Fintech in The Middle East, Africa and South Asia With Dubai DIFC’s Raja Al Mazrouei

https://thefintechtimes.com/fintech-in-the-middle-east-africa-and-south-asia-with-dubai-difcs-raja-al-mazrouei/

Dubai is an undisputed leader as a regional leading FinTech hub across the wider Middle East, Africa and South Asia (MEASA) region. The Fintech Times understands more first-hand of the developments and aspirations of Dubai in FinTech and digital as a whole with Dubai International Financial Centre’s (DIFC) Raja Al Mazrouei

The crown jewel in Dubai’s wider financial services success and global hub status in the global economy is the Dubai International Financial Centre (DIFC). Within DIFC, the DIFC FinTech Hive is the largest and first financial technology accelerator in the Middle East, Africa and South Asia (MEASA) region. They support the development and growth of FinTech, InsurTech, RegTech, and Islamic FinTech start-ups via various programmes, as well as providing a platform to present innovative products and solutions to MEASA’s most established financial service organisations and unparalleled investor network. Over 100 start-ups have been accelerated via DIFC’s FinTech Hive and have raised approximately $300 million, in addition to having strong relationships with leading innovation hubs around the world.

A notable initiative amongst many by DIFC FinTech Hive is AccelerateHer, which is a female-focused career mentorship accelerator which aims to provide young aspiring executives with the necessary tools and experience to help broaden their knowledge and reach in the industry and play a more active role in shaping the future of the financial landscape as a whole. AccelerateHer has enabled nearly 50 females, with 104 mentorship pairings and presented around 80 workshops thus far.

How has DIFC FinTech Hive grown since its launch in 2017? Watch the full interview with Raja Al Mazrouei, Executive Vice President of DIFC’s FinTech Hive:

Raja Al Mazrouei has an extensive career in the financial services sector, where she has developed an ecosystem for FinTech entrepreneurs and stakeholders in Dubai. Her marketing & communications expertise has enabled her to bring brands to life and foster communities to create business opportunities and societal impact for the FinTech sector specifically.

As the Executive Vice President of DIFC’s FinTech Hive, Raja brings together leading financial institutions, government entities, technology partners, venture capital as well as funds, and entrepreneurs to realise a common goal in driving the UAE’s national innovation agenda and shaping the future of financial services.  Today, Raja stands at the helm of a regional leader in financial technology hubs and has contributed significantly to building a vibrant and dynamic community of over 350 start-ups operating in DIFC.

Raja has been named one of the top 100 Women in FinTech by Innovate Finance, the 50 Most Influential Women in Middle East Finance by Dow Jones’ Financial News, the top 100 Power Businesswomen in The Middle East by Forbes, and MENA Fintech Leader of the year by Entrepreneur Magazine. She is also an executive graduate of Harvard Business School (HBS), as well as holding positions on the boards of Dubai Fintech VenturesAl Masraf Arab Bank for Investment & Foreign Trade, and a Member Board of Trustees of Mohammed Bin Rashid School of Government.

  • Head of Middle East and Africa (MEA) | Contributor

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  • Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.

https://thefintechtimes.com/fintech-in-the-middle-east-africa-and-south-asia-with-dubai-difcs-raja-al-mazrouei/

West Ham United Partners With Digital Wealth Management Platform YIELD App

https://thefintechtimes.com/west-ham-united-partners-with-digital-wealth-management-platform-yield-app/

YIELD App, a FinTech company, has announced that it has become the Official Digital Asset Wealth Management Partner of Premier League football club, West Ham United.

This exciting partnership comes just seven months after the public launch of YIELD App in February 2021, demonstrating the growing attractiveness of digital assets to a mainstream audience across the world.

YIELD App enables its users to invest in digital assets and earn as much as 20.5% annual interest at the touch of a button. YIELD App is challenging the status quo of the traditional investment system and has seen significant growth since its public launch, with 60,000 users and an impressive $400million of managed assets to date.

YIELD App users will now benefit from the opportunity to experience hospitality at West Ham United home fixtures, through regular competitions throughout the season.

Commenting on the partnership, Justin Wright, Chief Operations Officer of YIELD App, says: “We are delighted to partner with West Ham United. The club’s incredible community-driven strategy and its long-term vision for success are on par with ours. We look forward to developing a lasting relationship with the Club and all its fans around the world.”

Nathan Thompson, Commercial Director at West Ham United, said, “Today, we welcome YIELD App to the West Ham United partner family. We believe YIELD App will provide our growing fanbase with education of, and access to, some of the best investment opportunities. Our partnership will enable our fans to take advantage of these opportunities regardless of their financial or technical knowledge.”

West Ham’s partnership with YIELD App adds to the ever-growing list of football teams choosing to partner with a company within the fintech space. Others include:

  • Francis is a junior journalist with a BA in Classical Civilization, he has a specialist interest in North and South America.

https://thefintechtimes.com/west-ham-united-partners-with-digital-wealth-management-platform-yield-app/

This Week in Fintech: TFT Bi-Weekly News Roundup 30/09

https://thefintechtimes.com/this-week-in-fintech-tft-bi-weekly-news-roundup-30-09/

The Fintech Times Bi-Weekly News Roundup on Thursday sees the Cardano Foundation unveil a number of strategic partnerships.

Job moves

First Internet Bank welcomes Dustin DeNeal as first vice president, counsel. He will be responsible for a range of legal and regulatory matters, while also providing guidance to the First Internet Bank executive leadership team. He joins from Faegre Drinker Biddle & Reath LLP where he practiced for 13 years.

HPD Lendscape also welcomes Xavier Lang-Claes as a full-time consultant. As well as helping the company achieve new sales objectives, he will also take on the role of product owner for HPD Lendscape’s working capital finance solution. Lang-Claes said he has known HPD Lendscape for more than 20 years and worked with their solutions regularly.

Meanwhile Neptune Networks, the fixed income pre-trade market utility, has appointed John ‘Coach’ Robinson as permanent CEO. Robinson has worked with Neptune as a senior consultant since November 2020. Neptune has been under the leadership of interim CEO Byron Cooper-Fogarty since January 2020. He will remain part of its management team as COO.

GoCardless, a global fintech in account-to-account payments, has appointed Ben Knight as head of environmental sustainability while Lena Tailor joins as director of diversity and inclusion. GoCardless said it wants to create an inclusive environment where employees from ‘all walks of life can thrive’.

Airewallex has bolstered its global executive with a pair of key senior hires. Joanne Chin joins the fintech as global head of people and talent. While David Bicknell joins as global SVP finance. Both will be based in Melbourne. Airwallex has nearly doubled its headcount in 2021 and employs almost 1,000 employees in more than 20 locations globally.

Airwallex senior teamAirwallex senior team
Joanne Chin and David Bicknell join Airwallex
Further job moves

Jerome Kemp, former global head of futures, clearing, and FXPB at Citigroup, is named president of fast-growing fintech Baton Systems. The former chair of FIA Board joins to grow ‘new global standard for payments and settlements’.

Cloud8 appoints Graham Jarvis as chair of the board. The Cloud-based employee benefits platforms provider has recently embarked on a scaleup journey.

“Graham’s appointment and insight will help us shake up what’s on offer to SME’s within our space right now.”

Dipa Mistry Kandola, MD, Cloud8

Hawk AI, a financial crime fighting software platform, has hired Georg Hauer as chief operating officer and chief financial officer. He will drive its expansion into new markets worldwide, as well as go-to-market-strategy. Hauer joins from neobank N26, where he was general manager of the German-speaking markets.

Meanwhile deVere Group has appointed Beverley Yeomans as its inaugural chief diversity officer role. Yeomans is also the chief operating officer at the independent financial advisory, asset management and fintech organisation.

Finally, UAE-based fintech startup Trade Capital Partners (TCP) has named Adel Alkhaja as commercial director. His appointment will help ‘kickstart the process of continuous reinvention as TCP embarks on the next phase of growth’.

Mergers and acquistions

VoxSmart, a communications surveillance firm, has announced the acquisition of GreenKey Technologies Inc, the automated speech recognition and natural language processing provider. The acquisition marks a period of rapid growth for VoxSmart, following a $25million growth equity investment injection from Toscafund.

While Market Pay, the European and omni-channel payment platform, has snapped up Dejamobile, a French fintech specialist in mobile and connected equipment payment solutions. Market Pay and Dejamobile have already partnered pre acquisition by developing PayWishâ, a service for mobile purchasing experiences. The deal is the second acquisition for Market Pay in September following the acquisition of the Acoustic Payment platform.

Funding rounds

Funding Round Up News

Funding Round Up News

SourceScrub, an intelligence platform for financial services, has secured strategic growth investment from Francisco Partners. Existing investor Mainsail Partners and SourceScrub’s founders will remain significant equity holders in the company. The investment will help drive SourceScrub’s expansion into new markets and customer segments in addition to continued product development.

Card platform Highnote has enjoyed $54million in combined funding from both a Seed and Series A round. Oak HC/FT led the Series A and co-led the Seed with Costanoa Ventures, with additional participation from XYZ, SVB Capital and WestCap. Bill Ready, president of commerce and payments at Google and Renaud Laplanche, CEO of Upgrade, also participated as angel investors.

BNY Mellon has completed a strategic investment in Quantexa, the data and analytics software company. It follows a 12-month engagement with BNY Mellon using Quantexa’s platform. The investment closes Quantexa’s series D led by Warburg Pincus.

Meanwhile Omneky, the AI platform that generates social ad creatives, has raised $2.5million in a round of seed funding with multiple investors, including venture capital firms Village Global and Hyphen Capital. The seed funding will support further build out of Omneky’s AI platform, which powers growth for small businesses.

Predictive blockchain monitoring and investigative platform Merkle Science has closed a $5.75million Series A round. Led by Darrow Holdings, with additional participation from Kraken Ventures and Uncorrelated Ventures. Merkle Science also adds venture investing veteran and Susquehanna’s head of digital asset investment Dean Carlson to its board.

Finally, Optimove, a CRM marketing firm, announced a $75million investment led by global growth investor Summit Partners. The financing will support investment in strategic hiring, expansion of its marketing platform and further acceleration of Optimove’s growth. The company also announced the addition of Summit Partners’ head of Europe Han Sikkens and MD Steffan Peyer to its board.

Partnerships

Payments fintech Mint Middle East has forged a strategic partnership with Texas-based global payments firm Payolog. Based on Payolog’s technologies, Mint will invest and partner with several banks and financial institutions in the region. They announced the collaboration at Seamless Middle East 2021, a payments technology conference and exhibition.

The Cardano Foundation has announced a number of strategic partnerships that will drive further adoption and utilisation of the Cardano blockchain. It followes the launch of smart contract capabilities earlier this month. One partnership sees tree planting verification company veritree secure its records on Cardano’s blockchain. While Cardano also partners with esports and gaming platform Rival. It also revealed a strategic collaborations with UBX and AID:Tech.

Keebo, a UK credit card provider, has partnered with Yolt Technology Services, the open banking provider, to deploy next generation of credit card management.

“YTS have extensive API coverage and offer a simple, fully functional sandbox enabling super quick development thus reducing our time-to-market.”

Matthew Hallett, chief technology officer of Keebo

KBC, a multi-channel bank-insurance group, has teamed up with Personetics, a provider of financial-data-driven personalisation and customer engagement solutions. The companies will deliver multi-lingual, data-driven solutions to increase customer engagement on KBC’s mobile application.

Payment technology provider Tribe Payments is now a payment partner for Amon.Tech‘s Amon Card. Tribe will provide issuer processing services including its proprietary 3D Secure product for the Amon Card in the UK and across Europe.

DIFC Academy and K2 Integrity Partner to Offer the DOLFIN eLearning Platform in the UAEDIFC Academy and K2 Integrity Partner to Offer the DOLFIN eLearning Platform in the UAE
DIFC’s Gate Building
Further partnerships

DIFC Academy and K2 Integrity partner to lffer the DOLFIN e-learning platform in the UAE. The DOLFIN platform offers comprehensive resources on anti-money laundering, sanctions, export controls, terrorism and proliferation financing, anti-bribery and corruption and fraud. DOLFIN will be introduced to 2400 firms in the DIFC Academy ecosystem.

Paysafe and Shelby Financial partner to safeguard US airline payments. Shelby Financial’s escrow solution will mitigate financial risk and secure airline ticket payments for American carriers that plug into Paysafe. Shelby Financial will also leverage its customised technology and experienced staff to oversee data validation.

Meanwhile Western Union has signed a partnership with invoice financing platform Crowdz to power payments for SMBs using the platform to sell unpaid invoices for capital. The collaboration follows Crowdz securing $7million in venture capital over the past twelve months from the likes of Global Cleantech Capital and Bold Capital Partners.

xpate Links and INDUSTRA BANK join forces to streamline acquiring. xpate’s next-generation payment solution Links will provide end-to-end operational risk and fraud management for Latvian bank’s payment services.

Company growth stories

Fintech Deriv is expanding into Europe as part of a £5million investment, including a new office in London. This is in addition to a new office in Paris, opening later this month, and another in Guernsey by the end of this year. Deriv boasts more than 4.3 million registered users across more than 100 countries.

Visa plans to grow its presence in Atlanta, including opening a new office in 2022. The new office is located at 1200 Peachtree Street in Midtown Atlanta and represents a wide range of Visa teams and functions. Michelle Gethers-Clark, Visa’s chief diversity officer and head of corporate responsibility, will reside in Atlanta and help to lead the new office.

UK bank Starling is expanding into Europe. It plans to offer its banking as a service (BaaS) solution in the EU, including France, Germany, The Netherlands and Spain. Starling launched BaaS in the UK in 2018 and has 25 payment and banking services customers, including Raisin, CurrencyCloud, Moneybox and Vitesse.

Starling BankStarling Bank
Starling to make BaaS available in Europe

Pipe, creator of a trading platform for recurring revenues, is launching its first international market in the UK. To support the expansion and further accelerate growth, Pipe has also hired Brad Coffey as chief customer officer. While Sid Orlando joins to head up content to increase global awareness on the impact of alternative finance.

  • Claire works across print and online as Editor for The Fintech Times.

https://thefintechtimes.com/this-week-in-fintech-tft-bi-weekly-news-roundup-30-09/

What To Expect From the Mastercard Expo 2020 Dubai

https://thefintechtimes.com/what-to-expect-from-the-mastercard-expo-2020-dubai/

As the world looks to the UAE for the opening of Expo 2020 Dubai on 1st of October 2021, Mastercard has shared a glimpse into the promising line-up visitors can expect at the biggest event to date to be hosted in the Arab world.

As the Official Payment Technology Partner of Expo 2020 Dubai, the global technology company will connect people to their passions, provide a glimpse into a future powered by digital transformation, and share its industry-leading insights during the six-month period.

Khalid Elgibali, Division President, MENA, MastercardKhalid Elgibali, Division President, MENA, Mastercard
Khalid Elgibali, Division President, MENA, Mastercard

“With one of the world’s biggest economic and cultural milestones fast approaching, Mastercard is geared to welcome people from across the globe and connect them to unforgettable experiences filled with Priceless possibilities. Together with Expo 2020 Dubai, we have curated a journey that will excite, inspire and mobilise millions of visitors. Together, we will start something priceless,” said Khalid Elgibali, Division President – MENA, Mastercard.

Unveiling the Mastercard Cube

Mastercard will connect guests to their passions through the introduction of its Mastercard Cube. The installation will immerse visitors in a range of multi-sensory experiences as they embark on Priceless journeys tailored to their passion, including sport, food, and music, plus being a ‘force for good’.

At the Cube, visitors will be wowed by mixed reality content that brings to life the next era of innovation, as Mastercard demonstrates how the power of payment technology will be harnessed to make life safer, easier, and more connected for all.

Building a Greener Planet

Building on its global sustainability efforts, Mastercard will reveal an installation dedicated to its Priceless Planet Coalition, which aims to plant 100 million trees worldwide over five years. The innovative concept, led by Mastercard and joined by Expo 2020 Dubai, will invite visitors to learn more about Mastercard’s efforts in bringing together governments, businesses, and consumers in combatting the effects of climate change, offering them an opportunity to become part of the network and contribute towards a greener future.

Expo visitors can also help contribute to a greener future by donating to Mastercard’s Priceless Planet Coalition upon checkout as an add-on feature as they purchase their tickets to the mega event.

Advancing Gender Equality

Supporting Expo 2020 Dubai’s commitment to creating a more equitable future, Mastercard will harness the platform to advance its efforts in driving gender equality around the world. The technology leader will be working closely with Expo 2020 Dubai to host a range of activities at the Women’s Pavilion to celebrate the successes of women leaders and offer a platform for female voices that will culminate in a legacy project to be jointly launched early next year.

Empowering Small Businesses

Mastercard will also be bringing together the region’s small business community with a series of on-ground and virtual workshops to empower, enable and connect thousands of businesses and entrepreneurs. The series will build on Mastercard’s ongoing efforts to support small businesses, helping them go digital and grow in an increasingly digital world.

Looking to the Next 50

Mastercard is fully committed to supporting Expo 2020 Dubai’s diverse range of knowledge-sharing initiatives and will be welcoming senior executives from across the globe to offer valuable insights and expertise to Expo’s audiences.

For 35 years, Mastercard has been fostering strategic public-private-partnerships in the UAE to drive economic progress and realise a digital economy. As the UAE marks its Golden Jubilee, Mastercard invites all visitors to discover a seamless world – one without borders – using the power of technology to leaves a positive legacy for humanity and the planet.

  • Tyler is a Fintech Junior Journalist with specific interests in Online Banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

  • Head of Middle East and Africa (MEA) | Contributor

https://thefintechtimes.com/what-to-expect-from-the-mastercard-expo-2020-dubai/

Contis: How e-money is a Force for Good

https://thefintechtimes.com/contis-how-e-money-is-a-force-for-good/

Regulated and risk-free, electronic money continues to revolutionise consumer finance. Payments technology innovator Contis explains.

Over the last decade, banking has gone through a digital revolution. Emerging fintechs have transformed the landscape from an old branch-based banking model to one that’s now comfortably digital-first.

Traditional banks face stiff competition from digitally native challenger banks as consumers expect budgeting, saving, lending, investing and international money transfers at their fingertips thanks to innovative fintech products.

Challenger Banks

Challenger Banks

Today, access to digital banking as standard is old news. Every major bank now has a digital app. But the competition continues to toughen as digital-first neobanks, such as Revolut and Monzo, create new innovations and release digital financial products every day.

But what led the banking sector towards the digital financial revolution, and who are the key drivers that have made these innovations possible?

Though most consumers are perhaps unaware, the short answer is – electronic money institutions (EMIs).

What are EMIs?

They look like current accounts and offer the same services as normal banks — which is exactly what makes EMIs a great alternative to traditional financial institutions.

At its core, e-money is a licensing regime that lets non-banks deliver payments and financial services — without the need to acquire full-blown banking licences. With lower barriers to entry, agile market newcomers can develop cutting-edge innovations and legally launch new financial products without the need to overcome additional regulatory hurdles and legacy systems.

Digitally disruptive EMIs are currently riding the wave of EU/EEA regulations designed over the past 10 years to increase competition in banking. As a result, they’re experimenting with and deploying automated technologies, mobile-first approaches, predictive analytics and digital-only banking services that are reshaping the consumer experience.

An early example of this was Monzo, which first launched as an e-money licence holder, offering its customers bank accounts (and later loans, free foreign payments and more) all through its dedicated app.

Recent data indicates that the three main reasons why people opened digital-only bank accounts in 2020 were because digital banking is more convenient (41 per cent), digital banks offer better rates (39 per cent) and transactions fees abroad are cheaper (28 per cent).

Some might even say EMIs have spearheaded the innovation that led the digital banking revolution and enabled the fintech revolution, fuelling further innovations that banks have since followed.

How have EMIs led the digital revolution?

Compared to traditional banks, digitally native e-money organisations are tech-focused without the burden of legacy challenges. This agility allows EMIs to adapt to emerging trends and integrate new innovations quickly and efficiently.

The development of new capabilities has empowered nimble EMIs to plug the gap in the financial market and provide financial services to underserved customers and communities. For example, PayPal emerged as the first online international money transfer company to fix what was previously a frustrating, expensive and inefficient way of transferring funds that could only be facilitated by a bank.

A sharp responsiveness to consumer needs has allowed e-money licence holders to confidently lead the charge in reimagining financial norms — a positive move that has forced traditional banks to adopt similar approaches.

So, what’s continuing to drive the e-money boom?

The rise of online banking and mobile-first platforms has taken what was once considered a complex way to manage money and transactions to (almost) mainstream adoption among consumers and businesses. In 2021, EY concluded that three out of four consumers across 27 global markets had used an e-money or fintech payment service.

covid-19

covid-19

Covid-19 has also fuelled the growth in e-money and digital payment systems. Withdrawals from UK ATMs fell by £37billion between March 2020 and March 2021, indicating little doubt that consumers (as well as retailers and venues) have become more accustomed to electronic payments in both the online and real world.

The reality is: the future is customer-centric. By prioritising round the clock mobile-first access, information security and privacy, and tech-fuelled customer engagement, e-money is locked and loaded to digitally disrupt.

EMIs in action: New and future innovations driven by e-moneyIn the UK, e-money and fintech currently hold the top spot as the strongest startup sector. From challenger banks to cryptocurrency innovations, these cutting-edge examples offer a glimpse into how e-money continues to revolutionise consumer finance, and why so much investment is being funnelled into the industry.

Curve

Open banking represents a great leap forward from the era of siloed bank accounts with different providers. Now your digital banks, credit providers, insurers and even retailers can deliver all the benefits of interconnected, data-led banking to their customers.

EMIs, such as Curve, are at the forefront of open banking innovation — not only reshaping financial management and visibility with their open banking-powered app but changing the face of payments too. The game-changing tool lets consumers see their entire financial life in one dashboard and enables spending from linked debit/credit card accounts via the one Curve card.

And it’s not only accessible in the UK. Open banking functionality means Curve is available in 31 countries across the EEC, able to offer competitive exchange rates and multiple payment options to help customers get the most out of their money wherever they are.

According to reports, trends in foreign exchange will continue to evolve as long as technology advances, showing that digital innovations — like open banking — are key to meeting consumer needs.

Hastee

With on-demand salary drawdown payments, Hastee is revolutionising the way employees get paid. By enabling access to a portion of their earned pay when they need it, people are no longer forced to wait until payday to access funds.

This revolution, made possible by e-money, helps people avoid taking out costly payday loans and getting trapped in unmanageable debt. In the UK, the most common amount the average consumer borrows from payday loans companies is £100, but with Hastee employees can spend as they earn — removing the reliance on short-term, quick-fix loans.

Hastee also delivers a range of financial education and management resources to support employees in their financial decisions. Perks, rewards and cashback help workers make their money go further.

And it’s not just employees who benefit from this e-money innovation. Organisations can integrate Hastee seamlessly into their payroll system without impacting company cash flow, allowing employers to better attract, retain and engage their workforce.

bitcoin banking

bitcoin banking

Buffer: secondary authorisation from Contis

Cryptocurrency is often seen as the new frontier in consumer finance. It’s proven its salt as an investment vehicle yet is still in its infancy for everyday spending. Many crypto companies and trading platforms have launched debit cards as an ‘off ramp’, giving customers an easy way to spend their digital assets on everyday goods. But since most merchants only accept fiat, users must manually convert their crypto before spending on the card. Until now.

Payments technology innovator Contis has developed a system that lets you spend on a card directly from your crypto wallet, yet the merchant still receives fiat. This Buffer ‘secondary authorisation’ technology is revolutionising crypto payments. It’s fully frictionless for the cardholder. The conversion happens at the point of sale!

Buffer successfully combines the practicality of fiat currency with the benefits of blockchain — providing a seamless way to spend non-liquid crypto assets on a card. It also applies to other investments, including precious metals, stocks and shares, and more. No need to sell up and release funds before spending on everyday goods. With Buffer, you can buy a coffee with Bitcoin, a sandwich with gold or a Tesla with your Apple stock.

And this B2B tech innovation created by an EMI has endless potential. Buffer gives access to separate funds by drawing down from another preapproved wallet or account if the primary account runs out, thanks to ‘zero balance’ and ‘secondary authorisation’ technology.

This has enabled consumer brands, including Binance, Bitpanda and Hastee Pay, to offer ground-breaking card products. But it can also be used for carer cards, company expense cards, insurance payouts and countless other applications that are set to rock the fintech world of consumer and business finance.

e-money reassurance: monetary safeguarding and financial security

Despite the innovations and consumer benefits brought by EMIs, there’s sometimes a view that e-money exists in a murky, unregulated space. This couldn’t be further from the truth.

Reality check: What’s an e-money licence?

An e-money licence issued by the UK’s Financial Conduct Authority (FCA) lets EMIs offer an ever-evolving range of financial products and services. According to leading accountancy firm BKL, there are clear signs that as the e-money sector expands, the FCA will continue to step up their scrutiny of institutions and enforcement of regulations.

Current e-money regulations include:

  • Authorisation — To become an EMI, a company must apply and comply with FCA conditions that comprehensively assess the nature, scale and complexity of electronic money activities or payment services.
  • Capital safeguarding — Under e-money regulations, any money held by an EMI must be safeguarded (backed by money stored in a separate account in trust). There’s no limit on the amount of funds protected through these safeguarding rules, and when an individual wants to make a withdrawal, the funds will always be available. This is because an EMI can’t use the money for loans, investments or pass it to creditors — making it a more secure capital storage option.
  • Third parties — An EMI can only provide payment services in the UK through an agent or third party if they’re on the FCA’s register. Where an EMI relies on a third party for the performance of operational functions, it must take every reasonable step to ensure compliance with the FCA’s regulations and the Payment Services Regulations 2009. The point here is that there’s no ‘open back door’ an EMI can use to perform an action or service without regulatory authorisation. An individual’s funds are securely ringfenced.

Do we really need EMIs?

In short, yes.

Following the Wirecard scandal in 2020, authorities – such as the European Commission and the FCA – introduced new regulations and strengthened requirements across all financial reporting.

Yet still, EMIs face outmoded attitudes towards e-money. The truth is, EMIs are low-risk (thanks to stringent SCA and KYC procedures), highly regulated, tech-focused and competitive players in today’s financial market.

They’re not only simplifying, diversifying and democratising the sector. They’re combining financial transparency with robust monetary safeguarding and fast-paced innovation. Ultimately, e-money is a force for good.

https://thefintechtimes.com/contis-how-e-money-is-a-force-for-good/

Modularbank Rebrands as Tuum

https://thefintechtimes.com/modularbank-rebrands-as-tuum/

Modularbank, the next-generation core banking platform, has announced the launch of its new corporate brand identity to better reflect its company values and market offering. The new company name is Tuum, which means “core” in Estonian, highlighting both its native roots and its goal to help customers supercharge their business from within through the use of its banking technology.

The brand refresh alludes to the new scope of the company, which has evolved significantly since its inception in 2019. While the company was initially set up to focus on serving banks, Tuum’s flexible core banking technology is not limited to banks, it can also help fintechs and any type of business looking to offer innovative financial services.

In the two years that the company has been operating, it has seen rapid growth and has already acquired an impressive customer base throughout Europe. It currently employs over 60 people across Europe with offices now in Tallinn, Berlin and Malaga. In December 2020, it closed a funding round of €4m. The new brand identity seeks to align both with the company’s ongoing expansion plans – to extend its core banking platform offering both within and beyond Europe – and with its story and ethos.

Tuum brings together years of experience in working both in technology and in banking. This expertise has enabled the company to build an extremely flexible, lean and modular core banking platform that is able to cater to the different needs of a broad range of clients from banks to other types of business (across vertical sectors) looking to roll out new or offer enhanced banking services to customers.

The new short and punchy name which excludes the word ‘bank’ also eliminates any confusion as to the services the company offers; Tuum is not a bank but a technology provider and a trusted partner for banks and businesses as they digitally transform or launch innovative new value propositions.

Vilve Vene, CEO and Co-founder at Tuum said: “Having experienced rapid growth over the last two and a half years and evolved quickly to respond to the needs not only of banks but also non-banks venturing into the financial services arena, it was time to renew and refresh our corporate identity to align with our company strategy.

“The rebrand marks an exciting and an important step on our journey to expanding our reach and consolidating our role as a trusted partner that customers can rely on to help them transform and introduce new services and developing leading-edge solutions that move banking into the future.”

  • Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.

https://thefintechtimes.com/modularbank-rebrands-as-tuum/

Gig Wage, Green Dot and Commonwealth Announce a Partnership To Help Minority Group Gig Workers

https://thefintechtimes.com/gig-wage-green-dot-and-commonwealth-announce-a-partnership-to-help-minority-group-gig-workers/

FinTech 1099 payroll platform Gig Wage has announced its partnership with national nonprofit Commonwealth in a new project aimed at addressing the financial insecurity of the growing non-traditional workforce. With the gig economy in the US growing by an estimated 33% since the start of the pandemic, the research will ultimately help drive sustainable change at scale to ensure that gig workers have the financial tools to achieve financial security and opportunity. The project is being funded in part by Green Dot Corporation (NYSE: GDOT), a lead investor of Gig Wage.

“At Gig Wage, our number one priority is to deliver economic empowerment to our customers and their 1099 contractors, many of whom live not only paycheck-to-paycheck but sometimes gig to gig and have been ignored and overlooked by traditional payment and banking models,” said Craig J. Lewis, Founder and CEO, Gig Wage. “We are working feverishly to understand the effects of income sufficiency and stability on these groups and build technology that helps as many people as possible. We’re excited to be collaborating with Commonwealth and Green Dot on research that will result in new insights into how we can better support the growing gig workforce and ultimately help guide us toward our mission to bank the entire gig economy.”

The income volatility faced by gig workers, which became even more pronounced during covid-19, has revealed unique financial challenges for non-traditional workers that disproportionately affect lower-income Black, Latinx, and female workers. Gig Wage and Commonwealth’s joint research initiative will study the effectiveness of strategies to bolster household incomes and reduce income volatility. The project is designed to understand strategies that can be implemented at scale to positively affect the financial security and inclusion of gig workers long-term.

“Financial security for non-traditional workers is a continuous challenge in the quickly expanding gig economy,” said Timothy Flacke, Co-Founder and Executive Director, Commonwealth. “The economic uncertainty and extreme income volatility of this labour force has been exacerbated by the pandemic. Through this research, we will continue to develop innovations and insights that drive the systems change we need to address these workers’ unique financial challenges.”

The pool of primarily Black, Latinx, and female gig workers involved in the study will be sourced by Gig Wage from its proprietary tech that is used to pay contractors. Green Dot, which also serves as the infrastructure bank partner enabling Gig Wage to design and deploy customised banking and money movement solutions for the growing customer base, has provided an investment that will help expand the pool of participating gig workers in this study.

“The growth of the gig workforce, and the unique challenges that have come with it, offers tremendous opportunity for fintechs to make these workers’ lives better,” said Dan Henry, President and CEO, Green Dot. “We’re proud to support Gig Wage and Commonwealth in the advancement of financial security and inclusion for these workers.”

What is Gig Wage and how is it different?

Craig Lewis, CEO and founder, Gig WageCraig Lewis, CEO and founder, Gig Wage
Craig Lewis, CEO and founder, Gig Wage

The Fintech Times sat down with Gig Wage’s CEO, Craig J. Lewis, to get a deeper understanding of the company and what set it aside from the rest of the market.

Gig Wage is a B2B2C company, looking to help the 10, which directly leads to helping the 10,000. Lewis said, “When you think about the gig economy, everybody thinks about the 10,000 drivers for the organisation, making sure they get their money fast and flexibly, and we do too, but we do it through the 10 people at the company responsible for paying the 10,000.

“We look at the 10’s challenges: why have they struggled in the past to deliver a fast and flexible service – be it compliance or operational challenges – and we solve these problems. The outcome is still the same, the workers get paid on time but we help the paying company organise this by sorting out operational inefficiencies, whilst also dealing with things ranging from W9 to 1099 compliance for the company.

“We lead with a third party mentality first, building our technology and business model to operate with that in mind.”

Gig Wage also sets itself apart by enabling payments to be paid directly into any bank account or neobank account, not a Gig Wage one that takes a fee for allowing early access to funds. Lewis continued, “We use embedded finance and bank accounts as we work to be the bank of the gig economy. We’re hyper-focused on providing the outcomes the customers need, but through the companies paying them. By leaning into the B2B infrastructure, the gig economy will have a groundwork that will allow others to overlay any technology on top of it as there will be connectivity and comprehensiveness.”

While Gig Wage’s main industry is transportation and delivery, the infrastructure could be applied to any field.

  • Francis is a junior journalist with a BA in Classical Civilization, he has a specialist interest in North and South America.

https://thefintechtimes.com/gig-wage-green-dot-and-commonwealth-announce-a-partnership-to-help-minority-group-gig-workers/

XBRL News about sustainability reporting, a proof of concept and Italy

https://dailyfintech.com/2021/09/30/xbrl-news-about-sustainability-reporting-a-proof-of-concept-and-italy/

Here are the three most relevant developments in the world of structured reporting we became aware of in the course of last week.

1  International taxonomy for reporting SASB standards unveiled

An international taxonomy for integrating SASB standards into corporate reporting was released Tuesday by The Value Reporting Foundation. More than 1,280 businesses now disclose ESG data using SASB standards, including more than half of those in the S&P Global 1200 index, the foundation said in the news release.

A long time in the making, this new taxonomy will now likely serve as a building block for the ISSB’s sustainability standard.

2  Using xBRL-CSV for granular data: a proof of concept from XBRL Europe

“Our proof of concept suggests that xBRL-CSV could streamline the reporting process and facilitate users in comparing and analysing information from across different countries and reporting requirements, including extensive and detailed data,” says Vincent Le Moal-Joubel, data scientist and XBRL expert at the Banque de France. 

While a data standard format linking to reporting concepts will certainly find many use cases, any insights into the rationale for small-capping the x in xBRL-CSV would be greatly appreciated.

3  XBRL reporting for Italian Confidi

XBRL Italy reports “another small step forward” in the digitisation of corporate reporting in Italy. Credit guarantee consortia known as Confidi are an important part of the Italian financial landscape. A decree from the Ministry of Economy and Finance has established a requirement for Confidi wishing to offer credit to file their financial statements in XBRL format, as soon as this option is available at the Italian Business Register. 

This is a good illustration of a niche use case in Italy.

—————————————————————

Christian Dreyer CFA is well known in Swiss Fintech circles as an expert in XBRL and financial reporting for investors.

 We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.

 For context on XBRL please read this introduction to our XBRL Week in 2016 and read articles tagged XBRL in our archives. 

 New readers can read 3 free articles.  To  become a member with full access to all that Daily Fintech offers,  the cost is just USD 143 a year (= USD 0.39 per day or USD 2.75 per week). For less than one cup of coffee you get a week full of caffeine for the mind.

https://dailyfintech.com/2021/09/30/xbrl-news-about-sustainability-reporting-a-proof-of-concept-and-italy/

Top 10 Countries With the Most GDPR-Related Fines

https://thefintechtimes.com/top-10-countries-with-the-most-gdpr-related-fines/

The GDPR (General Data Protection Regulation) came into effect in 2018, and in that time, a large number of organisations have fallen foul of its rules. In fact, over 650 fines have been issued relating to GDPR violations, totalling more than €280million in just over three years. New research from cybersecurity specialists ESET has revealed the countries that have handed out the biggest GDPR related fines, where it was found the UK has only issued five since 2018.

ESET conducted a study that analysed GDPR related penalties, looking at; the biggest fines companies have received, the most common reasons for GDPR fines and the countries handing out the most and largest fines.

When looking at the European countries which have received the most fines, Spain came out on top with 273 – representing just under a third of all fines given for GDPR violations. Spain was followed by Italy and Romania, with 75 and 60 fines issued respectively.

Despite receiving the most fines, Spain ranked sixth for the total amount fined (€32,440,810). Luxembourg was out in front with €746,060,300 and the United Kingdom placed second with a total of €44,250,000.

The ten countries that have given out the least amount GDPR-related fines since 2018

RankCountryNumber of finesAverage fineTotal amount fined
1The Netherlands1€450,000€450,000
1Isle Of Man1€13,500€13,500
1Malta1€5,000€5,000
4Slovakia2UnknownUnknown
4Croatia2UnknownUnknown
6Portugal4€106,000€424,000
6Iceland4€21,675€86,700
8United Kingdom5€8,850,000€44,250,000
8Estonia5€60,110€300,548
8Latvia5€48,650€243,250
The ten countries that have given out the most GDPR-related fines
RankCountryNumber of finesAverage fineTotal amount fined
1Spain273€118,831€32,440,810
2Italy75€1,126,584€84,493,770
3Romania60€11,659€699,550
4Hungary43€18,881€811,883
5Norway31€49,527€1,535,350
6Germany28€1,756,673€49,186,833
7Sweden26€697,374€18,131,730
8Belgium25€40,720€1,018,000
9Poland24€86,242€2,069,798
10Bulgaria20€160,535€3,210,690

The five biggest GDPR related fines since 2018’s introduction

RankController/ProcessorDateTypeFine
1 Amazon Europe Core S.à.r.l.16/07/2021Non-compliance general data processing principles€746,000,000
2Google21/10/2019Insufficient legal basis for data processing€50,000,000
3H&M01/10/2020Insufficient legal basis for data processing€35,258,708
4Gruppo TIM15/01/2020Insufficient legal basis for data processing€27,800,000
5British Airways16/10/2020Insufficient technical and organisational measures to ensure information security€22,046,000

Looking at the largest European GDPR-related fines to date, Amazon came out on top when it was fined €746,000,000 for non-compliance with general data processing principles in 2021. Closely following are Google and H&M, who were fined €50,000,000 and €35,258,708 respectively for their highest-costing GDPR violations.

Jake Moore, Cybersecurity Specialist at ESET, commented on the findings: “In today’s data-driven world, there is only so much that people can do to limit the information they share – whether it is online, through mobile communications, or in person. This means it is vital for organisations to be responsible with the data they gather and store. GDPR was introduced for precisely this reason, providing guidelines for good practices and enforcing consequences for bad.

“Some of Europe’s biggest companies have fallen foul of GDPR for various reasons. Most of the priciest fines have been given due to an insufficient legal basis for data processing, which is when an organisation is unable to prove that there is a lawful basis that makes their processing of customers’ data ‘necessary’. While the penalties can be huge, it unfortunately doesn’t seem that this acts as a sufficient deterrent, as fines have been issued as recently as September 2021.

“It is always interesting to see how different countries interpret and enforce the same legislation in different ways. With Spain issuing 230 fines compared to Germany’s 30, it is clear that GDPR penalties are not necessarily cut and dry. However, what should remain the same throughout each region is a dedicated focus on what really matters – ensuring individuals are in control of their own data and that it is not exploited for profit.”

  • Francis is a junior journalist with a BA in Classical Civilization, he has a specialist interest in North and South America.

https://thefintechtimes.com/top-10-countries-with-the-most-gdpr-related-fines/

4 Reasons to Believe Cryptocurrencies Are Here to Stay

https://finovate.com/4-reasons-to-believe-cryptocurrencies-are-here-to-stay/

On the final day of FinovateFall a few weeks ago, I had the opportunity to talk with James Wallis, Vice President of RippleX, Central Bank Engagements, and CBDCs, on the topic of blockchain technology, cryptocurrencies, and the potential traction both are gaining within mainstream finance.

Wallis offers an unqualified “yes!” in response to the question of whether or not digital assets and the technology that makes them possible are gaining in popularity with financial institutions. Pressed for examples that support his conviction, Wallis had more than a few examples to share with our attendees. Below, we excerpted a few highlights from his remarks on where to look and what to watch for as the financial sector begins to shift from crypto-curious toward a potentially more enduring embrace of the technology.

Trade Finance

“Traction is being gained. It has been steadily growing over the past four or five years. A few examples, or proof points, particularly in the blockchain space: there are a number of trade finance initiatives around the world, different consortiums are live and running, facilitating trade finance with different blockchain platforms.”

“With RippleNet we have a global network for cross-border payments, which is blockchain based, and we use a native crypto, XRP, to facilitate cross-border payments in what we call ‘on-demand liquidity’.”


Tokenization

“We’re seeing lots of different assets being tokenized, whether that’s NFTs, or securities, whether it’s currencies … That, I think, is a big trend. I think the World Economic Forum has predicted that something like 10% of the world’s GDP will be tokenized by 2027. I think that equates to around $24 trillion of goods and assets being tokenized.”


Central Bank Digital Currencies (CBDCs)

“It’s a very busy environment right now. I think there’s a clear distinction between research and proof of concept versus building out real systems. Among the ones that are furthest ahead in building out real systems, China is probably the biggest one of scale. They are still in pilot mode; they are not fully operational. But they have had a number of pilots in different cities around China, and also are looking now to do some pilots cross border, as well. On the other end of the scale in terms of size, you have the Bahamas with their sand dollar, which is up and running.”

“Others that have done a lot of great research and are fairly well along but have not really pulled the trigger to go live yet are in Sweden with their digital e-krona and then, of course, Singapore with the Monetary Authority there. They have had a number of different projects over the last several years.”


Commercial bank interest rising

“I’ve seen personally a big uptick (in interest) in the last three or four months from commercial banks, household name banks wanting to understand more about what their role will be or could be in a CBDC. You know, when commercial banks start paying attention to something its because they’re either feeling there’s an opportunity to make more money or they feel there’s a threat against them.”

“A lot of early work was really wholesale: bank to bank transfers through central bank accounts. And that’s a valid use case. There’s been a trend in the last 12 months more towards retail, people looking at digital cash or other use cases around retail. Most of those, so far, have been domestic. In the Bahamas it’s really allowing people to send digital money to each other across the different islands there. But we are seeing an increase in interest, as is the Bank of International Settlements, in cross-border CBDCs: so how do you transact, say, with a digital U.S. dollar to a digital Euro to a digital yuan? I think use cases will just keep coming and coming, to be honest.”


Photo by Alesia Kozik from Pexels

https://finovate.com/4-reasons-to-believe-cryptocurrencies-are-here-to-stay/

Unbanked and VISA: Combining Reliable Payment Solutions with Accessible Crypto

https://thefintechtimes.com/unbanked-and-visa-combining-reliable-payment-solutions-with-accessible-crypto/

The VISA Fast Track programme is making it easier for fintechs who wish to work with VISA to do so. And thanks to the financial services provider’s recent partnership with Unbanked, fintechs can enjoy the advantage of entering and scaling the market with VISA products.

Ian Kane, Co-Founder, UnbankedIan Kane, Co-Founder, Unbanked
Ian Kane, co-CEO, Unbanked

In this guest-authored piece for The Fintech Times, Ian Kane, the co-CEO of Unbanked,  details their fruitful partnership with VISA and what it means for growing fintech companies looking to enter VISA’s Fast Track programme.

The evolving fintech industry coupled with innovations like cryptocurrency, blockchain technology, artificial intelligence, and machine learning are changing the ways in which the financial services industry works. Financial institutions are leveraging the power of financial technology firms to keep up with increasing technological advancement and digitalisation. This is clearly evident in the way banks and wealth management firms now are investing.

Since 2015, financial institutions have invested over $98 billion in fintech and digital innovation. Additionally, customers are expecting a greater personalisation, faster customer support mechanism, and greater transparency, thus, we are witnessing a shift in both customer behavior and expectations. A recent survey by Edelman Trust Barometer revealed that around three-quarters of people trust the technology sector to bring a positive change. It should, therefore, come as no surprise that 94% of financial institutions are looking to increase their fintech partnerships in the next 2 to 3 years.

Such partnerships are mutually beneficial for both party entities. New fintech firms, for instance, can expand their markets to reach new customers and connect with previously uncontacted clients. And financial institutions can maintain their innovation strategies while offering their customers unique services and reduced costs.

The year 2021 has been a year of several notable fintech partnerships. For example: In April, the partnership of Nedbank, one of the leading financial institutions in South Africa, Mastercard, and Ukheshe Technologies launched Money Message; a payment platform that helps small to medium business owners receive payments from their customers through their WhatsApp messaging services. The owners can send an invoice to their customers through WhatsApp and the customers can directly pay through the same platform. One of the major innovative powers of fintech is providing financial services to the people who lack access to a conventional bank account. Currently, there are around 1.7 billion adults who lack a bank account.

Some fintech partnerships involve the issuance of card products (debit/credit/prepaid cards) to their customers. These card programmes have the potential to reach people who are unbanked or who do not want to open a traditional bank account. In this piece, we’ll be discussing one such revolutionary partnership between Unbanked, a global fintech leader which provides crypto-powered financial services, and VISA.

What does this partnership mean?

Unbanked announced on September 16, 20201 that it has been certified as a VISA Ready Partner for Program Management in the Visa Fast Track Programme. Unbanked also became a VISA Fast Track Enablement partner in 2020.

In November 2020, VISA launched its fintech Fast-Track programme to empower and support fintechs in their goals to restore and rebuild the global economy. The global pandemic has brought forward several economical challenges both for business owners and customers alike. To support the financial system, VISA launched this programme in two components:

  1. Fast Track Partner Toolkit: This toolkit aims to accelerate the growth of partner fintechs and help them to better serve their clients and stakeholders. The toolkit will allow fintech companies to leverage VISA’s expert strategy, marketing, design, risk management, and more. Additionally, each company can tap into VISA’s strategic resources and VISA’s online card design to build and launch their own credit cards.
  2. Visa Ready for Fintech Enablers: The Visa Ready certification helps fintech companies to design and launch payment solutions for customers that meet VISA’s global standards of functionality and security. VISA will provide its expertise to these companies to help them develop their products as well as market them.

With the new VISA Ready certification, Unbanked will share and expand its capabilities with its growing suite of partners. Unbanked currently offers its clients several different cryptocurrency-powered cards, which they can use to affordably and reliably participate in online and in-person transactions. With this partnership, Unbanked will be able to leverage VISA’s global payment network and introduce new crypto-friendly payment experiences. Using its VISA Ready certification, Unbanked can also help guide fintechs as they scale and launch new VISA products.

“We could not be more excited that VISA has certified us as a Programme Manager in its Fast Track Programme,” said Unbanked Co-CEO, Ian Kane. “We pride ourselves on offering a full-suite issuance, compliance, and ongoing management service for VISA cards linked to digital assets.”

Unbanked connects traditional enterprise, financial technology, and banking systems with innovative blockchain infrastructure – expanding the utility of cryptocurrency for everyday purchases and investments. Customers can also interact with cryptocurrencies using debit cards and bank accounts – allowing them to move from fiat money to cryptocurrency. Unbanked equips customers with a more convenient, flexible way to buy, share and spend their cryptocurrency. The company’s debit card programme also features one of the highest rewards rates in the industry, offering users up to 6.38% back on purchases. So not only are customers using their digital currencies, they are earning returns on them as well.

Unbanked believes that financial access and control is a basic human right. That is why its main focus of the operation is offering its clients transformative products and services that will allow them to free themselves from the restrictions of traditional banking. Unbanked believes in empowering everyone to create a financial experience as unique as the life they live. It uses blockchain technology to rebel against the status quo, which has plagued the traditional banking system for decades.

The past 5 years have introduced a level of disruption in the financial industry that is nearly unprecedented. The ability of emerging fintech companies to quickly gain traction in the global financial services market is forcing financial institutions to evolve in order for them to remain competitive. These financial institutions, new and old, are increasingly adopting customer-centered innovations and back-office solutions that will help them provide a more unique and cost-efficient customer experience. As digital currency and blockchain continue to shape the financial landscape, so too do our methods of banking and payment.

The partnership between VISA and Fast Track Enablement Partners like Unbanked portrays its commitment to finding new ways to help empower their network of fintechs. This partnership also demonstrates VISA’s  vision and commitment to a new way of thinking and – more importantly – a new way of banking.

Unbanked’s partnership with VISA combines their passion and mission for accessible crypto banking with reliable, easy-to-use credit and debit services. Fintech partnerships, such as this, will continue to shape and drive innovative practices within the financial services industry. More than collaboration, such partnerships have become the backbone for innovation in our increasingly digital society.

  • Tyler is a Fintech Junior Journalist with specific interests in Online Banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

https://thefintechtimes.com/unbanked-and-visa-combining-reliable-payment-solutions-with-accessible-crypto/

Vitesse: Driving Innovation and Speed into a Network of Local Banks

https://thefintechtimes.com/vitesse-driving-innovation-and-speed-into-a-network-of-local-banks/

With more than 30 years of experience in payments and banking, Paul Townsend co-founded Vitesse and serves as the company’s executive chairman. He explains what makes Vitesse an innovative player in the industry and how the London-based fintech is simplifying the cross-border payments space.

Founded in 2013, Vitesse provides cross-border payment services to banks and businesses via a globally distributed settlement network. An FCA-regulated company, Vitesse operates one of the largest domestic banking and payment networks in the world, giving its customers direct access to more than 100 countries’ domestic payment networks, covering 60-plus currencies. The company usually sees payments from more than 100 markets a month via local ACH methods.

Vitesse CEO, Paul TownsendVitesse CEO, Paul Townsend
Paul Townsend is the co-founder and CEO of Vitesse

“The focus was really about building a network of local banks around the world and payment methods that we can connect into via a treasury platform, and then use that to facilitate cross border platforms for corporates, rather than consumers,” says Townsend. “There’s already quite a lot of consumer-based platforms around, but this one was very much focused on the larger SME and corporate market, in particular things like insurance and payroll.”

The insurance industry

Vitesse currently serves a number of core industry verticals in its operations, with one of the largest being insurance. This focus on the insurance industry was fuelled in part by its previous business Envoy, where it had client relationships and partnerships that have been built on with Vitesse. “Some of these clients asked to use the platform as early adopters. One of the early adopters was a third-party claims handler in India and it had a lot of international requirements that introduced us to the whole market of insurers and claims handlers. We started on one, and then we hired some more people in that sector, and it grew from there through a number of relationships with insurers. Starting with a relatively small base we’ve just expanded into that sector. We’re now working closely with the London insurance market to provide our services across insurers, brokers and DCAs.”

Townsend continues to explain that, when looking at some of Vitesse’s recent achievements, one of the more interesting is these insurer offerings. “Before we were involved insurers tended to have quite manual processes around the flow of funds or the reconciliation of those funds. What we’ve managed to do is automate all of that flow for them by connecting the insurer with all their claims handlers from a payment perspective on our platform, so they can see the payments in real-time and see their balances across all these claims happening in real-time.”

Driving innovation

The speed of payments is something that is often discussed in the fintech industry, particularly with the Faster Payments Service becoming more widely adopted across the industry. For Vitesse, the goal is always to be as fast as possible – “it’s always speed and cost that drive payments”.

“Having our clients being able to pay people within seconds is the golden position you want to be in,” says Townsend. “It’s all about finding how those payment methods can be real-time and that you can tap into. We will always connect to the fastest method we can within a given country, which might vary from instant to a couple of hours.”

Tackling the challenge of regulation

When it comes to the paytech and fintech industries, regulation and compliance are often at the forefront of a company’s strategy. Townsend suggests the regulatory environment has ‘gotten tougher’ with the FCA more focused on prudential management and compliance. He says, “We hold significant funds for some of our clients who may be worried about their money, and so they rely on our audits. We do software audits as well as other audits to reassure them, but obviously, there are regulations that we follow, with the safeguarding and segregation of funds underpinned by our platform, with client funds on one and corporate funds on a completely separate platform. 

“The other thing we do is keep the vast majority of funds in our major treasury bank, and only fund the local accounts as required for payments, minimising our risk overseas. We keep the bulk of our funds in client operating accounts in the UK where we know the bank, and any issues are likely to be supported by the UK government.

“Regulation and compliance aspects are obviously large considerations, but we’re moving millions of pounds every day which brings its own challenges in terms of making sure things are under your control, and that people are trained and motivated to do the right thing. So, I think at its peak there is a constant people challenge as well as the regulation challenge, and that’s solved by getting the right people to come and work for us.”

As for Townsend, he emphasises that Vitesse takes its compliance responsibilities very seriously, adding, “ I really don’t think you can run a payments business without being pretty solid on all of the regulatory elements.”

  • Gina is a fintech journalist (BA, MA) who works across broadcast and print. She has written for most national newspapers and started her career in BBC local radio.

https://thefintechtimes.com/vitesse-driving-innovation-and-speed-into-a-network-of-local-banks/

Risk Exchange Platforms for Reinsurance Gain Prominence

https://dailyfintech.com/2021/09/30/risk-exchange-platforms-for-reinsurance-gain-prominence/

The future of reinsurance (RI) markets is being reshaped by new technology, alternative capital and reinsurers bundling value-added services with reinsurance. These forces are leading to new trends, in a backdrop of changing RI buying patterns, emerging risks and the realities of ever changing regulation. Placement processes have evolved at a slow pace while acquisition costs are on the rise. The reinsurance placement process includes discovering RI prices, agreeing to contract terms and conditions, and allocating limits among several reinsurers. It is a complex, slow and expensive process that involves face-to-face meetings with numerous handovers. The ensuing inefficiency and opacity makes this market ripe for more automation.

The technology to automate complex processes that require intermediation by trusted parties has advanced in the past few years. Helping with the uptick are participants like the Lloyd’s market who have mandated electronic placement. However, several RI contracts are distinctive enough that automated placement is impractical due to the complexity. Property and casualty RI programs being straightforward, lend themselves to more automated placement. Insurtechs such as Tremor saw this opportunity and began in this part of the market.

Auction site Tremor improves price discovery for risks, making transactions more cost efficient. It has found success with more traditional cat reinsurance. Tremor launched a weekly Industry Loss Warranty (ILW) auction in the middle of the COVID-19 disruption to keep delivering liquidity through any potential market dislocation. It provides key marketplace management information making it an effective risk trading platform to draw both reinsurance buyers and sellers.

Features include quoting tools that allow cedents and reinsurers to more precisely express their terms, aggregate reports that offer insight into transactions and the wider market, and a portal enabling brokers to leverage the marketplace on behalf of clients. Reinsurers can add subjectivities after expressing supply curves and capacity limitations. With subjectivities, one layer subsidizes another to maximize a reinsurer’s allocation while ensuring the aggregate price still meets the company’s needs.

Tremor Technologies’ risk transfer marketplace counts 33 Lloyd’s of London syndicates among the risk capacity providers signed up, representing over $33 billion of capacity. Nearly a fifth of companies signed up to provide capacity are ILS funds.

Akinova allows brokers to list risks with accompanying documentation and conduct auctions with specific capacity providers or the marketplace as a whole. Taking RI online and logging trades electronically is a substantial step forward compared to the current shuffling of papers. The auction functionality combined with market intelligence ensures a more efficient market. Chat and news functionality adds a community building touch.

Vested interests in the current system can be strong, making any change a challenging endeavor. Incumbent underwriters and brokers with profitable, multi-year relationships are likely to resist changes. Established culture and ways of working may block change to entrenched processes. One major reinsurer declined because underwriting was worried about revealing pricing.

B3i is an interesting industry initiative, which has eighteen shareholders including many of Europe’s largest groups including Ageas, Allianz, AXA, Generali, Hannover Re, Liberty Mutual, Munich Re, SCOR, Swiss Re and Zurich. Its Cat XoL is is built on distributed ledger technology. The application supports end-to-end digitization of the placement process from cedent to reinsurer. Parties can negotiate terms, agree rates and complete placements.

Given the rapid and drastic shift to remote working, it was just a matter of time before the reinsurance market would break free from many of its person-to-person interactions. Automated placement is a positive for distribution platforms and insurers. Platforms gain market power, insurers would see rates fail, from lower distribution costs and lower pricing as platforms increase competition among reinsurers. For reinsurers, the implication is more nuanced. Access to risk expands, but so does competition.

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https://dailyfintech.com/2021/09/30/risk-exchange-platforms-for-reinsurance-gain-prominence/

DeFi ‘blowing up,’ Coinbase chief compliance officer says

https://bankautomationnews.com/allposts/crypto-defi/defi-blowing-up-coinbase-chief-compliance-officer-says/

That banks and financial institutions can no longer ignore the cryptocurrency space may be a bygone conclusion. But are they ready for decentralized finance within that space? Cryptocurrency has seen rapid adoption, with estimates that 23% of Americans now own crypto, a panel said yesterday at the Association of Certified Anti-Money Laundering Specialists (ACAMS) conference […]

https://bankautomationnews.com/allposts/crypto-defi/defi-blowing-up-coinbase-chief-compliance-officer-says/

Vista seals $1.5B deal for software firm Blue Prism

https://bankautomationnews.com/allposts/core-cloud/vista-seals-1-5b-deal-for-software-firm-blue-prism/

Private equity firm Vista Equity Partners is to acquire automation software developer Blue Prism Group Plc for about 1.1 billion pounds ($1.5 billion), in yet another takeover of a U.K. tech company by a foreign buyer.

Blue Prism recommended Vista’s bid of 1,125 pence a share in a statement Tuesday. The offer represents a premium of about 35% to Blue Prism’s closing price of 832 pence on Aug. 27, the last full trading day before takeover interest became public.

The deal barely claws back the value lost this year as Blue Prism’s shares fell by around a third, pulled lower by concerns over gaps in its portfolio and the cost of developing the products needed to keep the company competitive.

Blue Prism’s shares fell as much as 3.3% to 1,150 pence in early trading Tuesday in London.

“While investors will no doubt have hoped for more, we note that Blue Prism has lowered full-year 2021 revenue expectations,” Jefferies analysts wrote in a note. “This obviously creates a weak negotiating position to extract a high price.”

It’s the latest in a growing number of British companies being sold to overseas buyers as foreign investors take advantage of valuations depressed by the pandemic and Brexit.

Image by Bloomberg Mercury

The government has welcomed the trend as a sign of confidence in the country’s economic prospects, yet it’s also sowing concerns that promising growth industries are being stripped of their expertise and strategic autonomy.

In February Dialog Semiconductor Plc was acquired by Japan’s Renesas Electronics Corp in a $5.6 billion deal, and in July Tencent Group acquired game developer Sumo Group Plc for $1.26 billion.

Bloomberg first reported details of the Blue Prism acquisition. Some 23% of its shareholders have said they will back the deal, including Jupiter Investment Management and Lead Edge Capital Management, according to the statement.

Blue Prism said in late August that it was in discussions with Vista and another private equity firm, TPG, about possible offers for the company.

Vista aims to combine Blue Prism with existing portfolio company Tibco Software Inc., which it acquired in 2014. It plans to maintain Blue Prism’s U.K. headquarters and invest in research and development, people familiar with the matter said. One of its independent directors, Murray Rode, was previously a longtime member of Tibco Software’s management and served as its chief executive after its purchase by Vista.

Activist investor Coast Capital, which owns just under 3% of Blue Prism, recently said it’s open to a private equity takeover of the company after initially opposing a sale. The investment firm’s founder, James Rasteh, said the company’s management had now earned his trust.

The software company’s depressed valuation reflects concerns about gaps in its product portfolio and its distance from key clients and investors in the U.S., Rasteh said in August. He said his firm had spent five months drawing up potential operational improvements that would accelerate Blue Prism’s sales growth.

Vista, which focuses on investments in enterprise software companies, was founded by billionaire Robert F. Smith in 2000. It has more than $81 billion in assets under management, according to the firm’s website.

— David Hellier, Liana Baker and Aaron Kirchfeld with assistance from Amy Thomson (Bloomberg Mercury)

https://bankautomationnews.com/allposts/core-cloud/vista-seals-1-5b-deal-for-software-firm-blue-prism/

Movers and Shakers: New CEO named by RPA vendor Workfusion

https://bankautomationnews.com/allposts/center-of-excellence/movers-and-shakers-new-ceo-named-by-rpa-vendor-workfusion/

Two leading players in the robotic process automation (RPA) space made executive hires this month, including today’s announcement by WorkFusion that Adam Famularo will lead the vendor as its new chief executive officer. Famularo joins WorkFusion from erwin Inc., where he served as CEO and doubled revenue over a four-year period, according to a WorkFusion […]

https://bankautomationnews.com/allposts/center-of-excellence/movers-and-shakers-new-ceo-named-by-rpa-vendor-workfusion/

Tap Global Announces a Strengthened Leadership Team in Response to Rapid Growth

https://thefintechtimes.com/tap-global-announces-a-strengthened-leadership-team-in-response-to-rapid-growth/

Crypto banking app, Tap Global, has announced that due to an unprecedented increase in demand for the Tap App, the company has added some focussed roles within its leadership team.

Launched in February 2020, Tap Global was the first company to launch a crypto prepaid payment card with Mastercard in the EU. Through the dedicated TAP app users can trade all major cryptocurrencies and fiat; buy goods and services using cryptocurrency, full EEA coverage for their card, a named EUR IBAN and/or GBP Sort Code and Account Number.

TAP Global developed proprietary AI Middleware that connects to multiple exchanges simultaneously, automatically validating available liquidity and selecting the most competitive prices while facilitating trades in a matter of seconds.

Co-Founder Arsen Torosian will be taking on the newly created role of Chief Strategic Officer to focus on the strategic product additions Tap has planned for 2021 and beyond.  Arsen will also oversee the marketing operations within this role.

Current Chief Operations Officer and Co-Founder, David Carr will become CEO, responsible for the overall success and development of the business, its expansion into new markets, strategic partnerships and will also continue to manage the daily operations of the company and its teams.

TAP Global has lured in another talent, Lea Bonnet who will be joining the management team in the newly appointed role of Marketing Manager. Lea was formerly heading the CRM activities at leading trading platform markets.com. She will be responsible for building the business’s overall consumer management capability to capture data across all key touchpoints of the business and provide a high level of service and consumer experience.

New team members are expected to join once further Covid related travel restrictions ease.

Carr comments, “Since TAP launched, we have experienced high adoption rates of our app and the appetite people have shown towards crypto trading has been explosive.  I believe that the functionality that Tap offers to our Pan-European client base puts us at the forefront of the market. Being the first Crypto product approved by Mastercard came with its challenges but the addition of the personal GBP Accounts and or EUR IBANs puts Tap at the forefront of comparable products”.

Carr adds, “Now with these new roles in place and additional hires planned for the coming year, we are set to support our expansion and the increase in consumer demand.”

  • Gina is a fintech journalist (BA, MA) who works across broadcast and print. She has written for most national newspapers and started her career in BBC local radio.

https://thefintechtimes.com/tap-global-announces-a-strengthened-leadership-team-in-response-to-rapid-growth/

Expanding Its Scalable Commercial Banking Tech, BankProv Partners With Fintel Connect

https://thefintechtimes.com/expanding-its-scalable-commercial-banking-tech-bankprov-partners-with-fintel-connect/

BankProv, a future-ready commercial bank offering adaptive and technology-first banking solutions to emerging markets, has launched its affiliate program in partnership with Fintel Connect, a provider of AI-powered performance marketing solutions built for the financial industry.

As the 10th oldest bank in the United States, BankProv has evolved from The Provident Bank as a digital-first, forward-thinking commercial bank focused on delivering superior banking solutions to its targeted customer base.  These solutions include personalised account onboarding, asset-based lending, and lowered minimums on its small business checking account, including zero-dollar deposit requirements and unlimited deposit insurance. The bank is also one of only a handful of banks nationwide offering deposit services to cryptocurrency exchanges, institutional investors, and brokers.

“We believe in challenging the status quo and helping our customers grow for tomorrow. Our partnership [with Fintel Connect] ensures we have the platform and tools we need to connect with future customers and drive long-term growth for our bank.” Said Carie Kelly, Senior Vice President of Virtual Banking, BankProv.

Like BankProv, the partnership is a fundamental pillar of Fintel Connect’s overall business mission. The collaboration between the two brands affirms their commitment to providing scalable, reliable technology solutions that drive the future of financial services.

“We believe in challenging the status quo and helping our customers grow for tomorrow,” Kelly continued.  “Fintel Connect has proven its ability to solve the growth challenges of financial services and fintechs, and our partnership ensures we have the platform and tools we need to connect with future customers and drive long-term growth for our bank.”

“Commercial banking is evolving at an unprecedented rate, and BankProv is at the forefront,” said Nicky Senyard, CEO and Founder of Fintel Connect. “Their digital-first approach and innovative solutions are what will continue to drive the industry forward, and we’re proud to support the BankProv team on their growth mission.”

  • Francis is a junior journalist with a BA in Classical Civilization, he has a specialist interest in North and South America.

https://thefintechtimes.com/expanding-its-scalable-commercial-banking-tech-bankprov-partners-with-fintel-connect/

Gig Wage, Green Dot and Commonwealth’s Announce a Partnership To Help Minority Group Gig Workers

https://thefintechtimes.com/gig-wage-green-dot-and-commonwealths-announce-a-partnership-to-help-minority-group-gig-workers/

FinTech 1099 payroll platform Gig Wage has announced its partnership with national nonprofit Commonwealth in a new project aimed at addressing the financial insecurity of the growing non-traditional workforce. With the gig economy in the US growing by an estimated 33% since the start of the pandemic, the research will ultimately help drive sustainable change at scale to ensure that gig workers have the financial tools to achieve financial security and opportunity. The project is being funded in part by Green Dot Corporation (NYSE: GDOT), a lead investor of Gig Wage.

“At Gig Wage, our number one priority is to deliver economic empowerment to our customers and their 1099 contractors, many of whom live not only paycheck-to-paycheck but sometimes gig to gig and have been ignored and overlooked by traditional payment and banking models,” said Craig J. Lewis, Founder and CEO, Gig Wage. “We are working feverishly to understand the effects of income sufficiency and stability on these groups and build technology that helps as many people as possible. We’re excited to be collaborating with Commonwealth and Green Dot on research that will result in new insights into how we can better support the growing gig workforce and ultimately help guide us toward our mission to bank the entire gig economy.”

The income volatility faced by gig workers, which became even more pronounced during covid-19, has revealed unique financial challenges for non-traditional workers that disproportionately affect lower-income Black, Latinx, and female workers. Gig Wage and Commonwealth’s joint research initiative will study the effectiveness of strategies to bolster household incomes and reduce income volatility. The project is designed to understand strategies that can be implemented at scale to positively affect the financial security and inclusion of gig workers long-term.

“Financial security for non-traditional workers is a continuous challenge in the quickly expanding gig economy,” said Timothy Flacke, Co-Founder and Executive Director, Commonwealth. “The economic uncertainty and extreme income volatility of this labour force has been exacerbated by the pandemic. Through this research, we will continue to develop innovations and insights that drive the systems change we need to address these workers’ unique financial challenges.”

The pool of primarily Black, Latinx, and female gig workers involved in the study will be sourced by Gig Wage from its proprietary tech that is used to pay contractors. Green Dot, which also serves as the infrastructure bank partner enabling Gig Wage to design and deploy customised banking and money movement solutions for the growing customer base, has provided an investment that will help expand the pool of participating gig workers in this study.

“The growth of the gig workforce, and the unique challenges that have come with it, offers tremendous opportunity for fintechs to make these workers’ lives better,” said Dan Henry, President and CEO, Green Dot. “We’re proud to support Gig Wage and Commonwealth in the advancement of financial security and inclusion for these workers.”

What is Gig Wage and how is it different?

Craig Lewis, CEO and founder, Gig WageCraig Lewis, CEO and founder, Gig Wage
Craig Lewis, CEO and founder, Gig Wage

The Fintech Times sat down with Gig Wage’s CEO, Craig J. Lewis, to get a deeper understanding of the company and what set it aside from the rest of the market.

Gig Wage is a B2B2C company, looking to help the 10, which directly leads to helping the 10,000. Lewis said, “When you think about the gig economy, everybody thinks about the 10,000 drivers for the organisation, making sure they get their money fast and flexibly, and we do too, but we do it through the 10 people at the company responsible for paying the 10,000.

“We look at the 10’s challenges: why have they struggled in the past to deliver a fast and flexible service – be it compliance or operational challenges – and we solve these problems. The outcome is still the same, the workers get paid on time but we help the paying company organise this by sorting out operational inefficiencies, whilst also dealing with things ranging from W9 to 1099 compliance for the company.

“We lead with a third party mentality first, building our technology and business model to operate with that in mind.”

Gig Wage also sets itself apart by enabling payments to be paid directly into any bank account or neobank account, not a Gig Wage one that takes a fee for allowing early access to funds. Lewis continued, “We use embedded finance and bank accounts as we work to be the bank of the gig economy. We’re hyper-focused on providing the outcomes the customers need, but through the companies paying them. By leaning into the B2B infrastructure, the gig economy will have a groundwork that will allow others to overlay any technology on top of it as there will be connectivity and comprehensiveness.”

While Gig Wage’s main industry is transportation and delivery, the infrastructure could be applied to any field.

  • Francis is a junior journalist with a BA in Classical Civilization, he has a specialist interest in North and South America.

https://thefintechtimes.com/gig-wage-green-dot-and-commonwealths-announce-a-partnership-to-help-minority-group-gig-workers/

Trust Science: The Power of Artificial Intelligence and Machine Learning in Credit Lending

https://thefintechtimes.com/trust-science-the-power-of-artificial-intelligence-and-machine-learning-in-credit-lending/

Human error is often at fault for poor lending decisions. However, technology has got to a stage where it can sort through different applications and work out what loan would suit a person the best. AI and Machine Learning mean technology can constantly learn to provide a better service in the lending market. However, if misused, private data could be leaked, breaching regulations in place.

Evan Chrapko, the Chairman and CEO of Trust Science, an Edmonton-based AI firm currently dedicated to reshaping modern data analysis techniques, particularly in the area of credit scoring. In addition to its alternative credit scoring technology, Trust Science is emerging as an industry leader in explainable AI (XAI), which aims to challenge the stigma surrounding ML and increase the visibility of its tools.

With a wealth of experience in the lending market working at different start ups, Chrapko explains the four main benefits of using AI and implementing machine learning in credit lending:

Evan Chrapko, the Chairman and CEO of Trust ScienceEvan Chrapko, the Chairman and CEO of Trust Science
Evan Chrapko, the Chairman and CEO of Trust Science

Artificial intelligence (AI) is an umbrella term defining how different machines and algorithms simulate human intelligence and functions. Machine learning (ML), on the other hand, is a subset of artificial intelligence in which machines are programmed to process large amounts of data (beyond the human limit) and improve gradually with time and experience. Both AI and ML have changed the business landscape, especially in financial services. With AI and ML, companies in the 21st century are offering their lender-customers faster and more accurate calculations of borrowers’ credit scores. The traditional credit lending system has resulted in bias, and even with considerable protections and regulations, eliminating traditional bias from the US credit system has been difficult. The integration of AI and ML models in providing financial services has the potential to solve this bias problem by using alternative data sources, therefore, making more accurate credit lending decisions. The International Data Corporation found that, in 2020, the AI Services market, which focuses on AI/ML integration, was valued at $19.4billion, representing the fastest growing AI segment outside of hardware and software. Similarly, another estimate from PricewaterhouseCoopers says that the companies investing in AI will get large returns on their investment and AI would be able to increase the GDP of the financial sector by 10% in less than a decade. The following are key advantages of using AI/ ML systems for making credit lending decisions:

  1. Benefits to All Stakeholders

The use of AI/ML technologies can be used to identify creditworthy borrowers who have been traditionally excluded from the credit system due to the lack of credit history (underbanked individuals, credit invisibles). AI/ML can use large amounts of additional alternative data (e.g. current income, employment history, and/or applicant-permissioned data from their mobile phone) to calculate the credit score of borrowers. Such data-driven methods allow wrongly-scored subprime borrowers to get credit, increasing the number and type of people and businesses that banks and other financial institutions can serve in a highly legal and ethical way. The traditional credit scoring system, for instance, labelled 50% of Americans as less-than-ideal borrowers. Worse, approximately 40% of those people are wrongly scored. Inaccurate, or limited, systems reduce the addressable customer base for conventional lenders, and it leads to unnecessarily high-interest rates or no credit at all for large segments of the population. The use of AI/ML in credit score calculation, however, leads to superior loan origination, has shown to increase lender’s profits by upwards of 15%, and contribute to a better return on their assets, all while keeping the risk level relatively constant.

2. Dynamic Scoring

AI/ML technologies are increasingly used in credit scoring to quickly adapt to environmental changes, such as interest rates, average household income, and other measurable factors. This method of dynamic scoring allows lenders to make consistently accurate decisions, regardless of macro-level factors. Conventional credit scoring models are very static, and they do not take into account drastic changes (like the covid-19 pandemic). But with the use of AI/ML technologies hosted inside a purpose-built infrastructure, scoring models can be retrained extremely rapidly to account for changes in the macro-environment and in consumers’ behaviour.  In this way, volatility and chaos (which are toxic to conventional scorecarding methodologies and even computerised regression-based modelling techniques) can be harnessed and converted into assets:  AI/ML helps eliminate the “fog of change” and accurately assesses the creditworthiness of borrowers even in highly volatile market conditions.

3. AI/ML Can Reduce Risks

Unlike traditional credit scoring systems, AI/ML has the capability to handle and process large quantities of data very quickly. Companies are using AI/ML systems to build both traditional and alternative data models. By leveraging the processing power of these ML-generated models, institutions, such as lenders, can make predictions based on a particular individual or scenario, such as evaluating a first-time borrower application. Coordinating these systems for the purposes of dynamic scoring, however, can be quite difficult without the right platform to operationalise these AI/ML-built models.

Arguably, the greatest risk for any lender is granting a loan to a client who cannot pay it back. The best way to eliminate this risk is by quantifying the risk of every client, or borrower, and identifying not only their creditworthiness but also the loan amounts at which the individual is likely to pay off the principal and its interest. Evaluating the riskiness of a borrower is the key to a successful lending business. With an accurate risk evaluation method, financial institutions can maximise the number of loans given to credit-worthy borrowers, and minimise the number of loans gifted to unreliable ones. AI/ML can leverage massive amounts of data to help create models that are highly informed and highly adaptable. The success of which, however, is limited by the data set you feed it.

AI/ML-built models are products of the data that was used to create them. The parameters and evaluation techniques of which are directly informed by what the AI has learnt. By introducing large alternative datasets, you are essentially providing the AI/ML with a more complete picture of the borrower and their profile. Therefore, by feeding the AI/ML more data, you can increase the amount of information the model has to create holistic, fair, and accurate credit evaluations. With an improved scoring and decision-making process, lenders can avoid declining good applicants and avoid approving bad applicants.

Just because one utilises a large amount of data to inform their AI/ML, doesn’t guarantee, however, that these borrower evaluations will be void of bias. In fact, the inclusion of prohibited factors and limited datasets can skew an otherwise objective process into a biased one.

4. Compliance

The traditional data used to calculate credit scores can be biased against minority populations or other historically marginalised groups, including single parents or low-income groups. If not handled properly, AI/ML systems can reproduce these biases in their assessment as well.  AI/ML algorithms should be properly modelled and fully supervised. Data ethics training should be provided to data scientists to ensure that the data used complies with regulations that ensure fairness (like the  Fair Credit Reporting Act) to outright avoid – not merely reduce – the use of prohibited factors.

Identifying said prohibited factors is not always so easy. According to the Effects Test legal doctrine, even if prohibited factors are not used, algorithms and evaluation processes may inherently perpetuate biases based on prohibited factors, which are explicitly non-compliant with the Equal Credit Opportunity Act (ECOA), Regulation B, and other similar regulations. Companies offering these kinds of automated scoring services must take part in and consistently pass regular and voluntary compliance checks, which screen extensively for biased factors and results. Not only will it improve the quality and size of their lending base, it will also avoid them having to incur massive fines from regulators like the Federal Trade Commission (FTC).

Using AI and ML to Power Fair and Equitable Credit Scoring

The credit market is growing rapidly, and the use of AI/ML in credit scoring systems can lead to more efficient and more accurate decisions. The potential of AI/ML is vast, which, if properly harnessed, can lead to a fairer and more inclusive credit lending sector. And if not, it can lead to wide misuse of personal and financial data of customers, reproduce additional biases and further marginalise certain populations.

Therefore, a company offering financial services must focus on its privacy policies, compliance policies and take measures for financial inclusion. The right company will build or buy its AI/ML systems in such a way that they are truly harnessing permitted and permissioned data to improve accuracy and efficiency of their lending.

Removing discriminatory credit scoring policies is not as easy, however, as simply identifying prohibited factors or integrating ML-built models. Legal doctrines like the Effects Test prove that, like humans, internal biases are deeper than surface-level judgement. Traditional systems subconsciously reinforce biases and inequalities that can manifest themselves in skewed credit scoring, which is non-compliant. Achieving compliance means utilising alternative data and scoring platforms to fairly, accurately, and inclusively assess everyone and thus gain the trust of your customers, stakeholders, and relevant regulators.

https://thefintechtimes.com/trust-science-the-power-of-artificial-intelligence-and-machine-learning-in-credit-lending/