Fintech News Issue #274

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https://www.fintechweekly.com/fintech-news/fintech-news-issue-274

Behind the Idea: OakNorth

https://thefintechtimes.com/behind-the-idea-oaknorth/?utm_source=rss&utm_medium=rss&utm_campaign=behind-the-idea-oaknorth
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When COVID-19 first began to emerge in January 2020, the first step that OakNorth took was to look at the potential for international supply chain disruption. The European fintech unicorn developed its own “COVID Vulnerability Rating” (CVR) Framework, which integrates over 130 proprietary subsector-specific COVID-19 stress scenarios with regional overlays, incorporating assumptions for impacts on key financial metrics such as revenue, operating costs, working capital and CapEx.

The Framework enables commercial lenders to re-underwrite loans and brings consistency to their credit approach through the crisis, running risk analysis on a consistent basis, and since the start of the year, has analysed around $400bn of loans.

Rishi Khosla OBE is the Co-founder and CEO of OakNorth

Rishi Khosla OBE, is the Co-founder and CEO of OakNorth. Prior to this, he co-founded Copal Amba, a financial research firm that was scaled to 3,000 employees and sold to Moody’s Corporation in 2014. He is also an early-stage investor in Paypal and Indiabulls. Known for building the fastest-growing business in Europe and one of the world’s only profitable fintech “unicorns”.

What has been the traditional OakNorth response to financial technology innovations?

OakNorth combines a deep understanding of credit, rich data sets (which include unconventional and previously unavailable data), cloud computing, and state of the art machine learning, to provide its bank partners with the insight and foresight they need to holistically and profitably lend to the Missing. The operating efficiencies realised through the OakNorth Platform allow banks’ relationship managers to focus more time with borrowers, having received insight on those borrowers and their sector.

Through 360-degree monitoring of borrowers’ financial and operational data, the Platform provides banks with early warning indicators in case of deterioration in credit quality, enabling it to have preliminary conversations with borrowers before negative credit issues arise – something that will prove invaluable during the economic recovery that will follow after the COVID-19 crisis abates. 

How has this changed over the past few years?

It hasn’t – our approach was always to build a Platform and prove it within our own bank before we begin licensing it to other lenders. That’s what we’ve done – we’ve built OakNorth Bank in the UK which today ranks within the top 1% of banks globally in terms of performance, and that gives us a great proof of concept for the Platform.

Is there anything that has created a culture of change inside the company?

We’re a very mission-driven and values-driven company. Like any fast-growing company, it’s an environment that is very intense and high-pressured, but it’s also fun, rewarding, collaborative and open.

We’re fortunate to continue to attract some of the most ambitious and talented people from across industries who also share our values. Those values are working together as One Team to deliver products and services to our customers that are ‘10X’ better than the competition and deliver ‘Customer Delight’, ensuring that we put energy and momentum into everything we do.

We’re not afraid to ‘Say it how it is’ or zero-base the way things have always been done. Joel and I have said numerous times that we want to continue building this business for the next few decades. We are not looking for a quick exit. This reflects our final value of ‘Right Ambition’, and one that is shared by our team. Almost half of our employees have taken the opportunity to become shareholders in the business, investing their own money and in doing so, helping to build for the long term.

What FinTech ideas have been implemented?
One of the largest banks in the US, PNC, is deploying OakNorth’s CVR Framework across its C&I and CRE portfolio, mapping individual borrowers to 130 domains. PNC and OakNorth will run portfolio diagnostics on a periodic basis to factor the rapidly evolving scenarios of COVID-19 across subsectors and regions.

What benefits have these brought?
The OakNorth Platform enables the lenders we work with to have fundamentally different conversations and engage with their borrowers in a dramatically different way. It brings credit insight about borrowers’ businesses back to the front line, democratising this knowledge so that lenders have a deeper understanding of the individual business, its industry and its sub-sector. As a result, they have more relevant and thoughtful conversations with the business owner and can build much more meaningful relationships with them.

However, the Platform doesn’t only assist them with credit analysis and data optimisation, it also aids in portfolio monitoring. By proactively monitoring clients’ financial and operational data, it is able to provide early warning indicators in case of deterioration in credit quality, enabling the lenders we partner with to have preliminary conversations with their borrowers, well before a negative credit issue arises – thus leading to more positive credit outcomes.

Do you see any other industry challenges on the horizon?

Businesses need liquidity to overcome the challenges being presented by COVID-19 and get back on their feet when the recovery begins. They are looking to banks and lenders to support them in this crucial period – either directly, or through Government loan programs.

However, given the unprecedented scale and dynamics of this crisis, trying to assess credit risk based on previous risk ratings doesn’t make sense as all previous correlations are broken. As a result, lenders need to be able to:

  • Reassess credit risk based on forward-looking scenarios which factor in the impact that COVID-19 is having on businesses and then follow through on these stress scenarios on a granular, loan-by-loan basis, rather than just at the portfolio level;
  • Monitor all credits more closely as sectors have become more volatile post-COVID-19, and;
  • Re-underwrite these loans at depth and bring consistency to their credit approach through the crisis, running risk analysis on a consistent basis.

Can these challenges be aided by FinTech?
Absolutely. We’re helping lenders address this challenge via our “COVID Vulnerability Rating” (CVR) Framework, which helps them undertake portfolio diagnostics to rate loans from 1-5 based on their vulnerability to the new economic environment, with 1 being least vulnerable, and 5 being most vulnerable. The ratings are based on multiple factors including liquidity, debt capacity, funding gap and profitability, and can be dynamically customized to reflect the lender’s credit risk criteria and appetite.

Final thoughts?

Credit insights will play a huge part in the COVID-19 recovery. Instead of wasting time on the things that don’t matter, it allows banks to be able to spend more time on the things that do – such as structuring a loan for the borrower’s needs in the time frame they need it, as well as exploring cross-selling opportunities

  • 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/behind-the-idea-oaknorth/?utm_source=rss&utm_medium=rss&utm_campaign=behind-the-idea-oaknorth

DigniFi raises $14M , buys $275M in assets to grow auto repair finance

https://www.mobilepaymentstoday.com/news/dignifi-raises-14m-buys-275m-in-assets-to-grow-auto-repair-finance/

DigniFi, an app-based platform for financing auto repair, has raised $14 million in Series A funding from Austin, Texas-based BuildGroup and Exor Seeds, the venture arm of Exor N.V., which is the holding company of the Agnelli family, the controlling shareholders of Fiat Chrysler.

DigniFi also signed an agreement with Neuberger Berman Private Equity to buy $275 million in assets, which will allow it to grow its network of 5,000 auto service centers.

“After months of financial uncertainty, Americans are eager to get back to work and many will need their cars in working order to do that,” Rick Counihan, CEO of DigniFi, said in a company release. “Our network of auto service centers has grown by 500 locations over the last 90 days, spurred by this rising demand.”

https://www.mobilepaymentstoday.com/news/dignifi-raises-14m-buys-275m-in-assets-to-grow-auto-repair-finance/

HighRadius opens Frankfurt office to continue European expansion

https://www.mobilepaymentstoday.com/news/highradius-opens-frankfurt-office-to-continue-european-expansion/
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HighRadius Corp., a fintech that automates accounts receivable and treasury management businesses, has opened a new office in Frankfurt, Germany, continuing its international expansion.

The Houston-based company originally expanded into Europe in 2017 when it opened a London office and opened an Amsterdam location in 2019. HighRadius officials said the firm has grown bookings in the region by more than 250%, added 25 new customers and quadrupled the number of employees in the region over the past 12 months.

“Frankfurt’s position in central Germany makes other parts of the country readily accessible, and its status as the financial center of the country opens up a gateway to a deep pool of talent and relevant partnerships,” Jon Keating, vice president and general manager, EMEA at High Radius, said in a company release.

The Frankfurt location follows a new $125 million funding round announced in January.

The company sees Germany, Switzerland and Austria as major market opportunities. The company plans to staff the Frankfurt office with pre-sales, sales, marketing and consulting teams.

https://www.mobilepaymentstoday.com/news/highradius-opens-frankfurt-office-to-continue-european-expansion/

American Express Global Business Travel Launches Neo1, a Spend Management Platform for SMEs

https://thefintechtimes.com/american-express-global-business-travel-launches-neo1-a-spend-management-platform-for-smes/?utm_source=rss&utm_medium=rss&utm_campaign=american-express-global-business-travel-launches-neo1-a-spend-management-platform-for-smes
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Free online service helps finance teams manage cashflow

American Express Global Business Travel (GBT) has launched a service to help owner-managed businesses control cashflow. Neo1 integrates purchasing from Amazon Business and GBT’s online travel booking tool. It gives finance managers better visibility over what employees are spending money on, in addition to the powerful backing of the world’s leading travel management company (TMC). It’s free to subscribe, and can be set up in less than five minutes.

Jason Geall, GBT’s Vice President and General Manager for Northern Europe, said: “We understand how
important cash flow and liquidity are to companies in the current environment. It’s crucial they have the tools to manage their businesses as efficiently as possible. We also realise how important SMEs are in driving a country’s economy, so we actually expedited development of Neo1 to make it available to business owners as soon as we could.”

Neo1 allows finance teams to manage all spend categories, such as office supplies, utilities and travel bookings, in one place. The tool gives users real-time visibility of money spent, money committed, and future spend requests. It is particularly helpful in managing large volumes of smaller line items, which can collectively amount to a significant percentage of overall business expense.

Fiona Hastings, Neo1 General Manager, said: “Finance teams can get started with Neo1 in only a few minutes. It will help them effectively manage all employee spend. People can request budgets, order supplies and manage all purchasing, payment and expense reporting in one place online. Payments are integrated from corporate cards, while the same system is used to log claims for reimbursements.”

In a February 2020 poll, nearly three quarters of business owners said controlling spend was more important for making strategic business decisions than had been five years previously. One in five admitted they did not have visibility of their business expenses from the previous 30 days. These issues are now in even sharper focus.

Neo1 is currently available in the UK. Click here to sign up.

https://thefintechtimes.com/american-express-global-business-travel-launches-neo1-a-spend-management-platform-for-smes/?utm_source=rss&utm_medium=rss&utm_campaign=american-express-global-business-travel-launches-neo1-a-spend-management-platform-for-smes

Equity investment in smaller UK tech businesses increased 27% to £4.0bn last year

https://thefintechtimes.com/equity-investment-in-smaller-uk-tech-businesses-increased-27-to-4-0bn-last-year/?utm_source=rss&utm_medium=rss&utm_campaign=equity-investment-in-smaller-uk-tech-businesses-increased-27-to-4-0bn-last-year
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  • Value of total equity investment in UK’s smaller businesses rose 24% to £8.5bn

  • Growth stage deals are the primary driver of increased investment – Early signs of market softening before emergence of Covid-19 – British Business Bank programmes supported 11% of all UK equity deals

Equity investment in the UK’s tech businesses increased by 27% in 2019 to £4.0bn, the highest amount since the series began in 2011, reveals the British Business Bank’s annual Small Business Equity Tracker report, published today. The UK’s thriving tech sector remains highly attractive to equity investors, accounting for 47% of total equity investment in UK SMEs through 691 deals in 2019.

Within tech, the sectors receiving the largest share of deals were software (425 deals worth £2bn) and life sciences (78 deals worth £540m). The verticals attracting the greatest amount of equity investment in 2019 were Software as a Service (471 deals worth £2.5bn), FinTech (193 deals worth £1.8bn) and AI (173 deals worth £880m). Software as a Service companies in particular were highly attractive to equity investors, with investment value increasing by 69% in 2019 compared to 2018, a much larger increase than that seen in the overall market.

The Small Business Equity Tracker report, which analyses Beauhurst data on equity investments throughout the UK in 2019, provides an important benchmark of the market immediately prior to the Covid-19 pandemic. It shows the value of total equity investment in the UK’s smaller businesses rising 24% to £8.5bn in 2019 – the highest amount recorded – and a record number of deals, rising 4% to 1,832 with deal sizes up by 21%.

52% of deals by number took place outside of London, with South West, Scotland and Northern Ireland showing a strong increase by deal number in 2019, rising by 34%, 26% and 24% respectively. Several regions also saw investment levels by value increase strongly in 2019, including Northern Ireland (191%), Scotland (51%), North West (50%), London (37%), West Midlands (36%), and the South East (27%).

The growth stage engine

Equity investments into growth stage companies rose by 39% to £5.3bn. The average growth stage deal size, where the UK has lagged behind the US, also grew by 27% driven by a small number of very large deals. Such financing is important as it is often used to help international expansion and to enter new markets, demonstrating both the increasing strength and maturity of private UK SME equity markets and the broader potential of later-stage private companies.

Keith Morgan, CEO, British Business Bank, said: “The UK’s small business equity finance market saw a record year in 2019 with investment amounts soaring to £8.5bn. This was a clear sign of investor confidence in UK smaller businesses located across the country and their potential for growth as well as the strong fundamentals of the UK economy as a place to start and grow a business.”

“The British Business Bank’s equity programmes are estimated to have supported around 11% of all equity deals in UK SMEs in 2019. As the economic impact of Covid-19 continues to affect businesses across the country, the work of the Bank has never been more important. Ensuring a wide range of innovative and ambitious smaller businesses continue to have access to equity investment to support their growth plans will be essential to the UK retaining its world-leading position in science, innovation and technology.”

Emerging signs of market changes before Covid-19

Despite a record year for fundraising overall, signals of a softening in private UK small business equity markets were apparent prior to the impact of Covid-19.

The amount of investment into seed stage companies declined by 1% in 2019. While the scale of this decline is small, it is set against seed stage investment increasing every year since 2011. This decline, combined with the number of companies raising follow-on funding in 2019 being higher than the number of companies raising finance for the first time, has the potential to impact on the future UK equity pipeline.

Investors also appeared to be exercising more caution in 2019, particularly towards some growth stage companies where average pre-money valuations fell compared to 2018. There was an increase in the proportion of equity ‘down rounds’ in 2019, with down rounds forming 12% of all deals in 2019, compared to 9% in 2018.

Unsurprisingly the Covid-19 outbreak is expected to have an impact on smaller businesses’ ability to raise equity finance. The Bank’s analysis of Beauhurst data showed that 43% of all UK equity backed companies are at least moderately affected by changes in delivery and demand for their products and services.

Alice Hu Wagner, Managing Director, Strategy Economics and Business Development, British Business Bank said: “The British Business Bank’s Small Business Equity Tracker report illustrates a strong interest in growth stage investment in the equity market in 2019, with a particular focus on tech businesses. Ensuring our high-potential later stage companies have the capital they need to compete on the global stage will be crucial to powering the economic recovery.”

The British Business Bank Effect

British Business Bank programmes are estimated to have supported 11% of UK equity deals between 2017 and 2019, compared to 9% between 2016 and 2018 as reported in last year’s report. The increase in market coverage is due to British Patient Capital fund activity, which has grown considerably over the same period.

Seed and venture stage deals supported by the Bank are generally smaller than the wider market, while growth stage deals tend to be larger, showing the Bank’s programmes are tackling market gaps at both ends of the UK SME equity spectrum.

The commercialisation and growth of the UK’s science-based companies, crucial for building the future economy, is well supported by the Bank’s equity programmes – 50% of our deals between 2017 and 2019 went to technology/IP-based businesses.

Addressing regional imbalances remains core to all British Business Bank activity, with two funds in particular specifically targeting underserved regions. The Northern Powerhouse Investment Fund and Midlands Engine Investment Fund (MEIF) contributed to 16% and 19% of deals in their respective areas.

https://thefintechtimes.com/equity-investment-in-smaller-uk-tech-businesses-increased-27-to-4-0bn-last-year/?utm_source=rss&utm_medium=rss&utm_campaign=equity-investment-in-smaller-uk-tech-businesses-increased-27-to-4-0bn-last-year

XBRL: scrapping quarterlies, explaining AI and low latency reporting

https://dailyfintech.com/2020/07/02/xbrl-scrapping-quarterlies-explaining-ai-and-low-latency-reporting/
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Here is our pick of the 3 most important XBRL news stories this week.

1 FDIC considers scrapping quarterly bank reports

The Federal Deposit Insurance Corp. is moving to boost the way it monitors for risks at thousands of U.S. banks, potentially scrapping quarterly reports that have been a fixture of oversight for more than 150 years yet often contain stale data.

The FDIC has been one of the cheerleaders and case studies for the efficiency increasing impact of XBRL based reporting forever. Therefore it will be fascinating to observe this competition and its outcome.

2 XBRL data feeds explainable AI models

Amongst several fascinating presentations at the Eurofiling Innovation Day this week was an interesting demonstration on how XBRL reports can be used as the basis of explainable AI for bankruptcy prediction.

The black box nature of many AI models is one biggest issues of applying AI in regulated environments, where causal linkages are the bedrock of litigation etc. Making them explainable would remove a major headache for lots of use cases.

3 Low latency earnings press release data

Standardized financials from Earnings Press Release and 8-Ks are now available via the Calcbench API minutes after published.  Calcbench is leveraging our expertise in XBRL to get many of the numbers from the Income Statement, Balance Sheet and Statement of Cash Flows from the earnings press release or 8-K.  

The time lag between the publication of earnings information and its availability in the XBRL format continues to be a roadblock for the wholesale adoption of XBRL by financial markets until regulators require immediate publication in the XBRL format in real time. The Calcbench API is a welcome stop gap measure. 

 

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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/2020/07/02/xbrl-scrapping-quarterlies-explaining-ai-and-low-latency-reporting/

First Bank launches Micro Creditum app and continues its digital transformation with FintechOS as technology partner

https://thefintechtimes.com/first-bank-launches-micro-creditum-app-and-continues-its-digital-transformation-with-fintechos-as-technology-partner/?utm_source=rss&utm_medium=rss&utm_campaign=first-bank-launches-micro-creditum-app-and-continues-its-digital-transformation-with-fintechos-as-technology-partner
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First Bank continues the steps of its digital
transformation process by launching the Micro Creditum application.
This optimization was possible with the help of FintechOS
technology.

First Bank continues its digital transformation with the launch
of the Micro Creditum application, making the entire lending
process more efficient for its business customers in need of
finance. Analysis of credit documents can now be achieved in just
one hour, marking a reduction in processing time of 80%.

This optimization was made possible with the help of FintechOS
technology, which has the ability to integrate data from multiple
external sources and analyze information automatically. Customers
benefit from fast access to finance and the bank’s specialists
gain valuable time in managing customer relationships.

“The future of First Bank is predominantly digital, but its
human component will continue to offer added value in finding the
best solution for every customer.

We focus on process automation to give customers a fast response
and allocate more time to offering financial advice, instead of
spending too much time analysing the paperwork.

We currently use 19 robots to perform operational processes in
the area of credit management, cards, deposits, collaterals,
payments and interbanking, but also in the HR departament.

Together with FintechOS, we launched Micro Creditum, the
innovative solution that reduces the processing time of documents
by 80%, enabling us to provide a response in 24 hours to every
client in the Micro segment, the target customer of First Bank.

MICRO CREDITUM represents only a step in the whole process of
digital transformation, through which First Bank follows its
“Digital Bank with a human touch” roadmap,” said
Mădălina Teodorescu, Vice President of First
Bank
.

“Using technologies that facilitate the bank’s interaction
with customers is a first step in the digitalization of financial
services. Opening remote accounts, accessing services without
having to go to the branch, and digital signing of documents are
all becoming part of how customers expect to bank. We see this
trend towards digitalisation evolving rapidly across the entire
market, even when the restrictions caused by the current crisis are
lifted. We look forward to working with FirstBank in accelerating
its digital transformation strategy”, said Teodor
Blidarus, CEO of FintechOS, global provider of digital
transformation technology to banks, insurance companies and other
financial institutions
.

In recent months, in the context of the Covid-19 pandemic, more
and more companies in the financial services sector have adopted
new technologies to ramp up the automation of internal processes
and migrate to a digital environment, as well as embracing cloud
solutions.

The highest demand has been for solutions that solve issues like
online enrollment of new customers, the configuration of virtual
branches and online support services. FintechOS technology is
natively built to respond quickly and flexibly to these needs.

FintechOS is currently involved in more than 20 projects to
deploy omnichannel solutions for banks and insurers in the UK,
Central and Eastern Europe, South-East Asia and North America.

The post
First Bank launches Micro Creditum app and continues its digital
transformation with FintechOS as technology partner
appeared
first on The Fintech
Times
.

https://thefintechtimes.com/first-bank-launches-micro-creditum-app-and-continues-its-digital-transformation-with-fintechos-as-technology-partner/?utm_source=rss&utm_medium=rss&utm_campaign=first-bank-launches-micro-creditum-app-and-continues-its-digital-transformation-with-fintechos-as-technology-partner

Mastercard SpendingPulse: UK E-Commerce Sales up 72% Year-On-Year in May as Pandemic Continues to Drive Consumers Online [REPORT]

https://thefintechtimes.com/mastercard-spendingpulse-uk-e-commerce-sales-up-72-year-on-year-in-may-as-pandemic-continues-to-drive-consumers-online-report/?utm_source=rss&utm_medium=rss&utm_campaign=mastercard-spendingpulse-uk-e-commerce-sales-up-72-year-on-year-in-may-as-pandemic-continues-to-drive-consumers-online-report
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New Mastercard Recovery Insights Report Spotlights the Impacts of COVID-19

Online retail sales were up 72% year-on-year in the UK in May according to Mastercard SpendingPulse1, which tracks overall retail sales across all types of payment, including card, cash and cheque. This is an advance on April’s online sales – which were up 64% year-over-year, showing an ongoing growth trend as consumers continue to shop online during the pandemic.

To dig into this further, Mastercard has released the first report, The Shift to Digital in its Recovery Insights series, which sheds light on the impacts of the pandemic and stay-at-home orders, including the incredible growth of online shopping.

In the UK, total retail sales for May were down 13.6% year on year while e-commerce sales* were up 72.3 percent, according to SpendingPulse, underscoring the broader shift to digital in how we work, live and shop. Indeed, during April and May 2020, e-commerce as a share of total retail sales reached 33 percent in the United Kingdom – an unprecedented high.

Additionally, consumers are focusing more on consumer staples versus spending on luxury. UK SpendingPulse retail sales estimates for May show e-commerce spending on groceries increased by 76% year-on-year. By comparison, e-commerce luxury decreased by 14% year-on-year during that same time.

UK E-Commerce Sector

Year-On-Year E-Commerce Growth

May 2020

Total eCommerce

72%

Clothing

69%

Department Stores

227%

Electronics

192%

Grocery

76%

Luxury

-14%

“There has been an undeniable shift to online shopping over the past two months,” says Janne Karppinen, Head of Retail at Mastercard “The question is whether these trends will continue for the long-term. We’ve seen some redistribution of sales away from the High Street into online channels and this could have a huge impact on how retailers blend their online and physical footprints in the future.”

Yesterday, Amazon announced it is to tokenise Mastercard transactions in the UK and 11 other countries, for a faster, safer and more convenient checkout.

Mastercard has been committed to helping retailers and many others navigate the challenges of the pandemic – and now the recovery. This has included making certain insight-driven tools available at no cost to consumers, governments and small businesses to give a timely snapshot of economic performance during this time.

Earlier in June, Mastercard launched www.shopopenings.com, a new online search tool that confirms which UK shops and businesses are open for customers to visit as the nation gradually reopens. Having the ability to make informed decisions is critical to the long-term success of companies, communities and individuals around the world.

https://thefintechtimes.com/mastercard-spendingpulse-uk-e-commerce-sales-up-72-year-on-year-in-may-as-pandemic-continues-to-drive-consumers-online-report/?utm_source=rss&utm_medium=rss&utm_campaign=mastercard-spendingpulse-uk-e-commerce-sales-up-72-year-on-year-in-may-as-pandemic-continues-to-drive-consumers-online-report

AI- hot water for insurance incumbents, or a relaxing spa?

https://dailyfintech.com/2020/07/02/ai-hot-water-for-insurance-incumbents-or-a-relaxing-spa/
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Frog-in-boiling-water

The parable of the frog in the boiling water is well known- you know, if you put a frog into boiling water it will immediately jump out, but if you put the frog into tepid water and gradually increase the temperature of the water it will slowly boil to death.  It’s not true but it is a clever lede into the artificial intelligence evolution within insurance.  Are there insurance ‘frogs’ in danger of tepid water turning hot, and are there frogs suffering from FOHW (fear of hot water?)

image source

Patrick Kelahan is a CX, engineering & insurance consultant, working with Insurers, Attorneys & Owners in his day job. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

The frog and boiling water example is intuitive- stark change is noticed, gradual change not so much.  It’s like Ernest Hemmingway’s quotation in “The Sun Also Rises”- “How did you go bankrupt?  Gradually, and then suddenly!”  In each of the examples the message is similar- adverse change is not always abrupt, but failure to notice or react to changing conditions can lead to a worst-case scenario.  As such with insurance innovation.

A recent interview in The Telegraph by Michael Dwyer of Peter Cullum, non-executive Director of Global Risk Partners (and certainly one with a CV that qualifies him as a knowing authority), provided this view:

“Insurance is one business that is all about data. It’s about numbers. It’s about the algorithms. Quite frankly, in 10 years’ time, I predict that 70pc or 80pc of all underwriters will be redundant because it will be machine driven.

“We don’t need smart people to make what I’d regard as judgmental decisions because the data will make the decision for you.”

A clever insurance innovation colleague, Craig Polley, recently posed Peter’s insurance scenario for discussion and the topic generated lively debate- will underwriting become machine driven, or is there an overarching need for human intuition?  I’m not brave enough to serve as arbiter of the discussion, but the chord Craig’s question struck leads to the broader point- is the insurance industry sitting in that tepid water now, and are the flames of AI potentially leading to par boiling?

I offered a thought recently to an AI advocate looking for some insight into how the concept is embraced by insurance organizations.  In considering the fundamentals of insurance, I recounted that insurance as a product thrives best in environments where risk can be understood, predicted, and priced across populations with widely varied individual risk exposures as best determined by risk experience within the population or application of risk indicators.  Blah, blah, blah. Insurance is a long-standing principle of sharing of the ultimate cost of risk where no one participant is unduly at a disadvantage, and no one party is at a financial advantage- it is a balance of cost and probability.

Underwriting has been built on a model of proxy information, on the law of large numbers, of historical performance, of significant populations and statistical sampling.  There is not much new in that description, but what if the dynamic is changed, to an environment where the understanding of risk factors is not retrospective, but prospective?

Take commercial motor insurance for example.  Reasonably expensive, plenty of human involvement in underwriting, high maximum loss outcomes for occurrences.  Internal data are the primary source of rating the book of business.  There are, however,  new approaches being made in the industry that supplant traditional internal or proxy data with robust analysis of external data.  Luminant Analytics is an example of a firm that leverages AI in providing not only provide predictive models for motor line loss frequency and severity trends, but also analytics that help companies expanding into new markets, where historical loss data is unavailable.  Traditional underwriting has remained a solid approach, but is it now akin to turning the heat up on the industry frog?

The COVID-19 environment has by default prompted a dramatic increase in virtual claim handling techniques, changing what was not too long ago verboten- waiver of inspection on higher value claims, or acceptance of third party estimates in lieu of measure by the inch adjuster work.  Yes, there will be severity hangovers and spikes in supplements, but carriers will find expediency trumps detail- as long as the customer is accepting of the change in methods.  If we consider the recent announcement by US P&C carrier Allstate of significant staff layoffs as an indicator of the inroads of virtual efforts then there seemingly is hope for that figurative frog.

Elsewhere it was announced that the All England Club has not had its Wimbledon event cancellation cover renewed for 2021 (please recall that the Club was prescient in having cancellation cover in force that included pandemic benefits).  The prior policy’s underwriters are apparently reluctant to shell out another potential $140 million with a recurrence of a pandemic, but are there other approaches to pandemic cover?  The consortium of underwriting firms devised the cover seventeen years ago; can the cover for a marquee event benefit from AI methodology that simply didn’t exist in 2003?  It’s apparent the ask for cover for the 2021 event attracted knowledgeable frogs that knew to jump out of hot water, but what if the exposure burner is turned down through better understanding of the breadth of data affecting the risk, that there is involvement of capital markets in diversifying the risk perhaps across many unique events’ outcomes and alternative risk financing, and leveraging of underwriting tools that are supported by AI and machine learning?  Will it be found in due time that the written rule that pandemics cannot be underwritten as a peril will have less validity because well placed application of data analysis has wrangled the risk exposure to a reasonable bet by an ILS fund?

There are more examples of AI’s promise but let us not forget that AI is not the magic solution to all insurance tasks.  Companies that invest in AI without a fitting use case simply are moving their frog to a different but jest as threatening a pot.  Companies that invest in innovation that cannot bridge their legacy system to meaningful outcomes because there is no API functionality are turning the heat up themselves.  Large scale innovation options that are coming to a twenty-year anniversary (think post Y2K) may have compounding legacy issues- old legacy and new legacy.

The insurance industry needs to consider not just individual instances of the gradual heat of change being applied.

What prevents the capital markets from applying AI methods (through design or purchase) in predicting or betting on risk outcomes?  The more comprehensive and accurate risk prediction methods become the more direct the path between customer and risk financing partner also becomes.  Insurance frogs need not fear the heat if there are fewer pots to work from, but no pots, no business.

The risk sharing/risk financing industry has evolved through application of available technology and tools, what’s to say AI does not become a double-edged sword for the insurance industry- a clever tool in the hands of insurers, or a clever tool in the hands of alternative financing that serves to cut away some of the insurers’ business?  If asked, Peter Cullum might opine that it’s not just underwriting that AI will affect, but any other aspect of insurance that AI can effectively influence.  Frogs beware.

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https://dailyfintech.com/2020/07/02/ai-hot-water-for-insurance-incumbents-or-a-relaxing-spa/

KeyBank upgrades relationship banking with human-digital approach

https://bankinnovation.net/allposts/biz-lines/retail/keybank-upgrades-relationship-banking-with-human-digital-approach/
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Share KeyBank is embracing a human-digital strategy. The Cleveland-based bank, which has $156 billion in assets, is using banker-led consulting sessions, complemented by proprietary algorithms, to connect customers with relevant solutions. “Think of the old banking world where the customer is on one side of the desk and a banker is typing into a mystery …Read More

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https://bankinnovation.net/allposts/biz-lines/retail/keybank-upgrades-relationship-banking-with-human-digital-approach/

BNY Mellon, Microsoft launch data and analytics solution

https://bankinnovation.net/editorial/premium/bny-mellon-microsoft-launch-data-and-analytics-solution/
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Share Bank Of New York Mellon launched three new data and analytic products with Microsoft last week to provide data services to investment institutions. The three products, namely, Data Vault, Distribution Analytics and ESG Data Analytics, will be available on Microsoft Azure. The New York-based bank, which has over $468 billion in assets, said that …Read More

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https://bankinnovation.net/editorial/premium/bny-mellon-microsoft-launch-data-and-analytics-solution/

Moneycorp nabs e-money license in Dublin for EU expansion

https://www.mobilepaymentstoday.com/news/moneycorp-nabs-e-money-license-in-dublin-for-eu-expansion/
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Moneycorp Group, a London-based foreign exchange and payments company, has obtained an e-money and MiFID license to operate in Dublin, part of a strategy to maintain international operations post Brexit.

The firm, originally founded in 1979, has operated an office in Dublin since 2013, however, the licenses mean the firm can now operate an Ireland-based business called Moneycorp Technologies Ltd.

“We are delighted to have secured both E-Money and MiFiD licenses from the Central Bank of Ireland,” Bryan McSharry, CEO of Moneycorp’s European business, said in a company release. “This ensures we can continue to support our existing customer base, continue to grow business in Ireland and expand our business across the EU in a post Brexit environment.”

The company has existing offices in the U.K., U.S., Brazil, Hong Kong, Spain, Gibraltar, Romania, the UAE and Ireland.

https://www.mobilepaymentstoday.com/news/moneycorp-nabs-e-money-license-in-dublin-for-eu-expansion/

Curv raises $23M to grow digital asset security platform

https://www.mobilepaymentstoday.com/news/curv-raises-23m-to-grow-digital-asset-security-platform/

Curv, a provider of cloud-based digital asset security, has raised $23 million in Series A funding from a group of investors, including CommerzVentures, Coinbase Ventures, Digital Asset Group, Team8 and Digital Garage Lab Fund, according to a blog post on Medium from CTO Dan Yadlin.

The company also introduced a group called public tX, which is an elite group of cryptographers and engineers that use the company’s keyless technology to develop deployment models for crypto firms and traditional financial institutions.

The funding will be used to expand the New York-based company’s international business, to innovate new products, to develop solutions inside tX and to hire additional talent.

“Despite a challenging economic climate, we’re seeing strong growth among traditional financial institutions who require our enterprise-grade security infrastructure, robust governance engine and seamless integration with blockchain technology,” Itay Malinger, CEO of Curv, said in a company release. “Unlike other legacy solutions, we simultaneously deliver the protection, instant liquidity and complete control for all institutions to thrive in the digital asset economy.”

Curv is used by a variety of firms around the world, including eToro, Genesis and investment firm Franklin Templeton.

https://www.mobilepaymentstoday.com/news/curv-raises-23m-to-grow-digital-asset-security-platform/

Three Things We’ve Learned from the Paycheck Protection Program

https://finovate.com/three-things-weve-learned-from-the-paycheck-protection-program/
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The U.S. Government’s Paycheck Protection Program (PPP) was set to expire yesterday, but the Senate voted to extend the loan program by five weeks, making the new deadline August 8, 2020.

Since it was initiated on April 3, the PPP has helped banks provide billions in working capital to 4.8 million small businesses. The extension offers businesses more time to apply for the $130 billion in unspent funds that remain in the program.

The PPP has had a rocky existence, caused by a muddy application system, confusion from both businesses and banks on the terms surrounding the funds, and the fraudulent (or at least unethical) acquisition of loan money by major corporations. That said, there are a handful of lessons learned we can take away from this experience. Here is a summary of the top three.

Open banking would have made a positive impact

In the height of the coronavirus, many small businesses struggled to find a bank that would lend PPP funds to them. Much of this was due to the fact that banks had difficulty underwriting loans of new clients. With open banking, businesses could opt to share their data with other financial institutions. This availability of data would not only help businesses speed up the application process at the bank of their choice, it would also offer banks access to crucial data regarding businesses’ historical finances.

It is possible for the government to move fast

“Move fast and break things” is typically a mantra of agile startups, and not a slow-moving government. However, given the serious economic threat that the coronavirus-induced stay-at-home orders posed, there was no time for a lengthy revision process and regulatory approvals.

The PPP is part of the CARES act, which includes multiple provisions for unemployment benefits, tax rebates, grants, and more. Early voting on the bill began March 22 and by the morning of March 25, Senate Democrats and Republicans announced they had come to an agreement on the 300-page document. A few hours after the agreement, the President signed the bill into law.

“Like all compromises, this bill is far from perfect, but we believe the legislation has been improved significantly to warrant its quick consideration and passage, and because many Democrats and Republicans were willing to do the serious and hard work, the bill is much better off than where it started,” said Democratic Senate Minority Leader Chuck Schumer.

Communication and transparency are king and queen

One of the biggest speed bumps encountered was confusion around the terms of the loans. Businesses not only had difficulty during the application process, many also had trouble in determining if they were eligible for the loans. And even if they were eligible, many businesses still didn’t understand if the funds needed to be repaid and what the stipulations for repayment were.

There is no other loan in America where the applicant is unaware of their responsibility to repay. Because of this confusion (and the legal and regulatory ramifications), in early June President Trump signed a new law relaxing some of the PPP regulations and addressing some of the original flaws.

This mistake is easy to excuse, given the tight deadline to organize and originate the program. However, it doesn’t discount the need for lenders to maintain transparency and ensure borrowers know what is expected when it comes to repayment. It reminds me of a millionaire I once met who, after originating a mortgage on his new home, didn’t understand that he was expected to pay his mortgage every month. He assumed that the bank would automatically deduct the funds from his account each month on his behalf. After 6 months of missed payments, his credit score was trashed.

Since we have yet to conquer the virus and are reeling from low unemployment, we still have a lot to learn. One of these lessons is to take things one day at a time. As we do so, let’s take stock of lessons learned so that we can help each other during this crisis.


Photo by Kyle Glenn on Unsplash

https://finovate.com/three-things-weve-learned-from-the-paycheck-protection-program/

Zeller Raises $4.4 Million to Change the World of Business Banking

https://finovate.com/zeller-raises-4-4-million-to-change-the-world-of-business-banking/
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Business banking services provider Zeller launched earlier this year to offer businesses in Australia a new way to bank. Heading up the new company is ex-Square duo Ben Pfisterer and Dominic Yap, which just revealed a round of funding Zeller landed earlier this year.

The investment, which closed before the emergence of the coronavirus, totaled $4.4 million (AU$6.3 million). The seed round was led by Square Peg and saw contributions from Apex Capital Partners.

Taking aim at the lack of alternative business banking services in Australia, Zeller seeks to compete with traditional banks by better serving the small business banking market.

“First and foremost [businesses] need to get paid, then they need somewhere to put that money and then need a way to deploy it, to pay their bills and staff and invest further,” Pfisterer told Business Insider Australia. “What we wanted to do was create a solution that did all three for them on one system.”

Specifically, Zeller is targeting the historically underserved category of mid-market businesses, a group Pfisterer estimates at 1.5 million. While the company hasn’t yet launched its services, once it does it will offer payment acceptance technology, business financial management tools, an instant deposit account, and a fee-free debit card.

“You see neobanks popping up everywhere, but they’re all consumer-focused. There’s no sort of neobank focused on all these other business needs. It’s quite complicated but we think we have something completely unique.” said Pfisterer of the Australian market.

Worldwide, there have been a flood of new consumer-focused challenger banks in the past year. However, we’ve seen rising competition in challenger banks working in the businesses banking arena. Among the new entrants are Arival Bank, which was founded in 2018 and recently unveiled its business bank account. Digital payments company Square also announced plans to launch a small business bank next year.


Photo by Ben White on Unsplash

https://finovate.com/zeller-raises-4-4-million-to-change-the-world-of-business-banking/

Using tech to get back to work – Finastra CEO

https://thefintechtimes.com/using-tech-to-get-back-to-work-finastra-ceo/?utm_source=rss&utm_medium=rss&utm_campaign=using-tech-to-get-back-to-work-finastra-ceo
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Businesses all over the world are now grappling with the next COVID-19 challenge: as new cases slowly begin to fall, how do companies restart and rebuild operations? Some firms have continued to operate from their facilities throughout lockdown and others, like Finastra, quickly moved most of their people to home working. Some have had to temporarily cease operations completely.

We all now face a new reality. Whether a business is based in an office or a factory, whether it hosts customers or its people travel to other offices or homes, everything has changed. Serving our customers and protecting the wellbeing of our people has always been a key focus for us. And as we learn to live with COVID-19 and approach the next phase of recovery, we must protect our employees and think about which parts of a ‘normal’ workplace we want to return to – and, importantly, those we don’t.

Employers need new information. How people get to work, where they work or whether they are symptomatic is all important data. Much of this is personal information that employees may never have been asked to share before, so it’s important that when they are asked to, they can trust it will be used properly.

It’s also important that people are not obliged to give too much away: some organizations advocate systems where employees are physically tagged and every step around their workplace is monitored. Even if the technology is out there – for example, smart wristbands or lanyards to track movement and adherence to social distancing – this wouldn’t fit with our open company culture.

Maintaining a degree of physical separation to protect colleagues will be extremely important for the foreseeable future. This is something that must be taken into consideration as workplaces return to some semblance of business as usual.

Much of what is necessary to adjust is about sharing the load across the economy. Millions of people have adapted to working from home and proven that business can keep running in this new environment. Firms should embrace this. Fewer journeys, particularly on public transport, mean less risk for everyone. There are also significant benefits to be derived from increased digital collaboration and virtual events.

Tying all of this together will need coordination and communication, which technology can help with. Businesses can easily send messages to employees and receive useful, relevant information back. Done right, it means every aspect of managing the return to work can be held in a single secure system.

At Finastra, we use Everbridge. Its technology brings together data about the pandemic as it’s made public and gives business leaders the tools to apply it in real time. During the current situation we’ve sent around 20 different messages to our people, mostly informing them about office closures. We’ve used it to manage our business continuity plans – moving over 8,000 staff to home working in just three days. In fact, since adopting Everbridge, we’ve used it a number of times to respond to situations such as hurricane warnings or minor incidents at local facilities.

There’s never been a more important time to harness the power of technology to keep staff safe. We use Everbridge to significantly reduce the time it takes to connect with our people at crucial moments. Workplaces are very different from just a few months ago and will most likely never be the same again. COVID-19 has forced businesses to transform the way they work – virtual events, video conferencing, less travel and a readiness to emerge stronger together.

By Simon Paris, CEO at Finastra and NED at Everbridge

https://thefintechtimes.com/using-tech-to-get-back-to-work-finastra-ceo/?utm_source=rss&utm_medium=rss&utm_campaign=using-tech-to-get-back-to-work-finastra-ceo

Giving access to any sort of earned income – anytime

https://thefintechtimes.com/giving-access-to-any-sort-of-earned-income-anytime/?utm_source=rss&utm_medium=rss&utm_campaign=giving-access-to-any-sort-of-earned-income-anytime
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Dubai and Riyadh-based FlexxPay, which according to their website, offers an online platform to employers whose employees can access their earned salaries & commissions instantly before the regular payday.​ We sit down with Michael Truschler from FlexxPay to understand more about the company and their future aspirations.

FlexxPay is a Dubai and Riyadh-based fintech company Dubai and Riyadh-based FlexxPay

Can you give us a bit of background about yourself and your role at Dubai/Riyadh-based FlexxPay?

I am Michael Truschler, co-founder and CEO of FlexxPay. I have been in the Gulf region for about 16 years. Prior to FlexxPay, I built citrussTV, the largest TV home shopping network in the MENA region. We sold the company in 2017 and I then started FlexxPay in late 2018.

What Makes Your Product Unique in the Fintech Ecosystem both in the GCC and Potentially in the Global Market?

FlexxPay gives access to any sort of earned income, anytime. This includes salaries, commissions and soon pensions and end of service benefits. We believe that everyone should be able to access what they have already earned, whenever they need to. There are companies around the world that let you access your salary early, but FlexxPay is the only company give access to any sort of earned income. We aim to positively impact society and the overall economy of a country.

Dubai’s story from a small fishing and trading post to a global hub across various sectors (including fintech) is both remarkable and admirable.
Being based in Dubai and Riyadh, can you give some insights to our international audience who might not be familiar in detail with Dubai and Riyadh, and their roles in fintech specifically?

Dubai International Financial Center is a top ten global financial centre, and the leading financial hub in MENA. DIFC and FlexxPay share the vision to drive the future of finance and create value for the economy. Dubai is home to most of the well known international firms and provides a great infrastructure for conducting business.

Saudi Arabia’s 2030 vision is a strategy to reduce the country’s dependency on oil and the FinTech sector plays a vital role in this. All government institutions and private sector companies support that vision and that’s why we have chosen to open our co-headquarters in Riaydh. There is a massive potential for FinTech companies in Saudi Arabia and the support given is significant.

Dubai International Financial Centre (DIFC), the main financial hub of Dubai as well as where you are based at, has recently announced that Flexxpay (as well as three other companies) has received a significant investment. How will that help you both manage the current global situation that is Co-VID 19 and also continue to grow in the future?

We are based at in5 Tech, a Dubai based innovation centre as well as in Riyadh, the capital of Saudi Arabia.

The investment we received will mainly be spent on the technology development and the business expansion to acquire new corporate customers in various countries in the region.

Especially during stressful times such as the current one cause by COVID-19, people need a solution such as FlexxPay more than ever. Unexpected expenses, emergencies, family support etc. – all this is very relevant.

COVID-19 forces companies (and society) to digitally transform. Many companies knew that they have to digitize their businesses and processes but were reluctant to invest or simply took too much time. These are the companies that suffer now. COVID-19 is a sort of catalyst or accelerator forcing companies to take the necessary steps immediately to survive and grow in the current (new) reality.

Globally – where do you see the fintech sector heading in the future? Also, specifically with the payday model that FlexxPay is looking to disrupt?

Not only FinTech, but any digital business will grow. Remote work is the new normal. Flexibility and quick adoption of trends are key to success. FlexxPay revolutionizes the way we get paid. The times of waiting for a month or 2 weeks (such as in the US) for your pay will soon be over. You will access what you have earned through an app such as FlexxPay.

https://thefintechtimes.com/giving-access-to-any-sort-of-earned-income-anytime/?utm_source=rss&utm_medium=rss&utm_campaign=giving-access-to-any-sort-of-earned-income-anytime

Munich authorities raid Wirecard offices

https://www.mobilepaymentstoday.com/news/munich-authorities-raid-wirecard-offices/

Munich law enforcement officials have launched a raid on Wirecard AG’s offices in connection with the ongoing accounting scandal that led to the arrest of former CEO Markus Braun, according to multiple reports, including Reuters.

Meanwhile, Wirecard officials said the process to sell off assets has begun, as a court appointed creditors’ committee confirmed attorney Michael Jaffe as the company’s preliminary insolvency administrator.

The committee’s main role will be to stabilize the business, including its payments processing operations and to that end, intensive discussions are being held with customers, credit card organizations and trading partners.

A search for investors for the core parts of the company and various subsidiaries of Wirecard is underway.

“A large number of investors from all over the world have already contacted us who are interested in acquiring the core business or the independent and the successfully operative business divisions,” Jaffe said, in a release from Wirecard.

The company is also in touch with overseas licensed units of Wirecard, with the intent of continuing business and safeguarding customers.

A spokesperson for Wirecard said the company had no additional comment.

https://www.mobilepaymentstoday.com/news/munich-authorities-raid-wirecard-offices/

ShopKeep offers no-interest advances to minority-owned businesses

https://www.mobilepaymentstoday.com/news/shopkeep-offers-no-interest-advances-to-minority-owned-businesses/

ShopKeep, a point-of-sale platform for independent retailers and restaurants, has launched a program called ShopKeep R.I.S.E. to offer no-fee, no-interest cash advances to minority owned businesses in a bid to help close racial disparities in accessing capital.

The program will offer a total of $250,000 on a rolling basis, with individual businesses able to access anywhere from $1,000 to $10,000 each.

“While we must all make decisions about the types of actions we take as individuals, we believe it’s also critical for the business community to take a stand and to take action where it can make a difference,” Michael DeSimone, CEO of ShopKeep, said in a company release. “With the creation of this special fund, we are taking sustainable action to help drive real and impactful change.”

To be eligible for the funding, the businesses must meet the following criteria:

Businesses must meet the criteria for being a minority-owned business. For purposes of the program, an minority group member is a person who is at least 25% Black, Hispanic, Asian or Native American as defined by the National Minority Supplier Development Council.

Businesses must use ShopKeep as their only point-of-sale platform.

Merchants must actively process transactions with ShopKeep Payments. Non-ShopKeep Payments customers can still apply for an advance and switch over if they are approved.

The business must be based in the U.S. and also be majority owned by a U.S. citizen.

https://www.mobilepaymentstoday.com/news/shopkeep-offers-no-interest-advances-to-minority-owned-businesses/