This week’s edition of Finovate Global takes a look at the wave of funding that fintechs in France have received in recent weeks. The $108 million secured by hardware crypto wallet maker Ledger appropriately leads the pack. But there have been a handful of investments in a variety of French fintechs that are also noteworthy.
First up, though, it’s Ledger’s massive fundraising. The Paris, France-based crypto wallet designer and manufacturer announced that it raised $108 million in funding this week. The investment is part of the company’s Series C round and, as such, does not change Ledger’s $1.4 billion valuation. The funding does add to the $385 million the company raised in 2021.
Ledger’s latest investors are a lengthy list of new and existing backers. True Global Ventures, Digital Finance Group, and VaynerFund are among the new investors. Existing investors 10T, Cité Gestion Private Bank, Cap Horn, Morgan Creek, Cathay Innovation, Korelya Capital, and Molten Ventures are among Ledger’s existing investors who also participated.
“Today, Ledger announced our funding round. These funds will accelerate our mission to bring a new generation of secure consumer devices to hundreds of millions exploring critical digital assets and blockchain-enabled technology,” Ledger chairman and CEO Pascal Gauthier wrote in a blog post at the Ledger website.
Ledger demonstrated its crypto hardware technology at FinovateEurope back in 2016. The company currently offers three hardware wallets, Ledger Nano X and Ledger Nano S Plus, and Ledger Stax. The latter model, the company’s latest, was only recently announced and is scheduled to begin shipping to customers within the next few months.
The investment in Ledger is a reminder that France remains among the more crypto-friendly countries in Europe, if not the western world. U.S. based Circle, the company behind both USDC and Euro Coin, recently announced that it had chosen France for its European headquarters. This is just one reflection of the country’s openness to the cryptocurrency industry.
News that Burger King fast food restaurants in Paris will begin accepting cryptocurrency for payment may be another. The company has partnered with Instpower, who will deploy its power bank rental machines in Burger King’s Paris locations. The power bank rental machines are connected to a pair of cryptocurrency payment services – Alchemy Pay and Binance Pay. Now Burger King consumers will be able to get their Whoppers, charge their mobile devices, and pay in crypto all in the same place. The move is a boon for Instpower as it seeks to expand the popularity of power banks in Europe. The collaboration is also a clear win for crypto, which benefits from both the publicity and the convenient new use case for crypto holders.
Ledger is not the only French fintech scoring investor dollars this month. N2F, a French startup that offers business financial management software, raised $26 million (€24 million) in a round led by PSG Equity. A French fintech called Elyn that offers try-before-you-buy services raised $2.7 million (€2.5 million) in pre-seed funding in a round led by Headline and Sequoia Arc. On the financing front, B2B lender Aria secured a $53.3 million (€50 million) debt facility courtesy of M&G Investments. The funding added to the $21.7 million (€20 million) debt facility the company announced last year.
Here is our look at fintech innovation around the world.
Latin America and the Caribbean
Asia-Pacific
Sub-Saharan Africa
Central and Eastern Europe
Poland’s Secfensejoined the Cybersecurity program of Google’s Startups Growth Academy. Secfense demoed its passwordless authentication technology at FinovateEurope 2022.
Austria-based Finmatics secured $6.5 million (€6 million) in Series A funding for its technology that brings the power of AI to accounting and tax planning.
Today is the final day of Women’s History Month. At Finovate, we have spent the past 30+ days highlighting the accomplishments of women in our industry. We began our commemoration with a look at the women who would demo their companies’ latest technologies at FinovateEurope. We followed up on International Women’s Day, showcasing the women who would deliver mainstage keynote addresses at the conference. And just this week, we featured the winners of the “Female Founded/Owned” category of our Finovate Demo Scholarship program for fintech startups.
Today we share insights from Maggie O’Toole, Vice President of Strategic Partnerships at TabaPay. Headquartered in Mountain View, California, and founded in 2017, TabaPay is a specialist in real-time money movement. The company facilitates one million transactions every day, has more than 2,000 clients, and is the number seven ranked CNP (card-not-present) acquirer in the U.S.
We caught up with Ms. O’Toole to discuss her work at TabaPay, her experience as a female leader in fintech and financial services, and what needs to be done in order to enable more women to secure leadership roles in our industry.
Tell us about your background and current position at TabaPay.
Maggie O’Toole: When I graduated college and moved to the United States from Poland, I faced some of the biggest challenges of my life. Being an immigrant in a new country without speaking the language was a difficult experience, but it also ignited a fire in me to prove that I could succeed.
Over the past decade, I’ve dedicated myself to the payments industry, focusing on strategic partnerships that help businesses thrive. My time at Onbe was particularly impactful; I had the opportunity to lead the charge on launching new products and forging partnerships that enabled real-time payments. I’m proud to say that I played a pivotal role in helping Onbe grow from a startup to a scaled enterprise, while completing a successful M&A strategy.
Today, at TabaPay, I focus on maximizing value for our clients and positioning the company for long-term growth. Building solid relationships with clients, networks, and banks is at the heart of everything I do. I take pride in the fact that I’ve been able to establish a partner management department from scratch, which is set to quadruple in size by the end of the year.
My journey has been anything but easy, but it has shaped me into the leader I am today. I’m passionate about the payments industry and helping businesses succeed, and I’m excited to see where my journey will take me next.
What challenges have you faced as a woman in fintech, and how have you overcome them?
O’Toole: As a woman in fintech, I have faced various challenges throughout my career. I’m still amazed by the vast underrepresentation of women in leadership positions in the industry. This has made it more difficult to find role models or mentors who share similar experiences and can provide guidance and support.
Another challenge I have faced is the pervasive gender bias that exists in many aspects of the industry. This bias can manifest in subtle ways, such as being interrupted or talked over in meetings, or in more overt ways, such as being passed over for promotions or opportunities.
To overcome these challenges, I have sought out supportive networks of women in fintech and other industries. These networks have provided me with invaluable mentorship, advice, and opportunities for growth. I have also worked hard to advocate for myself and my accomplishments, and to challenge gender bias whenever I encounter it.
Furthermore, I have always prioritized my personal and professional development. I have sought training and education opportunities to improve my skills and knowledge, allowing me to excel in my role and advance my career despite these challenges.
How have these challenges shaped your leadership style?
O’Toole: My experiences as a woman in fintech have influenced my leadership style. I believe overcoming challenges and facing obstacles head-on has helped me become a stronger and more effective leader. By persevering through difficult times, I have developed a resilient and adaptable leadership style; I’m always ready to take on new challenges.
One way these challenges have shaped my leadership style is by making me a better communicator. I have learned the importance of clearly articulating the company’s vision and plan to my team, so everyone is on the same page and working towards the same goals. Additionally, I have become more empathetic and understanding of my team’s needs, providing them with the support and guidance they need to be successful. I truly believe that sound, repeatable, positive business results are a natural outcome of prioritizing our employees, clients, and partners through building trusted and safe relationships.
Finally, setbacks and failures have taught me to view them as learning opportunities and growth. I encourage my team to adopt a similar mindset and not to be afraid to take risks and make mistakes. I believe that taking pauses periodically and reflecting on where we are and where we’re headed as a team is essential for long-term success.
Overall, my experiences have made me a more effective and compassionate leader, and I am grateful for the lessons they have taught me.
What is your approach to building work environments and teams?
O’Toole: My approach to building work environments and teams is rooted in building strong relationships. As a leader, I believe it’s essential to take the time to understand the backgrounds, experiences, and perspectives of each team member to foster a culture of trust and mutual respect. By investing in these relationships, I aim to create an environment that empowers individuals to be their best selves and feel supported in their growth and development.
I strive to create a work environment that encourages collaboration, creativity, and innovation. This includes providing opportunities for open communication and feedback, as well as recognizing and celebrating individual and team achievements. Ultimately, I aim to build a team united by a common purpose and inspired to work towards a shared vision.
What are the most important qualities for women in leadership positions in fintech, and how can they develop these qualities?
O’Toole: As women in leadership positions in fintech, we have unique perspectives and valuable insights to bring to the table. We must have confidence in our abilities and not let anyone else define us or hold us back. We should proudly tell our stories, embrace our individuality, and be intentional with our time and energy.
To develop the necessary qualities for leadership, we should constantly be growing and learning, personally and professionally. We can bring new skills and lessons from our personal lives into our work and vice versa and remain open to new perspectives and opportunities for growth.
As leaders, we must be intentional about what we say “yes” to, knowing that every decision comes with trade-offs. We should prioritize our strengths and areas of expertise and allocate our time strategically to make the most significant impact on our teams and organizations. By doing so, we can create a more fulfilling and rewarding work environment for ourselves and those around us.
How do you see the role of women in fintech evolving over the next five years, and what are your thoughts on the industry’s progress toward gender parity?
O’Toole: The fintech industry has come a long way regarding gender parity, but much more work remains to be done. As a female leader in fintech, I’m confident that women will continue to play a pivotal role in shaping the industry over the next five years, and beyond.
Companies need to recognize the value of diversity and make a concerted effort to hire and promote female leaders. This is not about meeting quotas, but about creating a genuinely inclusive workforce that reflects the communities we serve. By empowering women to take risks, dream big, and believe in themselves, we can develop a culture of success that benefits everyone.
At TabaPay, I’m proud to be part of a team committed to diversity and inclusion. With 55% of our employees and 65% of our leadership identifying as women or non-binary, we’re setting a powerful example for the rest of the industry. In the years to come, I believe we’ll see even more significant progress as more companies recognize the critical importance of gender parity in fintech and beyond.
E-commerce and embedded payments continue to gain popularity as millennials and Gen Z consumers look to social media for shopping experiences — and banks must meet their customers where they are shopping online. “Facebook, Instagram, TikTok users — 50% of them say they will make a social media purchase in 2023,” Allie Chafey, innovation senior […]
When ChatGPT seemingly burst on the scene late last year, everyone from college students to CEOs took notice. For financial institutions, ChatGPT is just one tool in their digital transformation toolkit. It can refine and complement existing digital banking solutions, but when it comes to improving digital customer service and engagement, it still has a long way to go.
Sasha Caskey, chief technology officer, Kasisto
To build out digital customer experience tools, it’s better to go with digital assistants or chatbots that are more refined and specifically trained for banking services. But first, let’s take a look at what everyone’s talking about.
What is ChatGPT?
ChatGPT is a chatbot trained on a massive amount of data. It models the person it is talking to and can engage in a contextual conversation, much like speaking with another person. In certain situations, it would be difficult to distinguish between ChatGPT and another person.
The technology is based on large language models (LLMs), specifically GPT-3.5. A large language model is a tool that can predictively compose text based on patterns it has learned from massive amounts of text data, usually drawn from publicly available sources, such as the internet. GPT, or generative pretrained transformer, is a framework for large language models based on the Transformer architecture for deep neural networks.
These neural networks can track sequence and relationship data — such as words in a sentence — to learn context and, ultimately, meaning. GPT itself has been making headlines since the release of GPT-3 in June 2020.
Limitations of ChatGPT
ChatGPT is like nothing most of us have seen before. It seems knowledgeable and creative, it can write code and poetry, and even create games. More importantly, it is more likely to align its output to the user’s specific goals and much less likely to produce inappropriate or toxic output than previous LLMs.
But for today’s financial institutions, ChatGPT and other similar technologies are still in the early stages of development and, as such, come with a bit of baggage. Here’s why:
They’re temporal. ChatGPT was trained at one point in time, which means it lacks any information published since then.
They’re expensive to produce and train.
As has been reported elsewhere, ChatGPT can lack ethics and can be offensive — not exactly great for customer experience.
They can be wrong. Very wrong. LLMs like ChatGPT are known to “hallucinate,” or produce content that is not based on any reality.
What chatbots should do for digital banking
Current banking customers are comfortable with using a chatbot. According to a Cornerstone Advisors study: “Among consumers whose bank or credit union has deployed a chatbot, 70% have used it at least once, with about three in 10 having used it three or more times.”
The study also showed consumers’ satisfaction with their digital assistants’ interactions is strong, with half being “very” satisfied and 43% reported as “somewhat” satisfied.
Yet for banks looking to build out their digital banking solutions with a chatbot, or its more robust cousin, an intelligent digital assistant (IDA), ChatGPT is just not ready for prime time. It’s a more basic and generic chatbot that’s not exclusively built for customer service.
It’s better to look for chatbots or IDAs that can address member queries, provide personalized and detailed financial information, help consumers make smarter financial decisions and act as the first encounter with your brand.
There are a number of chatbots out there. But no matter which solution banks choose, a chatbot or digital assistant can be a forward-facing, bank-savvy digital solution that speaks the unique language of their financial institution.
Smart, personable chatbots can do that. ChatGPT? Not quite yet.
Sasha Caskey is the chief technology officer for Kasisto, which makes conversational AI-powered digital assistants for financial institutions.
LeapXpert, a specialist in compliant business communications, has locked in $22 million in Series A+ funding.
The round was led by Rockefeller Asset Management via its Technology Ventures Group.
LeapXpert most recently demoed its technology at FinovateFall 2022 in New York.
Business communications company LeapXpert has secured $22 million in Series A+ funding. The round was led by Rockefeller Asset Management via its Technology Ventures Group. Also participating in the round were Uncorrelated Ventures, and the Partnership Fund for New York City. Existing investors and a new strategic investor were also involved in the funding.
“Today marks a significant milestone for LeapXpert’s growth journey,” LeapXpert Dima Gutzeit founder and CEO said. “Our goal is to set the global standard for responsible and flexible employee-customer communication, and with this funding, we are one step closer to achieving our vision.”
This week’s investment takes LeapXpert’s total capital to $36 million, according to Crunchbase. LeapXpert will use the funding to help meet increasing demand for its services from financial institutions. The investment will also fuel its entry into other industry verticals and build out its partnership network. Additionally, the investment will support continued development of its LeapXpert Communications Platform, and launch a new public SaaS solution.
The platform helps balance the ability of customers to use popular communication tools with compliance and security requirements. LeapXpert has found that messaging and communications apps are “almost universally used” by businesses in financial services. Yet the compliance technology to regulate them has yet to catch up. With LeapXpert’s technology, companies can offer employees a single corporate identity for business communications through these popular, already widely used options.
“Of course, customers should be able to use iMessage, WhatsApp, SMS, Signal, Telegram, WeChat, or whatever to interact with their service providers,” Uncorrelated Ventures Founder and General Partner Salil Deshpande said. “And financial institutions and other service providers should be able to communicate with those customers using Slack, Teams, or whatever else, while still respecting security, compliance, regulations, and governance. LeapXpert is really the only solution.”
LeapXpert most recently demoed its technology at FinovateFall 2022. At the conference, the New York-based company showed how its app for Microsoft Teams creates a comprehensive digital record of company conversations across all text and instant messaging communications channels.
Cross River Bank is launching an encompassing payment platform called CrossPay alongside online payment company Pay.com to streamline several business payment functions. The $9.2 billion Ft. Lee, N.J.-based bank saw an opportunity to streamline processes through the CrossPay platform via Cross River’s core and suite of APIs, Keith Vander Leest, head of payments at Cross […]
Credolab and Provenir announced a partnership this week that will make credolab’s SDK available in the Provenir Data Marketplace.
Credolab’s SDK won the “AI Platform” category in Juniper Research’s Future Digital Awards last fall.
Based in Singapore, credolab made its Finovate debut in 2018 at FinovateAsia in Hong Kong.
A new partnership between credolab and Provenir will enable financial institutions to leverage behavioral data to handle the challenges of credit risk management, fraud detection, and more. The companies announced this week that credolab’s mobile SDK will be made available in the Provenir Data Marketplace, a data hub for Open Banking, KYC/KYB, verifications, and other resources.
In a statement, credolab co-founder and CEO Peter Barcak added financial inclusion to the list of challenges that the partnership responds to. “Credolab believes that traditional lending processes exclude many people because they target applicants with pre-existing credit history, typically in the middle- and high-income groups,” Barcak said. “Our aim is to make credit available to all by giving lenders access to a previously untapped, highly predictive source of behavioral data.”
CredoLab’s technology analyzes more than 10 million behavioral features to provide predictive credit risk scores, marketing predictions, and fraud alerts – without processing personal data. Companies using the technology have experienced up to a 40% predictivity uplift, up to a 22% reduction in fraud costs, and up to a 32% increase in approval rate. Last fall, credolab won the “AI Platform” category in Juniper Research’s Future Digital Awards – Fintech & Payments for its SDK. credoSDK offers a multi-modular code library that enables both Android and iOS apps to capture behavioral metadata. With the user’s consent, credoSDK collects both privacy-consented and anonymous metadata, and sends it to credolab’s proprietary scoring engine. The API delivers risk and fraud scores, anti-fraud verification, and marketing insights to users in real-time.
Headquartered in Singapore and founded in 2016, credolab made its Finovate debut at FinovateAsia 2018 in Hong Kong. Today, the company has more than 150 financial companies, banks, fintech unicorns in more than 30 countries as its clients.
LAS VEGAS – Banks are reducing manual processes and streamlining workflows through fintech nCino’s digital banking platform. Wells Fargo, for one, expanded the use of fintech nCino’s digital banking platform to its consumer and small business division in April 2022. The cloud-based platform provides visibility into application status, documentation, submission status, customer records and notes, […]
In 2022, Finovate launched its Demo Scholarship Program. The goal of the program is to highlight fintech founders from underrepresented communities, as well as fintech startups that are tackling issues of climate change, diversity, and financial inclusion. At each event, starting with FinovateFall in 2022, Finovate grants five scholarships in the categories of Environment, Social, Governance, Person of Color Founded/Owned, and Female Founded/Owned.
With Women’s History Month drawing to a close this week, we wanted to take a moment to highlight the scholarship winners in our Female Founded/Owned category since our scholarship program was launched last year.
Pave
FinovateSpring 2023 Scholarship Winner – Headquartered in Palo Alto, California, Pave enables credit risk teams to identify healthy borrowers, optimize credit limits, and improve collections outcomes. Pave’s technology provides access to a unified view of end customers’ cash flow and financial profile to help power a range of use cases including cash advances, credit building, overdraft protection, and more.
Pave was co-founded by Ema Rouf in 2020. Previously, Rouf co-founded Adazza – a company that built integrations with telecoms and mobile money operators in emerging markets including Africa and Central Asia in order to collect and analyze data for analytics and machine learning applications.
Quoroom
FinovateEurope 2023 Scholarship Winner – Headquartered in London, U.K., and founded in 2018, Quoroom offers an end-to-end fundraising and cap table management software solution for private companies. The firm’s technology enables users to raise capital up to four times faster thanks for Quoroom’s investment workflows. Quoroom supports a range of functions including building an investor pipeline and conducting investor matchmaking and outreach, as well as legal completion and cap table management.
Ulyana Shtybel is co-founder and CEO. Shtybel was named to the Inspiring Fifty Europe’s roster of the Top Fifty Women in European Tech for 2022.
TAZI AI
FinovateEurope 2023 Scholarship Winner – Based in San Francisco, California and founded in 2017, TAZI AI is a machine learning platform that enables businesses and data scientists to develop ML models for agile decision-making. The company earned recognition from Gartner as a Cool Vendor in Core AI Technologies for its continuous learning, explainable AI, and human-in-the-loop technology. TAZI AI won Best of Show in its Finovate debut at FinovateEurope this year.
Zehra Cataltepe is co-founder and CEO. A former professor of computer engineering for 17 years, Cataltepe is a member of the Forbes Technology Council, and an alum of the Alchemist Accelerator, Class 26.
Debbie
FinovateFall 2022 Scholarship Winner – Based in Miami, Florida and founded in 2021, Debbie is the Noom for debt loss. The company leverages behavioral psychology and rewards to help users pay off 3x more debt and enable lenders to recession-proof borrowers. Debbie won Best of Show at FinovateFall 2022 for its app that guides borrowers in a curriculum based on actionable financial assignments, offers rewards for successful goal achievement, and makes it easier for borrowers to connect and track all of their debt accounts.
Co-founder Frida Leibowitz is CEO. A member of the inaugural class of On Deck’s fellowship program in 2021, Leibowitz spent more than two and a half years working for Marcus by Goldman Sachs.
UBS’ acquisition of the failing Credit Suisse reframes the European banking market, but also presents significant technological challenges for UBS. The $1.5 trillion, Zurich-based UBS moves from “too big to fail” to “way too big to fail” with the $3.2 billion purchase of Credit Suisse, with global ramifications should the acquisition go sour, Jost Hoppermann, […]
Equifax is launching a new consumer credit scoring model called OneScore.
OneScore leverages alternative data, such as telecommunications, utility, and speciality finance data found in the Equifax Cloud.
OneScore offers traditional credit history and payment data on more than 191 million consumers.
Data analytics and credit scoring company Equifax is launching a new consumer credit scoring model. OneScore, the new model, aims to increase the scorable population of credit-seeking consumers.
To accomplish this, the firm is leveraging alternative data, such as telecommunications, utility, and speciality finance data found in the Equifax Cloud. Equifax anticipates this increase in data will provide lenders with a more comprehensive financial picture of consumers.
OneScore offers traditional credit history and payment data on more than 191 million consumers and provides Equifax DataX and Teletrack finance data on 80 million consumers. Because the majority of U.S. consumers have at least one cell phone or utility bill in their name, these tools have the potential to increase credit scores by up to 25 points. This increase translates into a 20% rise in the number of scorable consumers; a population of 8.8 million people.
“Equifax has invested billions of dollars into unique data, verification insights, fraud reduction tools, powerful modeling techniques and cloud-based technology solutions that empower our customers to bring greater access to financial opportunity to more people in more places,” said Equifax CEO Mark W. Begor. “OneScore is a testament to the power of the Equifax Cloud in driving innovation that can increase the visibility of consumers to help expand access to credit and create new, mainstream financial opportunities.”
Founded in 1899, Equifax employs nearly 14,000 employees across the globe. The company earned $5.1 billion in revenue last year by offering its credit, identity, fraud, marketing, and workforce management tools to both individuals and businesses. Equifax has made OneScore available to U.S. lenders and service providers.
The financial services industry has been using alternative data to underwrite risk for some time now. However, what’s continually evolving in this space is the ability of scoring models to gather valuable data from diverse sources and derive meaningful insights from it. As AI advances, we can expect to see more significant strides in underwriting that will enable loans for borrowers who were not previously considered creditworthy under traditional models.
U.K.-based Connect Earth landed $5.6 million (£4.65 million) in seed funding this week.
The company, founded in 2021, offers a carbon tracking API to help financial institutions access sustainability data.
Connect Earth made its Finovate debut in March at FinovateEurope in London.
Connect Earth, an environmental data company based in the U.K., has landed $5.6 million (£4.65 million) in seed funding. The startup, founded in 2021, will use the capital to accelerate its expansion among large enterprises in the U.S. and Europe. Connect Earth noted that it has already begun working with financial institutions like KBC Bank and strategic partners like FIS Global.
“We are delighted to have secured this investment, which will enable us to significantly increase our capacity for working with new partners around the world,” Connect Earth co-founder and CTO Nick Carmont said. “Connect Earth has the potential to make a huge impact on the financial sector and this investment will accelerate our ambitions to become the environmental data backbone of financial services across the globe.
The funding round was led by Gresham House Ventures. Also participating were Love Ventures, Global Brain, The Norinchukin Bank, Portfolio Ventures, and Super Capital VC, as well as strategic angel investors. Existing investors Market One Capital, Mustard Seed MAZE, and Venista Ventures were also involved in the round.
Connect Earth enables businesses to gain critical insights into the climate impact of their spending and investment decisions. The company’s carbon tracking API helps democratize access to sustainability data, empowering individuals and institutions alike to make sustainable choices. Connect Earth’s API can be embedded into financial institutions’ mobile apps to provide carbon footprint estimates for every spend-based transaction. This, according to Connect Earth, helps “bridge the gap between intent, knowledge, and action” when it comes to meeting sustainability goals.
Since the beginning of 2022, Connect Earth has estimated carbon emissions for more than 500 million financial transactions. Partner KBC Bank noted that it saw an increase in customer engagement of 2% and an increase in customer environmental awareness of 20% within the first two months of integrating Connect Earth’s API within its mobile app.
In a statement on the Connect Earth blog, Carmont added that the company also plans to launch “several new products that will break down the barriers to accessing environmental data and tools.” Connect Earth recently announced the launch of Connect Invest, an API solution that provides carbon emissions estimates for stock and share investments.
Connect Earth’s funding announcement – and recent new product – come at an opportune time. In the same Connect Earth blog post, Gresham House Ventures Associate Director Benjamin Faulkner noted that Connect Earth may benefit from “extensive regulatory tailwinds such as TCFD and SFDR” which mandate that financial institutions improve disclosure of their carbon footprints. Accompanying the investment, Gresham House Ventures’ Steward Holness will join Connect Earth’s board of directors.
Connect Earth made its Finovate debut at FinovateEurope 2023 earlier this month in London.
Many financial institutions still rely on legacy systems or outdated computer hardware and software that were introduced more than half a century ago. These technologies were not designed with future-proofing in mind and were not intended to be upgraded or replaced.
Fast forward to 2023, and the financial services industry has changed beyond recognition. Digital start-ups are disrupting the market, and customers expect digital integration and seamless transactions. Banking services are no longer the sole preserve of established financial institutions.
Established financial institutions can feel like supertankers compared to agile speedboats, such as digital disruptors, racing off into the distance with their innovative products that exceed customer demands. But the process of updating or replacing legacy technology is not completely bleak. With their size, resources, and momentum, these institutions can weather the storm while nimble disruptors are at risk. Established institutions have financial stability, customer base, and solid reputations that digital disruptors lack, and some may question why they need to innovate at all.
Customer expectations are changing.
A PwC survey from June 2020 found that 41% of customers would switch providers due to a lack of digital capability. Nowadays, customers expect the latest technology across all their financial interactions, and companies that can’t meet these high standards are quickly left behind. As Gen-Z comes of age, they expect intelligent technology as a simple fact of life. Staff working within these organizations will also have higher expectations and be reluctant to work with outdated tools.
The changing scenery can be bewildering for established banks with legacy tech, especially since research from BCG has shown that 70% of digital transformations failed in the last few years. Complicated and costly legacy core banking transformation projects are negatively impacting profits and not hitting the mark with consumers.
A smarter way to innovate.
Fintech enablement offers a smarter way to innovate. It allows organizations – not just financial institutions, but any company operating digitally – to create and launch new digital products without the need for a full digital transformation. Fintech enablement is a full-stack technology solution that works with existing legacy systems and can transform them into efficient, automated ecosystems. Hyper-personalized customer journeys become simple, which not only better caters to existing customers but also wins over new ones. Backend processes can be automated, saving time, resources, and money.
Traditionally, there are three ways for established financial institutions to innovate: innovation labs, incubators/accelerators, and venture capital investment.
Innovation labs allow established financial institutions to maintain their steady course while creating small, innovative teams that can develop agile digital products that match those of their nimble digital competitors. Fintech enablement solutions enable these small teams to create and launch innovative financial products that meet the needs of the market without being reliant on legacy systems and teams of tech support.
By finding a way to balance legacy institutions with agile innovation, traditional financial establishments can reap two significant benefits.
Meet customer expectations – especially those of GenZ, who expect seamless technology across all aspects of life.
Reduce costs – digitally superior financial institutions will see dramatically reduced costs compared to their competitors.
Fintech enablement is a smarter way for established financial institutions to innovate, modernize their operations, and keep up with customer expectations. By embracing this approach, they can create and launch innovative digital products without the need for a full digital transformation.
Currently dealing with outdated legacy technology? Book a demo to learn about FintechOS’ fintech enablement platform here.
Amid the news of bank failures last week, you may have heard that cryptocurrency wallet and platform Coinbasereceived a Wells notice from the U.S. Securities and Exchange Commission (SEC). The notice is a letter that the SEC sends at the end of an investigation, informing an organization of the charges it plans to bring against the party.
What Coinbase did (or didn’t do) wrong
So why is the SEC taking aim at Coinbase? The commission said that its investigation identified that Coinbase’s listed digital assets, Coinbase Earn, Coinbase Prime, and Coinbase Wallet are potentially violating securities law. This statement makes it clear that the SEC believes it has identified securities listed on Coinbase’s platform. Coinbase, on the other hand, insists that it does not list securities on its platform.
Crucial to this debate is understanding that there is an ongoing, complicated debate on whether or not cryptoassets should be considered securities. After receiving the Wells notice, Coinbase asked the SEC to identify which specific assets listed on its platforms are considered securities, but the SEC declined to do so.
Coinbase’s public response
After receiving the Wells notice, Coinbase published a blog post titled, “We asked the SEC for reasonable crypto rules for Americans. We got legal threats instead.” In post, the company reinforces that it does not consider its cryptoassets securities, and that the Wells notice does not require changes to its current products or services.
Furthermore, Coinbase said it attempted to register a portion of its business with the SEC last summer. This was tricky because there is no current method for a crypto firm to register with the SEC. So Coinbase pioneered the registration process, spending millions of dollars on legal support to create proposals for the SEC. However, after spending nine months creating potential methods Coinbase met with the SEC 30 times and did not receive any feedback or questions regarding its suggested methods.
After undergoing this process, Coinbase said it is ultimately looking for guidance. “If our regulators cannot agree on who regulates which aspects of crypto, the industry has no fair notice on how to proceed,” said Coinbase Chief Legal Officer Paul Grewal. “Against this backdrop, it makes no sense to threaten enforcement actions against trusted public companies like Coinbase who are committed to playing by the rules. It makes even less sense to threaten enforcement actions unless an industry participant concedes that non-securities can be regulated by the SEC. That is for Congress to decide.”
Other SEC targets
Coinbase is not the only crypto-related organization the SEC has targeted in recent years. Stablecoin issuer Paxos, cryptocurrency exchange Kraken, USDC-creator Circle, and real-time money movement platform Ripple have each gone into battle with the SEC.
One of the above crypto firms the SEC has targeted, Circle, is doubling-down on its business in more crypto-friendly pastures. The Massachusetts-based company announced earlier this month that it has selected France as its European headquarters. Additionally, Circle recently filed applications in France to become both a licensed Electronic Money Institution and a registered Digital Asset Service Provider (DASP) in the nation.
What’s next?
Coinbase, which is publicly listed on the NASDAQ, has made it clear it is doing its best to be forthcoming and honest, and that it believes it is not breaking the law. “Tell us the rules and we will follow them. Give us an actual path to register, and we will register the parts of our business that need registering,” said Grewal. He concluded by saying that if U.S. regulators continue to threaten the good actors in the crypto industry, they will ultimately drive innovation, jobs, and the entire industry overseas. If Circle’s recent move is any indication, the U.S. may be saying, “au revoir” to the entire crypto industry.
The Smart Branch tool offers banks a digital way to help customers set up direct deposit when they visit the branch in person.
Pinwheel reports that the new tool will prove useful for the 75% of consumers who prefer to open a new account in-person, since setting up direct deposit is a natural next step in the process.
Payroll data connectivity platform PinwheelunveiledSmart Branch today. The new tool gives banks a digital way to set up direct deposits for customers who come into their physical bank branch.
“A customer’s account setup experience should automatically include direct deposit set up when they visit their bank,” said Pinwheel CRO Lauren Crossett. “For banks, it’s a simple fact that the customer relationship starts with a person’s paycheck. People are staying at jobs for shorter periods of time while the prevalence of gig-based jobs continues to grow, as does the number of people with multiple income sources, so banks will have more opportunities than ever to onboard their customers’ direct deposits.”
Smart Branch enables end users to use their smartphone to set up direct deposits and verify income without requiring paper-based forms. This new tool will prove particularly useful for the 75% of consumers who prefer to open a new account in-person. That’s because, as Pinwheel describes, having their income deposited directly into their new account is the “next natural step” when opening a new account.
When banks eschew paper forms for Smart Branch, their customers will use their smartphone to scan a QR code, which will direct them to enter information to connect their payroll or income accounts. Customers without a smartphone can use a bank teller computer or iPad to set up the connection.
“Banks see millions of new account openings per year, so that’s hundreds of thousands of opportunities for banks to set up customers’ direct deposits in one easy step when they visit their branch,” said Pinwheel Client Solutions Lead Kate Marienthal. “There’s no reason the customer experience should fracture when the need to set up direct deposits is presented. Now, thanks to Pinwheel Smart Branch, banks won’t need to send customers away to fill out paper forms at home. They can finalize the process right inside their locations. We’re excited about what the availability of this new solution means for our customers’ omnichannel strategies.”
An iteration of Smart Branch geared toward credit unions and community banks is already in the works. Pinwheel is currently working on a product for smaller FIs that need a swift, lightweight direct deposit switching deployment option. Crossett said the company plans to roll out the new version next month.
Pinwheel was founded in 2018 to create a fairer financial system with its API that connects to more than 1,600 payroll platforms and more than 40 time and attendance platforms. In all, the system covers 80% of U.S. workers and more than 1.5 million employers. Since launch, Pinwheel has amassed $77 million in funding from investors such as GGV, Coatue, and First Round Capital. Kurt Lin, who Finovate interviewed earlier this year, is CEO.
LAS VEGAS — PNC Financial Services is leaning on digital outreach to decrease defaults and communicate with borrowers at risk of delinquency. “We’re up to about 85% of unique delinquent customers receiving some sort of digital outreach,” Anthony Hark, senior vice president of collections and recovery at PNC, said during CBA Live. The rate of digital outreach is up from about 30% […]
As business reconsiders their budgets this year, many are already taking extra cuts in 2023. We’ve already seen some layoffs at major banking and financial institutions, and if a recession happens, as firms such as BlackRock and JP Morgan have predicted, this will likely continue.
Restructuring spending is a natural reaction in tougher market conditions, but companies will regret cutting resources for data governance and risk management. Regulators are strengthening enforcement and issuing more fines for compliance errors such as compromised data and spreadsheet failures.
Robert Showers, CRO of Capital Markets and Bank Services for SaaS company Coherent
The last decade has seen an increasing number of fines by regulators to banks with weak living-will plans involving the use of spreadsheets — fines that have made headlines in all key financial centers in the United States, Europe and Asia. In addition to the financial costs, this news can impact reputation. Among banks, there is an ever-increasing rise of manual spreadsheet calculations and modeling deployed to make business decisions. But to avoid repercussions, they will need to keep governance and tracking in check.
Spreadsheet error: The Achilles heel
Performance speed has often led to spreadsheet errors and is proving incredibly costly — misplaced data or calculations can make institutions lose billions of dollars and be fined millions more.
While there are numerous benefits to automating and integrating a bank’s spreadsheets, including bringing products to market faster and scaling successful ones more quickly, the most pressing issue this year is complying with regulatory rules for the software tool.
Excel has been an enterprise tool for decades, so why is this issue so critical now? It’s because regulators in the U.S. and the U.K. want financial institutions to take data governance in general — and spreadsheet risk, in particular — more seriously. Specifically, authorities want to see better implementation of BCBS 239, the section of Basel III that addresses spreadsheet risk.
Since 2019, regulators have sent CEO letters to the industry highlighting failures to implement BCBS, especially around the lack of data automation and proper controls over spreadsheets and the potential risk posed by spreadsheet failures. Now, regulators globally are taking an enforcement-led approach of strengthening regulations, increasing oversight and issuing more fines for banks’ spreadsheet failures to bring more attention to the importance of compliance.
The U.K.’s PRA is consulting on CP6/22’s “Model risk management principles for banks,” while the U.S. FR Y-14 reporting regulations will be strengthened in 2023to require more accurate and timely P&L reporting, particularly in a “severely adverse scenario.” The decision to implement these new regulations is because they believe that firms’ use of spreadsheet models will continue to increase and become more complex. However, previous reviews have found numerous data governance failures, particularly around reporting requirements.
What risks do spreadsheets pose?
Many of the concerns around spreadsheets stem from their ease of use. They can be adjusted with one click, making them vulnerable to overwriting. Often, many employees rely on a spreadsheet for tasks as massive as tracking millions of data points to something as benign as quick sums.
But without appropriate documentation of key processes, risk assessments and judgments, they are also a compliance landmine, leading to improper management. Regulators are cracking down after discovering that several firms were not formally registering working files as EUCs, and others have no program of ongoing reviews of the underlying logic.
Regulators argue that lack of controls makes it difficult to generate accurate returns, particularly at speed during periods of market volatility.
Preparing for heightened banking regulations
Not only will proper compliance save a firm potentially millions (if not billions) of dollars, but it will also create a culture that is more strategic.
Software add-ons to Excel can be incredibly valuable in assisting employees with compliance tasks. They can create better accounting of spreadsheets so they cannot be overwritten, help manage reports and flag and manage risks before they become a company’s headache. Regardless of which solution a company takes, it will have to have some strategy in place to govern increased operational risk exposure. The key will be implementing this strategy before it’s too late.
Robert Showers is CRO of Capital Markets and Bank Services for Coherent, a global SaaS company that converts spreadsheet business logic into enterprise-grade code for financial institutions and insurance companies.
KeyBank Executive Vice President of Payments Brandon Nowac is focused on delivering tech-forward automation solutions to the bank’s third-party fintech partners and forming additional partnerships in the year ahead.
BAN caught up with Nowac to discuss KeyBank’s use of technology to mitigate fraud, preparation for the launch of new real-time payment rail FedNow and new technology the bank foresees in the payment space. What follows is an edited version of that conversation.
Bank Automation News: What tech has KeyBank been working on in the payment space?
Brandon Nowac, Executive Vice President of Payments, KeyBank
Brandon Nowac: A lot of times we’re delivering these highly technical, software-first solutions to our customers through our team, but we’re doing it through partnerships and from our API suite that our clients can consume, all the way to the work we’re doing in card acceptance to be able to digitize that whole experience.
Adjacent to it, we acquired XUP and their digital onboarding capabilities. When you think about embedded banking, we can digitize that onboarding experience for that end customer to accept credit card payments online. That’s a digital technology investment but adjacent to core payments on the onboarding side of the equation.
BAN: What technologies stand out in the payments space now?
BN: We do have three power industry verticals in areas of commercial real estate, technology companies and then health care. When we look at technology companies, it’s really the trend of how many new technology businesses’ software-first platforms are coming into the market every year and many times they’re built on user experience workflow management, but there’s a payment somewhere in there. It could be receivable or payable, and that’s where our strategy around tech companies is to help them make or receive payment in their native software that then customers are using.
BAN: How is KeyBank reducing payment fraud through technology?
BN: We are very focused on continuing to present ideas to our clients on ways to mitigate and manage fraud. We’ve been heavily invested in payment gateway partnerships, and one of the gateway partnerships we have is very much focused on fraud and risk management. That’s just an example of where, even in a digital experience, you can work with our team and we’ll use a partnership like a gateway to overlay tools to be able to mitigate fraud in something like card acceptance or merchant acquiring.
BAN: How is KeyBank preparing for the launch of FedNow?
BN: We are live with real-time payments, and we’ve seen good success particularly in some of our industry teams where there’s a product market fit for real-time payments. Although I wouldn’t say its broad adoption at this point, it’s a good conversation with almost every one of our commercial clients. It’s been adopted in certain industries more specifically, and then on our product roadmap, we have investments going into FedNow now as well.
BAN: How would you categorize your leadership style?
BN: I fundamentally believe the most successful businesses have ecosystem leaders, which means you’re well beyond the four walls of a bank, but you’re able to culturally align and then you can align to the ecosystem that you live within.
When we think about our platform of solutions that we bring to an end customer, there’s a massive ecosystem behind the scenes that’s enabling that product or service to be utilized by our client and that could be a network like Mastercard, Visa, American Express, Discover Card, or that could be a core processor, like a Fiserv or others. … I believe in trying to instill in my team [it’s important to be] going beyond being an effective enterprise leader to [becoming] an ecosystem leader.
Banking software provider Blend is partnering with Navy Federal Credit Union (NFCU).
The partnership will enable NFCU to reimagine its digital account opening process for new members with greater automation and enhanced workflows.
Blend made its Finovate debut in 2016, presenting its technology at both FinovateSpring and at our developer’s conference, FinDEVr Silicon Valley.
Cloud banking software provider Blend will bring its deposit account product to Navy Federal Credit Union to help the 90+ year financial institution reimagine its digital account-opening process for new members.
NFCU will leverage Blend’s deposit account solution to automate more processes and unify workflows across multiple acquisition channels. The integration will enable members to open new accounts quickly (“in just minutes”) and supports identity and eligibility verification, membership confirmation, decisioning, and new account funding. The new user interface and functionality come courtesy of Blend’s Composable Origination Platform, which is a low-code solution that enables designers to build unique workflows and customer integrations quickly and easily.
“We are thrilled to deepen our long-term relationship with Navy Federal to support this initiative in streamlining deposit account openings,” Blend’s Nima Ghamsari said. “The ability to rapidly deploy innovative solutions in cases like these validates the flexibility and power of our product offerings underpinned by Blend Builder, and we look forward to continuing to work with them on providing best-in-class offerings to America’s service members.”
Blend made its Finovate debut at FinovateSpring in 2016, and also demonstrated its technology at our developer’s event, FinDEVr Silicon Valley, that year. Making its first big splash as an innovator in the mortgage lending space, Blend leveraged high-fidelity data sources to enable lenders to originate efficient, data-driven mortgages. In recent years, Blend has expanded its mission by providing a new range of services beyond mortgages, including deposit accounts, credit cards, and support for other lending solutions such as personal, home equity, and auto loans.
In addition to its partnership with Navy Federal Credit Union, Blend also this year announced that KeyBank has experienced “significant results” – including the ability to close home loans 17 days faster on average – since deploying Blend’s cloud banking technology. “Blend’s mission to bring simplicity is paying off for our teammates who are having a streamlined experience, as it’s also bringing greater transparency to our clients to be instantly in touch with where their closing stands and obtaining it quicker than we’ve ever been able to,” President of Home Lending for KeyBank Dale Baker said.
Blend began the year with news that BMO had fully digitized its residential mortgage refinancing operations for loans secured by property in states and counties that accept e-signatures and digital notaries. BMO is using Blend’s mortgage eNotes capabilities, as well as the company’s Close product which enable customers to complete their mortgage refinancing from any location at any time.
Headquartered in San Francisco, California, Blend was founded in 2012.
For many, FinovateEurope is like a family reunion. For others, it’s all about the new trends and tech that will change the course of finance. Find out what brings everyone back to FinovateEurope – check out our event highlights.
