empowered consumers to better understand the impact of their spending habits on the environment. Rabobank, a Dutch multinational banking and financial services company, just announced that it will enable 1,000 of its Rabo payments accountholders to see the impact of their consumption on the climate – courtesy of a Carbon Insights feature on their Rabo app.
“With Carbon Insights, we make consumers part of the solution, just like we do with sustainable farmers who can earn carbon credits through carbon storage in their farmland,” Rabo Carbon Bank CEO Barbara Baarsma said. “Together our eight million private customers can make a difference and combat climate change by changing their spending patterns towards a smaller carbon footprint. For example, by buying different, less carbon intensive food they also stimulate supermarkets to offer more sustainable products.”
Rabobank developed its Carbon Insights capability in partnership with green fintech Ecolytiq, which has partnered with a number of financial services companies to help them develop climate sustainability-based solutions. Ecolytiq, leveraging the European Union’s Open Payment Standard, provides Rabobank with Dutch CO2 values per euro and spending category (food, transportation, clothing, etc.). Rabobank manages the secure environment in which accountholder payment data is processed, ensuring that customer data remains with Rabobank and that data is not used for any other purpose.
Underscoring the emphasis on privacy, Rabo Carbon Bank Product Manager for Carbon Bank Retail Fadoua Ajjaji explained, “Of course we don’t know the exact products somebody buys in the supermarket, so the CO2 emissions remain an estimation. For the calculation we look at the payment itself, not the actual receipt. Customers can provide additional information, if they eat meat or own a car, which allows us to make the calculations more accurate.” Ajjaji called carbon tracking “a missed opportunity” when it comes to meeting the climate challenge “as gaining insights is the first step in making more sustainable choices.”
A Finovate alum since 2014, CuneXus specializes in enabling lenders to deliver personalized, mobile customer experiences while helping financial institutions grow loan volume and revenue. The company has reached more than $60 million in loans funded daily, $500 billion in client combined assets, and represented 28 million consumers in the U.S.
Last fall, the company announced the launch of its new credit and identity protection monitoring solution. The technology enables credit union members to both optimize their financial picture as well as monitor their accounts for any fraudulent activity from within the credit union’s dashboard.
We caught up with Barry Kirby, CuneXus SVP to talk about the company’s new offering and the CuneXus’ broader commitment to financial wellness.
Can you tell us a little about the decision to launch this new credit monitoring solution. Why this and why now?
The reality is that the entire banking system is backwards. Meaning this is the only industry where consumers do the heavy lifting, like applying for credit, only to be told 70% of the time that they can’t buy the product. This results in a dissatisfied customer who will most likely look elsewhere.
Moving forward, it is crucial that financial institutions strategize a new method of engaging with their customers and members through personalized offers that match their needs, especially as spending continues to return to normal. To remain a central role in their communities and the main line of financial support for their customers, financial institutions must implement a business model that promotes the importance of financial awareness and delivers customers next level services and products best suited for their lifestyle.
At CuneXus, we are dedicated to helping banks and credit unions achieve this through our first-to-market digital storefront for account holders, addressing the need for a personalized, on-demand banking experience. This storefront is empowering banks and credit unions to provide a new level of support to their customers and members, by eliminating the loan application process and offering the convenience and immediacy that they expect.
Our new real time credit monitoring solution, which is embedded within the CuneXus storefront, allows us to enter the financial wellness market and elevate the customer experience. We have traditionally provided unparalleled transparency into consumers’ borrowing power through a perpetual pre-approval process. This new product, which provides a transparent view into credit health, is a natural addition to the CuneXus storefront.
What are some of the unique aspects of CuneXus’ new tool?
Our credit monitoring solution has the ability to pull credit information from all the three credit bureaus. Our tool gives financial institutions the option to display information from any of the three bureaus (their bureau of choice), or they can opt to provide their account holders with scores from all three bureaus. This gives the consumer the ability to monitor and compare, and gives the financial institution the flexibility to provide consumers with the best loan options and highest approval odds.
Unlike other credit monitoring solutions on the market that encourage more debt, this new solution helps consumers make informed financial decisions for their futures. The CuneXus storefront is not on a mission to solicit more debt, but rather to offer an array of viable options that the consumer can choose from in their moment of need. Now, with the help of simulators, this new tool can offer account holders suggestions and advice based on their real time credit scores, empowering them to better understand their financial standings. This education component is crucial. Our well-rounded tool balances between education and offering account holders access to credit, to ensure they make the best next move for their future.
How does the new tool give users more control over and visibility into their financial health?
Imagine logging onto online banking and a loan offer with a personalized note pops up explaining how to improve your credit; or it offers details on how boosting your score by 50 points may lead to an even better rate. Financial institutions have a timely and unique opportunity here to step in and help their communities by providing alternative credit options or displaying suggestions for future financial decisions based on each individual’s real time, credit rating. This is exactly what our new tool does – displaying tailored advice and personalized suggestions based on internal data paired with real time credit scores. Account holders can view these relevant offers and advice as soon as they log onto their account and decide their next step on their own. This allows lenders to give end-users more control and visibility over their financial health and elevate consumer confidence, transparency, and awareness to new levels.
What is the advantage of providing multi-bureau information and credit scores as this solution does?
Financial institutions have the ability to either display credit scores from all or one credit bureau. However, those who choose to display more than one, give consumers the ability to monitor and compare their credit ratings and enables financial institutions to offer them the best loan options and highest approval odds. The ability to view all of this information right inside the digital storefront provides financial institutions’ account holders with a more consistent and seamless digital experience, eliminates the need to monitor them elsewhere, and empowers them to track their financial wellbeing over a period of time with ongoing transparency – all which ultimately helps them optimize their financial picture.
It’s been reported that the new solution serves as an identity theft alert system, as well. How is this so?
This credit monitoring tool has the ability to automatically identify any adjustments or changes that have been made to an account holder’s credit score, alerts the user, and automatically suggests steps to correct issues. This capability can also act as a fraud examiner by monitoring any fraudulent activity and alerting both the financial institution and customer.
The credit monitoring tool was introduced last fall. What has the response been since the launch?
We announced that we were building this tool last fall. However, it just hit the market this spring. We have financial institutions on the waitlist to launch and would be happy to offer a follow up story with any measurable benefits/results after they have gone live.
Will we see more from CuneXus on the financial wellness front going forward?
Absolutely. CuneXus makes banking simple, enabling consumers to more easily interact and transact with their institutions through digital channels. As part of our ongoing commitment to helping banks and credit unions navigate an increasingly complex and changing landscape, we recently made a few additional strategic investments in partnerships that will help these financial institutions also understand where and how financial wellness can and should fit into their digital strategy.
Recently we teamed up with Equifax to offer CuneXus credit union customers a better view of their members’ financial wellness and help ensure they are receiving the most relevant offers in a timely and effective manner. The CuneXus platform will leverage insights and predictive analytics that ‘Only Equifax’ can provide in the pre-screen and segmentation phases of the loan process, empowering credit unions to understand more intimately their account holders’ financial standing and create a new level of consumer transparency and awareness.
Another example of this is our new partnership we just announced with Zest AI, the leader in software for more inclusive underwriting. By leveraging Zest AI’s fair credit scoring model within the CuneXus platform, credit unions and banks will be able to extend firm offers of credit to more members than ever before, especially those who are often overlooked by legacy credit scoring. This enables a more inclusive underwriting process, improves consumer access to affordable lines of credit, and helps consumers on the lower credit spectrum build healthier credit scores, improving their long-term financial wellness.
Russia’s invasion of Ukraine has sent shockwaves around the world – and the fintech industry has not been immune to the reverberations. As Axios noted last week, fintechs such as money transfer giant Wise and financial services company Brex have limited or halted fund transfers altogether to Russia and Ukraine. The reasons given for the service changes have varied, with some organizations emphasizing solidarity with Ukraine and others citing operational challenges. But the fact remains that the Russian invasion of Ukraine has forced many fintechs, in Europe especially, into scramble mode is impossible to deny.
The crisis in Ukraine also has brought renewed interest in the role of cryptocurrencies. As economic sanctions – including the expulsion of a number of Russian banks from global financial messaging service SWIFT – take their toll on the Russian economy, the idea that Russia and the country’s elites could turn to cryptocurrencies to limit the financial damage may be edging from possibility to probability. The Ukrainian government has asked cryptocurrency exchanges to freeze the accounts of Russians and Belarusians and, at this point, it appears that some of the world’s biggest cryptocurrency exchanges are moving in that direction.
Ukrainian fintechs are also committing their technology and talent to the cause of defending their country from Russian aggression. For one, the country’s leading neobank Monobank is accepting SEPA transfers to help fund the Ukrainian army, and announced that it has raised more than 11 million Ukrainian hryvnia ($395,830) to date.
That said, one of the biggest concerns from Ukrainian tech companies in general and fintech companies in specific is panic from these companies’ customers. TechUkraine’s Nataly Veremeeva urged clients of Ukrainian firms to maintain their relationships, noting that the income from these partnerships helps support both the Ukrainian economy and the Ukrainian military. Importantly, the fact that Ukraine has been under threat from Russia for nearly a decade has helped Ukrainian companies develop a resiliency that is being brought to bear today, Veremeeva explained.
This point was underscored by Senka Hadzimuratovic, spokesperson for one of the more famous Ukraine-founded tech companies, Grammarly. Backup communications and temporarily transferring certain critical business responsibilities to Grammarly team members living outside of the country have been among the precautions taken by the company.
Ivan Kaunov, Head of Growth and co-founder of Finmap.online, a Ukraine-based financial management app for SMEs, spoke for many of his fellow Ukrainians late last week. “Today Russia (has) invaded Ukraine. All our teammates (are) in safe places, We, as a nation, unite(d) and ready to resist.”
A brief primer on fintech in Ukraine
There is a wide variety of fintech companies in the Ukraine. These firms range from neobanks like Monobank, a five year old financial institution with more than four million customers, to payments companies like IBox and EasyPay, to financial services technology companies like Neofin and Wallet Factory, to cryptocurrency exchanges like Kuna. One way to get a broad cross-section of the country’s fintech sector is via the Ukrainian Association of Fintech and Innovation Companies (UAFIC). The organization, founded in 2018, is a membership-based NGO designed to support the development of Ukraine’s fintech industry. Approximately 66% of the association’s members are fintechs, with another 14% representing IT companies and MFOs, and banks making up 6%.
Last fall, the UAFIC announced a collaboration with leading financial sector associations in Ukraine- including the Independent Association of Banks of Ukraine (NABU), the Association of Financial Institutions, the All-Ukrainian Association of Credit Unions, and the Insurance Business Association. The goal of the alliance is to help design legislation to support the development of open banking and payment services in the country.
“Recently, fintech companies and banks have realized that working on the basis of OpenBanking technologies is much more profitable than competing with each other,” UAFIC Board Chairman Rostislav Duke said. “The financial ecosystemn is receiving new signals of openness and willingness to cooperate and partner in the market. Our work will promote greater access to information for all financial market participants.”
Another way to learn more about the Ukraine fintech industry is via TechUkraine, a platform dedicated to supporting the country’s technology ecosystem. A spin-off from the Export Strategy of Ukraine for ICT Sector, TechUkraine is geared toward encouraging what Director Veremeeva called “a great story of government and business working together to achieve a truly significant goal – Ukraine (as) an innovation-driven, universally recognized tech destination that delivers high value for the global economy.”
At its most basic, a metaverse is a three-dimensional virtual universe that combines augmented and virtual reality with social media technology to create a simulated digital environment.
For some in the digital space, especially video gamers, the idea of the metaverse is easy to understand. Whether it is the (often) mild-mannered virtual spaces of the simulation-based games or the action-packed digital worlds of RPGs and shooters, the idea of adopting a persona and entering a universe radically different from the real one is something gamers have appreciated for years.
What makes the metaverse different is the level and types of technology being applied – enabling a greater sense of participation, autonomy, and boundlessness. What’s also different is the growing interest from non-game oriented businesses in finding out whether or not virtual environments like the metaverse offer a way to engage customers beyond both the brick and mortar storefront and the smartphone-based app.
The metaverse and financial services
Believe it or not, Finovate audiences already have had the opportunity to see how financial services companies might take advantage of many of the tools that make the metaverse possible. Back in 2015 eBankIT demonstrated how it was deploying augmented reality technology to make printed materials come to life on their smartphone screens. In 2017, we took a look at how proptech firms in particular were leveraging virtual reality to offer virtual walkthroughs in both existing and to-be-developed properties.
More recently, in 2020, Mastercard unveiled an augmented reality app that offered cardholders a virtual tour of three reward categories. “At Mastercard, we’re using our technology and solutions to deliver multi-sensory experiences for consumers every day,” Mastercard Chief Marketing and Communications Officer Raja Rajamannar explained, “whether they’re shopping, taking transit, or exploring the card benefits they care about.”
Fintechs and financial services companies have become increasingly sensitive to the opportunities of the metaverse. Brokerage firm eTorounveiled its MetaverseLife offering earlier this month. MetaverseLife is a new smart portfolio that gives investors exposure to the enabling platforms – such as Meta Platforms and Roblox – as well as cryptocurreny and blockchain-based platforms like Decentraland and Enjin.
And while there are many who are quick to point out differences between online gaming worlds and the metaverse, there’s no doubt that Microsoft’s $68+ billion acquisition of gaming company Activision earlier this month was a major shot across the bow for those who question the high priority tech companies are giving the metaverse.
What is the metaverse made of?
While there are elements of the metaverse in both the virtual worlds and the technologies offered in the past, there are a few key differences between those spaces and the metaverse currently being envisioned by contemporary technologists. Coinbase, in a blog post explaining its ambitions for the metaverse, highlights three aspects in particular that serve as a dividing line between the virtual worlds that existed before the metaverse – including the world of online gaming, and virtual social platforms – and what they expect afterwards.
A fully-functioning economy: This is one of the big differentiators between traditional virtual worlds and simulations and the metaverse. It is also an example of how central blockchain technology will be to the metaverse. Within the metaverse, individuals and organizations will be able to engage in a wide variety of value-generating activities and have a means of transferring that value to others in the metaverse.
Open and decentralized: Another gift from the world of blockchain – and the pre-platform Internet, for that matter, is the reality that the metaverse will not be a singular platform but will instead be a space in which no one entity (not even Meta) will have complete control when it comes to a metaverse participant’s data or experience. In this way, the metaverse will more resemble the Internet of the early Google years than the increasingly platformed Internet of the social media age.
Interoperability: One of the goals of the metaverse is create a space in which the content of experiences in the metaverse are readily transferable from one experience to another. Currently, what happens in one digital world tends to stay in that digital world. With the metaverse, participants can take their data and experiences with them from one simulated environment to another.
The future of the financial services in the metaverse
With these caveats in place, what can we expect from fintechs and financial services companies when it comes to embracing the opportunities of the metaverse?
Virtual Interactions: Using the metaverse as a way of interacting with customers is probably the most likely way that financial services companies initially will engage with the metaverse. As noted above, many fintechs and financial services companies have already made tentative steps in this direction via deployment of AR/VR technology. However, few have taken the concept as far as Korea’s Kookmin Bank, which created a “virtual town” consisting of a business center, a telecommunications center, and a recreation area – on a metaverse platform.
Virtual Training: In addition to customer-facing functionality, this kind of metaverse deployment can also be used as a training environment for financial services professionals. In the same way the CIA has relied on “The Farm” as a key component of agent training, it is easy to imagine financial institutions building and offering virtual environments to enable them and their clients to further develop the skills of their wealth management teams, financial crime and regulatory staffs, and others.
Virtual Business: To the extent that the metaverse will have its own economy, we should expect to see a proliferation of businesses catering to the financial needs of denizens of the metaverse. Digital identity and authentication providers – to say nothing of innovators like Soul Machines – will have a significant role in such a world, as will financial data management companies and financial infrastructure companies whose job it will be to help facilitate value-exchange in the virtual environment. Blockchain and digital asset companies obviously will be critical in the metaverse, but companies that develop virtual assistants and other AI-powered agents for financial services should also likely have plenty of work to do in building out the metaverse.
Lynx CEO Mike Penner, whose company announced a pair of metaverse-friendly initiatives earlier this month, spoke for many fintechs that are looking for ways to take advantage of the new opportunities hinted at by the metaverse.
“While (the) metaverse is widely discussed across all industries right now, for Lynx, we have always focused on building an inclusive digital economy. The ability to integrate the virtual economy to our legacy financial system is further opportunity to give access of everyday financial transactions to people, regardless of income level or where they live; for them to expand their own local economy,” Penner said.
Two use cases announced by Lynx include a cryptocurrency-based game that enables players to create and earn digital items that can be sold to generate income, and an “enhanced remittance experience” featuring a digital meeting space that enables those sending money to loved ones to visit with and communicate with them in a “streamlined, entertaining, economical, and secure way.”
Penner added “I believe that this is potentially the most exciting time to be an entrepreneur in our financial history, the Metaverse, Blockchain, and Cryptocurrency technologies that we are poised to develop and deploy will change the financial landscape forever.”
At a time when concerns about illegal immigration have complicated the mostly positive attitude most Americans have toward immigrants in general, it is heartening to see that innovators and entrepreneurs in the fintech space are finding ways to bring vital services to those fleeing often-horrific conditions to find better lives in another land.
One such company is MAJORITY, a U.S.-based, mobile banking service designed specifically to serve the migrant communities in the States.
Founded in 2019, MAJORITY offers a banking app that provides an no-overdraft-fee, FDIC-insured bank account, a debit card with community discounts from local merchants, no-fee remittances, and “at-cost” international calling. The app is available for $5 a month. Company founder and CEO Magnus Larsson said that MAJORITY already has saved its Cuban members $21 a month on average and its Nigerian members $10 a month on average thanks to its “cost-efficient service offerings.”
MAJORITY also offers members the services of its hundreds of local advisors who help onboard and support new customers in their native languages. And while MAJORITY’s banking services are available in all 50 states, the company’s advisors are currently operating only in Texas and Florida.
Larsson explained the utility of the company’s human advisors in a conversation with TechCrunch. He described how a MAJORITY customer could meet up with an advisor outside of a grocery store and, within minutes, have their bank information, a Visa debit card, and the ability to use that grocery store to send money to another country.
“Migrants, by their very definition, are the most ambitious people in the world, striving for success in a new country – but they are lacking the necessary tools,” Larsson said. “Migrant-relevant financial services come with extensive fees that feel overwhelming for all people, but even more intimidating for those trying to navigate an unfamiliar system. At MAJORITY, we seek to remove the uncertainty that comes with international financial services and do our part to better facilitate a world where people are valued on their positive impact, not their country of origin.”
MAJORITY estimates that there are more than 258 million migrants worldwide, with nearly 50 million migrants in the U.S. – who are under-banked, un-banked, or otherwise experiencing “insurmountable barriers” when it comes to financially integrating into their new country. And courtesy of a $27 million investment MAJORITY announced last week, the company now has new resources to help.
“Our mission, as a migrant-led company, has always been to serve the migrant communities with the unique resources they need—financial and otherwise—and this latest funding will help us continue to perfect our services and support this community that is the backbone of America,” Larsson said.
The Series A round was led by Valar Ventures and featured the participation of Avid Ventures, Heartcore Capital, and a number of Nordic fintech founders. MAJORITY now has $46 million in total funding, which includes $19 million in seed funding the company raised earlier this year.
Accompanying its funding news, MAJORITY also announced that it is introducing a new feature that will enable migrants to sign up for a bank account without requiring a social security number. Instead, applicants will be able to use a government ID from any other country and proof of U.S. residency to access MAJORITY’s banking services.
“A bank account is the starting point to so many other things for someone moving to a new country, and American bureaucratic delays and backup shouldn’t prevent people from being able to establish themselves here,” Larsson said. An immigrant himself from Sweden, Larsson is currently waiting for visa approval in order to move from Stockholm to Miami, Florida, to further build out MAJORITY. He also looks forward to being able to grow the company from its current 65+ employees in Sweden and the U.S.
What are the latest signs that fintech is leaning in to support the cause of sustainability?
I’ve always been struck by the lack of optimism in response to the challenge of climate change. One of the Champagne Executive Boardroom sessions at FinovateFall in September discussed the way that financial services companies and fintechs were responding to climate change. And while the beginning of the conversation was predictably focused on constraints (political, social, and cultural), it was heartening to see the second half of the session. That’s because the panelists shifted toward a closer look at the opportunities that many in fintech and financial services firms were beginning to embrace – particularly by empowering customers and members.
With COP26 in the headlines over the past several days, we’ve seen an uptick in this “opportunities-instead-of-constraints” conversation in the fintech community. Here is a look at a few of the more interesting developments of late.
Standard Chartered partners with Starling Bank to help investors go green – Expected to launch next year, Standard Chartered’s Shoal platform will enable customers to financially support the environmental causes they believe in. The shortlist will include projects in areas such as renewable energy, clean water, and community development. Customers will receive both an update on the projects they helped fund as well as a “competitive” rate of return.
SC Ventures, Standard Chartered’s innovation arm which is behind Shoal, noted today that the first offering from the platform will be a savings account, and that the platform will be added to the Starling Bank’s Starling Marketplace “in due course.” Courtesy of the partnership between Standard Chartered and Starling Bank, the new platform will be powered by Starling’s BaaS technology and API. This will enable Shoal to emphasize front-end issues like customer acquisition and service, while Starling Bank manages what CEO Anne Boden called “the technical and regulatory demands behind the scenes.”
“Sustainability is one of the high conviction themes for SC Ventures as we explore different business models,” SC Ventures’ Alex Manson said. “With Shoal, we are creating a new venture to address the growing need of all retail clients for sustainable financial and non-financial products, starting with (the) U.K. and expanding to other markets over time.”
It’s also worth pointing out that Starling Bank recently announced a commitment to a one-third reduction in its carbon emissions by 2030. The firm added that it will also offset carbon emissions from its own operations and supply chain annually using March 2021 as a baseline. Starling’s three U.K.-based offices run on renewable energy and, earlier this year, the bank launched the first U.K. Mastercard debit card made from recycled plastic.
“Understanding our carbon emissions enables us to make targeted improvements as we continue to grow,” Starling Bank’s Boden said. “Climate change is one of the biggest challenges that we face globally, and Starling is 100% committed to playing its part in the fight against it, not just in the lead up to 2050, but starting right away.”
Starling Bank is also a founding member of the TechZero Charter. TechZero is a climate action group for technology companies that have committed to leveraging their technology and ingenuity to “accelerate progress to net zero.”
Climate management and accounting platform Persefoni secures $101 million in funding – On the other side of the Atlantic, word that SaaS climate technology company Persefoni has raised more than $100 million in equity capital has people wondering if the Series B round represents the biggest fundraising by a climate-tech company to date. Regardless of whether or not Persefoni is leading that charge, the company is clearly at the front lines of innovators using technology to help businesses calculate their carbon footprint in an auditable and compliant fashion.
The round was led by Prelude Ventures and The Rise Fund, and featured first-time participation from Clearvision Ventures, Parkway Ventures, Bain & Co., EDF Pulse Holding, Sumitomo Mitsui Banking Corporation, The Ferrante Group, Alumni Ventures Group, and New Valley Ventures. A number of existing investors also participated in the round. The investment gives the Tempe, Arizona-based company a total equity funding of more than $114 million.
“Carbon and climate disclosures will be the biggest compliance market since the advent of Sarbanes Oxley and GDPR, but with even greater complexity,” Persefoni CEO and co-founder Kentaro Kawamori said. “The market is rife with data and software solutions that create new proprietary methodologies every day, and our customers are exhausted with that approach.” Kawamori added that his company’s extensive work with “industry standards setters and regulators” gives Persefoni an edge over other companies offering solutions in the space. “As disclosure requirements continue to accelerate,” Kawamori said, “every CEO, CFO, and Board Director is looking for a solution they know was purpose-built for the enterprise first – like Persefoni.”
Persefoni also announced that it has entered a strategic corporate partnership with Bain & Co. The “first-of-its-kind” collaboration will have the two firms developing dacarbonization solutions for both the private equity and institutional investing markets. The goal is to enable clients of Bain to “manage their carbon inventory with the same rigor and transparency as their financial metrics,” according to Torsten Lichtenau, global head of Bain & Co.’s Carbon Transition Impact Area.
For the third Q3 in a row, Finovate alums have raised at least $1 billion in equity funding. This year’s third quarter is consistent with both the amounts raised ($1.1 billion) and the number of alums securing investment (14) from the same quarter last year.
Interestingly, August continues to be a strong month for alum funding during the third quarter; for a third consecutive year, August investment has exceeded that of both July and September for our Finovate alums.
Previous Quarterly Comparisons
Q3 2020: More than $1.2 billion raised by 14 alums
Q3 2016: More than $500 million raised by 30 alums
The third quarter of 2021 also saw one company, DriveWealth, become far and away the biggest recipient of investment dollars, topping the second biggest fundraiser by 3x. Three companies, M1 Finance, Alloy, and AuthenticID, secured triple-digit investments of at least $100 million.
The top ten equity investments, in a quarter with fourteen total alum fundraisings, represented the lion’s share of Q3’s investment total. Approximately 90% of the quarter’s total funding was represented by Q3’s top ten investments.
Top Ten Equity Investments for Q3 2021
DriveWealth: $450 million
M1 Finance: $150 million
Alloy: $100 million
AuthenticID: $100 million
Ocrolus: $80 million
Paystand: $50 million
Sezzle: $30 million
Dwolla: $21 million
Moneyhub: $18 million
Capitalise.com: $13.8 million
Here is our detailed alum funding report for Q3 2021.
July 2021: More than $469 million raised by seven alums
If you are a Finovate alum that raised money in the third quarter of 2021, and do not see your company listed, please drop us a note at research@finovate.com. We would love to share the good news! Funding received prior to becoming an alum not included.
The payments space is one of the areas within fintech that has benefitted from the acceleration in digital transformation trends over the past year. And within the payments industry, innovation in billpay has been especially vigorous, as a growing number of individuals and businesses turned toward digital channels to make and receive transactions during the COVID-19 crisis.
We caught up with Anne Hay, Head of PayNearMe’s consumer research initiative, to discuss the company’s new collaborations with Green Dot and Walmart, as well as PayNearMe’s findings from a study of consumer payment preferences the company launched earlier this year. Have consumers become more or less interested in digital payment solutions since the pandemic? And what can financial services organizations do to take advantage of these trends? Anne Hay explains.
What problem in the payments space does PayNearMe solve? And for whom does it solve it?
Anne Hay: Today’s consumers are used to making quick, easy payments when shopping online or sending money to friends, and they now expect that same level of convenience for all their payment interactions.
PayNearMe clients are largely recurring billers, such as consumer lenders, mortgage companies, municipalities, and iGaming operators, and we are helping them bring that frictionless, flexible payment experience to their customers.
With PayNearMe, their customers can choose how, when, and where they want to pay. For instance, they can pay with all major payment methods including cards, ACH, and mobile-first payment methods including Google Pay and Apple Pay, as well as with cash at more than 31,000 retail locations, including 7-Eleven and Walmart.
This focus on the customer payment experience is crucial as it is often the most frequent touchpoint our clients have with their customers. Our modern payment experience platform is also the first to enable our clients to fully own the customer payment experience — from facilitating transactions across payment types and channels, to sending payment reminders, to analyzing data for business insights.
PayNearMe recently announced an expanded partnership with Walmart and Green Dot. Can you tell us more about this collaboration?
Anne Hay: PayNearMe is rethinking payments with an emphasis on the payment experience, customer satisfaction and, of course, increasing our clients’ ability to get paid reliably. This expanded partnership with Green Dot makes on-time bill payment more convenient by bringing easy cash payments to the same location where customers do their everyday shopping. Now millions of consumers who prefer to — or need to — pay in cash can quickly and easily pay their rent, car payments, and utility bills at Walmart.
Customers simply show their scannable PayNearMe cash barcode on their smartphone to an associate in the Walmart MoneyCenter, pay with cash, and collect a receipt confirming that the payment is complete.
The expanded partnership with Green Dot adds participating Walmart locations across the country to our ever-expanding electronic cash network, and we expect to launch additional retailers in the near future to extend the convenience of our cash pay experience to our clients and their customers.
Enabling cash payers is a strategy that can help retailers, such as Walmart, bring more shoppers into their stores on a regular basis. Each visit to Walmart to pay a bill presents an opportunity for these customers to make additional purchases.
PayNearMe recently took a look at consumer preferences with regard to modern billpay options. What were the top takeaways from that survey?
Anne Hay: With all the innovation going on in e-commerce and peer-to-peer payments, we wanted to better understand consumer expectations around bill payments. There’s already a lot of research and data out there about how consumers are paying bills, but we wanted to ask consumers about what would make their bill payment experience easier.
Overall, the study uncovered a significant disconnect between consumers and businesses regarding how consumers want and expect to pay their bills, and the current bill payment options offered by most businesses today. About 75% wish managing and paying bills were easier, with 38% even preferring to do laundry over paying bills.
We found three big issues that need to be addressed.
Billers are slow to offer bill payment choices consumers have come to expect in other facets of their lives, such as Venmo, PayPal, and Apple Pay.
Consumers are struggling with disorganization, and it’s causing bill payment problems, including late payments.
Accessing bill payment information and paying bills is a cumbersome and difficult process for a good portion of those surveyed.
A couple of interesting and surprising findings were the number of consumers, especially young adults, that call in, likely when they are not able to seamlessly complete their payment transactions on their own, and the number of respondents willing to use QR codes to make bill payments.
Respondents said that the billpay experience itself was a more significant stressor than the fear of not being able to pay the bill. What does that tell you? Where is the experience going wrong?
Anne Hay: According to the bill pay study, nearly 1 in 3 adults revealed that paying bills causes them stress and anxiety. Surprisingly, for 70% of them, it’s not because of money issues.
Remembering logins, passwords, and account numbers top the list of what makes bill payment cumbersome. Keeping track of payment due dates is challenging for 41% of those surveyed, especially for younger adults. 30% cite having to navigate poorly designed biller websites and 26% report manually entering payment information further add to consumers’ dissatisfaction with their current bill payment experience. This expectation mismatch is not only potentially damaging billers’ relationships with their customers, but it is also hurting their bottom line as these frustrations can lead to late or missed payments. In fact, more than half of the respondents paid at least one bill late during the past 12 months.
This finding shows just how important focusing on the customer experience is and how much that experience is shaped by expectations. Even though consumers have the financial ability to pay their bills, they are still stressed because the bill payment process is not as seamless as making an Amazon purchase or paying a friend with Venmo.
The survey suggested that nearly a third of respondents saw mobile payment options as key to easier billpay. What are the obstacles to broader mobile payment adoption?
Anne Hay: One of our survey’s key findings was that billers are slow to adopt new technology. Mindsets need to change. They are not just competing against other entities in their industry, but against the consumer experience expectations influenced by Amazon, Apple, and Uber. They are competing against fast, easy, frictionless innovation.
As payments software is not often a core capability for many billers, working with a modern, future-looking enterprise software platform partner like PayNearMe is key to meeting new customer preferences such as mobile. Not only do we offer a choice of mobile payment channel options, including pay by text, digital wallets (including Apple Pay, Google Pay and more to come soon) and QR codes, but we also incorporate the security features needed to protect mobile payments. With 38% of respondents saying they would be likely or very likely to use Apple Pay and Google Pay to pay their bills if they had this option, innovation matters. The right partner can help billers stay ahead of the latest trends and perfect the customer experience.
Given the rise of QR codes, cryptocurrencies, real-time payments, embedded finance, and more, which innovations in payments excite you most?
Anne Hay: More and more we’re seeing that the phone is primarily the way people interact with the web these days. So not only Apple Pay and Google Pay, but digital wallets as well. Apple just broke news that they signed agreements with eight states to embed driver’s licenses and IDs within their wallets; more and more, digital wallets are becoming the de facto way to handle important personal and financial matters.
Consumers are storing everything in their wallets, and this can include their bills. In fact, our survey found that if given the opportunity, 42% of consumers would be likely or very likely to use their digital wallet to store, view, and pay their bills from a single place. By storing bills in their digital wallets, consumers can access all of their billing information, including their history, which solves a key pain point our survey found.
For those living on their phones, digital wallets give them everything they need, including reminder notifications and payment channels. With a thumbprint or face scan, payment is done. It’s about meeting the consumer where they live. It’s more than just payments; it’s about making the experience as easy as possible for the customer and merchant.
It’s hard out here for a bank. Your clients are, to put in bluntly, getting older, while the world around you just seems to get younger and younger every year.
“You have to understand who your clientele really is,” Vincent Bezemer, SVP of Americas for Backbase, explained in a recent conversation for Finovate TV. “Let’s face it: most institutions have an aging clientele. And that is really not indicative of what the future of banking should look like. There is this digital divide.”
Financial institutions – from Tier 1 banks to the credit union around the corner – are all working to figure out how to bring a 21st century digital experience to their customers. We caught up with Mr, Bezemer, a technology veteran with more than a decade of experience innovating in the CX space, to hear his thoughts on what institutions need to do in order to not just keep the customers they have, but to attract, engage, and retain new customers, as well.
On the importance of self-directness and becoming the kind of bank that people love
“…(T)here is this need for self-directedness. There is a large part of the population – inclusive of all the demographics – that simply does not want to engage with a person and, if they engage, they want to engage on their own terms.
Supporting that self-directedness – and giving our customers, the banks, and the credit unions the tools to compete in an omni-channel fashion when it comes to digital – is key. The experience on mobile, web, should all be the same. But also the processes should be the same. Whether I’m in collection cycle, whether I’m in a self-service cycle, or maybe when I’m originating products, I want those experiences to be the same. And if I need help, the bank’s team member actually sees that same view that I do as a customer has seen and they can help me with as little friction as possible.
On balancing the unique innovation needs of Tier 1 institutions compared to those of community banks and credit unions
We approach both sizes of our customer base with the same principle that is that we are a platform. As much as Amazon is an e-commerce platform and Netflix is a content platform and Uber is a mobility platform, we really approach it from a banking platform perspective.
With our proposition, you can take the platform as is and build on top of that, which is what a lot of Tier 1s want to do. They have built everything themselves. They basically had unlimited innovation power. But they saw that 80% of their IT budget was there to basically keep their legacy systems afloat. They are now seeing that all of these non-functionals – whether its from an auditing or security or entitlements perspective. They say, “why don’t we just outsource that? Why don’t we just get a product with a roadmap that is supported by hundreds of thousands of people in the Backbase ecosystem, so we don’t have to worry about that any more. Then we can apply our resources to actually create the experiences and the innovations that actually matter in our competitive landscape.”
On the nature of personalization in banking
I think in financial services specifically, personalization falls into two categories: one, do you understand your customer? Do you understand the moments of truth that matter to that customer when they start engaging with you for a certain product? And this is where market data, behavioral data, any type of database you can procure can really help you have that understanding.
But then the second kind of personalization is really a “mass personalization.” Can you give your prospective customer – and also existing customers – the feeling that they can tweak the product ever so slightly? Because if you can, you are relating more with the needs of that person.
So you want personalization in the top of the funnel, driving them to the moment of truth where you want to be there for them. And then, subsequently, you want to understand how you are going to create that process so that the customer feels that you truly listened and that they can make those small customizations.
Is fintech’s final frontier the last chapter for banks?
A provocative new essay from Andreessen Horowitz General Partner Alex Rampell suggests that the way governments have directly intervened to provide financial support to citizens and businesses during the COVID-19 crisis could point the way to a new banking relationship between “people” and “We, the People” – with fintechs playing a starring role.
Rampell’s theme is disintermediation, which he calls the Internet’s greatest legacy. By enabling individuals to get access to the things they want – products, services, information – without a series of (often) fee-charging and rent-seeking gatekeepers, disintermediation has empowered users and rewarded those institutions that are best able to respond – quicker, safer, more accurately, and more completely – to customer demand.
The spectacle of governments – particularly the U.S. government – attempting to provide COVID-19 relief funding was for Rampell a dramatic example of what can happen when effective gatekeepers are NOT present. Because the U.S. government has few options to provide quick financing to its citizens and their businesses, a host of intermediaries were enlisted to help get relief money from Washington, D.C. to the American communities where it was needed. This, as we have since learned, has been time-consuming. Unfortunately, in some instances, it has also appeared to be wasteful in directing some funds to areas where none were needed and, in instances where support was needed, not distributing available funding, at all.
As Rampell put it: “The reason why things like the Paycheck Protection Program (PPP) have been such a disaster , or that stimulus checks still have to be mailed in 2021, is that there is no ‘direct connection’ between consumers and government for money. The government is the mainframe for money, but there’s not really an Expedia yet.”
And Rampell doesn’t see the point in waiting around for one, either. Instead, he asks why not use what the government already has access to, namely, social security accounts, and treat them like bank accounts?
“With an SSN as a permanent financial account with the government,” he writes, “the government could deposit money directly to consumers, or allow person-to-person transfers, or pay overnight interest on deposits directly.” Rampell imagines not only the ease of paying taxes (or receiving tax refunds) under such a regime, but also how much more efficient a government relief program might be with this SSN 2.0 approach.
Rampell is quick to insist that he is not interested in nationalized banking or what he called “postal banking” (generally, the idea of turning post offices into bank branches). Instead he argues that, in some instances, incumbent financial institutions are playing no more than a filtering role when it comes to facilitating savings in a country. And while this filtering has a role in modern capitalist economies, it is not exclusive and there is a good argument against treating legacy financial institutions as if it is.
“Fintech—’apps for money’—represents the most powerful tool that governments have to make their monetary services available directly to their own citizens,” Rampell writes, “helping accomplish monetary and policy goals and benefiting consumers equally.”
There’s more to Rampell’s discussion – including a key caveat on the role of private capital and risk-taking in such a system. But in a world that is getting increasingly comfortable with government playing an active role in the economy, a disintermediation that brings citizens closer to the government that rules in their name may be an idea whose time has arrived.
FinovateWest Digital is a wrap. And with our second, all-digital fintech conference now in the books, what have we learned about the state – and future – of fintech after three days of live demos, keynote addresses, and expert discussions?
Every Year is the Year of the Customer
The COVID-19 crisis has sensitized businesses to the speed at which consumer behaviors can shift. These shifts can both accelerate existing trends as well as to create new trends that had not been broadly anticipated. Whether this has meant embrace of digital technologies or improving the efficiency and security of incumbent solutions, businesses in have learned to listen more and move faster when it comes to responding to customer needs.
Maybe “The Era of the Customer” is a better way to describe the New Normal between businesses and consumers. With Big Tech, Big Banks, and a host of other financial and fintech providers increasingly competing over the same financial services turf, the most obvious and potentially enduring winners of this contest are most likely to be the consumers those firms are battling ferociously to serve.
Find a Friend!
There was a moment on the final day of FinovateWest when the moderator of a panel on challenger banking turned to his panelists and asked: “we hear a great deal about partnerships with incumbent financial institutions? What value do partnerships have for upstart institutions like challenger banks?”
The question took the neobanking innovators a bit by surprise, at first. But the idea of the innovators turning to innovators to help them add key elements to their offering, or to ensure that their solution is safe and secure is as much a part of the promise of fintech as is “disrupting” incumbents – if not more so. In the same way that our developers conferences helped shine a light on those professionals whose skills make everything from UX to back office operations that much better, so to do events like FinovateWest Digital provide a valuable space for all the players in the fintech ecosystem to meet and do business together.
Partnership is the fastest way to add competencies. You can’t innovate faster than someone who has already figured it out.
Live/Digital is Our Destiny
For those who fear a future of AI-powered robot overlords, the growing consensus among technologists is that AI will most likely and effectively be used in coordination with and support of human activity. In other words, rather than be replaced, human beings are more likely to be merely “enhanced”.
Similarly, even as news of a potential COVID-19 vaccine becomes more common and optimistic, we see a role for both digital-only and live-with -digital fintech conferences for the forseeable future. That’s not just for our upcoming Finovate Fintech Fulltime Review, December 7 through 11, but for our big events in 2021, as well.
For now, our upcoming events for European and West coast audiences are still slated to be digital-only affairs in March and May of 2021, respectively. But like those increasingly agile banks, financial services companies, and fintechs we praised above, we’re looking forward to engaging our audiences – live in-person or online and digital – wherever they are and every way we can.
FinovateWest Digital is still available On Demand for registered attendees. Check out live demos from our Best of Show winning companies, videos of our keynotes and panels, and more!
What is the impact of financial technology on what some might suggest is the most important “vertical” of all? With churches and other religious institutions joining other organizations in their embrace of technology, we wanted to take a look at how trends toward digitization – especially given the onset of the global health crisis – are impacting the way that faith institutions support and engage with their communities and congregations.
To learn more, we connected with Aaron Senneff, Chief Technology Officer with Pushpay. Founded in 2011 and headquartered in Redmond, Washington, Pushpay offers engagement and mobile commerce solutions, including payment solutions, to faith, non-profit, and educational organizations.
Finovate: With more than 10,500 customers and a total processing volume of $5 billion, Pushpay operates in a fascinating space within fintech: providing donor management and engagement solutions for faith communities. Can you tell us a little about the idea behind launching the company and the problem Pushpay solves for its customers?
Aaron Senneff: Pushpay was formed on the idea that church giving should be easier. When the company was founded, e-commerce through mobile devices and app was accelerating. You could order and pay for your coffee through the phone.
At the same time, churches were accepting donations via cash, check, and passing offering plates as they had done for years. Our founders saw an opportunity to use technology to help make giving easier for church members and make it much easier for church staff to track, manage, and encourage generosity through digital tools.
Today, Pushpay’s digital systems have built on the early success of digital giving, and expanded into donor development, custom mobile applications for churches and church management systems – a full complement of tools that aid churches. As our original founder was known to say, “Everything we do is driven by our purpose to bring people together by strengthening community, connection, and belonging.”
Finovate: How widely are services such as Pushpay used by churches and other religious institutions in the U.S.? Is this a rapidly growing opportunity for you?
Senneff: Many large, progressive churches use technology to their advantage today. It’s not uncommon for a church to use a wide variety of digital tools now, from streaming technology, to email marketing or CRM tools, to sophisticated custom websites. Many of those churches have added digital giving to their arsenal of tools, especially in the last five years. Particularly, large U.S. protestant churches – the so-called “mega-churches” – have significantly embraced the concept of digital giving.
The adoption of digital giving follows the adoption curve you might expect from other technologies. There are early adopters, early majority, late majority and laggards – churches span across all of these categories. While we’ve seen a lot of adoption in churches to date, we still see a number of churches and faith-based organizations using antiquated tools and processes to manage their giving. In addition, among our current customer base, the suite of tools is ever maturing, growing, and becoming more capable. There’s a great deal of opportunity to utilize those new capabilities, even for churches who adopted digital giving tools early.
Finovate: Who are Pushpay’s primary customers? Is this something that churches of varying congregation sizes can use – or is it mostly for larger institutions? Is there much geographic variation in terms of who uses Pushpay’s solutions?
Senneff: Pushpay serves churches of all types in the U.S. We have customers that rage from 20,000 in weekly attendance to less than 100, and every type of church in between. We have found that larger, progressive churches – the kinds of churches that might operate multiple campuses, have staff dedicated to digital technology, that have processes, systems and structures in place that support their complex and growing organizations – are often the first to adopt new technology and digital tools like Pushpay. However, we see very active interest in our tools across the spectrum of churches.
We’ve also seen an acceleration of adoption across the market as a result of COVID, as churches across the U.S. closed their doors, but still needed a way to engage their membership. The digital tools we provide can give churches a means to continue to communicate and engage with their membership, even while physical participation is on pause.
Finovate: You recently launched ChurchStaq, an end-to-end engagement solutions platform that includes a church management system. I think our readers would be especially interested to hear about the giving and donor management functionalities of the platform. Can you talk a little about this?
Senneff: ChurchStaq is a full suite of tools that enables churches to engage with their people on all levels. It includes a Church Management System – a back office system not unlike a CRM but customized for church staff – a customized mobile app that a church can deploy to their community, and a digital giving platform. These three core capabilities are combined into one product offer that work together to help churches know, grow and keep their people.
The strength of this platform isn’t the standalone donor management system or app or ChMS, but the combination of them all. A really good example of this is our suite of donor development tools. In addition to facilitating online giving, donor management system has some sophisticated reporting that allows church staff to easily identify changes in giving patterns among their community. A church might, for example, have a family that is experiencing financial distress as a result of a job loss and that is surfacing in their giving stopping or becoming more erratic.
The donor management system can easily identify those people who may be in need of care. From that point, the ChMS system can take those individuals and put them in automated workflows for the church that kick off a process of care that is designed by the church. Whether it’s assigning a staff member to call them and check in, sending them an encouraging email, or texting them with some resources, etc. They can also use the church app to push out content or push notifications to specific groups of people. The tools really work powerfully together to help churches big and small care for their people individually.
Finovate: How has COVID-19 impacted your customers? Have you seen the same eagerness to embrace new technologies as we’ve seen in among other institutions and organizations? Has Pushpay played a role in helping its customers manage the crisis?
Senneff: COVID has had a mammoth impact on U.S. churches. Many churches across the nation have been closed to physical attendance since early March. Even as they begin to re-open, we see hybrid models that combine in person and online attendance, and many church-goers and families continue to participate on-line. Digital tools like Pushpay’s have been vital for some churches. It’s allowed those who may have historically relied on physical engagements to connect with people – like written Connection Cards, booths in the lobby, new attendees meeting or classes – to replace those physical engagements with digital ones, such as invitations to give, to join groups, to interact with staff or see the churches calendar of events from a mobile app.
Many churches who were already investing in online tools actually saw attendance via viewership rise during COVID over their historic physical attendance, and the digital tools that Pushpay provides can help churches better engage with those individuals.
Finovate: What can we expect from Pushpay over the balance of 2020 and into next year?
Senneff: We continue to invest significantly in our entire product family: our digital giving platform, our church management systems, and our custom mobile apps. We’ll continue to move each of these products’ features and capabilities forward individually, but we have a significant emphasis this year and beyond on providing a seamless, full-suite solution where churches can gain a sharp 360-degree view of their people, which they can rely on to help know, grow, and keep their people.
