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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
MX has appointed Jim Magats as CEO, replacing Interim CEO Shane Evans.
Magats comes to MX after spending 18 years as a senior executive at PayPal, where he specialized in open finance.
Evans will continue to serve as a senior advisor.
Open finance fintech MXnamed Jim Magats CEO this week.
The news comes after company Founder and former CEO Ryan Caldwell stepped down at the beginning of the year, appointing Shane Evans as Interim CEO. After the transition, Caldwell stepped into a new role as Executive Chair to spend more time with family and focus on his daughter’s health recovery.
“Jim Magats brings a wealth of experience and knowledge about how to deliver high-impact financial solutions and products for consumers, merchants, and financial organizations, along with a vast network of partners and customers at the world’s leading financial institutions and fintechs,” said Caldwell. “We have tremendous confidence in Jim’s ability to lead the organization through the next phase of our growth in establishing our leadership in the open finance economy, helping organizations of all sizes access and act on financial data to improve customer outcomes and grow their businesses.”
Magats comes to MX after spending 18 years as a senior executive at PayPal. Most recently, he served as the company’s Senior Vice President for Omni Payments Solutions where he was charged with overseeing the company’s open banking strategy and partnership network of more than 150 financial institutions and networks.
The appointment is strategic for MX, which has spent the past few years positioning itself as a leader in the open finance space, because of Magats’ experience in open finance. While at PayPal, he worked with regulators in Europe helping to create PSD2 banking standards. He also spent time building PayPal’s open, secure API capabilities to facilitate digital payments.
“Financial data is the lifeblood of a connected economy, and nobody helps organizations access and act on financial data better than MX. Our opportunity to make financial data accessible and actionable is global, extends across verticals, and has the potential to make a positive difference in the lives of billions of people,” said Magats. “After 18 amazing years at PayPal, I’m incredibly excited to join MX, a company on a mission to build the open finance economy and empower the world to be financially strong. We are going to deepen and extend our partnerships with financial institutions and fintechs to fuel the next wave of innovation while fostering greater participation in the global economy through new products, use cases, and services.”
During his seven-month tenure as Interim CEO, Evans saw the company through the tragic passing of company Cofounder Brandon Dewitt. Evans, who joined MX in 2019 as Chief Revenue Officer, will continue to serve as a senior advisor.
One of the more interesting developments in fintech in recent years has been how a number of innovators have sought to leverage the workplace as a way to make financial wellness, education, and inclusion a reality for workers. Today’s column will introduce five of fintechs – Finovate alums all – that are bringing the benefits of fintech innovation not only to where users live, but to where they work, as well.
Digital transformation consulting services company Digital Align introduced its AlignMoney solution at FinovateSpring two years ago. The offering is the world’s first, digital Banking-as-a-Benefit platform for employers to offer to their employees, helping companies both attract and retain talent. AlignMoney makes it easy for employees to secure a variety of banking products and services – ranging from savings, checking, and credit cards to home loans, insurance, and investments.
Making its Finovate debut as part of our all-digital fintech conference in 2020, Icon Savings Plan returned to the Finovate stage a year later for FinovateFall in New York. The company’s innovation is a portable retirement plan that replaces the complexity and fragmentation of the 401(k)s with a low-cost, personalized savings and investing plan for both W2 and 1099 employees. And when the employee leaves their employer, their Icon Savings Plan goes with them without any change in service or hassle – and potential expense – of having to rollover the account.
Among Finovate’s newest alums, Keep Financial made its Finovate debut earlier this year at FinovateSpring. The company, headquartered in Atlanta, Georgia, and founded in January 2022, won Best of Show for its Cash Vesting Plans that help companies solve hiring and retention challenges while aligning interests between employees and employers. More than a typical bonus, Keep Financial’s Cash Vesting Plans vest over time, enabling workers to be rewarded for their continued contributions to the company. The plans operate like 0% interest loans from which employees can draw upon at any time and for any amount. Borrowed funds are repaid at each vesting milestone while the employee continues to work for the company.
In the same way that fintechs urge banks to leverage their relationship with customers to provide new and better financial products and services, SalaryFits seek to leverage the relationship between the employee and employer to provide better, fairer financial solutions, as well. The London-based company connects the product offers from financial institutions to the payroll of companies. This enables businesses to contribute to the financial wellbeing of their employees and gives providers a way to reach a broader market of potential customers. Financial solutions from more than 100 financial institutions are available via SalaryFit’s cloud-based platform.
Taking to the Finovate stage for the first time two years ago at FinovateSpring, Kirkland, Washington-based SecureSave offers a new type of workplace savings program that helps employees build and maintain an emergency savings account. SecureSave provides employees with a free emergency savings app to make the process of saving for an emergency fund easy and automatic via payroll deductions. The company partners with employers, benefit brokerage firms, and financial services providers to make emergency savings a component in a holistic financial wellness program.
Provo, Utah-based fintech Asa announced a partnership with Pyramid Federal Credit Union.
Asa will use its collaborative banking approach to enable Pyramid FCU to expand its offerings via connections with customer-facing fintechs.
Asa made its Finovate debut last September at FinovateFall 2021.
Pyramid Federal Credit Union, a Tucson, Arizona-based financial institution with $168 million in assets, has selected Asa to enhance the customer experience for its more than 17,000 members. Asa specializes in connecting financial institutions with customer-facing fintechs via a secure, compliant, and easy-to-implement marketplace. The company helps credit unions, as well as community and regional banks, leverage what it calls “collaborative banking” to innovate faster and provide the most modern customer experience possible.
Pyramid FCU CEO Ray Lancaster underscored the challenge that smaller financial institutions face when it comes to providing their customers and members with the kind of up-to-date digital experience they are accustomed to in other areas of their lives. “As a community institution, it can be challenging to keep up with the rapid rate that technology and member expectations change,” Lancaster explained. “Asa and the collaborative banking model help solve for this pain point, providing members with fast and easy access to the apps and tools they want to try, all without having to share any sensitive information. This allows us to nimbly innovate without being bogged down with cumbersome one-to-one vendor due diligence, carving out a strong competitive advantage.”
The partnership with Asa will enable Pyramid FCU to connect to a community of fintechs courtesy of Asa’s digital rails, which will allow Pyramid FCU to provide its customers with a range of new innovations and capabilities. The collaboration will ensure that member data is tokenized, normalized, and anonymized before being shared with any connected fintechs in order to remove both liability and risk.
“By embracing the collaborative banking model, Pyramid FCU is improving the member experience and empowering them with unprecedented choice, all while removing much of the liability and risk that has traditionally hindered credit union-fintech partnerships,” Asa founder and CEO Landon Glenn said.
Founded in 2019 and headquartered in Provo, Utah, Asa made its Finovate debut last year at FinovateFall 2021. At the event, we had the opportunity to talk with Asa’s Head of Fintech Relationships Ryan Ruff about the challenges of creating successful partnerships between financial institutions and fintechs and how Asa can help facilitate these partnerships.
Asa has raised $1.8 million in funding courtesy of an August 2021 seed round led by CFV Ventures.
Identity verification and fraud solution provider Socure is teaming up with business verification and identity platform Middesk.
The partnership is the first instance in which two Know Your Business (KYB) and Know Your Customer (KYC0 innovators have created an integrated, end-to-end business verification solution.
Socure, a Finovate alum since 2013, has raised more than $646 million in funding.
Digital identity verification and fraud solutions provider Socureannounced an industry-first partnership this week with business verification and identity platform Middesk. The integration combines Socure’s real-time, predictive analytics identity verification and fraud prevention solution with Middesk’s business entity verification technology to enhance the ability of B2B companies to accurately verify their customers. The collaboration marks the first time that two innovators in the Know Your Business (KYB) and Know Your Customer (KYC) space have created an integrated solution for end-to-end business verification.
“With our partnership, B2B companies will achieve an incremental lift in their business due to Socure’s industry-leading accuracy and coverage of our identity verification and fraud risk prediction solutions,” Socure CEO and founder Johnny Ayers said. “This accuracy leads to the auto-approval of more good consumers and creates increased conversion rates and a higher assurance of onboarding trustworthy business customers.”
The integration will help B2B companies verify not only the details of new business customers such as name, address, and tax ID, but also the personal details for that business’ beneficial owners. The addition of Socure’s digital identity verification and fraud platform will ease and streamline the process through which Middesk customers can authenticate the associated beneficial owners of the businesses they register and onboard. The partnership could be a major boon for businesses in regulated industries – including banks, financial services companies, and insurance companies – that require a high degree of business identity verification. The collaboration also should prove helpful to entities such as B2B marketplaces that serve gig economy businesses and entrepreneurs who often have smaller or more incomplete data footprints that can make KYB more challenging.
Middesk co-founder and CEO Kyle Mack said that the partnership would help Middesk customers who are eager to tackle the issues of identity verification. “Customers can now leverage the Socure integration to validate personal attributes of beneficial owners,” Mack said. “Additionally, Socure delivers key risk insights that determine the likelihood that someone’s identity is legitimate, and applicants are who they claim to be, which provides even more value to our customers in uncertain, but growing market conditions.”
Founded in 2012 and making its Finovate debut a year later at FinovateFall, Socure has grown into a leading identity verification solution provider. With more than 1,000 financial institutions, government agencies, and enterprises using on the company’s verification technology, Socure reported in May that it had reached record customer growth of 236%, and currently includes companies such as EarnUp and fellow Finovate alum Sezzle among its financial services clients. Also in May, Socure introduced new Chief Financial Officer Krish Venkataraman.
“I’ve long had the sense that, no matter what type of business you’re in, solving for identity verification was critical to operating in the next phase of the internet,” Venkataraman said when his appointment was announced. “What’s really becoming clear is that the line of demarcation between a real identity and how that identity operates in the digital world no longer exists. A person’s identity is how they access everything they want and need to do, and today, those things almost all happen online.” Venkataraman called Socure “the identity verification layer for the Internet.”
Headquartered in New York City, Socure has raised more than $646 million in funding. The company’s investors include Accel, T. Rowe Price, and ff Venture Capital.
We may have missed an alum or two. But with the second quarter of 2022 in the books, here’s a look at our Finovate alumni funding for April, May, and June of this year.
As of our current count, eight Finovate alums have raised more than $984 million in Q2 of 2022. Of the eight alums that received funding in the quarter just ended, two – Allied Payment Network and Chekk – did not disclose the total amount of their investments.
Two of the quarter’s biggest investments were received in June, giving that month the lion’s share of capital raised by Finovate alums in the second quarter of the year.
Previous quarterly comparisons
Q2 2021: More than $2.8 billion raised by 14 alums
Q2 2020: More than $975 million raised by 15 alums
Q2 2019: More than $1.8 billion raised by 29 alums
Q2 2018: More than $1.5 billion raised by 25 alums
Q2 2017: More than $726 million raised by 25 alums
As we noted last year around this time, it is not unusual for second quarters to produce more moderate funding numbers compared to other quarters. And, as with last year, April proved to be an especially “cruel” month for fintech funding – at least as measured by our alums – with only FinovateEurope alum and relative newcomer Crowdz reporting funding that month.
That said, this year’s Q2 haul surpassed that of two of the previous five second quarters – and with significantly fewer alums participating.
Top Equity Investments
SumUp: $624 million
ThoughtMachine: $160 million
Backbase: $122 million
The top equity investment for the quarter was far and away the $624 million raised by London-based e-commerce innovator SumUp. In fact, all three of the top equity investments in Q2 of 2022 were greater than the largest investment in the previous quarter. SumUp’s massive capital infusion rivals all Finovate alum investments since NuBank raised $750 million in the second quarter of 2021.
If you are a Finovate alum that raised money in the second quarter of 2022 and do not see your company listed, please drop us a note at [email protected]. We would love to share the good news! Funding received prior to becoming an alum not included.
Finovate Best of Show winner Arkose Labs announced an integration with Ping Identity.
The partnership will combine Arkose’s Fraud Deterrence Platform with Ping Identity’s PingOne DaVinci no-code identity orchestration service.
Arkose Labs made its Finovate debut in 2019. Ping Identity has been a Finovate alum since its appearance at FinovateEurope in 2012.
Fraud deterrence and account security specialist Arkose Labsannounced an integration with fellow Finovate alum Ping Identity. Arkose Labs will leverage Ping Identity’s no-code identity orchestration service, PingOne DaVinci, to create an additional level of protection against both bot and human-led fraud attacks.
The integration blends Ping Identity’s identity and access management (IAM) technology with the Arkose Fraud Deterrence Platform. The combined offering will enable enterprise clients to better identify authorized users sooner, reducing friction during account registration and log in. The technology also reduces emphasis on multi-factor authentication, creating an even more seamless experience for users.
“Arkose Labs is very excited to integrate our leading fraud detection and protection platform into DaVinci,” Arkose Labs Chief Product Officer Ashish Jain said. “Together with Ping we are providing a best-in-class experience to end users while helping to protect a company’s digital environment from malicious attacks.”
The Arkose Labs/Ping Identity partnership comes as the number of active fraudsters has grown by 10x since 2019 – according to the Arkose Global Network. Additionally, Arkose noted that consumer, account-based fraud still represents almost 33% of all cybercrime losses. Firms that have embraced Arkose Labs’ technology have seen their ability to improve bot detection by 90% or more and an improvement in authorized user throughput of 70% or more.
Partnering with Ping Identity should only enhance Arkose’s ability to help its customers defend themselves against cyberfraud. Companies that have teamed up to use PingIdentity’s PingOne DaVinci solutions – via Ping Identity’s Global Technology Partner Program – have been able to deliver protected user experiences in industries ranging from finance and e-commerce to gaming and consumer technology.
“Ping Identity is committed to expanding our technology partner ecosystem to deliver better, more frictionless customer experiences,” Ping Identity SVP of Product Management Loren Russon said. “Our partnership with Arkose Labs leverages PingOne DaVinci’s seamless orchestration to ensure dynamic user journeys are delivered quickly and efficiently at every stage of the user journey.”
Arkose Labs won Best of Show in its Finovate debut at FinovateSpring 2019. The company returned to the Finovate stage two years later for FinovateFall where it demonstrated its Fraud and Abuse Prevention Platform. Headquartered in San Francisco, California and founded in 2017, Arkose Labs has raised more than $106 million in funding from investors including the SoftBank Vision Fund, the Sony Innovation Fund, and PayPal Ventures.
European business finance solution company Qonto is seeking to acquire its competitor Penta.
Together, the two will serve more than 300,000 small business customers across Germany, France, Italy, and Spain.
Terms of the deal have not been disclosed.
Two European business finance solution companies have agreed to join forces. In the deal, which is expected to close in the next few weeks, Paris-based Qonto is seeking to purchase Berlin-based Penta. Financial terms have not been disclosed.
“When Steve Anavi and I founded Qonto in 2016, we had the ambitious goal of simplifying everyday banking for SMEs and freelancers across Europe,” said Qonto CEO Alexandre Prot. “Today, we’re already present in four European markets and, while I’m very proud of what we’ve achieved so far, we want to go even further: the natural next step was to join forces with Penta. We are thrilled to welcome the Penta team onboard. Together we’re going to be the finance solution of choice for one million European SMEs and freelancers by 2025!”
Penta launched in 2017 and now serves 50,000 small business customers in Germany. Qonto launched the same year and currently serves more than 250,000 clients across France, Germany, Italy, and Spain. The acquisition will combine Qonto’s brand strength, license, and core banking system with Penta’s local expertise.
Qonto is anticipating that Penta’s existing market presence will strengthen its operations in Germany. The combined entity will make Qonto a strong leader in the European digital business finance sector. After the acquisition is complete, the company will have more than 300,000 customers and 900 employees.
“With the combination of increasing customer numbers and rising revenues, we have gained even more substance in the past 18 months,” said Penta CEO Markus Pertlwieser. “We are very excited that we now have the chance to actively shape digital banking for business customers in Europe as a team with Qonto.”
Dynamic Planner, a risk-based financial planning firn based in the U.K., has secured what the company is calling a “significant investment” from private equity growth firm FPE Capital. Terms of the investment were not disclosed, but the additional funding is designed to help accelerate Dynamic Planner’s expansion plans in the U.K. and Europe.
Dynamic Planner CEO Ben Goss praised FPE Capital for not only for backing successful software companies in the past and helping them scale their businesses, but also for sharing values that Dynamic Planner holds dear. “They also share our vision for solving our industry’s major challenges through technology such as process digitization, customer experience, investing sustainably for future generations, and omni-channel financial planning in a post-pandemic world,” Goss said.
Making its Finovate debut at FinovateEurope in London earlier this year, Dynamic Planner offers a single platform that enables financial advisory firms to match clients with investment portfolios that meet their individual needs and goals. The company’s technology provides client profiling to ensure that client preferences are accurately assessed and reflected in the portfolio composition process. Dynamic Planner also offers whole-of-market fund research, cash flow modeling, and pre-populated reports to make it easier for advisors to provide holistic, compliant investment portfolio reviews and reports. Via its SaaS platform, Dynamic Planner serves nearly 40% of wealth advice firms in the U.K., and more than 150 asset managers representing $300 billion (£250 billion) in assets. The company is on pace to surpass $12 million (£10 million) in annual recurring license revenues in 2022.
In addition to making its first appearance on the Finovate stage earlier this year, Dynamic Planner also launched its Client Access solution. Unveiled in March, the new offering leverages psychometric risk and sustainability profiling to make remote financial advice more precise and engaging.
“While remote advice is here to stay, it can be a challenge for advisors to make the process engaging or easy to understand for clients, as well as build deep relationships which ultimately result in better outcomes,” Dynamic Planner Sales & Marketing Director Yasmina Siadatan explained. Siadatan called the new solution “a fundamental piece of the hybrid advice puzzle.”
Headquartered in Reading, Berkshire, Dynamic Planner was founded in 2003. The company was named “Adviser Technology Provider of the Year” at the Money Marketing Awards in 2021 and, that same year, won top honors as the “Leading Independent Planning Tool Provider” at the Schroders U.K. Platform Awards.
Speaking of fintech in the U.K., a hearty congratulations to Starling Bank, the pioneering U.K.-based digital bank launched in 2014 by CEO Anne Boden. The bank announced this week that it had achieved its first full year of profitability, delivering a pre-tax profit of $38.4 million (£32.1 million). The news represents a major milestone for the company, which produced a pre-tax loss of $37.7 million (£31.5 million) the previous year.
“With our first full year of profitability, we’ve placed ourselves firmly in a category of one,” Boden said in a statement. “As an innovative digital bank with a sustainable business model and a strong balance sheet, we are generating our own capital and we stand apart from both the old banks and other challengers.”
A fully-licensed and regulated bank, Starling Bank offers personal, business, joint, euro and dollar current accounts, as well as a card for youth. Headquartered in London and maintaining offices in Southampton, Cardiff, and Dublin, Starling Bank also offers a B2B banking-as-a-service and software-as-a-service proposition, leveraging the same proprietary technology Starling uses to power its own operations.
Earlier this month, Starling Bank unveiled its Bills Manager solution for small businesses. The new feature gives small businesses greater flexibility when making Direct Debit or standing orders by taking funds from money set aside in one of their available Savings Spaces rather than from the business’ main account. The solution helps small businesses streamline their finances by making budget forecasting and cost management easier. Bills Manager seamlessly integrates with popular accounting platforms such as Xero and FreeAgent – both of which are available via the Starling Marketplace – as well as with Starling’s own bookkeeping solution I.
“Our small business customers requested this feature, so we’ve delivered,” Starling Bank Chief Banking Officer Helen Bierton said. “Uptake of Bills Manager has been strong among our personal current account customers and we’re confident it will help hundreds of thousands of small businesses better manage their money, too.”
Check out our conversation with Starling’s Boden moments after she delivered her keynote address at FinovateSpring in May.
Here is our look at fintech innovation around the world.
Latin America and the Caribbean
Brazilian fintech Neon secured $80 million for its first Credit Right Investment Fund.
YAP Pakistan announced a strategic partnership with Faysal Bank in the wake of securing in-principle approval for an Electronic Money Institution license.
Open-Finance.ai partnered with FICO to leverage the company’s Blaze Advisor decision rules management system.
Israel-based Open-Finance.ai will integrate Blaze Advisor into its open banking platform to offer real-time credit assessments.
This news comes as “Israel is on the cusp of major banking reform with the introduction of open banking,” said FICO VP of Partner Management in Europe, the Middle East, and Africa Mark Farmer.
Analytic decisioning platform FICO and risk, finance, and compliance software company Open-Finance.ai have teamed up this week.
Under the agreement, Open-Finance.ai will integrate the FICO’s Blaze Advisor decision rules management system into its open banking platform. Using FICO’s technology, Open-Finance.ai will assist its financial services clients to save time on consumer credit assessments by leveraging real-time, analytically driven appraisals.
For Israel-based Open-Finance.ai, this comes just as open banking legislation is gaining traction. “Israel is on the cusp of major banking reform with the introduction of open banking,” said FICO VP of Partner Management in Europe, the Middle East, and Africa Mark Farmer. “Automating decisions allows lenders to increase the efficiency of the lending process without sacrificing risk management regulatory rigour. This will speed up lending, increase customer satisfaction, reduce operational costs and drive economic activity.”
Open-Finance.ai anticipates the move will help remove human bias from lending decisions, improve risk decisions, and expand access to credit to more people.
FICO’s Blaze Advisor gives businesses a solution to make smarter, more transparent business decisions by offering companies multiple methods for rule authoring, testing, deployment, and management. To make this work, Blaze Advisor provides decision trees, scorecards, decision tables, graphic decision flows, and customized templates. The technology also supports business performance monitoring.
“Manual processes, a conservative approach and significant regulation have been a drag on growth of the Israeli market,” said Open-Finance.ai Co-founder Shay Basson. “Now, we have an ability to manage risk instantly, based on multiple data sources to provide an instant, yet risk-aware decision to credit and insurance consumers.”
Founded in 1956 and headquartered in California, FICO offers decisioning tools used by more than 650 clients, including nine of the top 10 U.S. banks and eight of the top 10 EMEA banks. Last year, FICO launched a new loan origination solution called FICO Originations Solution that seeks to automate the entire customer journey.
Financial services digital marketing innovator DeepTarget has launched its 3D Story on the Go product extension to its Digital Experience Platform (DXP).
The new solution enables banks and credit unions to add immersive and adaptive user experiences to email, SMS, and social media marketing campaigns.
Alabama-based DeepTarget made its Finovate debut at FinovateWest 2020.
DeepTarget has unveiled the new 3D Story On the Go product extension to its Digital Experience Platform (DXP). The new addition leverages consumer and business intelligence, as well as AI, to help banks and credit unions personalize customer communications and launch more effective marketing campaigns via email, SMS, and social media.
“Today’s consumers are digital users first and expect their financial institutions to deliver seamless, personalized, relevant experiences,” DeepTarget CEO Preetha Pulusani said. “As much as personalization is a growing expectation for consumers, achieving it is a growing challenge for many financial institutions, especially in understanding how and when to leverage consumer data.”
DeepTarget’s 3D Story On the Go enables banks and credit unions to boost engagement through some of the most widely-used channels by creating immersive and adaptive, prismatic user experiences. These AI-powered and insights-based, visually appealing experiences can be used for onboarding new customers, sending personalized offers and promotions, product announcements, and more. Crane Credit Union VP of Marketing Michael Hostetler highlighted the way DeepTarget’s technology has brought additional value to its email marketing efforts. “We use email extensively to communicate with our members based on DeepTarget’s AI-based predictive campaigns,” Hostetler said. “With 3D Story On the Go, it will be great to easily deliver a new, elevated level of AI-based personalized experience to our members.”
Founded in 2009 and headquartered in Huntsville, Alabama, DeepTarget made its Finovate debut at FinovateWest in 2020. At the event, the company demoed its 3D StoryTeller solution which brings an innovative, 3D user experience to DeepTarget’s Digital Experience Platform. The new offering helps financial institutions take advantage of social media platforms such as Instagram, Facebook, and Snapchat.
The introduction of 3D Story On the Go comes weeks after DeepTarget announced that MDT Credit Union, a credit union service organization (CUSO), would offer the DeepTarget integration into the Banno Digital Platform to its credit union customers. MDT President and CEO Larry Nichols underscored the importance of the digital experience to credit unions and their members, noting that DeepTarget’s technology helps them “maintain their differentiators – human connection, empathy, and exceptional service – within the digital network.”
If there were a Challenger Bank Hall of Fame, then rest assured that Anne Boden, who founded U.K.-based Starling Bank in 2014 and is the challenger bank’s CEO, would be prominently featured therein. As we learned in our conversation with Ms. Boden, her inspiration for founding the U.K.’s first digital bank was driven by both the opportunities presented by new technologies as well as a banking industry that was still significantly shell-shocked from the Great Financial Crisis of 2007 and 2008.
Headquartered in London, Starling Bank now has more than three million accounts and four different account types. Voted Britain’s “Best Current Account” five years in a row, Starling Bank maintains offices in Cardiff and Southampton, as well as London, and still has zero brick-and-mortar branches. Starling Bank secured its banking license from the Bank of England in 2016, launched its first mobile personal current account in 2017, and introduced the country’s first digital business bank account in 2018.
On the decision to launch a fully-digital challenger bank
(T)he banking sector, back in 2014, was still looking backwards. They were still looking at the financial crisis, trying to repair their balance sheets, trying to repair their financials, and they weren’t really looking forward about what they could do to improve customer experience or customer satisfaction. I went around the world, talking to big banks and talking to technology companies and asking what they were doing. I came to the decision in 2014: wouldn’t it be great to start a new bank? Wouldn’t it be great to have a new bank with all new technology, a different way of engaging with customers, being fair to customers? And here we are in 2022 and things have gone from strength to strength.
On the challenge and opportunity of digital transformation in financial services
Organizations have become far more fixated on minimizing the risk of change. “Let’s do small projects around the core. Let’s not change the core. Let’s make big decisions at the senior level. Don’t empower people.” But in order for big banks to be more successful and compete with the new startups such as Starling, they have to have new technology, but above all a culture of being prepared to change. I am trying to empower people – the CTOs, the CIOs – to knock on the door of the CEO and say: “We can be better. We can embark upon technology projects. And we can compete with the new guys.”
On the present and future of Starling Bank
In the U.K. we’re very, very successful. We’ve built a whole new technology stack. We have a new banking license, three million customers, (and) we have something like eight percent of market share in business banking. That is huge. We’ve done in three years what some banks have done in 300. But that’s because we have this remarkable technology stack which we call Engine, and we have lots of banks around the world asking us if they can use Engine. We don’t plan to get a banking license in the States, but banks in the States will be able to use our Engine technology. So we’re going to be software-as-a-service, based on Engine, so lots of businesses around the world can have a bit of the Starling magic.
The $2.4 trillion consumer credit card industry has been getting crowded, but the increase in competition is not enough to stop X1, one of the newest players in the smart payment card space.
X1 was founded in 2017 to create a challenger credit card that fits today’s digital-first era. “With X1, we tossed the rulebook out and designed the first challenger card for digital natives,” said X1 Co-founder and CEO Deepak Rao. “X1 delivers a superior experience that feels both simpler and smarter than any other credit card on the market.”
Having exited private beta in October of last year, X1 now has cardholders in 50 states and its card has been used in more than 100 countries. The company reports that a card transaction takes place every five seconds, and it is on track to see $1 billion in annualized spend this year.
Helping to fuel this success is a $25 million Series B funding round the company received this week. The investment was led by FPV, with Craft Ventures, Spark Capital, Harrison Metal, SV Angel, Abstract Ventures, the Chainsmokers, and Global Founders Capital also participating. X1’s total funding now sits at more than $45 million, which the company will use to invest in product innovation and scale.
So why is a newcomer experiencing this kind of success so early on? The answer may lie in how X1 is differentiating itself from the competition. The company offers four major features that set it apart from incumbent credit card providers. Cardholders can:
Benefit from income-based credit limit
X1 says it bases cardholder credit limits on their current and future income, rather than on their credit score, which is a risk underwriting method that is not only dated, but also excludes certain segments of the population that have thin credit files. The company estimates that this method allows it to set cardholder credit limits up to five times higher than traditional players.
End free trials automatically
In today’s subscription-based economy, cardholders need a payment method that works for their needs. X1 offers virtual payment cards that automatically expire, allowing users to automatically end a free trial by terminating the payment method. Using a virtual card number in this way limits the possibility a user will continue to pay for a service they have forgotten about and don’t use.
Spend anonymously
X1 offers a feature to help users protect their privacy. The company allows cardholders to spend anonymously, without disclosing their personal information, which can be sold, misused, or susceptible to fraud.
Create virtual cards for one-time use
While not a new feature to the credit card world, single-use virtual credit card numbers are more commonly found in commercial credit card offerings. At their core, these single-use virtual cards offer more security since the credit card number expires. They are also great to use as a backup method to control recurring transactions or limit subscription fees.
X1 will begin accepting applications from its 500,000 user waitlist– as well as to the general public– in the coming weeks. The card comes with no annual fee and pays users two points on every dollar they spend (3 points for every dollar if the cardholder spends more than $15,000 in a year). Points can be redeemed at major brands and retailers.
