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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
When we think of global corporations and business in general, do we feel pride in how we do things? Beyond Good, a new book by Unconventional Ventures co-founders Theodora Lau and Bradley Leimer, is a call to arms for business leaders to recognize how they can do well by doing good.
Beyond Good showcases how fintech is changing business models and what every industry can learn from it. The leaders in financial services are fostering a thriving ecosystem of incumbents and startups, unlocking new possibilities to make broader financial inclusion a reality.
With a foreword from the Aspen Institute, exclusive interviews with leading B-Corps, policy makers, executives, and case studies from companies like Sunrise Banks, Ant Group, Village Capital, Microsoft, and PayPal, Beyond Good shows how everyone can contribute to a more common good. Finovate readers can also get 20% off their copy of the book, using code Inspire20.
Below are a few excerpts from our conversation with Theo and Brad on the new book and their upcoming appearance at FinovateSpring next month. For the full interview, check out the video above.
On the importance of financial inclusion
Theo Lau: “If we talk about the onset of the so-called fintech revolution, if you will, a lot of the new startups seemed to regurgitate old ideas that have already been around. They make it prettier, they create this bamboo credit card … But it that really changing our behavior, is it really changing how we work? In the West, are we really including more demographics and doing things better for them? I would argue a lot of the time we are not.”
Bradley Leimer: “Inclusivity goes much broader than just a credit card or just lending or just credit. And that’s a lot of what we discuss. There’s more to a financial relationship than one side of the balance sheet. There’s more to the financial services model than just profitability. There are longer term implications in everything we do every single day and every decision that we make.”
Why fintechs and financial services need to move “beyond good.”
Leimer: “We’ve seen a lot of stakeholder capitalism lately and examples of companies that have tried to mean more for their business model and their communities. That’s what we celebrate in the book, the shift that we can include more people in our communities in society. Especially in financial services and technology, companies we really need to focus how we can serve these larger groups. Everybody in society should be able to be a part of our business models. And that’s why we go “beyond good.”
Lau: “We want to reinforce that this is not a zero-sum game. Just because we are including more demographics and more considerations on how we conduct business doesn’t mean you’re losing. Case in point, one of the things lately we’ve been talking about is student loan debt, $1.7 trillion dollars of debt. Obviously the burden is shared across all demographics, but particularly in communities of color, among first generation college students, and among those in other less advantaged groups.
So our question is: how do we go about solving it? There are a lot of different moving parts. But for financial services, the role isn’t just to offer another loan on top of the pile of deb because that’s not solving the problem. We need to go back further to ask how we create a more equal society, more equal products, and create services to help people rethink their finances and get to a healthier financial situation.”
Join Theo Lau and Bradley Leimer at FinovateSpring May 10 through 13. For more information about our upcoming, all digital, spring fintech conference, visit our FinovateSpring hub today.
News of NYMBUS’$15 million fundraising this week – and the company’s recent appointment of three women to key leadership positions – serves as a fitting bookend to a first quarter that began with big investment and big C-suite hires, as well.
In January, the Miami, Florida-based banking technology provider expanded its leadership team with the addition of Chief Alliance Officer Sarah Howell and Chief Product Officer Larry McClanahan. A month later, Nymbus secured a Series C investment of $53 million in a round led by Insight Partners.
“As the pandemic has pushed digital to the forefront, more banks and credit unions have turned to Nymbus as their partner for growth,” Nymbus CEO and Chairman Jeffery Kendall said when the funding was announced in February. “This new and significant investment validates a confidence in Nymbus to continue transforming the financial services industry with a banking strategy that buys back decades of lost time to speed digital innovation.”
Little did we know how quickly further valuation would arrive. This week’s investment by European private equity firm Financial Services Capital doubles its investment in Nymbus to more than $31 million. The funding gives Nymbus a total capital raised of more than $98 million.
“We look forward to continue working with Nymbus as they build out a best-in-class, cloud-native offering that is well positioned to be a leader in the industry and will transform our portfolio companies,” Financial Services Capital Managing Partner Miroslav Boublik said. He and fellow Managing Partner Matthew Hansen will join the Nymbus Board of Directors as part of the investment.
Also joining “Team Nymbus” is Veeva Systems co-founder Matt Wallach, who will serve as a Strategic Advisor. Nymbus will benefit from Wallach’s experience in co-founding one of the leading cloud software companies in life sciences. Founded in 2007 and, 14 years later, the first publicly traded company to transition into a public benefit corporation, Veeva now has a market capitalization of more than $40 billion and 975+ customers in the pharmaceutical industry, as well as in emerging biotech.
As mentioned, Nymbus’ funding announcement comes on the heels of the company further bolstering its leadership ranks with a trio of new, C-suite hires. The women – Trish North as Chief Customer Officer, Michelle Prohaska as Chief Compliance Officer, and Crina Pupaza as Chief People Officer – bring years of customer success, risk management, and people-centered programming experience to a company that has seen significant growth as banks turn increasingly toward digital transformation of their outdated legacy systems.
“In order to help our partner institutions serve the unique financial needs of niche audiences, success begins with diversity in our own Nymbus leadership,” Kendall said last week when the appointments were announced. “I’m incredibly proud of the impactful effort we are making to recruit a balanced male to female representation into our C-suite, and beyond confident of the value that Trish, Michelle, and Crina will each uniquely provide to both our team and partner clients.”
Avanti Financial Group has put the final touches on a deal that will bring the firm that much closer to its goal of launching a digital asset bank.
Late last week, Avanti announced that it had closed a Series A round, raising $37 million from a wide swathe of institutional investors, cryptocurrency companies, family offices, and angel investors.
The investment takes Avanti’s total capital to $44 million. Launched last year, Avanti secured $5 million in angel funding last June in a round led by the University of Wyoming Foundation and featuring participation from Morgan Creek Digital, Blockchain Capital, and Digital Currency Group. The new financing will fund the necessary regulatory capital for Avanti’s digital asset bank, as well as support engineering and operating expenses.
“Our roadmap includes offering API-based U.S. dollar payment services for wires, ACH, and SWIFT; issuance of our tokenized, programmable U.S. dollar called Avit; and custody and on-/off-ramp services for bitcoin and other digital assets,” Avanti founder and CEO Caitlin Long said. Long highlighted the number of customer inquiries (2,500+) that Avanti had received since it secured a bank charter back in the fall of 2020 and said that those looking to become a part of the firm’s digital asset bank should expect a launch “soon.”
Headquartered in Cheyenne, Wyoming, Avanti sees itself as a bridge between traditional banking and a world in which digital assets are bought, sold, and trusted as thoroughly as fiat currencies. A software platform with a bank charter, Avanti gives customers a strong regulatory environment compared to other digital asset companies, including a full-reserve requirement for dollar deposits and resources like its tokenized dollar, Avit, to help solve painpoints in the payments process.
Trace Meyer, who formed the consortium that led Avanti’s Series A, praised Avanti’s “potent, institutional-quality human capital.” A Bitcoin investor and early adopter, Meyer emphasized that both smart regulation and “experienced, competent operators” are critical to the institutionalization of digital assets, and said that Avanti was “well-positioned to competently answer questions that most in the industry have not even thought about.”
Luvleen Sidhu, CEO of BM Technologies (formerly known as BankMobile), is now one of the youngest female founders and CEOs of a public company.
Since she co-founded BM Technologies in 2014, the company has made major news headlines. We recently spoke with Sidhu to get the background behind some of those decisions and to get her opinion on what it takes to compete in the fintech world as an ethnic minority and a woman.
First off, give us some background on BM Technologies (BMTX) and how it differentiates itself from other challenger digital banking platforms.
Luvleen Sidhu: BM Technologies, Inc. (NYSE American: BMTX, BMTX.W) is among the first neobanking fintechs to go public and is one of the largest digital banking platforms in the U.S. (with over 2 million accountholders), providing access to checking and savings accounts, personal loans and credit cards. We are on a mission to utilize technology to provide millions of Americans with a better banking experience, especially around affordability, transparency and more consumer-friendly products. We are proud to share that we were named the “Most Innovative Bank” by LendIt Fintech in 2019 and we continue to stay true to our mission of being a customer-centric focused company committed to innovation, and financially empowering millions of Americans.
We are a profitable and high-growth company and have been able to build this strong foundation through our Banking-as-a-Service (BaaS) strategy, which enables the acquisition of customers at higher volumes and substantially lower expense than traditional banks. This allows us to provide low-cost banking services to low/middle-income Americans. Today, the BankMobile BaaS platform is provided to colleges and universities through BankMobile Disbursements and serves over two million account-holders, providing disbursement services at 722 campuses, covering one out of every three students in the U.S.
Additionally, BM Technologies executed an agreement with Google to introduce digital bank accounts, which will be available to its customers. We also expanded our white label strategy with T-Mobile for the launch of T-Mobile MONEY.
Tell us about why you chose to offer not only B2C banking products and services, but also banking-as-service tools?
Sidhu: When we launched our company over six years ago, we actually only had a B2C banking product. However, fairly early on, we realized we were not growing at the exponential rate that we had anticipated and our customer acquisition cost was high. This caused us to pause and reevaluate our strategy. We recognized that there was an opportunity to pivot our strategy to a B2B2C model where we could lower our customer acquisition cost to less than $10 and in return still deliver a tech-enabled banking experience to millions of Americans through our distribution partners. This has been critical in our growth and our success as a company.
BM Technologies has its roots in the traditional banking world, having been developed internally by Customers Bancorp. How did that relationship shape BM Technologies?
Sidhu: Customers Bancorp gave us an extremely solid foundation as a company. Even when we launched in 2015, Customers Bank had $6.5 billion in assets. My father, Jay Sidhu was then the CEO of Customers Bank and cofounded BankMobile with me. Richard Ehst, then President of Customers Bank, also helped guide me, along with other members of the company’s leadership team. Having the chance to work with banking veterans provided us with immense knowledge of the industry, which helped us be successful.
BM Technologies is one of the 11 financial institutions collaborating with Google to pilot its Plex bank accounts. What benefits does this partnership offer BM Technologies? Are there any challenges with the new partnership?
Sidhu: This collaboration is mutually beneficial and is differentiated from the others because of our unique college student acquisition funnel. This means we are bringing to Google Plex potentially millions of student customers.
For us, the collaboration offers additional brand equity since Google is one of the leading technology companies in the world and has chosen BM Technologies to work with.
Why did BM Technologies choose to go the SPAC route to become a public company? What opportunities will this offer?
Sidhu: We decided to go the SPAC route because it was a more efficient way for us to take the company public. Our ultimate goal is to add a new white-label partner and gain at least a million new bank customers each year and most importantly provide them with the most financially empowering banking experience. We also plan to use our new funds to continue to focus on innovations and expand our product offerings.
As not only an ethnic minority but also a woman, what have you learned about what it takes to compete in the fintech world?
Sidhu: It takes a lot of determination, flexibility and a “can-do” attitude. I have been raised by two parents who have always supported and encouraged me and given me the tools and resources to succeed. This has helped me throughout childhood and adulthood and has given me a strong foundation to launch my own company. “Never give up” is a motto that my father said to me since I was a young child and one that I truly believe in. There have been obstacles along the way, but by continuing on despite them and overcoming them, I feel I have been able to be competitive.
In general, what developments can we expect in the challenger banking space in 2021?
Sidhu: I think that challenger banks will continue to grow their customer base, becoming increasingly popular with consumers across the country. More and more people are turning to digital banking, and the pandemic accelerated this trend. Challenger banks are nimble and consistently creating new services, which are attractive to Americans. I also believe that more challenger banks will go public this year.
Celebrating and empowering women in fintech is something Finovate supports throughout the year, not just during Womens’ History Month and on International Womens’ Day – earlier this week, on March 8. And you may have already seen our next guest contributor, Janice Diner, CEO, Founder of Horizn, across other parts of the Finovate ecosystem. Be it on the Finovate Podcast to talk educating customers and turning employees into digital advocates, or at the physical (or digital!) Finovate events following Horizn’s latest demo. Today, Diner shares her journey through fintech as part of our #womeninfintech series.
What barriers did you face, as a woman, in becoming successful in your field and how did you overcome them?
Janice Diner: I think of my career in two phases, before I was the CEO and founder of Horizn I was a successful Creative Director. I had no concept of the “glass ceiling”, I was part of the 3% of successful women in advertising.
When I got into tech and started Horizn, all that changed. Back in 2013 issues that presented barriers to female entrepreneurs weren’t as loudly discussed. I remember feeling it in the room, when you are or have been successful, you know what a winning room smells like.
I often talk about being bootstrapped and proud. The hidden story behind that statement reflects my early experiences at fundraising in 2013. Remember, I had a full-blown creative director ego and had no concept of ‘ceilings’. But I ran into the “female” problem of fundraising at the time and smashed right into that ceiling.
At the time it seemed like a monumental problem, but we turned it into an opportunity and we walked in another direction. I think it has to do with how we look at money, I look at money as fuel — it’s all equal to me. At the end of the day, money is capital to build and run my business, that’s true no matter where that money comes from, whether it is venture capital, client revenue or debt financing.
And what about now, in 2021?
Diner: I am now in my 10th year of running the business. We are an award winning fintech helping many of the world’s largest banks. There is no doubt the future of banking will rely on digital platforms and the widespread adoption of new technologies. With that certainty in mind, Horizn equips both bank customers and employees with the knowledge needed to accelerate digital banking knowledge, fluency and adoption.
We won two Best of Show Finovate awards in 2020 and have multiple client awards. I am most proud when our clients speak for us about their success with Horizn, in articles, in fireside chats, webinars and on stage.
What was your first experience at Finovate like as a female CEO?
Diner: I remember my first Finovate event back in 2015, I was one of a few female CEOs on stage, nothing new for me. But this time was different. Women came up to me afterwards just to thank me for representing. They were just happy to see a female tech CEO on stage.
At Horizn we are very grateful to benefit from the diversity Toronto has to offer; together at Horizn we speak 20 languages and come from 15 countries. The team is made up of 44% women, impressive for a tech company.
On International Women’s Day, what is the most important message you want to send out to young women thinking about their careers?
Diner: When asked the question what advice would you give women, I think my advice is to entrepreneurs in general. Do what you love and be good at it, the rest will come. The five ways I have built the business are…
Build product in real time with your customers
Love your customers and make them love you
Visit/speak to your customers and go to industry events (or virtual – COVID)
Hire the best — people are everything when you are building a great company
Remember you are not in the start-up business. You are in a business.
In summary however I found regardless of what barriers I may have had or which doors have not necessarily open as I would have expected, it is always important to look at them from an opportunity perspective. Success is pretty much how you choose to define it.
Continuing our #womeninfintech series, we ask Regina Lau, Chief Strategy Officer, Retail Merchant Services, a TVC Portfolio Company and Executive Board Member of European Women Payments Network (EWPN), about her thoughts on International Women’s Day and the challenges and opportunities for women in the industry.
What does IWD & #ChooseToChallenge mean to you in your work life?
Regina Lau: International Womens’ Day (IWD) is a day to celebrate all the achievements from women around the world and also all the women who have been inspirational role models, no matter if they made big headlines or not. As a member of the Executive Board of European Women Payments Network (EWPN), this is also a very important day for us to continue the call for change and recommit to supporting all women. I believe that “when one rises, we all rise”.
What barriers did you face, as a woman, in becoming successful in your field and how did you overcome them?
Lau: I’ve always worked in male dominated industries, so I was often the only woman in the room (or at my level). It was challenging to ensure that my perspective and ideas were heard. I built as many relationships as possible with people who I knew supported and championed me. I also made sure I participated in discussions and meetings – if I was at the table, I was speaking up.
How could men contribute to support gender equality?
Lau: Mentor and sponsor women and give them equal access to opportunities. Give women credit. View women through the “people” lens – speak up and stop gender-biased language and descriptors (i.e. when a woman speaks in a direct style or promotes her ideas, she is often called “aggressive” and “ambitious.” But when a man does the same, he is seen as “confident” and “strong.”)
Can you tell us about your role model who have inspired you over your career?
Lau: I’ve admired many different women and men over my life. One piece of advice that stuck with me was “you deserve a seat at the table, and when you get that seat at the table, make it count”.
How important is it for women to lift each other up and what does that mean to you?
Lau: This is so important. I had very few female role models growing up and throughout most of my career. I wasn’t sure who had also experienced the same challenges I faced, and I didn’t know who to go to for support. This has made me even more aware of the need to support other women, no matter how small or big. Sometimes, people just need a listening ear or to know that someone else has gone through it before.
What is your favourite part of your job? And then the most rewarding?
Lau: Working in teams with colleagues and partners to solve problems is my favourite, and mentoring & coaching both women and men to help them grow and learn is very rewarding.
On International Women’s Day, what is the most important message you want to send out to young women thinking about their careers?
Lau: Be bold, try new things and don’t underestimate yourself. You won’t know unless you try – and if you need to, try again.
As our recent conversation featuring Boss Insights founder and CEO Keren Moynihan, reminds us, the fintechs (and “TechFins”) of the Great White North are engaged in some of the most forward-looking innovation on the continent.
This week brings an above average volume of news from Canada’s ambitious real-time payments industry. For one, the Vancouver Bullion & Currency Exchange (VBCE) announced a partnership with EMQ to bring “near real-time” cross-border payments to businesses and consumers across Canada. A PSP as well as a foreign currency exchange, VBCE hopes that its partnership with the global financial settlement network will give its customers the ability to move money faster and more efficiently. The firm also anticipates being able to use EMQ’s network to bring new services to market and scale existing ones.
“The speed and reach of EMQ’s global network allows us to pilot new services in one market and scale them rapidly across others to meet the evolving customer needs,” VBCE VP of Business Development Kevin Ma said. “This is especially important for our business with a diverse product portfolio.”
Elsewhere on the Canadian real-time payments beat, Payments Canada announced a collaboration with debit network Interac to support real-time payments in the country. Interac will serve as the exchange solution provider for Real-Time Rail, the real-time payments systems operated by Payments Canada and regulated by the Bank of Canada. RTR, scheduled to go live in 2022, will enable Canadians to initiate payments and receive funds in seconds.
Payments Canada President and CEO Tracey Black said that RTR will be the “foundation for faster, data-rich payments” and will serve as a “platform for innovation.” Black also praised Interac as a “well-suited partner” with the requisite infrastructure and connectivity to support “the rapid adoption of real-time payments in Canada.”
Last, some developments on the Canadian neobank front. Toronto, Ontario-based challenger bank KOHO added a no-fee savings account to its offerings this week. KOHO Save gives account holders 1.2% interest on their entire balance. There are no teaser rates and no minimum balance is required to acquire an account, which is available on the KOHO app.
“We’re excited to add KOHO Save to our product line as a simple and valuable money earning tool for Canadians,” KOHO CEO and founder Daniel Eberhard said. “We’ve been able to build a savings tool that doesn’t follow the same restrictions of most other savings products on the market. People just want to access their money freely and earn a great interest rate. We think Save is a wonderful step in that direction.”
KOHO also offers a savings and checking account and gives users a minimum of 0.5% (up to 10%) cash back on all purchases. KOHO Premium account holders get an additional 2% cash back on three major spending categories. The company, founded in 2014 and headquartered in Toronto, Ontario, has raised $57.5 million in funding from investors including Drive Capital and Portag3 Ventures.
Here is our look at fintech innovation around the world.
Israel-based Rewire, a cross-border digital banking firm that serves migrant workers, announced $20 million Series B round led by Finovate alum OurCrowd.
What does International Women’s Day and #IChoosetoChallenge mean in practice, and what can be done to support and develop truly diverse teams? How does the world of fast-paced fintechs compare with legacy banking when it comes to embracing women in leadership, and empowering new voices to be heard from the bottom up?
Ahead of International Women’s Day, Charlie Burgess, Head of Digital Content for Finovate, sat down with Nicole Newlin, VP Solutions at Ocrolus and part of the Leadership Team at NYC Fintech Women, and Filippa Noghani, Head of Marketing – Banking and Financial Services at Virtusa and Board Member and Marketing Chair of NYC Fintech Women to talk opportunities and challenges, walking the walk of celebrating women, and why brands getting on-board with the IWD should look beyond making it just a marketing stunt.
Watch the full interview below. If you’re interested in finding out more about NYC Fintech Women, visit their page and learn more about the panel discussed, taking place at FinovateSpring Digital 2021 here.
With International Womens’ Day just around the corner, we continue our #WomeninFintech series and speak with Kim Snyder, CEO & Founder, KlariVis about her journey through fintech and advice to the next generation of women coming through.
Tell us about yourself and your career path to your current role.
Snyder: Personally, I am a very family-oriented person and prior to the Pandemic we had started some new traditions, like “Sunday Brunch-day”; it truly is my favorite thing to do and I cannot wait until we are able to restart those activities!
My career path to KlariVis is probably not what you would expect. I started my career with KPMG and then moved into an accounting/finance role for a small private liberal arts college. My next step was where the entrepreneurial bug hit me: I joined a local start-up company focused on creating new innovations in a variety of industries and it was here I saw what it was like to build something from scratch and it was invigorating, exciting and scary all at the same time. I then spent 10 years at a community bank, and it was my passion for this industry that fueled my drive to take the chance and start my own consulting business. During those course of 4+ years, I hired many previous team members to help me build a premier, boutique consulting firm focused on helping community banks solve the prevalent issues they are faced with in this rapidly changing industry.
The one challenge that resonated more than any other, though, is the data conundrum that exists in the banking industry. Regardless of size, core system, talent level or management team experience, our clients were paralyzed with the mass volume of data generated by the various siloed processing systems and the bank’s inability to access that data in an efficient manner, thus making it virtually useless to the institution. We knew that there had to be a better way and thus the idea of KlariVis was born. We spent about a year incubating our solution and our consulting clients became our focus group – by the end of that year, they were using phrases like “game-changer” related to our solution. So, I started a second company in February 2019 and hired a technology firm to take our proof of concept and turn it into reality. We launched KlariVis in January 2020 and the response was incredible from our prospect banks. We issued a press release last week – FVCBank has now invested in KlariVis due to the value and impact our platform is having on their bank. I’m not sure what better testament there can be than for a client to say, I want to be more than a client, I want to invest in your success and become your long-term strategic partner.
There seems to be a big push towards knowing your customer and providing a personalized and exceptional service in recent years. How should banks go about this?
Snyder: Community banks are known for their exceptional customer service – they typically have a very loyal customer base who value the personal touch. The PPP program highlighted this very fact – it was the community banks who stepped up and were the heroes by helping the small businesses in their communities.
How do they take that exceptional customer service and turn it into a more personalized experience? I believe it all starts with treating data as an enterprise-wide asset – making sure it is in the hands of the relationship managers who interact with and serve bank customers every day. The banking customer is communicating to its bank every day through transactions, whether they be transacted in person or digitally.
Unfortunately banks and credit unions are hampered by the numerous disparate systems that exist in the banking ecosystem, most of all which have critical data points about their customer base. As such, they have no choice but to leverage solution providers to enable them to aggregate this information, cut out the noise and focus on the high-value actionable data points that will allow them to offer that more personalized touch.
Allowing easy and efficient access to customer data at the front-line is paramount to improving and personalizing the customer experience.
Are there other trends you see driving innovation within banking/ fintech?
Snyder: Digital transformation is the primary focus for financial institutions of all sizes and I don’t see that changing for quite some time. We’ve been talking in the industry for years about this wave coming, and due to the Pandemic, it’s here. In a recent survey by the Digital Banking Report, the top three strategic priorities for 2021 were consistent for big and small institutions: 1) improve digital experience for consumers; 2) enhance data and analytic capabilities; and 3) reduce operating costs.
Fortunately for KlariVis, we hit 2 of the top 3 strategic priorities – enhancing data and analytic capabilities and reducing operating costs. Our solution accomplishes both and enables financial institutions to improve the overall customer experience.
What is important to you as a leader of a fintech? Does KlariVis have any initiatives that support diversity/ women in fintech?
Snyder: I strive to build a diverse and talented team. KlariVis was born out of an identified need in the banking industry but it was conceptualized through creativity and innovation. Diversity provides our team with expanded creativity stemming from different perspectives based upon life and work experiences. Absent of diversity of thought, skills and unique perspectives, our concept would not be what it is today.
My goal is to hire the best talent for the Company’s open positions, but as a female leader, I am passionate about ensuring that opportunities for women continue to grow in fintech and would like to see the same trend at KlariVis. Many tech industry roles are often filled by men. At KlariVis we have three females at the C-Suite level and each of us is equally passionate about hiring, promoting, and compensating talented deserving women. We would like to see more female applicants for technical positions particularly software engineers and have recently begun participation with a university’s internship program which may yield diverse candidates for future open positions.
What advice would you give to women looking to begin a career in banking/fintech?
Snyder: For women looking to begin a career in banking, fintech or another field, it is critical to learn the industry. Evaluating positions typical to the industry and matching that with individual skills, likes and dislikes is key to finding a position that is a good match. Passion is critical particularly in the rapidly growing fintech arena.
In addition to pursing an applicable degree and identifying a mentor, take the time to listen and learn from that person who can provide a frame of reference that you would not have otherwise. There are many different aspects of banking and financial technology is moving quickly with new innovations. Banks are trying to keep up with the latest and greatest technology advancements as well as their competitors with the goal of enhancing the customer experience. I recommend that anyone with an interest in banking or fintech read everything they can to stay current with the industry.
With new vaccines helping stoke confidence in a post-COVID summer, if not spring, what has the pandemic – and the work-from-anywhere movement it accelerated – revealed about the security of our increasingly digital world?
What is the biggest takeaway from your report on fraud?
Christina Luttrell: As COVID-19 drove 84 million Americans online for services that were previously carried out in person, businesses faced an influx of new customers to onboard. In response, many appeared to loosen fraud controls in an effort to reduce friction and simplify onboarding, particularly for digital “newbies.”
With this loosening, combined with COVID-19 factors such as dispersed fraud teams, remote work, stimulus checks, and sophisticated phishing and synthetic identity fraud (SIF) schemes, it’s easy to understand why fraud attempts surged to a four-year high. Also not surprising is the emergence of mobile as the most targeted channel, evidenced by an astounding 89% increase in fraud attempts likely due to an increased reliance on mobile devices during the pandemic.
In the report each year, we’ve seen businesses struggle with the challenge of balancing fraud with customer friction. Businesses drive revenue by greenlighting customers, which includes removing barriers and minimizing effort during the onboarding process to avoid unnecessary “friction.” Yet they must do so while deterring fraud. This challenge is exacerbated by current events and the state of fraud and, as a result, verification of identities was cited as the top challenge to fraud deterrence among businesses. Many have come to the conclusion that, at its core, fraud is an identity problem and 86% firmly view digital identity verification is a strategic differentiator across all industries.
When it comes to the future, 79% of businesses expect fraud to increase in 2021. With the COVID-induced shift to digital, fresh collection of more Personally Identifiable Information (PII) from 2020 and potential economic conditions, this is likely to be a “bust out” year for fraud.
How quickly have fraudsters followed the migration to digital channels during the COVID-19 crisis?
Luttrell: From our study, The COVID-19 Effect on Identity, Fraud and Customer Onboarding, we know that between March and July of 2020, 37% of Americans online activated an online service that was done offline prior and 46% said they have used their smartphone more often to sign up or apply for a new service. As a result, one-third of businesses experienced a customer shift of 50% or more to digital channels. In 2020, the number of new accounts opened with a mobile phone increased 43%. Fraudsters tend to follow the masses and the money and, in 2020, as those consumers went digital, criminals were quick to follow, employing rapidly shifting tactics, which was reported as a top challenge to fraud deterrence for 40% of businesses.
Mobile fraud attempts surged 89% in 2020 with increases across all fraud types, from spoofing and cloning to porting. With more consumers relying on digital information sources and businesses sending a higher number of customer communications, 56% of businesses reported phishing attacks as one of the most prevalent forms of fraud in their industries.
The pandemic provided a prime opportunity for fraudsters to take advantage of distracted Americans, the increase in digital communication between businesses and consumers and government relief efforts. Our research shows that 84 million Americans reported experiencing a phishing attack attempt in the months following the pandemic’s start, with an average of four attempts per person between March and June.
How have cybersecurity professionals effectively responded to this shift?
Luttrell: It appears cybersecurity professionals responded rapidly to this shift as best they could, but COVID-related disruption and distraction, such as remote working and government relief checks, put a wrinkle in plans and added a new layer of complexity to fraud detection and the consumer experience. Fraud is an identity problem, making identity verification the essential “digital handshake” and element of establishing trust. We expect to see more companies rely on the orchestration of blanketed layers of identity attributes, artificial intelligence, and integrated verification methods to remove friction and deter fraud.
Successfully onboarding new customers and building long-term loyalty in today’s rapidly shifting fraud landscape will require businesses to act quickly. On the back end, they will need to understand how identity verification attributes are performing so they can make adjustments to attributes that pinpoint fraud on an extremely granular scale while streamlining the verification process for real customers.
What kinds of fraud are increasingly prevalent – especially compared to the pre-COVID-19 period?
Luttrell: Aside from COVID-related fraud, such as vaccination schemes, the fundamental methods of remain relatively unchanged. Instead, the shift has occurred in the sophistication and amount of fraud which, as I mentioned, is rising across the board compared to pre-COVID numbers.
Credit, debit, and prepaid fraud were reported as the most prevalent by 63% of businesses, followed by phishing, account takeover, ACH/wire and first-person fraud. ACH/wire fraud spiked by 15% – presumably because of rising P2P usage due to social distancing and first-party, specifically “friendly or know fraud,” increased 28%. This may be attributable to chargeback fraud schemes as many Americans were unemployed, underemployed or suffering in shape or form financially, thereby increasing their pressure and rationalization of committing fraud.
Your report mentions the issue of synthetic fraud in the PPP lending program as specific challenge. Can you elaborate on this problem and what should be done?
Luttrell: A range of fraud schemes were used to exploit PPP in 2020, one of the most concerning being synthetic identity fraud (SIF). According to McKinsey, this is the fastest growing type of financial crime in the U.S. A recent report by Aite Group revealed that among 47 financial institutions surveyed, 25% experienced an increase of 10% or more since the start of the pandemic. Our own research also underscores the SIF problem, which hit an all-time high, with a 43% increase in SIF reported by respondents to the IDology Fraud Report.
SIF continues to trouble businesses, especially given the challenges associated with decentralized fraud teams working from home and the need to interpret and apply once-in-a-lifetime changes in consumer behavior and the swings and noise they create. There are also the problems created by the never-ending stream of data breaches, and the use of personally identifiable information gathered from phishing attempts and other scams that continue to thrive in the COVID era.
To quickly issue PPP loans and prevent fraud, lenders should reconsider the importance of Know Your Customer (KYC) measures. Placing a focus on strong KYC is not only best business practice, it also will help lenders prevent fraud and maintain integrity. To easily and securely ensure a borrower is who they claim to be and provide a smooth experience while battling fraud, such as SIF, the identity verification process supporting KYC should include multiple layers, control of the entire identity verification process and the flexibility to make and automatically deploy configuration changes and machine complimented with human intelligence.
How would you characterize the business world’s response to these new threats, especially in financial services?
Luttrell: The business world, as a whole, responded admirably. Consider the massive logistical shifts that needed to happen in months, if not weeks, from the mass migration of working from home to customer engagement and the shift toward digital. On a human scale, it’s a breathless achievement. Eighty-seven percent of businesses feel their organization is equipped to some degree to make the necessary changes to stay ahead of rapid digitization and COVID-19 fraud trends, indicating they recognize and perhaps, have a higher than expected sense of confidence.
Although two-thirds of Americans feel companies could be doing more to protect their identities, confidence in organizations being able to protect their data actually increased in comparison to pre-COVID-19 levels. Our data shows that financial services organizations are stepping up, forecasting larger anti-fraud investments and budgets for 2021, and leaning into a multi-layered approach to identity proofing as well as using diverse sources and types of data. Eighty percent of financial institutions expect to increase budgets on fraud deterrence in 2021, with 45% saying significantly, more so than any other industry. Though the investment varies by sub-sectors such as fintech, lenders and prepaid, prepaid firms appear to be most aggressive.
How do you think the post-COVID cybersecurity landscape will differ from the pre-COVID cybersecurity landscape?
Luttrell: The cat and mouse saga continues and the chase maze has become significantly more complicated. The lesson for many, in hindsight, is that strong, thoughtful and comprehensive digital identity verification is mission-critical. The digital handshake is essential in establishing trust.
Fraud knows no borders and the world is small and inter-related, as is identity verification. Address verification as part of identities is not only critical for accurate verification, but also for the delivery of essential items and resources. Americans have migrated much of their lives to digital, forever.
Identity collaboration between businesses and with customers will be more sought after, and technology, such as artificial intelligence, will need to be supplemented with high-touch layers of human intuition, proactive detection, fraud expertise, and consortium intelligence from other organizations. This is especially important as COVID introduces novel fraud schemes that can fool pre-COVID identity proofing methodologies. As was the case with major events in the past, the outcomes and unintended consequences of the pandemic are unknown but we know that fraudsters are harvesting data, scheming, probing new defenses, partnering with nation states and utilizing artificial intelligence to scale fraud on a global basis.
A black-owned, family-focused financial wellness app, Goalsetter, has raised $3.9 million in seed funding. The company said that the new funding will help it boost subscriber growth and enhance the Goalsetter offering, which includes a debit card (Cashola) and a financial literacy curriculum designed specifically for teens and youth.
The round was led by Astia, and featured participation from PNC Bank, Mastercard, US Bank, Northwestern Mutual Future Ventures, Elevate Capital, Portfolia Rising America, and Pipeline Angels, among other investors.
To be fair, “among other investors” is doing quite a bit of work. Goalsetter’s roster of angel investors is impressive, with National Basketball Association stars Kevin Durant, Chris Paul, and Baron Davis – as well as philanthropist Robert F. Smith, among the ranks. Also involved in the funding were actors Sterling K. Brown and Ryan Bathe.
Goalsetter, featured last fall as the Apple App of the Day, includes financial literacy modules that award users money for correctly answering questions on financial education topics (“Learn to Earn”), as well as a feature (“Learn Before You Burn”) that enables parents to freeze their child’s Goalsetter debit card if they have not completed their financial literacy lessons in a timely fashion.
Goalsetter is not only black-owned, it is female-run, as company founder and CEO Tanya Van Court underscored in the firm’s funding announcement. “As the only black-woman owned fintech company focused on the kid’s fintech space, we know how critical early finance education is to all kids in our country, and to black and brown kids in particular,” she said. Van Court emphasized the importance of raising children who are “smart spenders” rather than merely “conspicuous consumers,” and added that learning about financial education, saving, and investing are “the building blocks for achieving generational wealth.”
Founded in 2015 and headquartered in New York City, Goalsetter is partnered with Evolve Bank & Trust, which provides the company’s savings accounts. Goalsetter’s’ Cashola Prepaid Debit Mastercard is issued by MetaBank.
As part of our ongoing #WomeninFinTech series, we spoke with Kathy Strasser, Chief Operating Officer/Chief Information Officer at IncredibleBank about her experiences in and thoughts on the fintech industry today.
To start, please tell us a little about yourself and how you became involved in banking and fintech?
Strasser: After a 20-year career at Wausau Financial Systems (WFS) in various roles throughout the organization, I was approached by IncredibleBank’s CEO Todd Nagel (then River Valley Bank). He wanted a non-banker with a technology background to help him launch the internet-only division of River Valley Bank, IncredibleBank, into a leading digital bank reaching customers across the entire United States.
I never imagined myself working for a bank until 2015 when I joined as the EVP and Chief Operations Officer. Over the next few years, I’d play a key role in accelerating the growth of the bank and its digital transformation on both the technology and people side of our business.
While technology and payments are strong interests of mine, I’m most passionate about leading people, which is what IncredibleBank allows me to do. In my current position, I’m responsible for helping people find their motivation and providing them with purpose and the autonomy to be brilliant at what they do. By nature, I’m a problem solver, change guru, and love everything happening with digital transformation.
How have you seen the financial services industry change in 2020, and where is it headed in 2021?
Strasser: The work we’ve done over the past five years prepared us for this shift to digital technology. Our people were ready to meet the needs of our customers in a remote environment. We leaned on the expertise of employees from all parts of the organization for the PPP program, in addition to helping 1,000+ homeowners buy new or refinance their homes. We launched Zelle in September, made digital improvements to our customer experience, implemented new technology to help facilitate the PPP program, plus we became the first community bank to go live on TCH RTP in March.
We know that the momentum we have seen with digital is only going to continue and competition will shift as BigTech continues to make its foray into financial services. There are a few areas that are always top of mind for us: digital transformation and growth, continuing to master our incredible customer experience, talent management, employee engagement, and continuous growth in our business lines.
How can community banks make sure they’re not being left behind, especially when it comes to embracing new digital technology?
Strasser: Companies like Apple, Amazon, PayPal, and Starbucks are already in the payments space, which is traditionally a medium for banks to grow and retain deposit accounts as well as build customer relationships. We’ve remained competitive by prioritizing the customer experience and partnering with companies like Jack Henry to deliver new and innovative technology. Community banks need to stay at pace with this broader competitive market and having a differentiated customer experience that is both personal and meaningful is a strong start.
What does digital transformation entail within your institution?
Strasser: Digital transformation is about technology and people. Our people come first in our digital strategy and transformation, which is why culture must be approached with a growth mindset.
We start by mapping out our digital competencies and identifying areas of focus that will move the needle on customer experience. Some of these included the ability to confidently move between different devices and building relationships via digital channels. Our key values for our digital culture are speed, openness, and autonomy. Technology had to improve processes, productivity, and customer experience, delivering direct value to our institution and customers.
How can women help other women climb within the industry, and do you have any advice for those starting out their careers in technology or finance?
Strasser: The future is bright, and I highly recommend technology and finance for everyone, especially women. Women in the field can be a good example and share their experiences; I’m always willing to mentor, meet with young people getting ready to go to college, or those figuring out the next step in their career.
I’d give the following advice: 1) Focus on your role and how it contributes to the success of your company; 2) Seize new opportunities and don’t be afraid to ask; 3) Learn every single day; 4) Build relationships and your network; 6) Find guidance from someone greater.
What are fintechs and banks missing right now that women are uniquely positioned to help with?
Strasser: With diversity comes a background of many different experiences and approaches to problem-solving, disagreements, negotiations, leadership style, and approach. Dynamics and conversations change when the table is filled with both men and women and as a result collaboration and innovation happen. For example, knowing a large percentage of women make household decisions is important when creating and seeking feedback on new products and features. For any growing company, it’s important to have a diversified pool of candidates to choose from, and that includes women.
