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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
After the world went digital last year, the digital identity crisis began taking on new life. Most fintech players are involved in digital identity in some way, and Experian is no exception.
We recently spoke with Eric Haller, Experian’s Executive Vice President and General Manager of Identity, Fraud & DataLabs, to get an idea of how digital identity is changing.
In the interview below, Haller offers his expert opinion and shares how enabling technologies such as AI and the blockchain are impacting how firms think about digital identity.
Digital identity has been on the radar of financial services firms since the dawn of online services. How has this past year of digital acceleration changed how firms approach digital identity?
Eric Haller: The pandemic has shifted segments of the population to the web that weren’t as engaged online as they were prior to the pandemic. For this segment, shopping “face to face” felt safer in many ways. But with a biological threat surfacing, the risks of shopping in the physical world traded places for online risks. All of a sudden, online services seemed much safer.
This plays out in our research where we saw a 20% increase in online shopping this past year with 43% of consumers believing they will even increase their online activity over the next year. And with this shift, 55% of consumers say security is their top priority in a digital experience.
Tell us about the role that AI plays in enhancing digital identity verification for banks.
Haller: To validate someone’s digital identity, literally hundreds of data elements are evaluated to assess whether an individual is a bot, an imposter or the person they claim to be. And all this data is collected, analyzed, and acted on in milliseconds. AI allows for these complicated links and behaviors to be tied together in a variety of ways quickly, efficiently, and accurately to assign the correct conclusion to each customer.
If everything goes well for a legitimate customer, the experience is smooth sailing and both the consumer and merchant conduct “fraud free” business. Most often, there is no fraud. It only happens a very small percentage of the time. But it’s important that if it is a bot or an imposter, that the models in place are precise.
The blockchain seems like a valuable enabling technology when it comes to proving identity. Is this an idea you’ve seen gain popularity? Or is it more of just a fad?
Haller: The portability of a trusted identity in a digital ecosystem integrated with a blockchain could serve a lot of value for consumers and businesses. But it requires quite a bit of effort to get both those that want to share their identity and those willing to invest in accepting it participating in it.
If there were a lot of businesses that would accept a particular blockchain based ID, consumers would put in the effort to have on and use it. If there were a lot of consumers with it, businesses would put in the effort to invest and accept it.
Which side grows with scale first? There are many chasing this ideal. I wouldn’t characterize it as a fad — just very ambitious and challenging to achieve.
While Finovate is all about demoing the newest fintech, we’re also into discussing it.
At this year’s FinovateSpring conference, which will be held digitally on May 10 through May 13 in Central Standard Time, we’re hosting hours of discussions on the hottest topics in banking and fintech. Thinking of joining us? There’s still time to buy your ticket before the price increases on April 20.
Here’s a highlight of some of the topics you can expect:
Neobanks vs Traditional Banks
A look at who has the advantage and how neobanks will find a path to profitability
Embedded Finance & Banking As A Service: A Game-Changing Opportunity For Incumbents?
A discussion of how banks can leverage open finance
Fintech, ESG & Climate Change: How Financial Services Companies Can Play A Key Role Helping Clients On Their ESG & Climate Change Journeys
A look into how banks should act on the explosive ESG trend as it transcends investing into everyday finances
The ABC Of CBDCs: Why Central Bank Digital Currency Initiatives Are A Gamechanger
CBDC initiatives are moving fast. Here’s what you need to know.
Buy Now Pay Later: A Great Product For Customers Or A Debt Trap?
Experts debate the pros and cons of buy now, pay later schemes.
Seven in Seven
7 Expert Speakers Have Just 7 Minutes to Tackle Critical Issues Facing Financial Institutions & Fintechs.
Analyst All Stars
Alyson Clarke, Principal Analyst at Forrester; Daniel Latimore, Chief Research Officer at Celent; and Jacob Jegher, President of Javelin Strategy & Research discuss the top trends in fintech and banking.
Want to see more? Check out the full agenda on the FinovateSpring event page.
Demoing companies showcasing new and innovative technology are at the heart of Finovate events. We caught up with FinovateEurope 2021 demoer Erez Zohar, CEO & Co-Founder of Obsecure, about the company’s beginnings and the adaptations and takeaways from launching during a pandemic.
Tell us about Obsecure, when was the company founded and what problem was the company founded to solve?
ErezZohar: Obsecure was founded in January of 2020 with a mission to provide next generation identity trust biometric solutions for assuring the highest level of trust at time of digital onboarding and high risk transactions.
What in your background gave you the confidence to tackle this challenge?
Zohar: I spent the last 20 years helping financial service organizations fight financial crime and fraud. One of my key observations was that the industry spends so much effort to spot bad actors and suspicious activities but as a result good customers are being treated as suspects as well. A lot of authentic account opening applications are being declined or abandoned because of complex verification steps. Transaction limits and various authentication challenges are being imposed on good customers. This results in frustrated customers who are likely to abandon a digital onboarding process or switch to a different financial institution, especially in such a competitive market.
So I decided to develop products that focus on the good customers vs. the bad actors, increase identity trust and remove friction.
Who are your primary customers and how do you attract them?
Zohar: Our technology is applicable to any digital service. However, our primary market focus at the moment is within financial services and payments / ecommerce. The value proposition is simple. We help you accept more customers which means growing your business. We further help you take on riskier business and keep your customers happy – all while protecting you from bad actors.
Tell us a little bit about the technology behind your solution.
Zohar: Our core technology uses privacy-preserving face biometrics with state-of-the-art biometrics matching and liveness detection. We use this core technology plus other very unique techniques to develop innovative solutions that are different than anything else in the market today. Our two main solutions are:
CyberPrint™ – a biometrics identity verification solution that corroborates identities against their online visual persona. This solution can augment and in some scenarios replace document verification. The goal is to increase trust at time of onboarding and accept customers that otherwise would be rejected. We came up with an innovative approach that both increases trust but also maintains customer privacy which is key to everything we do
AuthenticAction™ – a notary-grade digital action signing solution that signs any digital transaction with the biometrics of the customer, ensuring that no one but the true customer can initiate the transaction. Very powerful for high risk transactions such as large wire or alcohol purchase. The innovation here is about using continuous biometrics authentication and combining identity with action into a single channel.
How did COVID-19 impact your company and its customers? What were some of the big adaptations you had to make? What are your biggest takeaways from the experience?
Zohar: COVID-19 hit not long after we started our journey and we were initially concerned. However, the accelerated shift to digital turned out to be a great driver for solutions like ours. This is also when we decided to expand our offering beyond high risk transactions to remote digital onboarding which is so critical today.
My key takeaway from this experience is to always be thoughtful about how to mitigate risks and at the same time seize opportunities which are presented when the market changes.
What can we expect from Obsecure in the months to come?
Zohar: Our products are innovative and unique in their nature and as such are adopted by innovative and nimble organizations first. Our focus in the next few months is on helping our customers and design partners gain the most value from our solutions and make the necessary enhancements. In parallel we plan to expand our customer base in both the financial services and payment / ecommerce markets. And of course, our roadmap is full of new and innovative ideas which we plan to add to our products.
Small business financial services platform Hatch unveiled its funding total today. The California-based company has pulled in $20 million in two funding rounds since it was founded in 2018.
The first investment, a Seed round that closed in January 2019, totaled $5 million. The company’s Series A round closed in February of last year, totaling $14 million.
Hatch’s investors include Kleiner Perkins, Foundation Capital, and SVB.
Hatch offers small businesses a line of credit and a business checking account which it launched this January. The checking accounts come with a Mastercard debit card and allow Hatch’s 4,000 business users to send money through ACH, billpay, or via digital checks from the Hatch dashboard. Additional features include overdraft protection and cashback rewards.
Because Hatch uses machine learning to complete KYC, KYB, and OFAC compliance checks, businesses can get approved for a checking account in under five minutes. Accounts cost $10 per month and feature a transparent fee structure.
Founded by Thomson Nguyen, Hatch has a team of 48 people, 40 of which were brought on in the past year during the pandemic.
Mortgagetech innovator Better.com recently landed a $500 million investment from Japan-based Softbank, bringing the company’s total funding to over $900 million.
According to the Wall Street Journal, which broke the news, Softbank is buying shares from existing Better investors, a list which includes Goldman Sachs, Citigroup, and Kleiner Perkins.
With the new round, experts estimate Better’s valuation to be around $6 billion. This is a significant jump from the company’s most recent valuation, which sat at around $4 billion after Better closed a funding round in November of last year.
Better was founded with the goal of reengineering the mortgage process. The company streamlines mortgage originations by taking the entire process online. Better also offers Better Real Estate, which matches buyers with real estate agents; Better Settlement Services, which offers title insurance; and Better Cover, a home insurance marketplace.
The new investment comes at a time of significant growth for Better. Inspired by low interest rates, more consumers have been refinancing their properties. The Wall Street Journal reports that because of this increase in demand, Better lent out $25 billion in loans in 2020 and has extended $14 billion in loans the first quarter of this year.
Better saw $800 million in revenue last year and is expected to go public by the end of 2021. Founded in 2014, the company is headquartered in New York City. Vishal Garg is CEO.
Mobile banking platform MoneyLion announced a move into the crypto realm today. The New York-based company will soon unveil tools that enable members to buy, sell, and earn digital currencies.
The new offering is expected to launch this fall.
Facilitating the new cryptocurrency capabilities is a strategic investment that MoneyLion has made in digital asset settlement provider Zero Hash. Founded in 2015, Zero Hash provides a turnkey solution that allows platforms to integrate a range of digital asset capabilities into their own user experiences.
The new cryptocurrency tools will enable users to buy and sell Bitcoin and Ethereum and earn cryptocurrencies via a rewards program and a spending roundup tool that will round up debit card purchases to the nearest dollar, investing the spare change in cryptocurrencies.
“We’re seeing exploding interest in the utility and investment potential of digital currencies, but one of the top reasons our members say they haven’t yet acquired cryptocurrencies is because they lack knowledge of the asset class,” said MoneyLion co-founder and CEO Dee Choubey. “The MoneyLion crypto offering will provide members an intuitive way to own digital currencies within a seamless and secure environment and, through our strategic investment in Zero Hash, we’re confident that we’re advancing our mission to increase access to previously exclusive financial services.”
This news comes at a time when user interest in cyrptocurrency is at an all-time high. According to a recent survey, 27% of Americans are planning to invest in cryptocurrency this year. Among MoneyLion users, almost 60% are already investing in cryptocurrencies.
Founded in 2013, MoneyLion recently announced its planned public debut after agreeing to merge with special purpose acquisition company Fusion Acquisition Corp. The deal is expected to close in the first half of this year.
The fintech industry in Latin America is among the world’s most vibrant. From the initiatives in Mexico to provide a legal framework that will enable local fintechs to flourish, to the innovations in central bank digital currencies in the Caribbean, to the rising fintech giants like Nubank in Brazil, financial technology is making a major difference in the lives of a growing number of Latin Americans.
For this week’s Finovate Global: Voices, we caught up with Ximena Aleman, co-founder and Chief Business Development Officer of Prometeo, to discuss fintech in Latin America and the power of open banking to improve financial wellness and create opportunity in the region.
Please tell us a little about Prometeo and what drove you to co-launch the company.
Ximena Aleman: Prometeo is a fintech company striving to create an open and connected financial market in Latin America (LATAM). We are building a huge highway of financial information across financial institutions and countries in LATAM. Prometeo is the largest Open Banking API platform in the region disrupting the financial sector in México, Colombia, Brazil, and six more countries. We provide a single point of access to information, transactions, and payments across more than 30 financial institutions and 45 APIs in nine countries of LATAM.
As LATAM entrepreneurs, we are well aware of the tech gap in the financial sector between underdeveloped and developed countries. In particular, the lack of adequate tech infrastructure. So we decided to approach this as an opportunity to build not only a great solution but also a path towards financial access for the region.
What are the drivers of open banking in Latin America?
Aleman: Open Banking is a disruptive innovation that reframes the way banking is carried out. Transactions and communications between customers and institutions are going from taking place behind closed doors to transparent exchanges in the public square. It is no wonder that traditional financial institutions initially viewed the practice with a measure of bemusement or even suspicion.
However, there has been a marked shift in their thinking. Adoption has been slower in Latin America than in other parts of the world, but most of the open banking biggest names in the region have headquarters abroad. Open banking has been a hot topic globally; Latin American associates have taken note and ushered in the conversation.
Another factor that has changed the playbook is the COVID-19 pandemic. The restrictions on daily life and public interactions have forced even the most hard-rooted, traditional financial institutions to review their digital transformation strategies. If customers can’t visit branches, digital channels become the sole venue of exchange.
What do you think it will take to get more women in leadership and founding roles in fintech?
Aleman: I think that as we move forward to a more “gender-balanced” society we have to rethink our financial exchanges from a gender perspective, too. There’s little offered in the financial sector for women and little by little some female fintech entrepreneurs are developing solutions for this segment (for instance, Emma Sanchez’s neobank for women, Jefa). If the startup ecosystem understands that half of the world’s population has been historically financially underserved, and the huge opportunity this is, it won’t take long for women to start developing custom-made products for that segment.
You have said two of the biggest challenges to diversity in fintech are funding and technical training. What can and should be done about this?
Aleman: The gap between VC investments in startups led by women is significant versus those led by men. In the last 10 years, fintech companies led by women have raised 1% of the total investment in fintech. The disparity is really significant.
I believe this gap is multifactorial: historically, the financial and the technology worlds were dominated by men. Also, among VC funds, women in the decision-making process are just a few in number and, per my own experience, men really value having another man as their counterpart.
There’s a lot we can all do: all the stakeholders involved in the fintech sector should make their own changes and push to close the gap. As women, we have to create our support network on every front, talk to mentors, female start-up groups, and above all, be confident and trust your knowledge, your experience, and your ability to navigate through hostile environments. If you feel you are not strong enough in certain areas, seek training. Technical training and really knowing your business is key to build confidence and close this gap.
One of the biggest reasons why women receive less VC investment than men is that so few of them make up decision-makers in VC funds.
How has the pandemic impacted the work you do and the communities you serve?
Aleman: Open Banking has seen a rise in LATAM in the past year, so our business vertical – as everything related to digital transformation in the financial sector – has been benefited by how the pandemic reshaped human interactions. However, no one in LATAM can be a stranger to the economic challenges we are facing today and ahead. There have been huge increases in unemployment, debt, etc. In Uruguay, a year after the pandemic, surfing what might be the country’s second wave of COVID-19 cases, early in the morning in the small towns in the countryside, you will bump into people waiting in line just in one shop, in the local microfinance branch, to ask for credit or pay their debt.
There are many who do not know much about Uruguay. What do you think more people should know about the country?
Aleman: Of course. I’m very proud of my country. We are a small country down in South America, between Argentina and Brazil. We are popular for the quality of our meat and football players, but as noticeable as that is, we are a growing tech hub, in particular for financial services. Uruguay has a long history of providing high-tech software to the financial sector, for instance, we host four banking core software companies (Infocorp, Topsystems, Bantotal, and Mantentia – that was recently bought by Technisys). Most recently, we joined the fintech wave with great B2B solutions like Bankingly or our first local unicorn, dLocal. I think it is worth mentioning the government’s efforts to promote entrepreneurship through the Innovation Agency (ANII) and Development Agency (ANDE). We are well aware that Prometeo was possible thanks to their support and as a startup, we are a result of the whole ecosystem pushing us to grow.
What can we expect from Prometeo over the balance of 2021?
Aleman: We are pushing hard for Open Banking adoption in Brazil, México, and Colombia. For those countries, it’s a challenging shift so we want to provide the best possible solution. That’s why we are releasing a payment feature that allows automated payments across banks in those countries. At the same time, we are on a mission to provide full coverage across LATAM. So this year it’s all about expansion, coding, and growth!
Learn more about fintech in Latin America and the work of Prometeo.
Open banking platform TrueLayer recently landed $70 million in Series D funding.
The investment, which brings the London-based company’s total funding to $142 million, was led by Addition, with contributions from all major existing investors, as well as new investors including Visionaries Club, Surojit Chatterjee, Zack Kanter, Daniel Graf, and David Avgi.
TrueLayer’s mission is to open up finance with its open banking network that connects payments, data, and identity to help people spend, save, and transact more freely online.
The funding comes at a time of major growth in the open banking scene in the U.K. The nation has seen more than three million open banking users and if the growth curve continues, 60% of the U.K.’s population will be using open banking by the end of 2023.
Founded in 2016, TrueLayer now processes more than half of the open banking volume in the U.K., Ireland, and Spain. Much of this growth has come over the course of the past year during which time the company has grown by 600x and expanded across 12 markets.
As for what’s next, TrueLayer will launch new open banking capabilities this year. The company will also expand its network, which will in turn add more account connectivity for consumers.
“We believe that open banking is reaching maturity in several markets and the next phase is about solving bigger, more complex problems for our customers – layering value on top of the raw infrastructure,” said TrueLayer CEO and Co-Founder Francesco Simoneschi. “You’ll see us building more and more in this direction.”
TrueLayer’s clients number in the hundreds and include fintechs such as Revolut, Nutmeg, Trading 212, Stake, and Payoneer.
Here’s an idea: a corporate card that incentivizes spending less rather than rewarding you for spending more.
Ramp, a New York-based fintech launched by Eric Glyman, Gene Lee, and Karim Atiyeh, has raised $115 million in Series B funding to power this approach to business expense management. Taking Ramp’s total capital to $320 million, the investment gives the company a valuation of $1.6 billion.
“Co-founding a fintech unicorn was never my plan,” Ramp CEO Glyman wrote on the company’s blog in a funding announcement, “and almost feels crazy given my job 12 years ago was selling t-shirts and jeans.”
The round was led by D1 Capital Partners and Stripe. Joining them were Founders Fund, Coatue Management, Thrive Capital, Redpoint, and Box Group. Ramp also announced that it had received a $150 million line of debt financing from Goldman Sachs. “During our next phase of growth,” Glyman added, “we plan to expand our efforts to bring the value of Ramp to more businesses in more places and to transform the way more companies do business.”
Ramp offers a corporate card with unlimited 1.5% cash back on every transaction, 10x to 20x higher limits and no fees, and both smart virtual and physical cards with built-in spend management controls. An integration with Slack makes it easy for managers to get alerts, approve expenses in real-time, and respond to issues from within the business communication platform.
Ramp says that it has identified more than $10,000,000 in annualized savings for 1,000+ customers, with the average Ramp customer saving in excess of $100,000. Companies using Ramp’s spend management platform range from startups to corporations, and include technology innovators in their own right such as Clubhouse and Finovate alum Marqeta. The technology is integrated with popular accounting platforms such as Netsuite, Sage Intacct, Xero, QuickBooks, and more than 100 others.
Onboarding its first company in 2019 and launching publicly one year later, Ramp has experienced 4x growth over the past six months. Glyman said the company is approaching annualized transaction volume of more than $1 billion.
Today brings news that Plaid has secured a massive $425 million investment in a round led by Altimeter Capital. The Series D round also features participation from Silver Lake, Ribbit Capital, and other current investors, and gives the firm a total capital amount of more than $734 million. Now sporting a valuation of $13.4 billion, Plaid said it will use the additional capital to “grow its platform, invest in infrastructure, payments capabilities and global expansion,” according to the company’s U.K. head, Keith Grose.
In a blog post titled “Digital finance is everywhere, but it’s just getting started,” Plaid CEO and co-founder Zach Perret described how, in some ways, the dream that led to the founding of Plaid “nearly a decade ago” is beginning to come true. “We dreamt of a financial system that was built to empower consumers and unlock financial freedom for everyone,” Perret said. “We are humbled to watch as fintech continues to expand and improve the financial lives of billions of people worldwide.”
More specifically, Perret’s post makes it clear that “scale” is the next big objective for the San Francisco, California-based fintech. In order to meet increasing global demand, as well as deliver on the growing expectations of ever-more-digitally-savvy consumers, Plaid will continue to invest in API technology as well as “tools and services to support enhanced privacy, personalization, decisioning, and automation.”
Founded in 2012, Plaid made its Finovate debut two years later at our developers conference, FinDEVr. The company has grown from an API-building technology infrastructure startup to now also offer key insights into the data access it provides via a suite of analytics solutions. Plaid’s technology enables users to access detailed transaction histories, setup direct debits and payouts, verify borrower assets, user identities, and real-time account balances; and make instant, in-app bank payments.
Since inception, Plaid has analyzed more than 10 billion transactions. Use cases for the company’s technology range from personal finance, lending, and wealth management, to consumer payments, banking, and business finance.
Online lending platform Avant is building out the breadth of services for its underbanked clients this week. The Illinois-based company acquired Zero Financial and its neobank Level for an undisclosed amount.
Level is built on the premise of helping users attain financial freedom. To differentiate itself from traditional financial services offerings, the digital bank offers cash back rewards on debit card purchases, a competitive APY on deposits, early access to paychecks, and no hidden fees.
As a result of today’s deal, Avant will be able to offer its 1.5 million customers access to Level’s digital banking services to augment its existing personal loan and credit card products. The additional banking products will also offer Avant access to more customer data which, in the end, will help in its underwriting process.
Avant CEO James Paris describes the move as “an important element” of the company’s strategy that involves providing underbanked consumers with financial products. “Expanding our product portfolio allows us to serve even more people, offering every consumer access to innovative and rewards-based products to simplify and improve their financial journey,” he added. “We’re looking forward to building on this acquisition and continuing to bring new products to our growing customer base.”
Current Level customers will still be able to make purchases, earn rewards, receive direct deposits to their account, and earn interest. While new customers cannot sign up for a Level account, they are able to join the wait list for Avant’s newly-branded banking product.
Avant was founded in 2012 and has since connected customers with more than $7.5 billion in loans and 400,000 credit cards. The company has raised more than $600 million in equity from investors including JP Morgan Chase and Hyde Park Venture Partners.
How does a technology company with a near-50 year pedigree adapt and grow in a world of rapid technological change? How does a company like this meet the challenge of embracing new opportunities while remaining true to its core competencies and values?
“Our core mission has not changed,” Nick Kerigan, Head of Innovation Execution at SWIFT explained in an interview for Finovate TV. “But we are moving from a world of point-to-point messaging to end-to-end transaction orchestration.”
Watch the rest of the conversation to find out how you can collaborate to Innovate with SWIFT.
On the ways SWIFT’s new strategy benefits the payments industry
In payments, we believe we can unlock huge opportunities that help our community strengthen their many existing market segments like core banking, B2B, and cross-border payments. We also think we can open up bold new opportunities for the future around SME and consumer segments. What we’re essentially trying to do is to create instant and frictionless, account-to-account transactions anywhere in the world. The vision is to make international payments as simple and easy as domestic payments.
Obviously that’s a big goal and it won’t be accomplished overnight. But we do think, particularly with our transaction management platform, that it’s fully achievable.
On the key areas of focus in SWIFT’s new innovation agenda
Innovation is not new to SWIFT; we were created to solve a big industry challenge 40 years ago, so that’s at our heart … A few things are high on our mind: one is cloud and simplifying the journey to cloud. All large financial institutions – and smaller ones as well – have important programs around bringing their services into the cloud. Everyone knows the benefits of doing that – and they also know that can be quite a challenging task.
What we’re doing is aiming to ease that journey for our customers. We’ve launched new cloud-based products and we are also making our existing products cloud-ready so when our customers are ready to migrate and move, we are ready for them.
On the collaborative innovation and the importance of partnership
Organizations in the financial community often find it challenging to balance the imperative of innovation with everything else they have to do on their agenda, which are often driven by forces such as regulations and others, that means that they are “must do.” What we say with collaborative innovation is that one way of unlocking that challenge is to work much more together as a community so the burden isn’t on any one bank or institution, but the burden is more shared.
SWIFT is well-placed to help the industry collaborate because we are a neutral, member-owned organization that sits in the middle of this great financial community. We think that by enhancing collaborative innovation and working together we can maybe unlock some of these problems that individually we struggle to solve.
