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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
A look at the companies demoing at FinovateSpring in San Francisco on May 18 and 19. Register today and save your spot.
Arena provides CFO services simplified for businesses in the United States under $20 million in annual revenue.
Features
Business financial health assessment
Optimized payment platform
Fractional CFO with modern analytics
Why it’s great
Fifty percent of businesses in the United States fail by their fifth year, and 82% of those businesses say it’s due to cash flow issues. Arena helps businesses thrive with a fractional CFO to proactively manage their finances.
Presenter
Heather Tuason, CEO Tuason is a career banker and fintech operator passionate about small businesses and creating the optimal financial toolkit for businesses. She believes in a “tech and touch” strategy that enable entrepreneurs to thrive. LinkedIn
A $50 million investment will help Egyptian digital payments company Paymob expand into new markets in both the Middle East and Africa. The round was led by Kora Capital, PayPal Ventures, and Clay Point, and represents the largest ever Series B round in Egyptian fintech history.
“Central Bank of Egypt initiatives that are continuously being introduced in the market to support fintech companies were key to Paymob’s growth,” company founder and CEO Islam Shawky said. “The Central Bank has created a regulatory framework to help fintech flourish and participate in making Egypt’s digital financial inclusion ambitions a reality.”
Processing more than 85% of the market share of transactions in Egypt with its mobile wallet technology, Paymob serves customers in five markets including Palestine, Pakistan, and Kenya. The investment comes as Paymob reports strong 2021 growth, including year-on-year growth in merchant partners and monthly volumes of 4x as of December. The company has onboarded more than 10,000 merchants in less than two years en route to a goal of onboarding one million SMEs.
This week’s funding brings Paymob’s total capital to more than $68.5 million.
South African bank Capitec announced that it was teaming up with two Finovate alums, Entersekt and nCino.
“Capitec has embraced an agile and innovative approach to growth,” nCino CEO Pierre Naudé said. “We’re glad Capitec saw a partner in nCino and look forward to providing the bank with industry-leading technology and a flexible platform that will help drive the sustainability and growth of its business banking operations.”
nCino made its Finovate debut in 2017 at FinovateEurope. The company’s flagship offering, its cloud-based Bank Operating System, provides a complete end-to-end banking solution that combines CRM, loan origination, workflow, ECM, business intelligence, and reporting all in a single location. nCino’s technology replaces disparate point solutions and manual processes with a modern, digitally-optimized experience.
The technology will enable Capitec to spot high risk e-commerce transactions in real-time, enhancing security without interfering with the customer experience. Entersekt’s EMV 3D Secure solution is pre-integrated with NuDetect from NuData Security – also a Finovate alum – which leverages behavioral biometrics and machine learning to help tell the difference between authentic users and potential fraudsters.
“We are constantly looking for ways to offer the best security possible without impacting our customers’ experiences,” Capitec Bank Marketing and Communications Executive Francois Viviers said. “By implementing Entersekt’s EMV 3D Secure solution with behavioral analytics from NuData Security, we are able to provide an additional level of protection for our e-commerce transactions. This also allows our team to continue to innovate, keeping our customers secure and Capitec at the forefront of digital banking innovation in South Africa.”
Entersekt demonstrated its technology as part of our developers conference, FinDEVr, in San Francisco in 2014. The company, headquartered in Cape Town, South Africa, finished 2021 with a “significant investment” from Accel-KKR. This spring, Entersekt announced partnerships with edtech Mindjoy and the MiDO Foundation to promote financial literacy, as well as a collaboration with credit union service organization (CUSO) Bonifii to bring context-aware authentication solutions to credit unions.
Here is our look at fintech innovation around the world.
There have been plenty of discussions surrounding fintech valuations this year. Rumors of a bubble have plagued fintech for a few years, and high valuations combined with seemingly endless funding rounds have analysts raising their eyebrows.
We spoke with CMFG Director of Discovery Fund Elizabeth McCluskey to get her take on fintech investment, M&A activity, and industry trends.
How is this year trending so far when it comes to investing? What are the funding numbers and volume as compared to years past?
Elizabeth McCluskey: Fintech startups raised $28.8 billion in funding during Q1 2022. Despite being down 18% from the previous quarter, this marked the fourth-largest funding quarter on record. And this represents a large share of all venture capital activity; fintech startups raised 1 out of every 5 VC dollars in Q1, indicating that the sector is still immensely popular for investors. CMFG Ventures is no exception—we’re on pace for our busiest and biggest year to-date since the inception of our funds. Transactions have been strong across all stages of companies.
Our two funds serve distinct purposes but share the same goal of fostering innovation between financial institutions and fintechs. Our main fund supports Series A companies and beyond, investing in fintechs focused on lending, banking technology, financial wellness, challenger banks, and insurtech. It has supported and validated nearly 50 fintechs. In 2021, we launched the Discovery Fund to support underrepresented entrepreneurs, who are building solutions for financial inclusion. It has funded 12 early- stage companies led by BIPOC, LGBTQ+, and women founders.
Some have talked of a funding slowdown. Do you expect 2022 to finish with lower funding totals than last year? Or will it build on the momentum?
McCluskey: Fintech continues to be a space for disruption and growth, presenting the industry with many opportunities to fund new solutions. The biggest fintech IPO of 2021 was Coinbase, which today has a market cap around $16bn. That seems like a large number, but it’s less than 5% of the market cap of the largest bank in the U.S., JP Morgan. Clearly, there is valuable market share still to be gained by fintechs. By capitalizing relevant and scalable companies, VCs can give fintechs the agility they need to compete in an increasingly active space.
2022 will build on several years of momentum – regardless of whether the final funding numbers are higher or lower than 2021. There is still a lot to do to keep pace with the rapid digitization of finance. Consumers expect Amazon-like speeds of interactions and a hyper-personalized, predictive experience. And businesses want their trusted financial institutions to deliver quick, frictionless decisions and client service. Financial services technology is primed for a future of tremendous growth for years to come.
Are we currently experiencing a fintech bubble? Do you think fintechs are overvalued?
McCluskey: It’s easy to get caught up in bubble talk, and there are certainly some frothy valuations in the private market in particular. However, there are many underlying opportunities for disruption and innovation, which leads me to believe the industry isn’t experiencing a bubble. What I do think we are seeing is fintech startups maturing to the point where they are being treated more like their “established” peers, and that is a good thing. While private markets may value potential in the form of user growth or even revenue generation, the public market wants to see profits.
Fintech companies that went public in 2021 have performed quite poorly vs the S&P, despite displaying strong revenue growth that in many cases exceeded expectations. The reason for this has been big misses on their earnings per share (EPS) results. For example, Robinhood’s user growth has been over 50% in the last year, and revenue nearly doubled. Yet they are down over 75% from their IPO price after disappointing from an earnings perspective. I don’t think we’ve seen a correction to the same extent in private markets yet, because companies are typically only resetting their price 1-2x per year when they raise a new round. So I expect private valuations to be a bit more tempered going forward.
What trends are you looking to invest in this year? Are there any specific trends you’re following?
McCluskey: As the Director of the Discovery Fund, I’m interested in fintechs focused on financial inclusion, specifically how we can make financial services more affordable and accessible to everyday Americans. This need only will grow in importance as people adjust to rising interest rates. Millennials and Gen Z have never experienced a sustained rising rate environment. Savers will be able to earn more, but borrowers will be impacted by higher rates for auto loans, mortgages, and personal loans. Our investments in portfolio companies like Climb, Line, and Zirtue will help them manage these uncharted waters.
I’m also interested in non-crypto applications of blockchain and distributed ledger tech, particularly in the mortgage industry. Use of these technologies has the potential to revolutionize the process of homebuying, as well as the secondary market for mortgages. A portfolio company of ours, Home Lending Pal, is working with IBM to make this process more seamless for both first time buyers and the financial institutions lending to them.
And lastly, I’m on the lookout for fintech solutions focused on the Latinx consumer. The GDP of this segment is growing 57% faster than the U.S.’s, according to a 2021 LDC U.S. Latino GDP report. Despite its size, the demographic continues to be an underserved market. Companies like Listo are building solutions to provide credit to Latinx consumers who are credit invisible yet display strong creditworthiness.
2021 was a record-making year for exits. Will we see increased M&A and IPO activity this year or are you expecting things to slow down?
McCluskey: M&A and IPO activity skyrocketed in 2021, yet the landscape may look a little different this year. Interest rates will play a factor in M&A, as borrowing money to fund acquisitions is expected to become more expensive. That said, if economic growth slows, then acquisitions are one way to bolster profits and growth.
Given the expected volatility in the public markets, I believe many companies will continue to raise VC dollars rather than following the IPO route, even if private market valuations take a hit. And we will continue to see the emergence of platforms for secondary transactions of private companies, which will enable employees to get liquidity even without an IPO.
Checkout.com is acquiring online identity verification provider ubble.
The move will enable Checkout.com to help its clients ensure compliance and stay ahead of changing regulations.
Terms of the deal were not disclosed.
Global payments solutions provider Checkout.com is boosting its digital identity expertise with the acquisition of online identity verification service provider ubble.
ubble was founded in 2018 to reinvent remote identity verification through video. The France-based company’s flagship solution offers clients automated verification of their users’ identity for over 2,000 types of documents from 214 countries and territories worldwide.
“ubble was founded with a mission to provide people with the convenience and security of using their personal identity in the digital world,” said Checkout.com Chief Product Officer Meron Colbeci, “and that is clearly becoming a growing need for e-commerce and crypto merchants, digital wallets, and other fintechs we serve.”
The move will allow Checkout.com to add identity verification services to its existing payments services, creating a holistic payments experience. The addition of digital identity tools will help Checkout.com not only ensure global compliance for its merchant and fintech clients, but also stay ahead of changing regulation.
“We always put the needs of our merchants first,” said Colbeci. “By expanding our security and fraud detection capabilities, we can reduce the time, cost and friction those merchants experience with existing IDV solutions. And they can offer their end consumers a simple and compelling experience, which lends itself to increased conversion rates and faster growth.”
Terms of the deal, which is expected to close later this year, were not disclosed.
This news comes on the heels of Checkout.com’s recent $1 billion Series D investment round, which valued the company at $40 billion. Today’s buy is the U.K.-based company’s fourth acquisition since it was founded in 2012. Guillaume Pousaz is founder and CEO.
FIS has partnered with Treasury Prime to launch a new embedded finance offering.
The new solution will give FIS’ banking customers additional options for managing deposits, AP, and other critical bank processes.
The collaboration with Treasury Prime is FIS’ second big embedded finance play of the year, having acquired embedded finance solution provider Payrix in February.
FIS has launched a new embedded finance offering, built in partnership with Treasury Prime, to help community and regional banks take advantage of the most modern digital capabilities and create new distribution channels. The new API-based solution will give FIS’ banking customers and their business clients new options when it comes to managing deposits, accounts payable, and other key banking operations.
The new offering will also enable community and regional banks to potentially create new revenue streams by expanding their client base, especially among highly digitally-active consumers.
“Embedded finance is a growing trend in the market because it allows businesses to bring innovative ideas quickly to market by combining financial services with user experiences right at the point of need,” FIS Head of Payments Kelly Beatty explained.
A leading technology solutions provider for merchants, banks, and capital markets firms – and a Finovate alum since 2010 – FIS processes more than $75 billion in transaction value for than 20,000+ clients globally. Treasury Prime offers APIs that enable companies to embed a range of banking services onto their platforms to boost revenues, increase customer loyalty, and offer rewards. Writing about the partnership on the Treasury Prime blog, Vice President of Banking Jeff Nowicki noted that the collaboration will enable banks to focus on their core strengths “rather than trying to compete with fintechs.” The partnership will also create new opportunities for business lines or revenues “(in) the same way community banks have for ages added lenders or business banking teams to target specific segments.”
The technology already has been integrated by digital commercial bank Grasshopper. The firm, in partnership with Web 3 blockchain company HUMBL, will deploy FIS’ embedded finance services across both its consumer and commercial divisions.
“Our vision has been clear from the start,” Grasshopper Chief Digital Officer Chris Tremont said,. “We wanted to better serve the needs of fintechs, small and medium-sized businesses, and the venture community. This BaaS platform and sophisticated set of APIs allows us to leverage technology and provide an enhanced banking experience for our clients.”
2022 has been a year in which FIS has paid particular attention to opportunities in embedded finance. A Finovate alum since 2010, FIS began the year with an acquisition of embedded payments solution provider Payrix. The deal will bolster FIS’ e-commerce, embedded payments, and finance experiences for small and medium-sized merchants via SaaS-based platforms.
“The acquisition of Payrix is an excellent proof point of FIS’ ability to unlock the value of our broad portfolio of solutions as companies of all sizes rely on FIS as a destination for innovation to advance how the world pays, banks, and invests,” said FIS President Stephanie Ferris.
A look at the companies demoing at FinovateSpring in San Francisco on May 18 and 19. Register today and save your spot.
Argyle provides streaming, user-permissioned, read-and-write access to employment records. Link 4.0 provides an updated look and feel for a more integrated and delightful end user experience.
Features
Customizable experience
Modern, simple, breathable search screen layout
Simplified multi-factor authentication
Clear error messaging
Why it’s great
The redesign provides a more transparent and trustworthy experience for end users to successfully connect their accounts, decrease drop-off rates, and evolve visual style.
Presenter
Billy Marsden, COO & Co-Founder Marsden is a Co-Founder and COO of Argyle. Prior, he was an Investor Associate with F-Prime Capital, VP of Business Operations with STRATIM, and Senior Associate Consultant with Bain & Company. LinkedIn
A look at the companies demoing at FinovateSpring in San Francisco on May 18 and 19. Register today and save your spot.
Global PayEx’s AI-powered, cloud platform targets working capital optimization in B2B accounts receivable (AR) and accounts payable (AP).
Features
95% straight-through reconciliation
20%+ reduction in DSO
1-4% enhancement in revenue
Why it’s great
It’s an AI-based reconciliation solution that’s customizable to every company’s accounts processes through core, ML-based modules.
Presenters
Naru Ramamoorthy, CRO Ramamoorthy specializes in growing P&Ls, leveraging technology, process, operations, and market needs. He’s held leadership roles in industries including payments, banking and financial services, and retail. LinkedIn
Anu Agrawal, Executive VP & Head, North America Agrawal has worked with tech start-ups and global giants and specializes in setting up new regions and taking them to scale. He has over two decades of leadership experience in banking and payment and tech. LinkedIn
Three credit unions – VyStar CU, BCU, and Reseda Group – have invested in credit risk management specialist AKUVO.
Terms of the funding were not disclosed.
The new capital will help AKUVO further develop its credit risk and delinquency management platform, Aperture.
Credit risk and delinquency management specialist AKUVOannounced a new investment not from the world of venture capital, but from the land of membership-powered credit unions. The amount of the investment was not disclosed, but the names of the credit unions involved in the funding have been: VyStar Credit Union, BCU, and Reseda Group, a wholly-owned CUSO (credit union service organization) of Michigan State University Federal Credit Union (MSUFCU).
The funding will enable AKUVO to further develop its collection and credit risk platform, Aperture. The cloud-based, API-enabled portfolio risk and delinquency management solution provides streamlined information for quick and easy research and leverages robotic processing to offer businesses a 20% improvement in collector efficiency, a 15% reduction of effort for speciality processes, a 10% reduction in collection workload, and a 10% increase in manager efficiency.
“Our goal is to empower members to discover financial freedom, and I am optimistic AKUVO’s data science solutions will help us accelerate our ability to do just that,” BCU EVP and COO Jim Block said. “We anticipate rapid growth over the next decade, and the Aperture platform has the promise to scale with our membership.”
With $5.5 billion in assets, BCU is based in Vernon Hills, Illinois, in the greater Chicago area. BCU is the smallest (by assets) of the three credit unions involved in AKUVO’s funding this week. Reseda Group is part of $6.8 billion MSUFCU and this investment represents the second time the institution has invested in AKUVO (the first being in January of this year).
“AKUVO’s Aperture platform will change the way we provide members with individual credit solutions that maximize recoveries,” MSUFCU Chief Risk Officer Jim Hunsanger said. “Aperture’s data-based decisioning also ensures we meet regulatory and legal requirements. We’re excited to be an AKUVO client and early investor.”
VyStar Credit Union, based in Jacksonville, Florida, has $12 billion in assets, and is one of the 15 largest credit unions in the country. Speaking on behalf of the firm, VyStar’s SVP of Loan Administration Eric Weatherly said that the investment in AKUVO will “allow us to be a greater force for change for our members and the credit union community.”
Courtesy of the investment, each of the three credit unions involved will have a representative on AKUVO’s board of directors. Headquartered in Pennsylvania, AKUVO was founded in 2019.
Deserve received a $250 million credit facility from Goldman Sachs, Cross River, and Waterfall Asset Management.
Last year, Deserve experienced a 650% growth in transactions volume and an 800% growth in receivables.
The company will use the credit facility to meet the growing demand from financial institutions, fintechs, and consumers.
Payment-card-as-a-service startup Deserveannounced a new $250 million credit facility from Goldman Sachs, Cross River, and Waterfall Asset Management.
Deserve (formerly Self-Score) has re-imagined traditional credit cards by transforming the application and onboarding processes, as well as the credit card itself by bringing them into the digital-first era. The company enables businesses to provide a white-labeled or co-branded card program made possible via a set of configurable APIs and SDKs.
Among Deserve’s clients are BlockFi, M1 Finance, OppFi, Seneca Women, Notre Dame Global Partnerships, and KrowdFit. The company will use today’s funds to meet the growing demand from financial institutions, fintechs, and consumers. Last year, Deserve experienced a 650% growth in transactions volume and an 800% growth in receivables. The company expects the new credit facility will boost its growth even further.
“At Deserve, we’re committed to helping organizations quickly and securely launch any type of credit card product in the cloud, customized to their specific audience – a valuable touchpoint with customers and a must-have in today’s landscape of competitive brand loyalties,” said Deserve CEO and Co-founder Kalpesh Kapadia. “Because our platform is digital-first and mobile-centric, customers can, in turn, begin using their Deserve-powered credit card minutes after application, no plastic required. We’re excited about what this new financing will enable us to do as we amplify our reach and help more fintechs, financial institutions, SMB lenders, and brands connect with and grow their customer base.”
In the coming years, Deserve plans to launch card programs to help consumers manage subscriptions, augment BNPL, and unlock their home equity. The California-based company also plans to build card programs for SMBs and commercial customers.
The $250 million credit facility comes six months after Deserve’s $50 million Series D equity round in October 2021 which boosted the company’s total funding to over $294 million.
FinovateSpring 2022 goes live next week. From Wednesday, May 18 through Friday, May 20, FinovateSpring returns to San Francisco, California for three days of innovative fintech demonstrations, insightful mainstage presentations, and lively debates and panel discussions on the most critical topics in fintech today.
To help get you ready for next week’s event, here’s an opportunity to get to know some of the companies that will be making their first-ever appearance at a Finovate conference. From innovators in credit decisioning and data management to specialists in cybersecurity and financial wellness, this year’s cohort of FinovateSpring newbees promises something for everyone.
Click on the buttons below to learn more about each of the companies making its Finovate debut next week at FinovateSpring. Then visit our FinovateSpring 2022 hub to pick up your ticket today!
Be sure to catch our Finovate first-timers next week at FinovateSpring 2022 in San Francisco, California, May 18 through May 20. Tickets are still available, so visit our registration page today and save your spot.
Business expense management firm Expensify is in the process of beta testing a unique new feature. Though, it’s more of a perk than a feature. The Expensify Lounge is a chic new space in the entrance to Expensify’s San Francisco office located in the heart of the financial district.
The idea for the Expensify Lounge came about pre-COVID. Much of the company’s workforce was already working remotely, and the Expensify Lounge was slowly becoming a ghost town. To maintain the vibrancy of the office, the team decided to turn the office into “best co-working cafe in the city” by launching the Expensify Lounge, a cafe-like working environment that includes great coffee, great cocktails, and great company. Now that the pandemic is waning in the U.S., the Expensify Lounge is in beta testing this spring.
“We added a ridiculously over-the-top cocktail bar like you’d find tucked away in a Tokyo high rise, and put in an espresso bar even us Portland coffee snobs can respect,” described Expensify CEO David Barrett. “Then we paired it with our integrated chat Concierge to offer to-your-seat delivery, and then turned the overall furnishings of everything else up to 11.”
The newly-renovated space functions like a high-touch version of a co-working space. Expensify customers can work from the space as often as they like, as long as they like, with wifi, complimentary drinks, and snacks. During the beta test period, there’s no membership required. The company is especially encouraging early stage companies and VCs to come in and check it out and kick the tires.
If you’re in the area and interested in visiting the Expensify Lounge during the beta period, go to https://use.expensify.com/lounges and use the password “Finovate” when you arrive. If you’re attending FinovateSpring on May 18 through May 20, you’re in luck. The Expensify Lounge is just a 10 minute walk from the event venue, the Hilton San Francisco Union Square.
The lounge is open Monday through Friday from 8 a.m. to 5p.m. and is located at:
88 Kearny St., 16th Floor San Francisco, CA 94108
After the beta period, Expensify clients can enjoy lounge access as part of their $9 per month Expensify membership. ” I guarantee it’s better than your office, or any office, and it’s designed to be a better place to work than any cafe in the city, too,” Barrett added.
A public company as of last November, Expensify is part of the fast-growing business financial management segment. The company’s flagship service is expense reporting, but it has since grown to add billpay, a travel concierge, and a corporate payment card.
Current launched its platform API today and introduced Plaid as its first partner.
The collaboration between Current and Plaid will enable Current members to access digital financial services from more than 6,000 apps and services on the Plaid network.
Current earned a valuation of $2.2 billion after securing $220 million in Series D funding last spring.
Fintech platform Currentlaunched its platform API today. The new offering is designed to bring seamless integrations and embedded banking experiences to fintechs and financial services companies. The product launch is being accompanied by news that Current has secured its first partner, API-first data network Plaid. The partnership will enable Current members (totaling nearly four million) to access an even wider range of innovative digital financial solutions to help them better manage their finances. These solutions, available via the Plaid network, range from digital payments to financial planning to investment tools.
“Our new platform API gives open banking partners the capability to embed our core banking technology,” Current CTO Trevor Marshall said. “We’re thrilled to be working with Plaid, the industry leader in open banking, as our first partner. We enabled this integration in response to feedback from our members. With Plaid, our members can access experiences that can help improve their financial lives with control and security.”
In working with Plaid, Current will provide its members with a credential-less open finance experience, leveraging both Current’s API as well as phone number and device authentication to reduce friction.
“We’re thrilled to enable a simple, secure on-ramp to digital financial services for Current members, who are often banking for the first time in their lives,” Plaid Partnerships Lead for Universal Access Raja Chakravorti said. “The integration ensures that consumers are in control of where and how their financial data is permissioned and shared, information that is essential to setting up a healthy financial life.”
Founded in 2015 and headquartered in New York, Current offers a variety of solutions to help its members change their lives by creating better financial outcomes. The company offers up to 4.00% APY via its Savings Pods solution, provides overdraft protection of up to $200, enables early wage access for members who use direct deposit, and gives consumers up to 15x the points on qualifying transactions made via the Current debit card.
Current secured $220 million in Series D funding last spring in a round led by Andreessen Horowitz. The investment gave the company a valuation of $2.2 billion. Stuart Sopp is CEO.
