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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Social investment platform eToro inked a definitive agreement to acquire stock and options trading app Gatsby for $50 million.
U.S.-based Gatsby offers a commission-free, stock and options trading solution geared toward Millennial and Gen Z investors and traders.
Making its first Finovate appearance in 2011, eToro has won Best of Show in every one of its six appearances on the Finovate stage.
Social investment platform eToro has agreed to acquire Gatsby, a U.S.-based, commission-free, stock and options trading app. The Israel-based company, which has won Best of Show awards in every one of its six appearances on the Finovate stage since 2011, will pay approximately $50 million for the trading company.
As part of the transaction, Gatsby’s co-CEOs and co-founders Jeff Myers and Ryan Belanger-Saleh – along with other senior Gatsby staffers – will join the eToro team. The acquisition of Gatsby will enable eToro to diversify its offering to investors and traders in the U.S., a factor that eToro CEO Yoni Assia called “a strategic focus” for his company.
“Through Gatsby we can provide U.S. users with access to a safe and simple way to trade options,” Assia said, “which we know are particularly attractive in challenging markets.”
Geared toward younger investors and traders, Gatsby was founded in 2018 as a way to bring commission-free options and stock trading to a demographic that has been overlooked until recently. Company co-founder Belanger-Saleh credited eToro as an inspiration for launching Gatsby, calling eToro a social investing pioneer and “the cool older sibling we’d love to hang with.” Joining the eToro team will be Gatsby’s president and chief operating officer (both co-founders), as well as Gatsby’s Chief Technology Officer, Head of Product, and others.
“We are incredibly excited to welcome the Gatsby team to the eToro family,” Assia said. “We have a shared mission of empowering investors through simple, transparent tools.”
The acquisition announcement from eToro comes less than a month after the company launched its private equity portfolio that enables individual retail investors to access private markets that would be otherwise inaccessible to them. eToro’s Private Equity Smart Portfolio gives users exposure to 14 publicly listed asset management and investment companies that manage alternative assets. These firms, including Apollo Global Management, Blackstone, and The Carlyle Group, all feature strong ROIs and get their revenues via a combination of management fees for asset allocation and performance fees based on realized profits.
“Our goal is to open the global markets so that everyone can trade and invest in a simple and transparent way,” eToro Head of Investment Portfolios Dani Brinker said. “With this portfolio we want to leverage the wave of private equity company listings and offer our users a new solution to diversify their portfolio and gain exposure to the revenues generated in private markets.”
Founded in 2007, eToro currently has more than 28 million registered users who share their investment strategies and make it easy for market newcomers to buy, hold, and sell assets ranging from stocks to cryptocurrencies.
Jack Henry Acquired payments-as-a-service startup Payrailz.
Jack Henry anticipates the acquisition will enhance its payments-as-a-service strategy and offer its 8,000 clients the ability to enable embedded finance.
Financial details were not disclosed.
Core banking provider Jack Henry & Associates has agreed to acquire digital payments startup Payrailz. Financial details of the acquisition, which is expected to close at the end of this month, have not been disclosed.
Jack Henry anticipates the acquisition will support banks and credit unions by enhancing its payments-as-a-service (PaaS) strategy and offering its 8,000 clients the ability to enable embedded finance. Jack Henry currently has a virtual payments hub that consolidates money transfer tools which support numerous payment channels and types. Payrailz’s technology complements this hub by adding consumer and commercial bill pay; real-time person-to-person (P2P), account-to-account (A2A), business-to-customer (B2C) payments; and more.
“We are excited about the opportunity to add these next-generation solutions to our payments capabilities,” said Jack Henry President and COO Greg Adelson. “Our company is engaged in technology modernization that is supporting banks and credit unions with innovative solutions that enable them to respond to business opportunities and challenges, and to improve the financial health of their accountholders. Considering the importance of modern digital and payments strategies to financial institutions, we plan to acquire Payrailz as a strategic addition to our payments ecosystem, which enables our clients to simplify the complexity of payments, modernize their existing payment channels, and remain at the center of their account holders’ payment experiences.”
Payrailz consumer and commercial digital payment solutions help banks compete with third party players with its PaaS offering. The company was founded in 2016 and had since raised $24 million. Earlier this year, Payrailz integrated with Q2’s digital banking platform to enable Q2 clients to provide P2P payment services.
Founded in 1976, Jack Henry most recently presented at FinovateFall 2015 where the company showcased the Banno solution after acquiring Banno in 2014. Among Jack Henry’s other fintech acquisitions are Geezeo, iPay Technologies, and Stackfolio.
Tax compliance firm Avalara has agreed to be acquired by Vista Equity Partners for $8.4 billion.
Avalara has more than 30,000 customers in 95 countries.
The transaction will take Avalara private, removing it from the New York Stock Exchange.
Avalara is starting the week with a big move. The tax compliance firm has agreed to be acquired by global investment firm Vista Equity Partners for $8.4 billion. Vista Equity Partners is acquiring Avalara at $93.50 per share, which represents a 27% premium of Avalara’s closing share price on July 6, 2022.
Founded in 2004, Avalara helps its more than 30,000 customers in 95 countries comply with tax regulations. The Washington-based company offers compliance solutions for various transaction taxes, including sales and use, VAT, GST, excise, communications, lodging, and other indirect tax types. In addition to tax compliance, Avalara also helps companies secure business licenses and provides sales tax data analysis that offer business insights. Among the company’s clients are Zillow, Pinterest, and Roku.
“Avalara is a mission-critical platform serving customers in a variety of end-markets, including retail, manufacturing, hospitality, and software,” said Vista Equity Partners Managing Director Adrian Alonso. “Avalara’s solutions, its commitment to product innovation, and its network of extensive partner integrations, resellers, and accountants make it a true leader in the space.”
Once complete, the transaction will take Avalara private, removing it from the New York Stock Exchange. Prior to going public in 2018, Avalara had raised $341 million. Scott McFarlane is co-founder and CEO.
Thoma Bravo is acquiring Ping Identity in an all-cash deal for $2.8 billion.
The acquisition will take publicly held Ping Identity into the private markets.
Thoma Bravo’s other recent fintech acquisitions include Bottomline Technologies, Digital Insight, and Ellie Mae.
Cloud-based identity software provider Ping Identity has agreed to be acquired by private equity firm Thoma Bravo. The all-cash deal is expected to close in the fourth quarter of this year for $2.8 billion.
“We are pleased to partner with Thoma Bravo, which has a strong track record of investing in high-growth cloud software security businesses and supporting companies with initiatives to turbocharge innovation and open new markets,” said Ping Identity CEO Andre Durand.
Ping Identity was founded in 2002 and has since made seven acquisitions of its own, including passwordless identity verification company Singular Key, bot prevention and fraud intelligence firm SecuredTouch, intelligent authorization company Symphonic, blockchain-based identity startup ShoCard, AI-powered security company Elastic Beam, customer identity solution UnboundID, and Accells Technologies.
Ping Identity has leveraged this acquired expertise, in addition to its own in-house knowledge, to help enterprises remove passwords, prevent fraud, support Zero Trust. The company offers a no-code, drag-and-drop user interface to make its seemingly intimidating offerings more approachable for non-technical staff.
After the deal closes, Ping Identity, which is listed on the New York Stock Exchange with a market capitalization of $2.38 billion, will transition to a privately held organization. Before the company’s debut onto the public markets, Ping Identity was majority-owned by Vista Equity, which now owns 9.7% of shares in the Denver, Colorado-based company.
“Ping Identity is a leader in intelligent identity solutions for the enterprise and is well-positioned to capitalize on the significant opportunities in the $50 billion Enterprise Identity security solutions area,” said Thoma Bravo Partner Chip Virnig. “Our shared commitment to growth and innovation, combined with Thoma Bravo’s significant security software investing and operational expertise, will enable Ping Identity to accelerate its cloud transformation and delivery of industry leading identity security experiences for the customers, employees and partners of large enterprises worldwide.”
Today’s purchase marks Thoma Bravo’s 91st acquisition. The firm takes a buy-and-build approach in which it acquires similar companies and consolidates them to create synergies and develop companies with greater scale, scope, and broader service offerings. Among the Illinois-based company’s most recent fintech purchases are Bottomline Technologies, Digital Insight, and Ellie Mae.
Last week, we looked at Finovate alums that are leveraging their technologies to help employers help their employees achieve financial wellness and greater financial inclusion. Today we are highlighting a Finovate alum – and Best of Show winner – that is using its innovation to facilitate charitable giving in the workplace.
Founded in 2017 and headquartered in Baltimore, Maryland, Pinkaloo made its Finovate debut two years ago at FinovateFall. At the conference, the company demonstrated Modern Giving, its white-label charitable giving platform. The technology gives individuals a centralized account to use for their charitable giving, learn about other charities that match their values, and collaborate on philanthropic efforts with others. Modern Giving enables businesses to maximize engagement with their employees and customers, helping promote and drive charitable giving in their communities.
“Pinkaloo’s white-label Modern Giving offers an opportunity to attract new banking customers and members, as well as more deeply connect with your current customers around an area that they are deeply, deeply passionate about and truly care about strongly,” Pinkaloo founder and CEO Gideon Taub told our FinovateFall audience. “At the same time, your banking institution can make more money and hit your KPIs while directly powering the charitable giving of your customers and members.”
Left to right: Pinkaloo’s Daniel Gardner (COO) and Gideon Taub (CEO & Founder) delivering the company’s Best of Show winning demo at FinovateFall 2019.
The company’s demonstration was impressive enough to earn Pinkaloo a Best of Show award in its first Finovate appearance. And it looks as if our Finovate audience was not the only one paying attention to Pinkaloo’s achievements. Less than two years after its award-winning appearance on the Finovate stage, the company announced that it had agreed to be acquired by Ren (formerly RenPSG), a leading independent philanthropic solutions provider. Terms of the transaction were not disclosed.
Founded in 1987 and headquartered in Indianapolis, Indiana, Ren supports more than $20 billion in assets. The firm partners with financial services companies, nonprofits, and community organizations to offer online access for donors, advisors, and employees to manage a variety of planned gifts ranging from charitable trusts to endowments and private foundations.
“Today’s philanthropic ecosystem demands ongoing innovation in how we recruit, engage, and retain donors – all while also giving donors the best possible experience,” Taub said when the deal was announced. “Donors want to be involved and drive change via small and large contributions alike. They need a robust platform to do just that – and a RenPSG-Pinkaloo team uniquely answers that demand.”
The future of the Pinkaloo brand, post-acquisition, remains to be seen. Techincal.ly quoted Taub in March 2021 as indicating that a “new shared brand will emerge from our combined company” as the two entities “integrate and innovate.” With employees around the country, Pinkaloo said it will retain its “Baltimore presence” as its leadership and team are integrated into Ren. Taub praised Ren for “respecting and welcoming our ideas and processes,” adding that the alignment of visions between the two companies “makes for an easy transition.”
Pinkaloo was a finalist in the Reimagine Charitable Giving Challenge sponsored by the Better Giving Studio (BGS) of Giving By All, an initiative of the Philanthropic Partnerships team of the Bill & Melinda Gates Foundation. Previous to its acquisition by Ren, Pinkaloo had raised $1.8 million in funding from investors including Squadra Ventures, C5 Accelerate, TEDCO, Baltimore Angels, and PeaceTech Accelerator.
European business finance solution company Qonto is seeking to acquire its competitor Penta.
Together, the two will serve more than 300,000 small business customers across Germany, France, Italy, and Spain.
Terms of the deal have not been disclosed.
Two European business finance solution companies have agreed to join forces. In the deal, which is expected to close in the next few weeks, Paris-based Qonto is seeking to purchase Berlin-based Penta. Financial terms have not been disclosed.
“When Steve Anavi and I founded Qonto in 2016, we had the ambitious goal of simplifying everyday banking for SMEs and freelancers across Europe,” said Qonto CEO Alexandre Prot. “Today, we’re already present in four European markets and, while I’m very proud of what we’ve achieved so far, we want to go even further: the natural next step was to join forces with Penta. We are thrilled to welcome the Penta team onboard. Together we’re going to be the finance solution of choice for one million European SMEs and freelancers by 2025!”
Penta launched in 2017 and now serves 50,000 small business customers in Germany. Qonto launched the same year and currently serves more than 250,000 clients across France, Germany, Italy, and Spain. The acquisition will combine Qonto’s brand strength, license, and core banking system with Penta’s local expertise.
Qonto is anticipating that Penta’s existing market presence will strengthen its operations in Germany. The combined entity will make Qonto a strong leader in the European digital business finance sector. After the acquisition is complete, the company will have more than 300,000 customers and 900 employees.
“With the combination of increasing customer numbers and rising revenues, we have gained even more substance in the past 18 months,” said Penta CEO Markus Pertlwieser. “We are very excited that we now have the chance to actively shape digital banking for business customers in Europe as a team with Qonto.”
Wealth management solutions provider Orion Advisor Solutions has closed two acquisitions in recent weeks.
The Omaha, Nebraska-based fintech closed its acquisition of CRM company Redtail Technology in June, and finished its acquisition of investment and trading platform TownSquare Capital in July. Terms were not disclosed about either transaction.
Orion Advisor Solutions made its Finovate debut in 2019 at FinovateFall, demonstrating its trading and rebalancing platform, Eclipse.
Wealthtech innovator Orion Advisor Solutions has recently closed a pair of acquisitions. Both deals are designed to help Orion expand its wealth management business and give financial advisors a “single-source solution to prospect, plan, invest, and achieve,” said Orion founder and CEO Eric Clarke.
At the beginning of the month, the Omaha, Nebraska-based company announced that it has completed its acquisition of investment and trading platform TownSquare Capital (TownSquare). Terms of the transaction were not disclosed, but the acquisition will add $6 billion in turnkey asset management program (TAMP) assets to Orion’s wealth management platform.
Post-acquisition, TownSquare will continue to operate as a standalone entity, serving as an indirect subsidiary of Orion Advisor Solutions. Headquartered in Provo, Utah, and founded in 2016, TownSquare offers custom investment solutions for institutions, wealth advisors, accounting firms, high net worth individuals, and banks.
“Combining TownSquare with Orion’s wealth management and advisor technology capabilities brings tremendous value to financial advisors and their clients,” Orion Chief of OCIO Services Kurt Brown said. “With the full weight of Orion’s resources and relationships behind us, we can continue providing best-in-class investment strategies to the advisors and clients we serve.”
Orion’s TownSquare announcement comes just one month after the wealth management firm reported that it has completed the acquisition of web-based client relationship management (CRM) software company Redtail Technology. Announced this spring, the combination of the two firms will provide financial advisors with a range of technology and outsourced solutions to help them serve their clients better. Specifically, the integration of Redtail’s CRM technology into Orion’s open architecture will give advisors a foundational tech stack courtesy of an integrated “most-in-one” platform that is built around a CRM hub.
“Redtail joining Orion will greatly benefit financial advisors who seek an integrated suite of technology to grow their businesses,” Orion’s President of CRM Brian McLaughlin said. “We aim to solve some of advisors’ tech integration challenges by bringing together the technology pieces they need to be successful and freeing advisors up to spend more time engaging with their clients and prospects in meaningful ways.”
With Redtail on board, Orion gained insights into more than $3 trillion in assets under management. Before closing its deal with Redtail, the company had been serving 4.7 million technology accounts and supported more than 2,300 independent advisory firms representing $1.9 trillion in assets under administration and $60 billion of wealth management assets.
Founded in 1999, Orion Advisor Solutions made its Finovate debut at FinovateFall 2019. At the event, the company demoed its fully-integrated trading and rebalancing platform, Eclipse. The technology leverages ASTRO’s institutional-grade portfolio optimization engine to create custom Direct Indexing products, as well as provide advisors with client-specific overlays to strategies that feature custom ESG solutions.
U.K.-based GoHenry has acquired France-based Pixpay for an undisclosed sum.
The deal will help GoHenry expand further into Europe.
GoHenry and Pixpay will operate under their own brands with no change in staffing or headquarters.
Kids money management app GoHenry has acquired France-based Pixpay for an undisclosed amount.
The move will help U.K.-based GoHenry expand further into Europe, taking advantage of Pixpay’s teen mobile banking operations in France, Spain, and eventually Germany and Italy.
“Pixpay is the most developed player in Europe,” said GoHenry CEO Alex Zivoder, “and we’re excited to combine our expertise in financial education to accelerate not only GoHenry’s growth but to accelerate the financial fitness of even more kids and teens globally.”
Founded in 2019, Pixpay’s mobile banking app targets a slightly older user base then GoHenry. Pixpay is aimed at pre-teens and teenagers, while GoHenry caters to kids as young as six years old. Both seek to not only help kids spend and save money, but also to teach them responsible money habits at an early age. With almost 200,000 users, Pixpay has raised €11.1 million. Benoit Grassin is co-founder and CEO.
“We are delighted to be joining the GoHenry Group as we prepare to accelerate Pixpay’s expansion across Europe,” said Grassin. “GoHenry’s experience and heritage will only serve to strengthen the already strong proposition offered by Pixpay.”
The acquisition will not impact current operations at either company. Both GoHenry and Pixpay will function under their own brands with no change in staffing or headquarters. The two plan to work together to improve their products and “further transform financial education across the globe.”
GoHenry launched in 2012 and has since raised $66.2 million. The company expanded into the U.S. in 2019 and now counts more than two million members across the U.S. and the U.K.
“So as we expand into Europe, we’re excited to empower even more young people with the money management skills they need to thrive in today’s digital economy,” the company said in its announcement.
Utility data aggregator Urjanet has been acquired by energy technology company Arcadia.
Urjanet made its Finovate debut last fall at FinovateSpring 2021.
Terms of the deal were not disclosed. Atlanta, Georgia-based Urjanet facilitates access to data from more than 6,500 utility, telecom, and cable providers around the world.
Here’s some big news from a Finovate newcomer that slipped beneath our radar in the wake of FinovateSpring this year. Urjanet, a leading utility data aggregator that made its Finovate debut last May, has been acquired by energy technology company Arcadia.
Terms of the deal were not disclosed. The deal will integrate Urjanet’s global data access with Arcadia’s data and API platform, Arc. This will enable Arc to serve as a universal software layer for the “zero-carbon economy.”
“Without data access, it will be impossible to meet the urgency and size of the climate crisis,” Arcadia CEO Kiran Bhatraju said. “Through our combined capabilities, Arc will help companies in every industry plan for and act on their climate responsibilities, pulling forward a zero-carbon future.”
Urjanet, founded in 2010 and headquartered in Atlanta, Georgia, is the world’s leading utility data aggregator. The company enables businesses to securely access consumer-permissioned data from more than 6,500 utility, telecom, and cable providers in 47 countries. Urjanet accesses more than one million utility bills a month and flows $150 billion in utility spend through its platform. With 50,000 connected utility accounts around the world, nearly a third (30%) of the Fortune 500 utility bills are captured with Urjanet’s technology. Bhatraju said that the integration with Arc will enable Arcadia’s platform to include more than 95% of all residential and commercial accounts in the U.S., as well as data from 9,500 electric, water, gas, and waste utilities globally. More than 1.35 million utility accounts around the world will be connected courtesy of the acquisition.
“Urjanet and Arcadia have long known the same secret: that on-demand, high-fidelity energy data is key to rapid decarbonization,” Arcadia’s Bhatraju wrote when the acquisition was announced earlier this year. “By integrating Urjanet’s global data access, Arc, Arcadia’s industry-leading data and API platform, becomes a universal software layer for the zero-carbon economy with the ability to serve all customers – residential and commercial – across the globe.”
At its Finovate appearance last May, Urjanet showed how its technology could be used to boost financial inclusion and expand credit access. The company partnered with Equifax to launch a new Payment Insights solution that enables banks and lenders to use utility payment history to help establish worthiness for loans.
More recently, Urjanet launched its new flagship platform, Utility Cloud, which provides easy and automated access to credentialed utility account information. Unveiled in April, Utility Cloud provides universal access to utility data, delivering sustainability reporting, energy consumption, utility bill data, and bill images on-demand. This allows businesses to become more energy-efficient, reduce energy spending, and produce quality, aggregated data for ESG reporting.
“Going forward, our customers’ data will be available on-demand in one central location, simplifying their utility data access even more. “Urjanet CEO Sanjoy Malik said. “This one-of-a-kind platform will help organizations streamline very manual and expensive business processes associated with organizing bills from all over the world.”
Envestnet acquired revenue management and hosted fee-billing solutions company Redi2 Technologies.
Envestnet will use the buy to modernize its billing, accounting, and back office capabilities.
Terms of the deal were not disclosed.
Financial wellness technology firm Envestnetannounced its 16th acquisition today. The Chicago-based company announced it has purchased revenue management and hosted fee-billing solutions company Redi2 Technologies. Terms of the deal were not disclosed.
Founded in 2002 and headquartered in Massachusetts, Redi2 offers a revenue management platform tailored to financial services companies. The tool offers fee calculation, invoice creation, payouts and accounting, and billing compliance. Among Redi2’s products are Revenue Manager, which provides client revenue accounting and billing services for asset managers; Wealth Manager, which delivers multi-party billing and payouts for broker-dealers and asset managers; and BillFin, which offers advisory billing and invoicing for financial advisors.
Envestnet will use Redi2’s technology to modernize its billing, accounting, and back office capabilities. The company anticipates the additional expertise will drive client engagement and ultimately boost revenue.
“Redi2 is a pioneer and innovator in the cloud-based delivery of wealth and investment management billing software, making them an ideal partner as we continue to strengthen our financial wellness ecosystem,” said Envestnet Executive Vice President of Business Lines Tom Sipp. “This acquisition enhances our strategic enablement of service and data, and over the next two years will create operating leverage by bringing Envestnet and Redi2’s administrative, revenue, and billing services together.”
Envestnet was founded in 1999. The company’s most noteworthy acquisition was its purchase of Yodlee in 2015. The Yodlee acquisition broadened Envestnet’s wealthtech offerings, launching it into the world of open finance. Envestnet is a publicly-traded company on the New York Stock Exchange under the ticker ENV and has a market capitalization of $4.66 billion.
Bank payments company GoCardless has announced its intention to acquire open banking platform Nordigen.
The Latvia-based fintech, a Finovate alum since 2018, connects to 2,300 banks in Europe and the U.K. via its free API.
Terms of the acquisition, which is expected to close later this summer, were not disclosed.
Bank payments company GoCardless has announced its intention to acquireNordigen, an open banking platform based in Latvia. GoCardless will integrate Nordigen’s open banking connectivity into its account-to-account network. Terms of the acquisition were not disclosed. The acquisition is expected to close later this summer.
“The Nordigen acquisition will take us to the next level,” GoCardless co-founder and CEO Hiroki Takeuchi said. “By intelligently combining free, state-of-the-art open banking connectivity with deep payment expertise, we can now offer open banking-as-a-service to any developer, partner, or fintech.” Takeuchi added that the acquisition will “lead to experimentation … that will create even more compelling use cases.”
Nordigen leverages open banking to help banks and lenders make more creditworthy loans. The company offers solutions that automate income and liability verification, and provides critical insights into prospective borrowers from account data for scoring models. Nordigen offers high-performance analytics including transaction categorization, feature engineering for credit modeling, and the capacity to generate risk scores from account data. Operating in 13 countries and partnered with more than 50 banks and lenders around the world, Nordigen connects to more than 2,300 banks in Europe and the U.K. via its free API.
“Our mission at Nordigen is to help companies around the world adopt and use Open Banking to enable greater financial transparency and financial inclusion,” Nordigen CEO Rolands Mesters said in a statement. “We share GoCardless’ enthusiasm for the growth of Open Banking and are excited to partner with people who not only share our passion for disruptive innovation in financial services, but who will also help us bring Open Banking freely to a much wider audience.”
Acquisition talk has not slowed down Nordigen, which has forged partnerships at an impressive pace this year alone. In June, Nordigen announced that it was working with Sherpa CRM, Landlord Fusion, HES FinTech, BUNNI, and Acounto. Already this month, Nordigen reported that it has expanded its collaboration with Latvian financial services company AS DelfinGroup.
Founded in 2016, Nordigen made its Finovate debut in 2018 at FinovateFall in New York. The company returned to the Finovate stage the following spring for FinovateEurope in London. Prior to the acquisition announcement, Nordigen had raised $4.2 million in funding from investors including Black Pearls VC and Superangel.
Intelligent identity solution provider Sontiq has issued a new report on security in financial services.
The report, 2022 Digital Safety and Security Report for Financial Services, underscores the importance of engaging customers and members in the fight against cyberfraud.
Sontiq made its Finovate debut in the fall of 2021 and was acquired a few months later by TransUnion for $638 million.
Intelligent identity security firm Sontiq has warned that the growing sophistication of cybercriminals and increased awareness and concern over the challenge to digital security from the public have created both new challenges and new opportunities for financial institutions. In a new report, the 2022 Digital Safety and Security Report for Financial Services, Sontiq highlights the way cybercriminals have leveraged advanced technologies – including automation and AI – to achieve what Sontiq called a “historic level of data compromise” in 2021.
“Consumers are increasingly anxious about cyber threats, but feel unprepared to take action or deal with the fallout,” Sontiq SVP of Enterprise Risk Solutions Al Pascual said. “Notably, they don’t want generic security advice. Financial institutions can combat increased identity risks with personalized, self-service tools that are seamlessly embedded into the digital banking experience.”
Here are some of the key takeaways from Sontiq’s report.
Financial institutions must understand the threat landscape
“What consumers, organizations, and the media often misunderstand,” the report noted, “is that the data breaches with the greatest impact on individuals are often not the high-profile ones that capture headlines.” Sontiq’s research distinguishes between high-profile breaches at institutions like Facebook/Meta and LinkedIn and high-risk breaches at companies like Gallagher and Waste Management. This is because “high-risk” breaches, while involving fewer victims, tend to involve compromises of more valuable personally-identifiable information compared to “high-profile” breaches.
Synthetic identity fraud is a bigger threat than identity theft
A growing number of financial services companies are recognizing the challenge of synthetic identity fraud, with Sontiq observing that 72% of financial services firms believe that synthetic identity fraud is a “much more pressing issue” compared to traditional identity theft.
Why so? And what’s the difference?
Traditional identity theft involves stealing a real person’s PII (personally-identifiable information) and using that data to engage in criminal activity. And make no mistake: traditional identity theft is still an issue, costing $24 billion in losses and victimizing more than 15 million individuals in 2021. Synthetic identity fraud, by comparison, involves a blending of both real and fictitious information. This enables the fraudster to create a completely new, made-up identity that can then be used to fraudulently open accounts, and apply for loans and credit cards. A newer arrival on the cybercrime scene, synthetic identity fraud also comes at a significant cost. The Federal Reserve has estimated that synthetic identity fraud losses have climbed to $20 billion, making it the “fastest growing financial crime.”
Personalized, proactive identity protection gives financial institutions the opportunity to differentiate themselves
In its report, Sontiq makes it clear that consumers are uncertain about who to turn to in the event of a security breach. “Nearly half of Americans,” the report notes, “say they would not know what to do if their identity was stolen.” Because of this, more than half of American fraud victims (54%) have indicated that they believe their financial institution can play a major role in helping them “navigate and resolve their identity fraud issues.” Breach victims across generations – under 35, between 35 and 54, and over 55 – all turned to their financial institutions for assistance in comparable numbers (50%, 48%, and 44% respectively).
This has resulted in a significant growth in the identity theft protection services market. Analysts project that this market will grow at a compound annual growth rate of 9.4% over the next 10 years.
There are a variety of ways that financial institutions can seize this opportunity by deploying better anti-fraud tools and partnering with fintechs and cybersecurity specialists. But key to all of these efforts, according to Sontiq, is customer engagement. Educating financial services consumers on what to do to enhance their own online security – and what to do in the event of a security breach – is critical. Also important is the role of empowerment, and helping consumers understand what they can do to enhance their own defense against fraud.
“Getting consumers to adopt a self-service approach to identity protection also has the potential to help a financial institution better invest resources,” the report noted. “Informed, engaged customers who actively protect their identities become potent allies – finding fraud earlier and reducing overall risk to them and the financial institution.”
Download the free white paper to read the full report.
Sontiq made its Finovate debut at FinovateFall 2021. At the event, the Nottingham, Maryland-based company demonstrated its BreachIQ solution. BreachIQ identifies and diagnoses a consumer’s security breach history to provide personalized, protective actions the consumer can take to improve financial health and enhance security. The technology effectively leverages AI to turn ID fraud risk into a consumer financial health opportunity.
Launched in 2019, Sontiq was formed when EZShield acquired identity theft protection provider IdentityForce. Last spring, Sontiq announced its acquisition of Breach Clarity, a post-breach fraud specialist and Finovate Best of Show winner. In October 2021, Sontiq itself was acquired by fellow Finovate alum TransUnion for $638 million. In a statement, TransUnion said that Sontiq’s identity security technology compliments its own digital identity assets and solutions.
“TransUnion is committed to empowering consumers to shape their financial futures,” TransUnion President of U.S. Markets and Consumer Interactive Steve Chaouki said. “With Sontiq, we will ensure that consumers and businesses have a comprehensive set of tools to protect the financial profile they have built.”
