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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
The votes have been cast and counted! Meet the winners of Best of Show for FinovateSpring 2022:
Array for its financial enablement platform, specializing in embeddable tools and white label solutions, used by leading financial institutions. Demo.
FinGoal for its insights platform that cleans, enriches, and analyzes personal financial data to better understand users and provide actionable insights. Demo.
Horizn for its platform that helps banks globally accelerate digital banking knowledge, fluency, and adoption with both customers and employees. Demo.
Keep Financial Technology for its innovation that solves the hiring and retention challenges of companies by introducing a new form of employee compensation called Cash Vesting Plans. Demo.
QuickFi for its 100% digital, self-service, mobile equipment financing platform that enables business equipment financing in minutes. Demo.
Spave for its all-in-one financial wholeness app that allows users to effortlessly save and give as they spend. Demo.
Our thanks to all of our demoing companies, our sponsors, our partners, and – of course – our attendees – for continuing to make FinovateSpring such a success. Thank you for being a part of our annual spring fintech conference. We’ll see you again next year!
Notes on methodology:
1. Only audience members NOT associated with demoing companies were eligible to vote. Finovate employees did not vote.
2. Attendees were encouraged to note their favorites during each day. At the end of the last demo, they chose their three favorites.
3. The exact written instructions given to attendees: “Please rate (the companies) on the basis of demo quality and potential impact of the innovation demoed.”
4. The six companies appearing on the highest percentage of submitted ballots were named “Best of Show.”
5. Go here for a list of previous Best of Show winners through 2014. Best of Show winners from our 2015 through 2022 conferences are below:
Core banking expert Thought Machine raised $160 million in Series D funding.
The investment was led by Temasek and saw participation from Intesa Sanpaolo, Morgan Stanley, Eurazeo, ING, JPMorgan Chase, Lloyds Banking Group, and SEB.
Thought Machine’s valuation now totals $2.7 million, double the valuation it held last fall.
Core banking innovator Thought Machinelanded $160 million in a Series D funding round which values the company at $2.7 billion. This number is two times than the valuation the company received at the close of its Series C round in November of last year.
Today’s investment was led by Temasek and saw participation from Intesa Sanpaolo and Morgan Stanley, as well as existing investors Eurazeo, ING, JPMorgan Chase, Lloyds Banking Group, and SEB. As part of today’s agreement, Lloyds Banking Group has extended its license agreement with Thought Machine until 2029.
“This new round of funding bringing Temasek, Morgan Stanley, and Intesa Sanpaolo into the business is our statement of intent: we intend to become the leader in core banking technology, and are being deployed by the biggest, most successful banks around the world,” said Thought Machine Founder and CEO Paul Taylor.
Thought Machine already operates in New York, Singapore, and Australia, and will soon be available in Latin America. The company will use the funding to fuel further global expansion into the Asia Pacific region, as well. Specifically, Thought Machine is scoping out Vietnam, Thailand, Indonesia, and the Philippines.
The company will also use a portion of today’s investment to expand on the capabilities of its existing core banking offering and explore new product lines. “We will use this new capital to accelerate our expansion plans, serve more clients around the world, and continuously refine the capabilities of our core banking platform and other products,” explained Taylor.
With 500 employees and $563 million in funding, U.K.-based Thought Machine has been working to transform the core banking space since 2014. Among the company’s clients are Lloyds Banking Group, Standard Chartered, Atom bank, Monese, SEB, and JP Morgan Chase.
Challenger bank Greenlight launched a credit card, the Family Cash Card.
The card offers up to 3% cash back and allows users to automatically invest the rewards into a mutual funds or ETFs.
This is Greenlight’s first credit card and first product marketed to parents.
Family-focused fintech Greenlightrevealed plans this week to launch a credit card called the Family Cash Card. This is the Georgia-based company’s first credit card as well as its first card marketed at parents.
Launching in partnership with Mastercard and issued by First National Bank of Omaha, the credit card offers up to 3% cash back when users spend more than $4,000 per month. While parents can opt to have the rewards deposited into their bank account, they can also automatically invest their rewards into a set of recommended mutual funds and ETFs. If they want more options, users can invest the rewards via the Greenlight app.
“Families today have an increasing amount of expenses, making it difficult for many to save for the long-term,” said Greenlight Co-founder and CEO Tim Sheehan. “At Greenlight, we’re focused on helping families build healthy financial futures. With the new Family Cash Card, parents can get the most out of everyday spending and invest towards big life events like their children’s college education.”
Sheehan told TechCrunch that, while Greenlight liked the idea of the rewards accruing into a 529 plan that would help parents pay for their childrens’ education, the company decided that more users would appreciate traditional investment vehicles. “We looked at the 529, and we just decided, after talking to really a lot of parents, that they basically valued flexibility over the small tax benefit of the 529. Essentially, they said, I would rather have the flexibility and not be penalized to use the money for anything my family needs,” said Sheehan.
Founded in 2014, Greenlight offers a money management platform for families that helps five million parents and kids gain skills to manage their earnings, savings, spending, giving, and learn to invest via a debit card, companion app, and educational resources. Last April, the company raised $260 million in a round that valued the company at $2.3 billion.
If you measure the beginning of fintech as 1886, the industry has had a very long time to get things right. Even if you consider 2007 as the birth of fintech, we have still had 15 years to deliver on the promises of improving and automating banking and finance.
In a panel at FinovateEurope titled, “Power Panel: What Do We All Need To Go Away & Think About?” the Financial Data and Technology Association’s Head of Europe Ghela Boskovich (pictured on the right in the photo below) declared that fintech has failed, citing the millions of underbanked citizens across the globe.
There are, of course, two sides to the coin. Below, we take a look at how fintech has failed, along with the wins the industry has accomplished over the years.
Fail
Underbanked populations are still left in the dark There have been hundreds of solutions created specifically to help underbanked populations. Some are very specific, like the ones that help people build up their credit score by reporting on-time rent payments. Others, such as niche challenger banks, offer a host of tools under one solution. Despite these efforts, 22% of American adults are either unbanked or underbanked. The industry is either not creating effective solutions or not reaching the right people.
Integrations are broken Even though many U.S. consumers do not know what the term “open finance” means, they are well aware of its implications. With very few exceptions, banks and fintechs don’t share customer data effectively. Users either need to manually input their financial data or they are continuously asked to re-authenticate to make data aggregation possible.
Open banking regulation is non-existent in the U.S. While Europe has been enjoying the benefits of open banking since its mandates went into effect in September 2018, the U.S. is still behind. However, President Joe Biden signed the Executive Order on Promoting Competition in the American Economy last July. The order urges the CFPB to implement rules supporting open banking.
Fraud is rampant Consumers have been struggling to safeguard not only their digital identity but also their personally identifiable information and payment credentials since before the dawn of the internet. Fraud incidents have increased dramatically in the past few years, further proving that the industry has a lot to do to stay ahead in this subsector.
Digital identity is flawed Having users prove they are who they say they are has always been a headache in the fintech industry. Keeping track of login credentials has consistently irked users, and fraudulent account takeovers has proven that a username and a password aren’t enough. While many biometric authentication methods would have seemed futuristic to us two decades ago, many still cause too much friction in the user experience and aren’t enough to keep bad actors away.
Real-time is still a dream While the blockchain has helped bring some transactions, authentications, and approvals into near-real time, the concept of instant banking activity is still far from reality. Consumers are still waiting three days for bank payments to clear. The U.S. Federal Reserve’s FedNow service has been working on a fix for this for years and is now piloting the solution. However, the target launch date isn’t until 2023.
It’s easy to identify these shortcomings, especially when there’s so much promising innovation to look forward to. However, let’s take a look at some of the ways the fintech industry has fulfilled its promises to make users’ financial lives easier, simplified, and more informed.
Win
Helped underbanked populations Though the number of unbanked consumers is still shockingly high, fintech has done a lot to help populations with no access to a bank account. The war on payday lending may be one of the brightest examples of this. Fintech has not only helped to highlight the hazards of payday lenders, the industry also has created tools such as earned wage access to help employees smooth out their cashflow and meet their financial obligations on time.
Supported digital-first customers The fintech industry has come a long way since the implementation of SMS banking in 2007. Even though it was such as simple innovation, only a handful of banks offered banking via text. Compare this to where the industry is today. Even the smallest financial institutions offer rich digital banking tools that can pack an entire bank branch’s worth of activity into a client’s smartphone.
Made banking available any time (even if transactions still don’t clear after hours) By supporting digital-first and digital-only customers, the fintech industry has also helped consumers who prefer to bank in-branch. That’s because users can still accomplish many banking activities, such as a loan application, even after branches have closed.
Provided plenty of employment opportunities for all of the recovering bankers out there This one is self-explanatory. How many times have you heard someone in the fintech space describe themselves as a “recovering banker”?
TechCrunch and Pitchbook are reporting that HR innovator Gusto has raised an extension on its Series E round.
The company’s Series E round, launched in 2021, was led by T. Rowe Price Associates, and totaled $175 million.
The amount of the extension was not disclosed, but it is believed to be in the neighborhood of $55 million.
TechCrunch is reporting that HR technology company – and Finovate alum – Gusto has secured an extension of its 2021 Series E funding round. That round featured an investment of $175 million and was led by T. Rowe Price Associates. The amount of capital in the extension announced this week has not been disclosed, but TechCrunch suggests that the sum “appears to be around the $55 million mark.” Ahead of this week’s extension announcement, Gusto had a valuation of nearly $10 billion, and now has more than $746 in total funding.
Gusto offers an all-in-one platform to enable businesses to successfully automate and manage their HR operations. This includes a full-service payroll capability, as well as employee benefits management, hiring and onboarding, talent management, and timecards and attendance. The platform also provides insights and reporting that support anonymous team surveys, customizable reports, automatic compliance alerts, and more.
The company, launched in 2012, made its Finovate debut as ZenPayroll in 2014. Rebranding one year later as Gusto, the company has since grown into a fintech unicorn with more than 200,000 business customers nationwide. Gusto processes tens of billions of dollars in payroll every year while providing employee benefits – including health insurance and 401(k) accounts – that help companies provide an optimal environment for their workers.
“We are excited to partner with Gusto, a leader in the people management platform,” Engagedly President and co-founder Sri Chellappa said. “As a partner, Gusto will help our joint clients leverage the vast power of Engagedly for employee engagement, people development, learning and performance management, and providing a seamless and holistic employee experience.”
Gusto is headquartered in San Francisco, California. Co-founder Joshua Reeves is CEO.
Open banking expert Token landed a $40 million Series C investment.
The round, which was co-led by Cota Capital and TempoCap, boosted the company’s total funding to $90 million.
Among Token’s clients are BNP Paribas, HSBC, Mastercard, Nuvei, Paysafe, Ecommpay, Rewire, Coingate, Sonae Universo, Volt, and Vyne.
Open banking innovator Token.ioclosed a $40 million Series C funding round this week. The investment was co-led by Cota Capital and TempoCap and boosted Token’s total funding to $90 million.
New investors Element Ventures, MissionOG, and PostFinance also pitched in, along with existing contributors Octopus Ventures, Opera Tech Ventures, and SBI Investments.
Token will use the capital to shift consumer habits from traditional payment methods like cards and wallets to open banking-enabled account-to-account (A2A) payments. Specifically, the company aims to enhance its APIs for Variable Recurring Payments and open finance functionality.
“With this investment, we will continue to expand open banking connectivity and push the boundaries of functionality beyond regulatory requirements to make A2A payments a mainstream payment method,” said Token CEO Todd Clyde.
Founded in 2016, Token is focused on driving the shift from traditional payment methods– such as cash and credit cards– towards bank payments. The company’s platform works towards this mission by enhancing open banking connectivity across Europe and supporting existing payment providers.
“Token’s A2A payments offering delivers faster and more secure payments than traditional methods while at a lower cost,” said TempoCap Investment Partner Adam Shepherd. “Token’s technology is enabling an impressive set of payment providers to offer seamless experiences for their merchant customers and, in turn, end users.”
Token’s client list includes BNP Paribas, HSBC, Mastercard, Nuvei, Paysafe, Ecommpay, Rewire, Coingate, Sonae Universo, Volt, and Vyne.
Experian has agreed to acquire a majority stake in Brazil-based MOVA Sociedade de Empréstimo entre Pessoas S.A. (MOVA) for $7.89 million (R$40 million).
Experian will take a 51% stake in MOVA today, with the option to acquire the remainder of the company between 2026 and 2028.
Experian is interested in P2P lender MOVA because it has the potential to enable Experian to help Brazilian companies assess the creditworthiness of their SME clients.
Information services company Experian will acquire a 51% stake in Brazil-based MOVA Sociedade de Empréstimo entre Pessoas S.A. (MOVA) for $7.89 million (R$40 million).
Headquartered in Sao Paulo, Brazil, MOVA is a peer-to-peer lending platform that seeks to offer borrowers an alternative to traditional bank loans. The company also offers a range B2B tools, including a credit-assessment-as-a-service product to offer automate credit decisioning, a service to help companies register a credit request, anti-fraud tools, and more.
Experian’s interest in MOVA stems from this ability to help Brazilian companies assess the creditworthiness of their SME clients. “SMEs are underserved by affordable credit in Brazil and MOVA is tackling this issue,” Experian said in an announcement.
A full acquisition is still on the table. Experian has a call option to acquire the remaining 49% stake in MOVA between 2026 and 2028. In 2029, the deal reverts to a put option for MOVA.
Founded in 1980 and headquartered in Ireland, Experian offers a range of services for small businesses, including business credit reporting, marketing products and services, debt collection tools, and more. On the consumer-facing side, Experian offers credit reports and scores, identity theft protection, and a marketplace to compare credit card, loan, and insurance offers.
A look at the companies demoing at FinovateSpring in San Francisco on May 18 and 19. Register today and save your spot.
Kognitos‘ business automation solution allows business people to build automations through English phrases, not learning and writing code.
Features
Natural Language Processing (NLP)
Most advanced business language engine
Human-in-the-loop exception handling
No bots! Bot-less infrastructure
Why it’s great
Business automation in plain English.
Presenters
Binny Gill, CEO An industry veteran, prior to founding Kognitos, Gill was the CTO at Nutanix where he drove growth from 20 employees to over 6000 employees, while reaching a market cap of $7 billion and $1.5 billion in revenue. LinkedIn
Jason Langone, VP of Growth An experienced sales and marketing leader, Langone believes in building a championship culture through effort, execution, and pace. He spent eight years at Nutanix building elite performing teams globally. LinkedIn
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.
