This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.
Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.
Capital One was the first bank to go live with an Alexa integration. Other banks are following suit.
Artificial intelligence (AI) is not new to fintech, but in the past two years we’ve seen a jump in the sophistication and scale of its use across the industry. The advances in chatbots and IVR solutions have done a lot to spur the growth of machine learning and AI.
In a Fintech Trending post earlier this month, we highlighted Capital One’s live integration and Lloyd Bank’s proof of concept with Amazon’s Alexa. We noted that Cap One was the only bank with a Skill (an Alexa-specific app) that’s currently live. Over the past couple of weeks, however, a handful of banks and financial services companies have launched their own A.I. initiatives in voice forms such as Alexa and GM’s OnStar Go, as well as text, such as Facebook Messenger.
However, compared to Capital One’s integration and Lloyd’s proof of concept, the UBS pilot is a bit stunted. In the UBS pilot, when users begin their inquiries with, “Ask UBS,” Alexa currently answers only general financial and economic questions, such as, “What is inflation?” and “How is the EU economy doing?” The pilot aims to test users’ comfort levels with spoken bot interactions.
Bank of America’s Erica
Also this week, Bank of America demo’d its smart chatbot, Erica, said to be coming in “late 2017.” While many banks offer this capability, Bank of America’s bot shows more emphasis on the intelligence piece of artificial intelligence. As Daniel Latimore, senior vice president of Celent’s banking practice, said in an interview with CNBC, “Though many banks have bots with some level of artificial intelligence, the customer experience has not always been great. Consumers are now accustomed to the types of seamless mobile experiences provided by apps like Uber and Airbnb and want better banking experiences.”
Erica will use AI, predictive analytics, and cognitive messaging to enable customers to make payments and check their account balances. She will even help them save money and offer advice to pay down debt by directing them toward educational videos and articles. Bank of America had a lot of consumer-usage data to draw upon while it was building Erica. In Q3 of this year, the bank saw 246+ billion payments and 950 million mobile banking sessions across 21 million active users.
Mastercard’s Facebook Messenger chatbot
Mastercard (F14) launched its own chatbot this week to deliver a personalized customer experience in messenger platforms. The company partnered with Kasisto to create Mastercard KAI, a bot for banks, which will launch next year on Facebook Messenger. The bot was created in-house in Mastercard Labs. It aims to offer a way for merchants to allow consumers to shop and transact in messaging platforms and check out with Masterpass.
The payments giant also announced partnerships with GM and IBM (FD16) this week to launch Masterpass payment functionality on OnStar Go, a digital platform that will be embedded in 2 million GM vehicles by the end of 2017. The OnStar Go platform will feature a marketplace of select merchants from which drivers can order and pay directly from their vehicle. Over time, OnStar Go learns the consumer’s purchasing behaviors and is able to push personalized and contextual offers to the driver. ExxonMobil, Glympse, iHeartRadio, MasterCard, and Parkopedia are the first brands to join the platform.
Roll out as a payment option across more of Facebook’s commerce experiences (including Messenger)
Make it easy for PayPal customers to link their PayPal accounts to Facebook and Messenger at PayPal checkout
Offer the ability to get notifications in Messenger, facilitating receipt management for PayPal transactions in one place
The biggest takeaway is that as Messenger rolls out a native payment experience, merchants can accept PayPal payments directly within their bots. As an early pilot of this capability, PayPal’s Braintree partnered with Facebook and Uber in December 2015 to allow users to hail and pay for an Uber directly within the app.
Contrary to some reports, PayPal’s integration isn’t a chatbot. I learned this the embarrassing way when I typed “balance” in a Facebook message to PayPal and a half-hour later received a message from an actual person:
That awkward moment you learn you’re chatting with a real person, not a chatbot
SimplyTapp launches mobile payments app with chatbot
SimplyTapp’s (FD14) newly launched mobile payments app, Gane, works on both Android and iOS and offers tap-and-pay functionality at the POS. With the companion mobile app, users can collect and apply discount offers. Aside from mobile payment and offer-redemption capability, Gane works with chatbots embedded in Facebook Messenger, iMessage, Kik, and Telegram messaging platforms. The company plans to integrate with additional platforms in the future.
Why all the AI?
Banks and financial services companies aren’t just trying to farm out the jobs of their tellers and customer service agents to bots that don’t require a salary, paid time off, and health insurance, though that does play a role. Aside from the obvious role chatbots and AI play in answering simple customer inquiries without using up the time of customer service agents, banks’ motives are twofold.
First, it helps them meet customers where they are by operating in the same channels in which their consumers spend hours a day, such as Facebook. Financial services companies can offer a better user experience by not requiring users to open a separate app or launch a new window to view their balance. In cases such as PayPal’s and Mastercard’s integrations with Facebook Messenger, it also serves as a way to become the customer’s preferred payment method in that channel, i.e., becoming top-of-wallet in Messenger.
Second, it establishes the financial services company on the millennial map. Many of the incumbent players are struggling to attract their next generation of clients for payments and wealth management. Offering services that reach into channels such as Alexa and social messenger platforms help banks engage with potential millennial wealth management customers. It’s the same reason established wealth management players are launching robo-adviser—to serve as training wheels.
Note: A Finovate alum’s most recent appearance is shown by a capital F followed by the year; for example, FIS first appeared at Finovate in 2009, so you will see (F09) after their name, with a link to that first demo.
A look at the trending topics of the past two weeks, co-authored by Finovate’s research analysts David Penn and Julie (Schicktanz) Muhn.
Big handshakes
Cardtronics acquires DirectCash Payments
In a $460 million deal, Texas-based ATM operator Cardtronics has acquired Canada-based DirectCash Payments. The deal is expected to help Cardtronics expand into Canada and the United Kingdom. DirectCash Payments has 25,000 ATMs around the globe, primarily in Australia, Canada, and the U.K. Once the deal closes in Q1 of 2017, it will boost Cardtronics’ network to 225,000 ATMs across North America, Europe, and Asia Pacific.
Jack Henry & Associates (F10) teams up with Visa (F10)
In a new partnership, Jack Henry & Associates has integrated with Visa to allow customers to send P2P payments directly to a recipient’s Visa debit card. This eliminates the need for a recipient to provide their account and routing number to the sender. With increased competition in the P2P payments industry (PayPal/Venmo (FDNY 16), Square Cash, Zello), banks are feeling pressure to compete by offering faster delivery of funds. The partnership enables banks to offer funds-transfers a day sooner, or even same-day. Jack Henry began offering P2P payment capability in 2005 and expects the new method to boost usage.
Sberbank (F16) and MasterCard (F11) partner to launch ApplePay in Russia
Starting this week, Mastercard cardholders in Russia can now pay using ApplePay, thanks to a new partnership between Russian bank Sberbank and Mastercard. In a statement, the bank’s Deputy Chairman of the Executive Board, Alexander Torbakhov, said, “Apple Pay is driving the popularization of contactless payments in Russia and globally. Many of Sberbank clients actively use new technologies, and an increasing number of them will prefer cash-free and contactless payment using their smartphones.”
This is the Russian bank’s second big move this week. On Monday the company inked a partnership with Hyperledger to begin working on the Hyperledger Project.
PayPal (F11) and Vodafone partner for in-store NFC mobile payments
Acting on a partnership it first initiated in February, PayPal partnered with Vodafone to enable U.K. users to make NFC payments from their PayPal accounts using their Android phones. The agreement enables consumers to make transactions of up to £30 ($36.60) at 400,000 retail locations. For more expensive purchases, Vodafone Pay users can use their Vodafone wallet (launched in 2013), which requires a PIN.
The NFC payment capability with Vodafone was piloted in Spain. PayPal also has agreements in place with other global telcos, including America Movil, Telcel, and Claro.
Regulation
Happy birthday, U.S. EMV. It’s been one year since EMV regulation in the United States was placed into effect. If you live in America, you’ve likely noticed that adoption is low. In fact, according to a recent report from Mastercard, 88% of consumers have been issued chip cards, but only 33% of merchant locations accept them.
Mobile POS company CardFlight (F13) released data on EMV usage in the U.S. over the course of the year and found:
78% of cards now contain EMV chips, up from 46% in October 2015
American Express leads the way in EMV card issuance, with 96% of their cards now EMV-enabled
Mastercard is the runner-up: 71% of cards issued contain an EMV chip
Though usage remains low, Mastercard reported this week that it has seen an overall decrease in fraud since the EMV change. The company reports that between April 2015 and April 2016, retailers who have transitioned to EMV experienced a 54% decrease in counterfeit fraud.
Ready, set, ACH
As of September 30, a new rule from NACHA requires all banks to process incoming same-day ACH credits. Most ACH payments are currently settled on the next business day: the new rule-change offers originators the option to send an ACH transaction to any recipient account for same-day processing. NACHA has imposed a same-day fee on every same-day ACH transaction to help financial institutions receiving the funds to recover the cost to enable same-day ACH. Phase two of NACHA’s Same-day ACH initiative will take effect 15 Sept 2017.
Capital One integration with Amazon Echo
Technologies: AI, chatbots, and natural language processing (NLP)
The industry-wide obsession with chatbots continues. Finovate last month showcased a dozen variants on the chatbot theme. One of our newer alums, Personetics (F16), is even holding a Chatbot Bootcamp next month in San Francisco. And our chatbot-banking post in March is our fourth most-read. But the bigger conversation is around natural language processing (NLP) and how it can be used to retrieve information and perform tasks. A new report from Juniper Research estimated that NLP would drive $2.1 TRILLION in annual purchases via mobile five years from now (2021).
The tech world is in a tizzy over Amazon’s Alexa capabilities. We showcased two demos of her at FinovateFall from BankJoy (F16 demo) and FIS (F09) (F16 demo). Capital One is the only bank with a live Alexa integration (called “Skill”), but Lloyds Bank put together a proof of concept this spring. There are currently 2,904 skills listed in the unofficial Alexa database, but very little in the financial realm. Expect to see much more activity as financial institutions and fintech companies develop applications using Amazon’s Alexa and the new Google Assistant.
Sibos 2016 celebrates the blockchain
The annual Sibos 2016 conference in Geneva took place at the end of September—between the last Fintech Trending meeting and this one. Organized by SWIFT, Sibos is considered to be the world’s premier financial services event covering areas such as payments, securities, cash management, and trade.
So what was big at Sibos 2016 this year? The blockchain. 2016 was the first year that Sibos dedicated a track “exclusively to distributed ledger” technology. And the event’s startup-industry challenge was all about how to use the blockchain in the securities industry. The three startups that won the challenge will develop PoCs using technologies like smart contracts (SmartContract), distributed ledgers (Rise Financial Technologies), and open-source blockchain platforms (Coin Sciences).
Some have ascertained the irony in SWIFT’s embrace of the blockchain: Its $6 billion payment-messaging service is one of the technologies “widely perceived to be at risk for disintermediation” by blockchain technology. And indeed, companies like Finovate alum Ripple (F13) have made great strides in helping FIs like Bank of America, Santander, and Royal Bank of Canada use distributed-ledger technology to provide a global blockchain-payments network with “near-instant” settlement. Interestingly, Ripple recently hired former SWIFT board member Marcus Treacher as its new global head of strategic accounts. Treacher told CoinDesk in September that SWIFT was the “de facto way everyone moves money through countries.” And cross-border payment is something he specifically believes Ripple “can do better.”
Global Banks Partner to Form Blockchain Payments Network—CoinDesk
Speaking of blockchain, a number of companies with blockchain and distributed-ledger technologies will be presenting at our developers conference, FinDEVr Silicon Valley, next week. These companies include PwC, which will present its blockchain-as-a-service technology to improve trade finance, and IBM with its hyperledger implementation in the cloud that helps manage and test blockchain-dev projects. Also on hand will be distributed database specialists Aerospike (FD16) and Cognitect (FD16).
InsurTech rising
From FT Partnersrecent report on the boom in insurance-technology innovation, to InsurTech Rising’s event, Informa, to launch on 21 Oct, this area of financial technology is garnering increasing attention.
Why? As FT Partners pointed out in their 247-page report, the insurance industry is one of the areas of finance that so far has been least affected by the technological disruption nearly commonplace elsewhere. The insurance industry is a multitrillion dollar business; property and casualty insurers alone generated more than $64 billion in net income in 2014. And it sits at the nexus between the drive to better engage customers (is there anything enjoyable about insurance from a consumer perspective) and the need to accommodate complex and shifting regulatory landscapes (something the rest of finance is becoming increasingly familiar with).
What are the focuses of insurtech? Most technology innovation in the area revolves around trends in distribution and administration: data and analytics, and marketing and customer engagement. This includes everything from the kinds of products offered to consumers, such as micro-insurance, to using mobile channels and interactive technologies to make insurance products easier to understand, choose from, and purchase.
How are industry players responding and what to watch for? From partnering with innovative startups to acquisitions, incumbent insurance firms are increasingly aware of the challenge. FT Partners reports that more than 40% of traditional insurers surveyed by Ptolemus Consulting said they were planning to “acquire, or have already acquired, innovative startups to help them expand their digital capabilities” and more than half say they have already invested in social media, data mining, and predictive modeling. Nearly 70% have embraced mobile technology.
Wave Mechanics: FT Partners Report Highlights Trends Driving Rise of Insurtech—Finovate
Prepare for the InsurTech Wave: Overview of Key Insurance Technology Trends—FT Partners
——
Note: Finovate alums have the year of their first appearance listed after their name. For example, FIS first appeared at Finovate in 2009, so there is a (F09) after their name, with a link to that first demo.
U.K.-based challenger bank Atom opens to the public. The bank’s iPhone and iPad app is built on the Unity gaming platform and is the only way to access the mobile-only bank. Atom has a customer service team equipped with AI and machine learning, and has bolstered its security using voice and face biometric login. Atom Bank is the first of a handful of U.K. challenger banks set to launch this year, including Mondo, Starling Bank, and Tandem. Atom is headquartered in Durham and is already valued at almost $190 million. Check out Business Insider’s coverage.
Deals
Akamai (FEU 15) acquires Soha Systems, which offers secure access as a service for enterprises. This matches well with Akamai’s aim to offer cloud-based services to enterprises, and places it in a good position for a potential acquisition. See our coverage.
Jack Henry & Associates (FF 15) collaborates with Visa (FDSV 14) to accelerate P2P payments to debit cards. This may help banks compete with other services that have sped up settlement times, such as Zelle (formerly clearXchange) and Venmo (FS 13). See the press release.
IBM (FF 16) announced a $200 million investment for a new global headquarters for its Watson IoT business. The headquarters will be located in Munich and is one of IBM’s largest-ever investments in Europe. This move is part of a $3 billion initiative to bring Watson’s computing expertise into the world of IoT. See IBM at FinDEVr Silicon Valley, 18/19 Oct 2016. See VentureBeat’s coverage here.
Banking Technology reported that Misys (FEU 15) is preparing to issue an IPO in Nov 2016 with a $6.9 billion float. Advisory firm Moelis will be overseeing the move. Misys was delisted from the London Stock Exchange in 2012 when it merged with Turaz. Misys CEO Nadeem Sayed says going public is a “logical step in our evolution.” See Banking Technology’s coverage.
Aire (FEU 15) raised $2 million. Along with the funding announcement, the alternative credit-scoring platform announced it is now authorized and regulated by the Financial Conduct Authority (FCA), the U.K.’s financial regulator. This places it on a more level playing field to compete with the big three credit bureaus. See our coverage.
Tech
Thomson Reuters (FF 12) unveils blockchain-dev platform, BlockOne ID. Built for Ethereum, BlockOne ID is an experimental framework in which app owners can manage access to their blockchain contracts in a controlled environment. See Banking Tech’s coverage.
PaySimplelaunches the first e-commerce platform for service providers.
Ethocateams up with Lean Industries to improve dispute processing for card-issuing banks.
RealtyMogul.comannounces 8% dividend payout for new REIT, MogulREIT I. Read more in our coverage about MogulREIT I.
Overbondwins spot in Canadian Innovation Exchange (CIX) 2016 Top 20.
This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.
Fidor Bankteams up with Abu Dhabi Islamic Bank to launch first community-based digital bank in the region.
Bank of Ireland to deployUniversalSuite core banking solution from Temenos.
Jack Henry & Associatescollaborates with Visa to accelerate P2P payments to debit cards.
Sberbank and MasterCardlaunch Apple Pay on Russian market.
BluefinAnnounces Issuance of Patent on Decryption as a Service.
Eurogiro and TransferTojoin forces to link mobile money with 500,000 bank and postal branches.
PayPalpromotesBraintree’s William Ready to chief operating officer.
Commercial Bank of Texas hiresInsuritas to launch insurance agency.
CachetPartners with Viamericas to Provide Mobile International Money Transfers
This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.
Mastercard (FD14) launches its developer portal (again). Having originally launched its dev platform in 2010, Mastercard this week announced an expansion of its platform that provides third-party developers single-location access to more than 25 updated APIs in categories such as payments, data, security, and financial inclusion. The platform also features an experimental category with APIs for bot commerce (think chatbots, VR, and augmented reality), and developers will be able to use six different coding languages (Java, Javascript, C#, Ruby, Python, and Node.js).
Mastercard says it has seen a 4x increase in API usage in 2016, which encouraged the company to expand its portal to include open APIs for all of its products. “The APIs are built to be open, flexible and available through a single doorway,” SVP for APIs at Mastercard Oran Cummins told ComputerWorld. “It’s our front door and we’ve been cranking up the volume on this.”
If the latest dev news is at the top of your daily agenda, then join us October 18 & 19 for FinDEVr Silicon Valley 2016. Our developers conference features two days of the latest in developer tools, platform, and case studies, along with hours of high-caliber networking with fintech developers, VPs of engineering, CTOs, and more. Visit our registration page and pick up your ticket today.
Trends
Look out London! A new report from the Association of Chartered Certified Accountants (ACCA) suggests that Singapore’s fintech industry could be a major beneficiary of rising regulatory restrictions and political uncertainty in the U.S. and Europe. “Singapore … is benefiting from a supportive regulatory framework and extremely high digital capacity, which means there is a potential for her to become the regional hub for Asia-Pacific and beyond,” said Joseph Alfred, head of policy and technical, ACCA Singapore.
JB Financial Group launches the first global hackathon dedicated to South Korea’s banking industry. Its BiSang Hackathon (“BiSang” is Korean for “Quantum Leap”) is devoted to global startups and developers, with the goal of helping JBFG discover potential collaborators to provide “innovative services and technologies to the financial and banking worlds.”
Manulife unveils new “Lab of Forward Thinking” location in Singapore. This is Manulife’s third location (the other two are in Boston and Toronto). “We are using emerging technologies and platforms such as blockchain and artificial intelligence to build competitive advantages,” Greg Framke, EVP and CIO for Manulife said.
Mastercard launches its first B2B mobile app to connect small business buyers and suppliers in Hong Kong: the Mastercard Commercial Network App. Hang Chong, Mastercard’s division president for Hong Kong, Macau, and Taiwan, said, “Small and medium sized businesses are the lifeblood of a thriving economy. To maximize the success of these enterprises, we will continue to innovate and develop a broad range of solutions that address evolving business needs.”
And speaking of Hong Kong, don’t forget that FinovateAsia 2016 will be in Hong Kong, November 8th. For more information, check out our FinovateAsia registration page.
ICYMI
Jumio (F15) CEO Stephen Stuut shared his thoughts on the future of ID verification in our latest CEO interview.
“Gimme That Old Time Navigation!” Mobile UI takes a look at Capital One Wallet and its new, old-school user interface
FT Partners prepares you for the insurtech wave. A new free report from FT Partners provides the most comprehensive look at the rising insurance technology industry.
Milestones
Samsung Pay celebrates its first anniversary in the U.S.
Under PayPal (F12), Braintree (FD16) transactions grew 25x.
Dash is the first digital currency to cooperate with a blockchain-compliance platform.
Payment-services giant Mastercard is launching its developer portal. Sound familiar? It should. The company’s original launch of its developer platform took place around 2010, so today’s launch is more of an expansion of the platform.
The new developer gateway, which aims to facilitate partner integration, offers a single location where third-party developers can access more than 25 updated APIs. The new APIs span payments, data, security, financial inclusion, and “experimental” categories.
Mastercard’s portal expansion comes about seven months after the company’s competitor Visa opened its Developer Center which hosts just over 25 APIs, as well as documentation on Visa Tokens and microtransactions. Both companies showed off their APIs at FinDEVr Silicon Valley 2014. Mastercard’s presentations focused on its Developer Zone and explained how developers can select the best API. Visa showed Visa Checkout, as well as Apple Pay integration with Authorize.Net and CyberSource.
D+H ExpandsMortgagebot Platform with MortgagebotMobile.
Gusto (fomerly ZenPayroll) now serves 40,000 small businesses.
Entersekt and Menigalisted among 100 most promising African fintech companies of 2016.
Motif Investingtransitions to subscription service; hints at plans to launch roboadviser.
This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.
We love seeing alums called out in the numerous “most innovative” articles. Usually, those skew to young private startups. But the recent Forbes list of innovators, limited to large public companies (minimum market cap = $10 billion, with 7 years of public ownership), didn’t disappoint. Four financial technology companies made the top-100 list, and all four have appeared on the Finovate stage. Interestingly, financial services firms are excluded by Forbes on the grounds that they “have no measurable investment in R&D.” (I am sure many readers would argue that point).
Here are the financial fab-four in order of their finish (the innovation premium is the extra value investors place on their growth vs. their enterprise value, methodology):
The terms of today’s agreement with Mastercard are similar to those PayPal laid out with Visa:
Mastercard will be clearly presented as a payment option within the PayPal app
Users will be able to set Mastercard as their preferred payment method
Mastercard will help PayPal boost its presence at the point-of-sale (POS)
Mastercard’s Masterpass will be available as a payment option for merchants using Braintree
Venmo users can withdraw their Venmo balance using Mastercard Send
Also similar to the Visa deal, PayPal will receive volume incentives and will not be charged a digital wallet-operator fee for using Masterpass.
PayPal spun off from parent company eBay last year and has since been focused on growing its presence at the brick-and-mortar POS to help it compete with the growing number of mobile-wallet apps. The company’s recent partnerships with Visa and Mastercard are expected to spur growth in this area.
ayondorelaunches website with new design and features to improve trading experience.
TransferWiseannounces tripling of revenues in first public annual report.
This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.
Also this week, Bank of America 
PayPal expands Facebook Messenger capabilities
That awkward moment you learn you’re chatting with a real person, not a chatbot
