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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Financial app building platform TrueLayer has long been using the power of open banking to facilitate payment activities. Today, the U.K.-based company is taking another step to make the online payments experience even easier with the launch of a new payments product, PayDirect.
PayDirect combines open banking with Europe’s payment rails to offer a customizable solution for instant payments, instant payouts, and smoother payment reconciliation.
“PayDirect builds on our open banking expertise to streamline onboarding, pay-in and payout, to help operators deliver an experience that is fit for the digital age,” said the company’s Chief Product Officer, Ossama Soliman.
Because PayDirect relies on open banking and Europe’s fast payment rails, the solution circumvents many of the headaches associated with traditional card payments. Cards can expire, require manual entry, and are subject to spending limits. These hurdles generally result in an 85% success rate. PayDirect, in comparison, has a 96% success rate. PayDirect also eliminates chargebacks and reduces fraud by authenticating via biometrics directly with the consumer’s bank.
Here’s how the checkout experience works:
Financial services companies that use PayDirect benefit from a single interface for onboarding users, receiving instant deposits into their account, and providing instant withdrawals. Customers, on the other hand, benefit from low risk of fraud, faster refunds and withdrawals, less false positives during fraud checks, and a faster checkout experience.
Founded in 2016, TrueLayer is best known for its payments API that helps financial services companies provide online payments, bill payments, and account top-ups.
The company has offices in five countries across the globe, including London, Sydney, Milan, Hong Kong and Dublin. Francesco Simoneschi is co-founder and CEO.
Is fintech’s final frontier the last chapter for banks?
A provocative new essay from Andreessen Horowitz General Partner Alex Rampell suggests that the way governments have directly intervened to provide financial support to citizens and businesses during the COVID-19 crisis could point the way to a new banking relationship between “people” and “We, the People” – with fintechs playing a starring role.
Rampell’s theme is disintermediation, which he calls the Internet’s greatest legacy. By enabling individuals to get access to the things they want – products, services, information – without a series of (often) fee-charging and rent-seeking gatekeepers, disintermediation has empowered users and rewarded those institutions that are best able to respond – quicker, safer, more accurately, and more completely – to customer demand.
The spectacle of governments – particularly the U.S. government – attempting to provide COVID-19 relief funding was for Rampell a dramatic example of what can happen when effective gatekeepers are NOT present. Because the U.S. government has few options to provide quick financing to its citizens and their businesses, a host of intermediaries were enlisted to help get relief money from Washington, D.C. to the American communities where it was needed. This, as we have since learned, has been time-consuming. Unfortunately, in some instances, it has also appeared to be wasteful in directing some funds to areas where none were needed and, in instances where support was needed, not distributing available funding, at all.
As Rampell put it: “The reason why things like the Paycheck Protection Program (PPP) have been such a disaster , or that stimulus checks still have to be mailed in 2021, is that there is no ‘direct connection’ between consumers and government for money. The government is the mainframe for money, but there’s not really an Expedia yet.”
And Rampell doesn’t see the point in waiting around for one, either. Instead, he asks why not use what the government already has access to, namely, social security accounts, and treat them like bank accounts?
“With an SSN as a permanent financial account with the government,” he writes, “the government could deposit money directly to consumers, or allow person-to-person transfers, or pay overnight interest on deposits directly.” Rampell imagines not only the ease of paying taxes (or receiving tax refunds) under such a regime, but also how much more efficient a government relief program might be with this SSN 2.0 approach.
Rampell is quick to insist that he is not interested in nationalized banking or what he called “postal banking” (generally, the idea of turning post offices into bank branches). Instead he argues that, in some instances, incumbent financial institutions are playing no more than a filtering role when it comes to facilitating savings in a country. And while this filtering has a role in modern capitalist economies, it is not exclusive and there is a good argument against treating legacy financial institutions as if it is.
“Fintech—’apps for money’—represents the most powerful tool that governments have to make their monetary services available directly to their own citizens,” Rampell writes, “helping accomplish monetary and policy goals and benefiting consumers equally.”
There’s more to Rampell’s discussion – including a key caveat on the role of private capital and risk-taking in such a system. But in a world that is getting increasingly comfortable with government playing an active role in the economy, a disintermediation that brings citizens closer to the government that rules in their name may be an idea whose time has arrived.
This comes after investment firms Apollo Global Management and Hudson Executive Capital initially agreed to buy the ATM operator last month. NCR agreed to a $2.5 billion deal, agreeing to purchase Cardtronics for $39 a share. This beat the bid from Apollo and Hudson, which totaled $2.3 billion at $35 per share. NCR was required to pay a termination fee of $32.6 million.
Cardronics CEO Edward H. West said that the deal is “a testament to the strength and value of Cardtronics, our talented team and customer base, and the complementary nature of our two businesses.”
NCR anticipates that Cardtronics’ Allpoint ATM network will complement its own payments platform and that combined they will connect retail and banking customers.
“This transaction accelerates the NCR-as-a-Service strategy we laid out at Investor Day in December, further shifts NCR’s revenue mix to software, services and recurring revenue, and adds value for our customers,” said NCR President and CEO Michael D. Hayford. “We have had a long-standing relationship with Cardtronics and its outstanding team… Simply put, we are better together.”
The deal, which has been approved by both companies’ Boards of Directors but is still subject to regulatory approvals and closing conditions, is expected to close in mid-2021. Once the deal is finalized, Cardtronics will become a privately held company.
A black-owned, family-focused financial wellness app, Goalsetter, has raised $3.9 million in seed funding. The company said that the new funding will help it boost subscriber growth and enhance the Goalsetter offering, which includes a debit card (Cashola) and a financial literacy curriculum designed specifically for teens and youth.
The round was led by Astia, and featured participation from PNC Bank, Mastercard, US Bank, Northwestern Mutual Future Ventures, Elevate Capital, Portfolia Rising America, and Pipeline Angels, among other investors.
To be fair, “among other investors” is doing quite a bit of work. Goalsetter’s roster of angel investors is impressive, with National Basketball Association stars Kevin Durant, Chris Paul, and Baron Davis – as well as philanthropist Robert F. Smith, among the ranks. Also involved in the funding were actors Sterling K. Brown and Ryan Bathe.
Goalsetter, featured last fall as the Apple App of the Day, includes financial literacy modules that award users money for correctly answering questions on financial education topics (“Learn to Earn”), as well as a feature (“Learn Before You Burn”) that enables parents to freeze their child’s Goalsetter debit card if they have not completed their financial literacy lessons in a timely fashion.
Goalsetter is not only black-owned, it is female-run, as company founder and CEO Tanya Van Court underscored in the firm’s funding announcement. “As the only black-woman owned fintech company focused on the kid’s fintech space, we know how critical early finance education is to all kids in our country, and to black and brown kids in particular,” she said. Van Court emphasized the importance of raising children who are “smart spenders” rather than merely “conspicuous consumers,” and added that learning about financial education, saving, and investing are “the building blocks for achieving generational wealth.”
Founded in 2015 and headquartered in New York City, Goalsetter is partnered with Evolve Bank & Trust, which provides the company’s savings accounts. Goalsetter’s’ Cashola Prepaid Debit Mastercard is issued by MetaBank.
Fintech veteran Bryan Clagett is making moves within Moven this year. Clagett was recently appointed Chief Revenue Officer of Moven after serving as an advisor to the New York-based company for six months.
“Bringing on Bryan was an essential next step in expanding our business maturity as we look to expand our U.S. market presence,” said Moven Founder Brett King. “Having worked on and off with Bryan for 10 years, I’m glad we finally snagged him at a time when our U.S. operations are accelerating rapidly and where COVID has created an extraordinary demand for digital differentiation in the retail digital banking space.”
Clagett’s fintech career started three decades ago, his most notable position being Chief Marketing Officer and Investor at Geezeo, where he served for ten years until the digital banking company was acquired by Jack Henry in 2019. During his tenure, Clagett helped Geezeo grow to more than 550 clients and achieve profitability.
Since his time at Geezeo, Clagett has served as an advisor to Conotext, Blip Labs, Procurity, and StrategyCorps.
“I’m extremely excited to join Moven to lead sales, marketing and partnership strategy as we evolve the company’s growth trajectory. Moven’s client-centric philosophy and emphasis on helping financial services via flexible and innovative, data-driven solutions made this a great fit for me. I’m looking forward to expanding into new markets, strengthening our relationships with our partners, and building the leading GTM function in our space,” said Clagett.
Moven’s appointment of Clagett comes after Moven made a major pivot in March of last year, dropping its B2C offering to focus on its enterprise arm that serves financial institutions. The new B2B approach has been flourishing in recent months, as banking-as-a-service tools have been gaining traction thanks to firms’ heightened focus on their digital presence.
With 2021 underway, fintech analysts and observers have begun sharing their lists of companies they expect to do big things in the coming year. This week, Finovate Global Lists shares two compilations of fintech startups from India and Africa that are raising millions in capital and bringing a variety of digital financial services to underserved consumers and businesses.
In India, these innovators range from online payments and banking technology company Cashfree to crypto trading platform CoinDCX (which we profiled in Finovate Global last spring). Inc42’s Suprita Anupam notes that the global health crisis of COVID-19 served “as a booster” for India’s fintech sector, citing year-on-year growth in transaction volumes of 70%.
Looking at fintech in sub-Saharan Africa, TechCabal’s Alexander Onukwue leverages Disrupt Africa’s 2020 tech startups funding report to highlight emerging African fintechs. Fara Jituboh-Ashiru’s Okra, which enables bank accountholders to link their accounts with lending and banking apps, and P2P mobile payments company Chipper Cash, were among the companies highlighted in Onukwue’s survey.
Javier García
This week our Finovate Global Voices feature comes to us courtesy of Nathan Lustig, entrepreneur, investor, and managing partner at Magma Partners. Launched in 2014 and headquartered in Santiago, Chile, Magma Partners is an early stage investment company that specializes in Latin American startups innovating in fintech, insurtech, and infrastructure.
Among the firm’s portfolio companies are Billpocket, the “Square of Latin America”; Albo, a mobile banking service for the unbanked; and an Ecuadorian/Colombian fintech, Kushki, based in U.S. that seeks to be the “Stripe of Latin America.”
Lustig is also a podcaster, and in his most recent Crossing Borders Podcast, he talks with Javier García, Director of Corporate Venturing and Growth Capital at the corporate VC fund of Mexican conglomerate FEMSA.
The two discuss the work of FEMSA’s fund in Latin America, including the firm’s investment strategy, recommendations for fintechs working with incumbents, and lessons García has learned in working with startups.
Here is our look at fintech innovation around the world.
I came across Dan Kimerling while chasing down the latest investment insights from Cathie Wood, whose ARK investment funds have been among the most sought-after, best-performing funds for the past few years. Dedicated explicitly to the most disruptive companies in the most disruptive sectors of the economy, Wood’s ARK funds are an interesting place to look when trying to learn about those companies that could become the next Amazon, or the next Tesla.
One of the people ARK’s analysts have turned for insight into disruption in the fintech industry specifically is Dan Kimerling, co-founder and Managing Partner of Deciens Capital. As Kimerling explained in an interview from last fall, he realized early in his career that there were “incredible” venture capital funds involved in fintech and “incredible” venture capitalists involved in seed funding, but “there’s nothing at that intersection of fintech early stage capital.”
He added, “… and where there is capital, it rarely will lead financings. A lot of them will be follow-on financings or if they are angels or smaller managers, they are not in a position to lead rounds.” He said that if Deciens stood for one thing, it’s leading seed rounds in fintech companies in the United States.
What has Kimerling’s attention as we move into 2021? As someone who saw back in 2012 that open APIs were the future of banking, Kimerling now underscores three factors that will drive fintech evolution in the coming years. These include what he calls “the scope of the prize” – fintech’s massive opportunity as 20% of GDP – as well as the rise of embedded finance which will enable more companies to participate and compete in financial services, driving competition and innovation.
Perhaps most interesting is the one factor Kimerling called “the most exciting”: the development of a cultural “context where smart ambitious professionals, especially early career professionals, feel like working on innovative businesses is a socially acceptable career trajectory.”
Check out his conversation with ARK Invest’s Max Friedrich and George Whitridge (currently of Graham Capital Management) from October 2020.
Launched in 2012, Deciens Capital supports early-stage companies in a wide range of fintech areas including payments, lending, insurance, regtech, and financial wellness. Among the firm’s portfolio companies are Chipper Cash – which raised more than $44 million in funding last year – Funding University, and Finovate alum True Link Financial.
Banking technology innovator Plaid is kicking off Black History Month ahead of schedule this year. The San Francisco-based company announced the launch of FinRise today. FinRise is a nine month accelerator program designed to support early-stage founders who are Black, Indigenous, or People of Color (BIPOC).
“While technology has come a long way to level the playing field, the reality is that many minority-owned businesses are still frequently denied access to some of the most basic resources needed to start and grow their businesses,” the company said in a blog post.
The program, which was developed during an internal hackathon, offers three key areas of support:
Access to capital and services Plaid is leveraging its network of venture capital firms, network service providers, and accelerators to offer startups networking opportunities, discounted services and ad credits, and pitch practice.
Resources for growth The program will kick off with a three-day virtual bootcamp led by Plaid experts and other thought leaders who will lead workshops on technical, product, and business topics. The sessions will focus on topics like communication and storytelling, engineering best practices, navigating the policy and regulatory landscapes, and designing user-centric experiences.
Mentorship and support Participants will receive support for nine months following the bootcamp. In addition to benefitting from others in the bootcamp cohort, startups will have access to a dedicated account manager, an internal skillshare network, and mentorship from Plaid leaders.
The FinRise program certainly fills a gap. Historically, much of the attention on diversity has been focused on driving more women into the fintech sector. With Black History Month starting in February and the Black Lives Matter Movement still fresh in everyone’s mind, we can expect to see more initiatives dedicated to solving the gap in ethnic diversity in fintech and the technology field in general.
The first FinRise program will take place from April to December, 2021.
Eligible startups are U.S.-based, BIPOC majority-owned businesses incorporated in the United States with two or more employees. A panel of Plaid leaders will select the participants, giving preference to those that offer a product that leverages financial data.
Founders can apply starting today and the first cohort will be announced in early March.
As part of our ongoing #WomeninFinTech series, we spoke with Kathy Strasser, Chief Operating Officer/Chief Information Officer at IncredibleBank about her experiences in and thoughts on the fintech industry today.
To start, please tell us a little about yourself and how you became involved in banking and fintech?
Strasser: After a 20-year career at Wausau Financial Systems (WFS) in various roles throughout the organization, I was approached by IncredibleBank’s CEO Todd Nagel (then River Valley Bank). He wanted a non-banker with a technology background to help him launch the internet-only division of River Valley Bank, IncredibleBank, into a leading digital bank reaching customers across the entire United States.
I never imagined myself working for a bank until 2015 when I joined as the EVP and Chief Operations Officer. Over the next few years, I’d play a key role in accelerating the growth of the bank and its digital transformation on both the technology and people side of our business.
While technology and payments are strong interests of mine, I’m most passionate about leading people, which is what IncredibleBank allows me to do. In my current position, I’m responsible for helping people find their motivation and providing them with purpose and the autonomy to be brilliant at what they do. By nature, I’m a problem solver, change guru, and love everything happening with digital transformation.
How have you seen the financial services industry change in 2020, and where is it headed in 2021?
Strasser: The work we’ve done over the past five years prepared us for this shift to digital technology. Our people were ready to meet the needs of our customers in a remote environment. We leaned on the expertise of employees from all parts of the organization for the PPP program, in addition to helping 1,000+ homeowners buy new or refinance their homes. We launched Zelle in September, made digital improvements to our customer experience, implemented new technology to help facilitate the PPP program, plus we became the first community bank to go live on TCH RTP in March.
We know that the momentum we have seen with digital is only going to continue and competition will shift as BigTech continues to make its foray into financial services. There are a few areas that are always top of mind for us: digital transformation and growth, continuing to master our incredible customer experience, talent management, employee engagement, and continuous growth in our business lines.
How can community banks make sure they’re not being left behind, especially when it comes to embracing new digital technology?
Strasser: Companies like Apple, Amazon, PayPal, and Starbucks are already in the payments space, which is traditionally a medium for banks to grow and retain deposit accounts as well as build customer relationships. We’ve remained competitive by prioritizing the customer experience and partnering with companies like Jack Henry to deliver new and innovative technology. Community banks need to stay at pace with this broader competitive market and having a differentiated customer experience that is both personal and meaningful is a strong start.
What does digital transformation entail within your institution?
Strasser: Digital transformation is about technology and people. Our people come first in our digital strategy and transformation, which is why culture must be approached with a growth mindset.
We start by mapping out our digital competencies and identifying areas of focus that will move the needle on customer experience. Some of these included the ability to confidently move between different devices and building relationships via digital channels. Our key values for our digital culture are speed, openness, and autonomy. Technology had to improve processes, productivity, and customer experience, delivering direct value to our institution and customers.
How can women help other women climb within the industry, and do you have any advice for those starting out their careers in technology or finance?
Strasser: The future is bright, and I highly recommend technology and finance for everyone, especially women. Women in the field can be a good example and share their experiences; I’m always willing to mentor, meet with young people getting ready to go to college, or those figuring out the next step in their career.
I’d give the following advice: 1) Focus on your role and how it contributes to the success of your company; 2) Seize new opportunities and don’t be afraid to ask; 3) Learn every single day; 4) Build relationships and your network; 6) Find guidance from someone greater.
What are fintechs and banks missing right now that women are uniquely positioned to help with?
Strasser: With diversity comes a background of many different experiences and approaches to problem-solving, disagreements, negotiations, leadership style, and approach. Dynamics and conversations change when the table is filled with both men and women and as a result collaboration and innovation happen. For example, knowing a large percentage of women make household decisions is important when creating and seeking feedback on new products and features. For any growing company, it’s important to have a diversified pool of candidates to choose from, and that includes women.
We’ve now reached the point in the Buy Now Pay Later revolution in which BNPL companies are investing in other BNPL companies. Today we learn that Zip, a Buy Now Pay Later firm based in Australia, has joined Elevator Ventures in leading a $19.5 million (€16 million) funding round for Twisto, a buy now pay later company based in the Czech Republic.
“We want to teach people to take advantage of payment tools the right way,” company CEO Michal Smida said, “to help them improve their family budgets and better manage their cash flow, especially during the time of COVID.”
Also participating in the funding were Finch Capital, Velocity Capital, ING Bank, and UNIQA, an insurance corporation based in Austria. Twisto’s total capital now stands at more than $61 million (EUR 50.5 million). The company will use the additional capital to help fuel further expansion across Europe. “(The funding) is a huge step that helps us continue in our mission to become a leading app in CEE region,” the company wrote on its LinkedIn page this week.
Twisto, which made its most recent Finovate appearance at our European conference in 2018, is a pioneer in the Buy Now Pay Later market in Central and Eastern Europe. Approximately 170,000 consumers have used Twisto’s app, leveraging the company’s risk-scoring engine to access deferred financing options on goods purchased online. Twisto offers consumers an interest-free, three-installment payment option, and also provides paid, premium plans that include features like Split the Bill, Twist Card with Google Pay, and Family Travel Insurance.
Smida believes that Twisto can play a role in changing attitudes toward credit in Europe, and encourage more Europeans to pursue better financing alternatives. Late last year, Twisto teamed up with ING Bank Śląski to invest $4.5 million (PLN 17 million) to develop Twisto Poland, and extend the company’s operations in the CEE. Twisto was founded in 2013.
There’s not much room in 2021 for 2020-style pessimism. Sure, if you look, you can find plenty of things to be negative about so far this year. However, one aspect of 2021 that’s giving fintechs hope is the recent uptick in valuations across the fintech sector.
Despite last year’s global events, many fintechs received valuations exceeding $1 billion. In fact, in December 2020 alone, four fintechs, including eToro, Creditas, PhonePE, and GoCardless, received unicorn status.
This year seems to be off to a similarly bullish start, with four fintechs becoming unicorns in just the first three weeks of 2021:
Digit Insurance
India-based Digit Insurance became India’s first unicorn of 2021 after the country saw 11 new unicorns in 2020. Just 15 days into the new year, and after raising $18.5 million, Digit Insurance unveiled a new valuation of $1.9 billion.
Divvy
Spend management startup Divvy received a valuation of $1.6 billion after its Series D round on January 5. The $165 million came from new investors PayPal Ventures, Whale Rock, Schonfeld, and previous backers NEA, Insight Venture Partners, Acrew, and Pelion. The pandemic has spurred increased traffic to Utah-based Divvy; the startup has experienced a 500% increase in monthly sign-ups since March 2020.
Mambu
SaaS banking platform Mambuearned its unicorn title after landing a $135 million investment on January 7. The boost gave the Germany-based company a post-money valuation of just over $2 billion. Mambu will use the funds to increase its presence in Brazil, Japan, and the U.S.
MX
The second fintech unicorn to come out of Lehi, Utah is fintech data company MX. Founded in 2010, MX raised $300 million in Series C funding on January 13, bringing the company’s total capital to $505 billion and boosting its valuation to $1.9 billion. Company CEO Ryan Caldwell said that MX will use the funds to hire more staff and improve its data collection and enhancement capabilities.
With its announcement today, intelligent enterprise payment solutions provider Plastiq becomes the first company to fully integrate QuickBooks Online into its payments platform. The integration will enable businesses to take advantage of an automated payments reconciliation system that cuts costs, saves time, and eliminates the burden of manual data entry.
“Time and again, we’ve heard from our customers how crucial QuickBooks is to their record-keeping, but as a small business ourselves, we also recognize how time-consuming and error-prone it can be to manually maintain accurate QuickBooks records,” Plastiq co-founder and CEO Eliot Buchanan said. “By integrating QuickBooks into Plastiq, we’re giving businesses back vital time and resources while greatly reducing the chances of human error, enabling businesses to keep their eyes on innovating and propelling growth.”
The integration with QuickBooks will enable Plastiq users to import invoices directly, accelerating the process of identifying and populating essential data elements including vendor name, amount due, and more. After invoices have been paid via Plastiq, the payment information is exported back to QuickBooks to ensure accurate record-keeping for monthly reporting, tax returns, audits, and other compliance-related matters.
The full integration gives Plastiq an advantage over other platforms, whose partial integrations with QuickBooks still leave room for error, especially in the import/export process. This often means returning to manual data entry to make corrections, which not only takes up additional time and resources, but also re-opens the process to the potential for human error. With Plastiq’s full integration, by contrast, companies’ QuickBooks entries are “completely and accurately” updated to ensure both day-to-day accuracy as well as error-free monthly reconciliations and tax reporting.
Founded in 2012, San Francisco, California-based Plastiq ended 2020 with the launch of its new cash payments offering. The new feature enables businesses to pay all of their bills via their linked bank accounts, credit cards, or debit cards. Company Chief Product and Technology Officer Stoyan Kenderov said the addition provided a “fully integrated, intelligent payments solution that serves as a one-stop shop for all of businesses’ payment needs.”
Last fall, Plastiq’s Head of People, Angela Loeffler, was named to The Financial Technology Report’s 2020 Top 25 Women Leaders in Financial Technology roster. The company has raised more than $141 million in funding, most recently securing $75 million in a Series D round last spring led by B Capital Group.
