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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Days after Bloomberg News reported that Apple will add Buy Now Pay Later (BNPL) functionality to Apple Pay, we learn that Buy Now Pay Later “OG” Sezzle has received an investment of $30 million from Discover. And not only will Discover make a financial commitment to the company, which most recently demonstrated its technology on the Finovate stage at FinovateFall in 2018, Discover also entered into an agreement that will enable the card company launch a Buy Now Pay Later service on its own Discover Global Network.
“We are excited about our relationship with Discover, as we believe our mission, vision, and values align,” Sezzle CEO and Executive Chairman Charlie Youakim said. “Discover’s capabilities via their network and financial products will enhance our own offerings and provide more paths to financially empower our consumers.”
Today’s announcement is also the fruit of an agreement inked back in February that enabled Sezzle to work with selected merchants on the Discover Global Network. Discover SVP of Global Business Development and Acceptance Jason Hanson underscored the benefit that BNPL provides to its merchant partners, and also noted that the partnership would boost Sezzle’s ability to “grow its business and provide new payment opportunities.” To this end, as part of the collaboration, Sezzle also will join a dedicated referral program that will introduce Discover’s credit and debit card products to its customers.
Founded in 2016 and headquartered in Minneapolis, Minnesota, Sezzle enables consumers to make purchases at more than 34,000 participating retailers, and pay for those purchases in four, interest-free installments over six weeks. Approval decisions are available instantly, and using Sezzle has no impact on the consumer’s credit.
The explosion in interest in Buy Now Pay Later payment schemes has been a boon for companies like Sezzle that were helping consumers shop today and pay tomorrow before it was cool. Last month, Sezzle announced partnerships with Target and Barstool Sports, and the company continues to affirm its plans for an initial public offering in the U.S. – having launched publicly on the Australian Stock Exchange (ASX) in 2019.
M1 Finance, which offers a financial super app featuring automated investing, lending, and banking services, has secured $150 million in Series E funding. The round was led by SoftBank’s Vision Fund 2 and takes the company’s total capital to more than $300 million. The Chicago, Illinois-based fintech now has a valuation of $1.6 billion, giving the firm “unicorn” status.
In its funding announcement, M1 Finance noted that the investment will help the company develop and deliver new products and features, continue to innovate on its platform, and expand its workforce. The Series E, which featured the participation of existing investors, as well, comes after a year in which the M1 Finance launched a trio of new solutions – Send Check, Custodial Accounts, and Smart Transfers – and reached more than $4.5 billion in total assets under management.
“Each funding round is proof and motivation that people believe in our mission of empowering financial well-being,” M1 Finance founder and CEO Brian Barnes said. “Financial well-being isn’t a luxury, it’s a necessity. Our platform helps people have more control, more freedom, and more power over their money. We experienced massive growth in the past year, and it’s extremely gratifying to see investors and clients believe in our vision and make it a reality.”
A Finovate alum since its debut at FinovateFall in 2016, M1 Finance combines the ability to build and maintain a personalized, automated investment portfolio – including access to fractional share investing – with a flexible line of credit and a digital banking service integrated into the user’s investment portfolio. M1 Finance offers both a free Basic program as well as a Plus program for $125/year (with the first year free) that has a lower borrowing rate, 1% cash back on spending, and access to Smart Transfers, Custodial Accounts, and Send Check functionality.
“M1 Finance simplifies the complex, time-consuming money management process for individuals,” SoftBank Investment Advisers Managing Partner Munish Varma said. “We believe the company is well-positioned to consolidate users’ financial lives on a one-stop super-app with its Invest, Spend, and Borrow products.”
If you had “Apple” on your bingo card as the next Big Tech company to edge its way deeper into fintech territory, congratulations! Bloomberg News reported this week that Apple’s Apple Pay solution will gain Buy Now Pay Later (BNPL) functionality – enabling consumers using Apple Pay to pay for purchases in interest-free installments.
The new service will leverage Apple’s partnership with Goldman Sachs – Apple’s credit card partner since 2019 – to facilitate what will reportedly be called Apple Pay Later. And while it is clear that Apple is taking advantage of one of the hottest retail trends in years, it is worth noting that Apple has ventured into installment payment territory before. Apple consumers can use their Apple Card to buy designated products in the Apple store and pay via monthly, no-interest payments. Apple cardholders also have been able to buy iPhones in 24 monthly installments with zero interest since shortly after the cards were launched in August of 2019.
According to Bloomberg, when users make purchases on their Apple device using Apple Pay, the service will enable users to pay either with four, interest-free payments made every two weeks, or over several months with interest charged. Neither Goldman Sachs nor Apple have responded to the Bloomberg report.
Fueled by powerful technology trends making online and mobile commerce easier for a new generation of consumers – as well as a low-interest rate economy – Buy Now Pay Later has grown to account for more than 2% of all ecommerce transactions around the world, according to a report from Worldpay. This growth is expected to accelerate by as much as 2x by 2024. In the United States, $20 billion worth of e-commerce transactions in 2019 used BNPL payment structures.
How will Apple’s arrival as a Buy Now Pay Later competitor impact the rest of the field of Klarna, Affirm, Splitit, Afterpay, Sezzle, and so many others? Is there enough room for growth in the BNPL market for multiple players to succeed before competition between them starts to intensify? For now, it is traditional credit card companies that have the most to lose from the rise of BNPL, as Millennials who came of age during the Great Recession continue to shun interest-charging payment methods, and Generation Z consumers grow up in a world in which Buy Now Pay Later options are not just available, but increasingly commonplace.
Our Women in Fintech Series returns with an interview featuring Izabella Gabowicz, Chief Operating Officer of Sensibill.
An innovator in the field of SKU-level data insights,Toronto, Ontario, Canada-based Sensibill made its Finovate debut in 2017 at FinovateFall. At the event, the company won Best of Show for its Insights solution that helps institutions identify and act upon revenue opportunities from on- and off-card purchase data.
We caught up with Izabella Gabowicz to talk about her work with Sensibill, the importance of achieving a work-life balance, and why everyone benefits when women have a seat at the table when decisions are being made.
Tell us about yourself.
Izabella Gabowicz: I graduated from the University of Toronto with a degree in Cognitive Science and AI, and I joined IBM as a developer in 2001. During my 14 years at IBM, I had the opportunity to work in the airline, banking, and telecommunication industries, improving customer and employee experiences via technology and processes, as well as normalizing data and interfaces to connect disparate systems across enterprises.
The lessons I learned from IBM, such as the importance of value creation, helped me transition into my next role at Sensibill where I became one of the founding team members. Moving from a global organization of a few hundred thousand to a startup of five was energizing. I contributed to product strategy, built client relationships and our client success division from zero, as well as shaped the company’s vision and organizational structure. Today, as COO, I’ve been directly involved in finalizing agreements and rolling out technology to large financial institutions and core banking providers. It’s been a rollercoaster ride, but an incredibly rewarding one.
When I’m not working, you’ll find me trying to stay physically active, which is often outside in nature where I feel connected. I enjoy spending time with my family — whether that’s weekly dinners with my parents or walking through a nearby creek with my daughters. Over the years, I’ve learned the importance of making time to “refill my cup” in order to show up as my best self at work, while also approaching each new phase of my career as a learning opportunity.
What are some tips for balancing work and life?
Gabowicz: The reality is you can’t do that perfectly, and that’s okay. There’s this myth that successful women always have it all together, and that holds us back because we keep believing we should be able to do it all, all the time. Instead, let’s accept the fact that everything is a series of trade-offs. On the days that I’m pitching to an important client, I’m looking at a messy house – or my parents are helping with childcare so I can travel for business, or my partner is making me dinner when I’m putting in longer days to negotiate an agreement. Sometimes I get the balance right, sometimes I don’t. But giving myself permission to drop some of the balls I’m juggling from time to time and being kind to myself when they do has been game changing.
Why is it important for women to have a seat at the table?
Gabowicz: Businesses need to have decision-makers who reflect and represent the people they serve, which is why it’s critical for women to also be part of the teams making the decisions – at each level. While this concept hasn’t been successfully done at the top levels, technology companies are becoming more mindful of their efforts to be inclusive. Financial institutions have, however, made huge strides in including women – from the working teams that are designing the customer journeys and the leadership teams that are choosing the initiatives to be prioritized, to the board and executives who identify the strategic direction, mission, and corporate objectives. When you belong to the group that is being targeted for a product and/or service, often it can be easier to empathize with their needs and understand them. And since half of the population are women, having a seat at the table is that much more important.
For women who have a seat at the table, be yourself. There are so many of us who feel as if we have to be reserved and polished to be seen as respectable professionals. But I argue that women can be respected because of the concepts and thoughts they bring to the table, as well as their competence, while still feeling empowered to be themselves. And that might include being a little quirky and awkward at times, but that’s okay.
How can women having a seat at the table help drive personalization?
Gabowicz: The key to personalization is to avoid thinking of everyone in any targeted group as having the same thoughts, valuing the same things, and having all the same needs. To humanize the experience, we need to look at customers as microsegments. That requires analyzing additional data, aside from demographics, to inform messaging and advice. Harnessing deeper, contextual data like SKU-level insights can reveal interests, lifestyles, spending habits, and behaviors. This alternative data enables the financial institution to speak to customers on an individual level using language, messaging, and imagery that’s relevant to them, creating an emotionally compelling experience where the customer feels listened to and understood.
How can financial institutions benefit from harnessing SKU-level data?
Gabowicz: People typically don’t buy products for the sake of making a purchase; they buy them to solve a problem or satisfy a need. A financial institution has a myriad of products it can offer to its customers, involving cards, investments, loans, and so on. But the uptake won’t be there unless the institution is presenting an offer that is personalized, meaningful, and compelling to their customers, at the right time to fit their unique financial needs. If the 360-degree view of a customer is only looking at their interaction patterns, but not the details of their spending and expenses, then there is a lot of rich information being left on the table.
Such details can help pinpoint micro-moments and tailor messages that attract and retain customers. For example, the bank or credit union might see two customers spend $100 at Costco, but SKU-level data can reveal customer A might be an expecting mother and B a small business owner. Messages and interactions will need to be personalized for individual financial needs, which can look very different person to person.
What advice would you share for women professionals looking to break into the field?
Gabowicz: What’s exciting to me about technology today is that “business” and “technology” are no longer separate. It’s not sufficient to build software that just meets basic requirements. There must be value created, the experience must be compelling, and companies must consider how they position the innovation in the market, onboard users, and explain its value proposition. Today’s technology jobs are not limited to writing code but can include designing the user experience, architecting systems, creating go-to-market plans, and more.
Future professionals should not shortchange any industry experience they have already amassed, but consider how they can leverage and sell it when looking for opportunities in tech. People are graduating every day with computer science and engineering degrees, and they need to work with talented professionals who can help them build products that serve the needs of all people. Together, they can create AI algorithms that are less susceptible to bias, considering all types of people in the training set.
As I think about my professional journey, I’ve learned the following:
There is substantial value in learning and growing — anything can be attainable, and there are always multiple paths to any one destination.
We’re all humans, which means we need connection, empathy, space to be ourselves, ease, and convenience. This knowledge can apply to building solutions for customers, fostering diversity in the workforce, or encouraging women building their careers to be as kind to themselves as they are to others.
And lastly, outcomes matter. You need to consider both data and behavioral psychology when building strategies to drive value and generate results that make a difference.
Connectivity and financial data enhancement innovator MXlaunched a new suite of financial insights APIs and embeddable user interfaces this week. The APIs will enable developers to quickly and securely bring MX-powered financial data into their solutions, helping companies pursue their open finance initiatives. MX also noted in their announcement that their offering will help firms accelerate time-to-market for financial wellness products – with personalized smart recommendations and insights built into the company’s app or website.
The API integrations and widgets now available enable companies to enjoy the benefits of MX-powered financial data without requiring them to build their own front-end solution. The embedded nature of the offering allows developers to add widgets to mobile banking and shopping apps, for example, without having to make major changes to the overall app or user experience.
“MX APIs and widgets make it easy for any company to embed financial insights and wellness tools into their current products and services,” MX Chief Product Officer Brett Allred said. “We’re making data-driven financial wellness tools more available and scalable than ever before by giving developers an easier and more secure way to connect financial data and help build products that power new money experiences for customers.”
Founded in 2010 and headquartered in Lehi, Utah, MX began the year with a $300 million Series C funding round that gave the company a valuation of $1.9 billion. Since then, the multiple-time Finovate Best of Show winner has forged partnerships with banks and credit unions including Libro Credit Union, First Hawaiian Bank, and AbbyBank. MX also this year has teamed up with Viva First to help the digital bank promote financial wellness in the Latino community. In April, MX collaborated with Moov to bring faster account verification to fintechs.
MX currently connects more than 16,000 financial institutions and fintechs with its data connectivity network. The company powers 85% of digital banking providers, as well as thousands of banks, credit unions, and fintechs, reaching more than 200 million financial services customers. Ryan Caldwell is co-founder and Chief Executive Officer.
This week’s Partnership Outlook focuses on recent Finovate alum – and Best of Show winner – Finzly. The Charlotte, North Carolina-based fintech announced that it will work with ICBA Bancard to bring instant payments to its payments hub, Payment Galaxy. ICBA Bancard is the payments services subsidiary of the Independent Community Bankers of America (ICBA), and the partnership with Finzly will enable the company to offer community banks and credit unions – as well as their customers and members – more efficiency and convenience, as well as improved cash flow.
“The rise in digital and contactless payments, fueled by the pandemic, has heightened demand for faster payments,” ICBA Bancard President and CEO Tina Giorgio said. “Through this collaboration, ICBA Bancard is helping community banks deliver payments when and where customers want while streamlining their payment processes for additional value and distinction in the market.”
Finzly’s Payment Gateway features preloaded connections to both the Fed and The Clearing House to support instant payments; built-in compliance tools for powerful, thorough audit trails; a bulk payment service for both real-time and future-date scheduling disbursements; and a secure, fraud management system for both payments and messages.
“Finzly’s payments hub not only helps banks stay relevant in today’s fast-paced market, but also helps future-proof their payment infrastructure,” Finzly founder and CEO Booshan Rengachari said. “We are very excited to partner with ICBA Bancard and are eager to see more community banks pursuing the road to innovation through smarter payments transformation.”
Most recently demonstrating its technology at FinovateWest 2020, Finzly took home Best of Show honors for its demonstration of its Digital Account Opening (DAO) solution, powered by Finzly’s BankOS. In the months since then, the company has teamed up with Pacific Western Bank, which selected Finzly’s FX STAR platform for end-to-end management of international banking products, and announced a strategic partnership with Fintel Connect, a performance marketing company specializing in financial services companies and fintechs. The Finzly-Fintel alliance will create a digital growth solution for bank partners, enabling them to meet growing customer demand for digital services and provide alternatives to in-person, in-branch services.
“Banks that rely on Finzly’s modern offerings really want help with digital marketing,” Finzly Chief Strategy Officer and advisor Dave Hunkele. “Fintel Connect provides our clients with a cost-effective, digital channel for attracting potential customers, who can then be onboarded through Finzly’s account opening solution.
Other major partnerships this year for a very-busy Finzly have included collaborations with California Community Banking Network and Fulton Bank, both announced in March. The company began the year with news that it had joined the pilot program for Federal Reserve’s FedNow instant payment service. Finzly was founded in 2012.
Six years after its launch, Danish fintech Pleo has become Europe’s latest fintech unicorn.
The smart company card provider announced early this week that it had raised $150 million in Series C funding – the largest Series C round for a Danish company to date – earning a valuation of $1.7 billion in the process. The new capital, according to CEO and co-founder Jeppe Rindom, will help scale the business and “ramp up” the company’s product offering. Pleo will also look at opportunities for market expansion, both by entering new markets as well as “doubling down” on the markets that Pleo is already active in.
“While this investment round is taking Pleo to new heights,” Rindom noted in a post on the company’s blog this week, “our core mission remains the same: to make everyone feel valued at work. Since day one, we’ve been committed to creating a spending solution that encourages a work culture built on trust and transparency, instead of overwhelming control and needless bureaucracy.”
More than 17,000 companies from a variety of industries rely on Pleo’s smart company cards that automate expense reports and make company spending easier. Pleo integrates seamlessly with major accounting software packages – including Xero, Sage and Quickbooks – and features three pricing tiers, Essential, Pro, and Premium – to make its technology accessible to small companies as well as bigger firms with larger teams.
The Series C round was co-led by Bain Capital Ventures and Thrive Capital. Existing investors Creandum, Kinnevik, Founders, Stripes, and Seedcamp also contributed.
Our other international fintech funding news story centers on Finovate alum Lidya, a digital bank based in Nigeria that announced receiving an investment of $8.3 million this week. Lidya, which made its Finovate debut at our fall conference in 2016, helps small and medium-sized businesses quickly secure the financing they need in order to grow and expand.
Companies can build a profile in just five minutes, select the type of loan that works best for them, and secure financing within 24 hours. Lidya’s credit scoring technology, Sardis, leverages machine learning, a proprietary algorithmic model, and an analysis of more than 1,000 data points to build a credit profile and establish creditworthiness.
“A customer repeat rate of over 90% in Nigeria and Europe shows that we are providing the services that SMEs need,” Lidya co-founder and CEO Tunde Kehinde explained. “At the height of the pandemic, we started lending in Europe. It was an important means of financial support for multi-sectoral businesses, including care, groceries and other important sectors. Multi-sectoral businesses. When the world began to emerge from this crisis, we were innovative. We are committed to enabling a strong ecosystem of leading SMEs with our products, unlocking their potential and helping the growing economy rebuild better. “
The pre-Series B Funding round was led by Alitheia Capital (by way of the uMunthu Fund) and featured participation from Bamboo Capital Partners, Accion Venture Lab, and Flourish Ventures. Lidya has operations in Poland and the Czech Republic, as well as Nigeria, and manages a technical team in Portugal. The company has raised a total of $16.5 million.
Here is our look at fintech innovation around the world.
Sub-Saharan Africa
Kenyan digital savings app Koa announced a partnership with Britam Asset Managers to enable investment services.
The tech-first alums of our FinDEVr developers conferences are often as savvy fundraisers as they are sharp technologists. This week in our Q2 Alum Funding Report, we noted that two of the quarter’s biggest fundraisings were from companies that made their Finovate debuts at FinDEVr events: Brazilian neobank NuBank, which secured $750 million in funding in June, and financial data network Plaid, which raised $425 million in funding in April.
This week, we add another FinDEVr alum to this list. LoanPro, a Farmington, Utah-based fintech that made its FinDEVr debut earlier this year, has raised $100 million in Series A funding. The growth equity investment comes courtesy of FTV Capital, and will help LoanPro add to its SaaS-based loan management, servicing, and collections platform, as well as enter new lending verticals and make investments in other “client-centric growth initiatives.”
“As founders who started out as lenders, we understand the pain points that lenders experience,” LoanPro co-founder and CEO Rhett Roberts explained. “LoanPro was built by lenders for lenders – we use a modern tech stack to simplify the user experience of managing loans – we do the hard work on the back end to make the front end clean and simple to use.”
With more than $15 billion of loans under management and 600+ clients in the U.S. and Canada, LoanPro offers a diverse range of loans types and lending programs. The company’s product suite include prime, sub-prime, and personal loan products, as well as consumer, auto, and business financing solutions. LoanPro also offers point-of-sale financing and the retail financing rage of the day – buy now pay later payment options – as well. LoanPro’s platform gives lenders an automated, configurable workflow, real-time access to data and insights, frictionless payment collections, and a flexible lending program.
In addition to the financial support, FTV Capital will use its market knowledge and strategic network to help grow LoanPro’s platform. The firm’s Robert Anderson, who led the investment, will join LoanPro’s board of directors.
“FTV Capital is excited to partner with LoanPro’s strong, passionate leadership team who have built an industry leading SaaS platform based on a deep understanding of their market and the needs of their customers,” Anderson said.
From Big Tech to Big Retail, banks and other traditional financial services providers are facing a unique and potentially existential challenge These companies are leveraging their technology-first platforms, powerful brands, and history of innovation to draw customers away from relying on banks for a growing amount of their financial and banking needs.
We caught up with Richard Steggall, CEO of Urban FT, to talk about the world that banks find themselves in today and what they need to do in order to better engage their customers and ward off the challenge from Big Tech and Big Retail.
A Finovate alum for more than six years, Urban FT offers a white-label, B2B digital banking platform and includes financial institutions, brokerages, insurance companies and non-traditional FSOs among its customers.
How big is the threat that banks – smaller banks in particular – face from Big Tech companies?
Richard Steggall: When it comes to the threat regional banks and credit unions face from big tech, we’re seeing a true David versus Goliath moment play out. There is unprecedented pressure mounting for small FIs to digitize – fast – and for the majority of FIs, the pace is much faster than what their capabilities and resources allow. As FIs continue to fall behind the tech curve in delivering on the convenience consumers demand, they’re losing customers in the payments arena to the ‘Fantastic Four’ in payments (Paypal, Stripe, Square and Adyen). And in the long term, FIs risk leaving the door wide open for tech giants like Apple, Amazon and Google to become our bankers.
According to a recent report from McKinsey, in order for regional banks and credit unions to preserve their market share, they must find a way to digitally transform the end-to-end “customer journey” by the end of 2022. No matter how large of a budget an FI has, that certainly does not leave much time for the digital overhaul that’s needed to achieve this lofty goal. As the same report outlines, transaction banking trails nearly a decade behind the technology industry when it comes to practices in customer-management and sales. These delays make a successful digital transformation of the customer journey a decidedly formidable – but certainly not unfeasible – vision for small FIs.
How can banks leverage their strengths to better compete with tech giants that are entering the banking services space?
Steggall: As I mentioned, the financial services industry is in the midst of a David vs. Goliath scenario. With big tech continuing to invade financial services – such as the November 2020 relaunch of Google Pay – some are prematurely saying that small FIs will soon become casualties of war. But, in reality, we’re still in the early battles and there’s no clear frontrunner yet. While regional banks and credit unions may not boast the tech savvy of fintech giants nor deep pockets of large bank conglomerates, they have a potentially more powerful weapon: the hearts of customers.
Reinforced by close community ties and unmatched trust, small FIs are ideally positioned to deliver personalized, innovative user experiences (UXs) that unlock meaningful, local economic development value rather than line the pockets of predatory big tech elites. This area is their strength and they need to home in and capitalize on it.
Moreover, they can benefit from the chinks in the armor of their competitors, as big tech’s approach to financial services is far from flawless. According to a recent Ponemon study, 86% of consumers are “very concerned” about how tech companies are using their personal information. Moreover, in good news for FIs, consumers still overwhelmingly trust banks more with their data than other industries, according to a report from nCipher Security.
This is the opportune moment for small FIs to cut in, striking a balance of innovation and ethics in digitizing. While big tech hoards consumer data to bolster other revenue streams like advertising, FIs can “wow” customers by using ethically sourced data to drive responsible personalization and superior UXs that safeguard privacy.
How do banks make the best of their newly-created digital experiences in a post-COVID world in which human-to-human interaction is again possible, if not preferred?
Steggall: While regional banks and credit unions have a leg up in trust and transparency, they also need to understand where their own weaknesses and risks lie. This exposure is largely in the 3Ds: data, digitization and deployment (of technology).
Customer data is truly the holy grail because it allows FIs to better serve consumers no matter where they lie on the financial spectrum. For example, if an FI knows a customer has college-aged children, there is a strong opportunity to be the thought leader on student lending. But there’s a fine line; in an environment where consumers feel surveilled, catchphrases like “convenience”, “personalization” and “user experiences” may lose their appeal.
By upholding the old adage “with great power comes great responsibility”, FIs can rise above big tech and continue to learn about their customers in organic ways that don’t find them creeping in on online activity. Rather, the purpose of technology deployment is to infuse ethically enhanced human touchpoints in all processes, such as allowing customers to provide pertinent financial information voluntarily that might help an FI build a profile.
Given that banks will never out-tech the tech titans, what is the most constructive way for financial institutions to understand and invest in technology, especially digital technology?
Steggall: In terms of digitization and technology deployment, one of the most pressing issues facing small FIs is the disjointed manner in which they’ve been innovating. To date, most small FIs have contracted with various third-party fintech vendors to complement their traditional commercial offerings with piecemeal digital tools and services, including remote deposits, remote credit card processing and wealth management dashboards.
While FIs need to rapidly adopt fintech and digitize their service offering to keep pace with consumer demands, digital transformation has largely been happening within a temporary, makeshift model. Though this ‘band-aid’ approach to innovation has bought FIs some time, it hasn’t healed the fundamental problem that’s restraining digitization. Rather, this framework has inadvertently staggered an infinite and vast maze of third-party fintech platforms – all using different forms of connectivity and technology languages. Sometimes, tools are not even directly connected to the banking core. Moreover, the countless agreements require ongoing vendor due diligence, contract reviews and audits. This cumbersome approach to fintech has overwhelmed some FIs with a complex labyrinth, deepening the innovation gap for regional banks and credit unions, in particular.
Small FIs must break free of this constrictive fintech investment model and focus on centralizing the digital ecosystem so they can become more malleable, agile, and nimble in responding to surging digital demands. Rather than let the labyrinth get more twisted, a fintech banking core can serve to connect core banking functions with digital technology. In the long term, an effective fintech core will help FIs better scale and maximize the investments they make in technology.
What role does Urban FT play in helping banks and other businesses close the technology gap?
Steggall: At Urban FT, our mission is succinct but powerful: “Dream Big, Deliver Exceptional.” We’re focused on empowering FIs – especially local and regional banks and credit unions – to better scale continuous innovation so they can gain a competitive advantage and protect their market share from the likes of big tech. We see ourselves as the bridge between FIs and fintech innovation.
As an example of our commitment to help close the technology gap, our X-35 FinTech Core is an API-first, developer-friendly and cloud-based technology hub that operates alongside and in tandem with an FI’s banking core or payment processor. Essentially, it consolidates any existing tools and all fintech solutions an FI wants to deploy. By placing all solutions within one centralized platform, the full digital ecosystem becomes accessible as part of a singular vendor relationship that’s governed by one contractual relationship. X-35 has been designed to enable FIs of any size to rapidly and continuously launch to market truly innovative products. And now they can do this without the prohibitive expenses they were previously faced with.
Urban FT helps advance innovation once thought of as impossible for small FIs, providing both the foundation and the plumbing so that our clients can deliver tomorrow’s fintech innovations today.
Are there factors that tend to make a given company’s digitization initiative more likely to succeed than not? Do the success stories have a similar theme?
Steggall: While digital transformation certainly needs to be a priority for FIs of all sizes, innovation for the sake of innovating is not the answer. In today’s fast-paced marketplace, consumers are signaling desires for more human touchpoints and sometimes this touch can get lost in the midst of technology adoption – especially when resources are limited.
To create long-term value, small FIs should continue their humanized, high-touch approach to banking. This means deeply understanding the most pressing pain points their customers and potential customers are facing. Being a problem-solver will help FIs reach broader audiences, attract more customers, launch more services and clear more transactions. For example, at least 6% of the population – over 14.1 million adults – are unbanked in the United States. By exploring how to serve the unbanked and underbanked, FIs can tap into new segments of their communities and connect them with tailored services that improve their financial health.
In particular, a successful digital transformation requires an FI to think carefully about how two very different operating models – one current and one future state – should be integrated and operate in tandem under the same roof. Broadly speaking, there are three models for this integration: full integration, a digital center of excellence, and a separate digital department. For most small FIs, a fully integrated model is not scalable whereas a separate digital department does not engage enough of the organization. We see the most success when the digital center of excellence is set up, building a bridge to fintech innovation.
Finovate alums enjoyed their biggest Q2 fundraising to date. A total of 14 alums from both our Finovate and FinDEVr conferences raised in excess of $2.8 billion in equity funding over the course of April, May, and June of this year.
For those who wondered if the second quarter of 2021 would represent a continuation of the strong performance Finovate alums recorded in Q1 of 2021, the answer is an unqualified “yes.” In fact, Q2 2021 funding not only exceeded all previous second quarter tallies; the sum also rivaled all previous first quarter alumni funding totals, as well.
Previous quarterly comparisons
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
Q2 2016: More than $510 million raised by 23 alums
Most of the funding in the second quarter came in the month of June, both in terms of the amounts raised and the number of alums involved. Modest second quarters are no surprise, and this year’s slow April – with only a pair of alums announcing funding – is reminiscent of last year’s slow May in which only three alums announced funding.
Top Equity Investments for Q2 2021
NuBank: $750 million
Plaid: $425 million
Trulioo: $394 million
Klarna: $369 million
Scalable Capital: $180 million
Paysend: $125 million
SmartAsset: $110 million
TipRanks: $77 million
Arkose Labs: $70 million
Credit Sesame: $51 million
Four big fundraisings dominated the second quarter for Finovate alums. NuBank’s $750 million was the clear standout, but impressive sums were raised by three other alums – Klarna, Plaid, and Trulioo – in Q2 also. Altogether, the top ten equity investments for Finovate alums in the second quarter represented $2.55 billion or more than 91% of the total raised by alums in Q2 2021.
Here is our detailed alum funding report for Q2 2021.
If you are a Finovate alum that raised money in the second quarter of 2021 and do not see your company listed, please drop us a note at research@finovate.com. We would love to share the good news! Funding received prior to becoming an alum not included.
Upcoming webinar Title: Keep your friends close and your data closer: How fintech teams grow engagement and digital outcomes Date: Tuesday, July 27, 2021 Time: 2:00 PM Singapore Time Duration: 1 hour
We have moved into a new, digital era in finance and banking. For those businesses that have not pivoted and evolved with the times, it will be an uphill struggle to keep customers happy and engaged. For those businesses that embraced new digital strategies, and upgraded their marketing tech stack, now is the time to reap the rewards of increased growth and customer loyalty. And for those businesses that are somewhere in the middle, it’s becoming ever more important to be bold and experimental when testing and engaging your customers with new services and features. Your business’s future depends on it.
The art of balancing and blending product analytics and customer engagement, and why you need both in your strategy
Managing disparate data and leveraging data to inform an event-driven martech strategy
Going beyond understanding your customer, and the power of behavioural analytics
Future-proofing your finserv brand, and responding to changes in customer demands and tech trends
Featuring Alka Gupta, Director of Data & People, BukaWarung; Chye Yien, Senior Strategic Business Consultant, Braze; Julio Bermúdez, VP APAC & LATAM, Amplitude; and Alex Bird, Product Manager, Openpay. Moderated by David Penn, Research Analyst, Finovate.
There may be few businesses more excited about the prospect of a post-COVID era than those in the travel industry – which makes the news of a collaboration between U.K.-based Fly Now Pay Later and BaaS provider Cross River Bank all the more musical to homebound ears. The partnership will enable Fly Now Pay Later to leverage Cross River Bank’s FDIC license to offer its travel financing solution in the United States. The company’s financing solution, available at checkout as well as via the Fly Now Pay Later’s Anywhere app, will enable U.S. travelers to book trips and spread the cost of travel over time.
“The recovery of travel is likely to be gradual, but when it happens, we hope that by giving people the freedom to book a trip and pay at a pace that works for them, will help spur reservations,” Fly Now Pay Later CEO Jasper Dykes said in May during the company’s recent funding announcement. “There are tens of thousands of people who have families around the world who need a frictionless way to finance their flights. By removing financial boundaries, we hope to open the post-COVID-19 world for travelers and reconnect people with their friends and families around the globe.”
For Cross River Bank, the partnership announcement with Fly Now Pay Later comes only a few weeks after the company completed its acquisition of data and analytics firm PeerIQ. In addition to supporting Cross River’s mission to provide greater access to financial services and enable greater financial inclusion, the acquisition will enable Cross River to expand its offerings to include end-to-end SaaS solutions, advanced portfolio analytics, as well as further data aggregation capability and risk management tools. In June, Cross River Bank also unveiled Cross River Digital Ventures, a venture capital division that will invest in companies innovating in lending, payments, investing, and fintech that offer “strategic value” to both Cross River and the technology industry more broadly.
“By providing strategic support to early-stage companies we can build on the Cross River momentum to fuel and strengthen the next wave of fintech innovation,” Cross River Head of Corporate Development Hillel Olivestone said. “These are promising startups that align with Cross River’s mission and values, and we look forward to working with them to grow and expand the fintech ecosystem.”
