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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Recession. Widespread staffing shortages. Increasing fraud. Customer demands — and advancements in technology like we’ve never seen. We’ve learned a lot about the current industry landscape so far in this first quarter alone, but there are still questions that loom large. Such as:
Will the threat of fraud ever go away?
Can my call center really become a revenue generator?
How will pending legislation around real-time payments and open finance affect our customers?
Should we really consider using TikTok?
Watch this Finovate webinar, in collaboration with Eltropy, on demand, and find out the top seven trends that CFIs like you should be focusing on in the coming year. You’ll discover:
Which trends are the most crucial to ensure success for your CFI this year
How the right digital strategies and tools can make or break your institution
Examples of what’s working and what’s not in financial services
You’ll hear from Jonny Manousaridis, social media & customer marketing manager, Eltropy, and banking strategy expert David Hall.
Buy now, pay later (BNPL) has seen a lot of hype since the popularity of the technology exploded in 2020. The U.K. Financial Conduct Authority (FCA) estimates that the U.K. BNPL market is worth $3.7 billion (£2.7 billion), and that five million British citizens have used BNPL tools since 2020. This growth is great for BNPL companies, but not necessarily so for the consumers they serve.
That’s because consumers in the U.K. are starting to take on debt to pay for purchases they’ve made using BNPL. According to a recent survey, more than 40% of U.K. consumers have done so. Citizens Advice, which conducted the survey, found that 51% of consumers ages 18 to 34 have borrowed money to pay for BNPL purchases, while 39% of 35 to 54 year-olds and 24% of people aged over 55 have done so.
The most common debt incurred to pay for purchases made using BNPL is credit card debt. Users have also borrowed money from friends and family, borrowed money from their bank overdraft, taken out loans, and have even taken out payday loans. The study also found that more than one in 10 customers of a major bank using BNPL services were already behind on their payments.
This misuse of BNPL technology is why the U.K. FCA released a set of four rules earlier this week. The agency anticipates they will protect millions of consumers.
Lenders will be required to carry out checks to ensure that loans are affordable for consumers.
Advertisements must be fair, clear, and not misleading.
Lenders will need to be approved by the FCA.
Borrowers will be be able to take complaints about BNPL schemes to the Financial Ombudsman Service.
The government will create secondary legislation by mid-2023, after which the FCA will consult on its rules for the short-term lending sector.
“Buy-Now Pay-Later can be a helpful way to manage your finances but we need to ensure that people can embrace new products and services with the appropriate protections in place,” said Economic Secretary to the Treasury John Glen. “By holding Buy-Now Pay-Later to the high standards we expect of other loans and forms of credit, we are protecting consumers and fostering the safe growth of this innovative market in the U.K.”
The FCA has made it clear that these regulations do not only apply to BNPL firms. Companies that extend other forms of short-term, interest-free credit will also be required to comply with the same rules. Not only that, the rules also apply to businesses who partner with a third-party lender to provide credit to their customers.
What a week it was in San Francisco, as FinovateSpring landed back in the tech capital of America!
And as much as this show felt familiar, being back in the same city again didn’t mean that we’re returned to 2019.
We come back to find a very different fintech ecosystem. There are surface-level similarities between where financial services is now and where it was in 2019, but the last few years have brought about dramatic changes all over the world. And more changes and challenges are coming. There are so many factors affecting everyday consumers and their finances that it’s hard to keep up with them all, but the short version is that consumers need help, and it’s up to us as an industry to provide the tools and technologies that people need to secure their financial futures.
The good news is that creativity in fintech abounds, and so do new ideas. Our attendees saw both on display over the three days, as innovative demoers and industry experts took to the stage to share their insights and vision for the future of fintech. And now it’s your chance to get a piece of the action, wherever you are in the world.
While some European fintechs are exiting the U.S. market, consumer payment services firm Klarna is doubling down. The Sweden-based company announced it is adding its Pay Now option to its U.S. payment services.
The Pay Now tool does exactly what it implies. Instead of using Klarna’s signature buy now, pay later (BNPL) payment structure, it allows users to pay immediately and in full at retailers where Klarna is accepted. This move offers U.S. shoppers more options when paying with Klarna at the point of sale. Users can now pay in full using Pay Now or pay over time with Pay in 4 and Pay in 30 solutions which allow users to split a purchase into four interest-free payments or pay over the course of 30 days, respectively.
“Consumers continue to reject double digit interest rates and fee-laden revolving credit, while simultaneously seeking more choice, control and flexibility in how they shop and pay both online and in store,” said Klarna Co-founder and CEO Sebastian Siemiatkowski. “With the introduction of ‘Pay Now’, Klarna now offers U.S. consumers the choice to pay immediately and in full, alongside our sustainable interest-free services.”
As a result of adding the Pay Now option, U.S. retailers can now offer Klarna users a more well-rounded payment experience. By offering the option to pay in installments or pay immediately, consumers will be more likely to choose Klarna as a payment option regardless of whether or not they want to use a BNPL tool or pay in full immediately.
Klarna also announced it will launch its physical debit card to the U.S. market. The company wasn’t specific about timing but said it plans to introduce the new product “very soon.” Klarna refers to its debit card as a “tangible extension of the Klarna app experience” because it allows users to pay for their purchases over time and connects to the Klarna app to help users track their purchases. The card is also integrated with Klarna’s loyalty program, Vibe, which offers users rewards, deals, and discounts.
The past year has been quite an active one for BNPL companies. Klarna almost doubled its U.S. customer base this year, now reaching 21 million customers. “By launching ‘Pay Now’ and introducing the Klarna Card in the US, we are continually developing our services to meet consumers’ changing needs,” added Siemiatkowski.
Across the globe, the company counts 90 million active customers in 19 countries who make two million transactions per day at Klarna’s 250,000 merchants, including big brands such as H&M, IKEA, Expedia Group, Samsung, ASOS, Peloton, Abercrombie & Fitch, and Nike. Since it was founded in 2005, Klarna has raised $3.7 billion. The company now has a valuation of $45.6 billion and 4,000 employees.
Ramp’s 5-in-1 approach to enterprise spending management offers zero-fee corporate cards, accounting automation, billpay (including invoices, approvals, and payments), as well as expense management and real-time reporting that delivers insights that can be key to uncovering further savings opportunities. The platform offers automated expense reporting that includes collection and verification of more than 90% of receipts, and smart-rule powered automated reconciliation which, along with multi-entity and custom field support, enables accounting teams to close books up to 86% faster. Ramp integrates out-of-the-box with more than 100 different accounting, productivity, and security software packages from QuickBooks and Xero, to Slack and 1Password, to Google Suite and Okta.
According to company co-founder and CEO Eric Glyman, Ramp customers are saving 3.3% on average after switching to Ramp. This comes courtesy of a combination of savings insights, real-time spend reporting, and a 1.5% cashback policy. “This is tangible money saved that customers are reinvesting into activities that actually grow their business,” he said.
In addition to its funding announcement, Ramp also announced an acquisition. The company purchased “negotiation-as-a-service” platform Buyer which helps facilitate big-dollar business costs such as annual software contracts. The acquisition was the first for Ramp, which was founded in the spring of 2019; terms of the transaction were not immediately disclosed.
In a blog post at the Ramp website, Glyman noted that the funding raised, as important as it is, was not “the main news.” Instead, Glyman underscored the value of the financing automation platform Ramp is building, a platform that will help business save “even more time and money that we’ve done to date.” Glyman added that this will enable the company to move from providing savings insights based on the past to instead being “able to proactively save you money before you spend.” Everything from helping companies save money on travel expenses to enabling them to keep software costs low are on Ramp’s radar.
It’s clear that we are entering a new, substantially more digital era in finance and banking. Customer behavior has changed forever (and so have customer expectations), and it’s not going to change back. We’re a long way from a new status quo, and things are going to keep moving quickly. It’s up to all of us to decide if we’re willing to move quickly too.
Last week saw the second Finovate Halftime Review, exploring the critical trends for banks, FIs and fintechs from 2021 so far and looking ahead, and designed to open up the discussion for those in the industry on what the future of finance should look like.
Payments network Ripple is bolstering its ranks this week with the appointment of Kristina Campbell as CFO.
Campbell has been tapped to drive Ripple’s financial strategy, accelerate growth, and deliver value to shareholders. She most recently served as CFO at PayNearMe and has also held multiple roles at GreenDot.
“Digital asset technology allows us to rethink and improve the systems and infrastructure around how money moves. With this technology, we will make the global financial system accessible to all,” said Campbell. “Ripple is uniquely positioned to improve global payments in ways that have yet to be defined and I’m excited to be a part of that solution.”
Ripple also revealed that Rosa Gumataotao Rios, 43rd Treasurer of the United States, has joined its Board of Directors. In her role as Treasurer, Rios oversaw all currency and coin production and focused on economic development, urban revitalization, and real estate finance.
“I’ve dedicated my career to financial inclusion and empowerment, which requires bringing new and innovative solutions to staid processes. Ripple is one of the best examples of how to use cryptocurrency in a substantive and legitimate role to facilitate payments globally,” said Rios. “Blockchain and digital assets will underpin our future global financial systems. Cryptocurrency is the what. Ripple is the how.”
Ripple CEO Brad Garlinghouse said that the new appointees come “at a pivotal time for the company.” Garlinghouse’s phrase, “pivotal time,” is in reference to Ripple’s international expansion efforts; earlier this spring the company acquired a 40% stake in Asia-based cross-border payment specialist Tranglo. It is also a head nod to the lawsuit Ripple is currently facing.
The U.S. Securities and Exchange Commission (SEC) alleged that Ripple co-founder Chris Larsen and CEO Brad Garlinghouse conducted an illegal securities offering that raised more than $1.3 billion through sales of Ripple’s XRP currency. Ripple, which considers XRP as a currency and not an investment contract, is denying the allegations.
Backed by SBI Holdings, Santander, Andreessen Horowitz, and Lightspeed, Ripple has raised $294 million and is valued at $10 billion.
AI marketing expert Micronotes recently launched a refinancing tool that will help consumers reorganize their debt, while enabling banks to lower their borrowing costs and boost customer retention.
The new tool builds on Micronotes’ ReFi solution it launched last June. The credit marketing automation suite enables banks to leverage AI to help their clients automatically identify refinancing opportunities for a range of consumer debt, including auto loans, personal loans, student loans, credit card debt, and mortgages.
With today’s advancement of ReFi, Micronotes is teaming up with Experian to leverage the firm’s database of consumer credit profiles. Experian will compare the bank’s current lending criteria to the consumer’s credit profile, and then synthetically refinance the customer’s existing debt held elsewhere while identifying other refinancing opportunities.
“We’re thrilled to partner with Experian to leverage artificial intelligence and data to help consumers lower their borrowing costs,” said Devon Kinkead, founder and CEO of Micronotes. “With an estimated $2 trillion in mispriced debt, during an era of persistently low interest rates, we help digital banking customers see where they’re overpaying interest that can be refinanced with a lender they know and trust — their primary financial institution.”
Micronotes’ personalization expertise comes in via the customer communication piece. The company will send the customer a message in the digital banking channel that informs them of the potential savings. Using Micronotes’ technology, the customer can respond to the message using preset, customizable quick-response buttons that range from “remind me later” to “chat with a banker.”
This quick-response messaging system is Micronotes’ bread and butter. The company was founded in 2008 to help financial institutions start conversations with their customers in a non-invasive way. At the company’s most recent Finovate appearance, FinovateSpring 2013, Micronotes showed off its cross-sell feature that uses predictive analytics to bring the branch sales process into the digital channel.
Headquartered in Boston, Massachusetts, Micronotes has raised $12.2 million.
Like most industries, fintech and banking have experienced massive disruptions in the past six months. As we’ve gone through the process of enforced change, the big question facing our industry is essentially the same as the one facing the entire world right now: what is the new “normal” going look like?
But before we get there, we’re living through a moment that people will remember. Customers will remember how they were treated by their banks, and banks will remember which tech companies helped them take care of their customers (and which didn’t). It will be important to stay focused on the big picture, and get remembered for the right reasons.
FinovateFall Digital 2020 honed in on the technologies changing the game this year, and put the thought leaders with a view for leveraging the opportunities this time offers up on the center stage. The event eMagazine was exclusively available to FinovateFall Digital attendees for the week of the event, but now we are making it available to the wider Finovate community.
Catch up on the insights from the week, including daily summaries from our Finovate’s analysts, expert insight from our Headline sponsor, Accusoft, Best of Show and Finovate Awards winner announcements, and exclusive interviews with our speakers, demoers and featured FIs from the event.
We were welcomed to the first day of FinovateFall 2020 by a familiar face: Finovate VP Greg Palmer. Greg kicked things off with a discussion of the importance of digital offerings, noting the increased accessibility to all.
The opening keynote was from Pablos Holman of Intellectual Ventures Lab who issued the friendly reminder that “nobody has ever invented a new technology by reading the directions.” Holman encouraged the audience to find real problems in the world and start innovating where there is a true need. He pointed out two keys to success in this type of innovation: first, form fintech-bank partnerships to give ideas the traction they need; second, run a lot of experiments by trying a handful of things to determine what works the best.
During his Mastermind keynote, Scott Gnau, VP of Data Platforms at InterSystems encouraged the audience to leverage the inflection point that is COVID-19 to focus on digital transformation and build technology that is resilient to change in the future. Part of the key to this, he explained, is to leverage partnerships but maintain ownership of your own data to remain agile.
After a round of virtual meet-ups and networking sessions, the demos began:
Yext kicked things off by showing how it can improve the search experience on company websites and across the entire search ecosystem.
Scientia Consulting presented FinTechInsights, a tool that analyzes digital banking competition in realtime behind their login screens.
Finzly showed its open banking platform, Finzly BankOS.
Lendsmart demoed its AI driven platform that solves for the lack of automation, transparency, and communication in the lending process.
Glance Networks presented its solution for transforming in-branch financial consultations into digital meetings.
NachademoedPhixius, a tool that enables the secure exchange of payment-related information via open APIs within a trusted network.
Icon Savings Plan showcased its portable, universally accessible, workplace retirement savings plan that serves as an alternative to the 401k.
Remitter presented its AI-powered, white-labeled digital communications platform that helps lenders maximize revenue by optimizing customer engagement.
XcooBee demoed its payment workflow automation tools that combine self-checkouts and remote pay to help reduce retail touch-points and boost transactions.
There aren’t many industries where organisations have so much data about customers for such a long period of time. For example, I have had the same bank for the last 25 years which, by the way, is the same as my father’s.
My bank has been my partner when I wanted to go to university or buy my first apartment. It knows how much I make and where I spend it, but I never truly felt they used that knowledge to either enrich my experience or deliver tailored offers. Why is that?
There is a wealth of value to explore in untapped customers’ financial behaviour and banks are in prime position to reap the benefits, but they need to adapt.
The transformation has already begun with banks introducing more channels, learning best practices from digital native banks and fintechs, and even creating new digital business models to test what works, aiming to later integrate those learnings into the core business.
Still, banks are drowning in data and have very little insight on how to transform it into actionable knowledge to better serve customers, personalise offers, and deliver a consistent customer experience.
Furthermore, through segmentation, banks can use their knowledge about current customers to define campaigns and other initiatives to fulfill one of their main objectives, attract new customers. Their continuous appetite for growth steams from delivering unique and innovative value propositions to current but also future customers which today can be, in many situations, hallenging.
From risk takers, tech-savvy, and hungry for innovation customers to techavoiders that value human touch, banks must accommodate different engagement approaches and insights to differentiate customer profiles. This happens not because they don’t have the data, but because they can’t mine it.
It’s clear that very soon ‘Customer intelligence’ will be the most important predictor of revenue growth and profitability. The use of behavioural analytics will be key to identify customer friction points and there will be a surge in building technological capabilities to get more insight on customers’ needs.
A New Engagement Model for the Digital Age
By nature, financial products are complex and both companies and individuals are deeply affected by their financial choices, so there’s a foreseeable need for contact, ensuring a correct understanding of what is at stake.
Bank tellers, financial advisers, and other resources are key in accommodating customers’ requests and providing value-added and timely information. They benefit first-hand from customer insights, which enable them to provide not only a better service, but also to increase the customer value by offering the best solutions.
In addition to assisted channels, there is the emergence of self-service applications aiming to allow customers to engage on their terms, when they want, going as far as allowing customers to configure product features, including pricing. If, in this case, the human factor is eliminated, the need for accuracy is even greater, otherwise, the sale may fail or the inquiry can go unanswered.
Customer expectations have changed mainly due to the experience from other digital native organisations, coming or not, from the financial sector. The easy interactions, the tailored offers, integration between physical and digital channels or the unmatched service, creates a gap between what many financial institutions can deliver and what customers are getting elsewhere.
Responding to the pressure to change, banks must find a balance between opening but guaranteeing trust continues to be paramount, at all levels. Up to this point, the perspectives presented argued for the need for banks to not only gain insights and knowledge from the data they already have, but also the challenge in adjusting to new customers’ demands and how they choose to engage.
However, the biggest challenge is how to orchestrate these two dimensions and provide customers with experiences that leverage the knowledge banks have delivered in a seamless way, using whatever channel customers choose from.
The holy grail of an enhanced experience in the banking sector is to have an holistic and end-to-end perspective of the customer experience.
Introducing Celfocus Customer Knowledge Augmentation and Activation
Celfocus Customer Knowledge Augmentation and Activation is a modular and integrated framework tailored to leverage banks’ customer knowledge and deliver tailored services.
This framework is anchored in 2 main modules. The first comprises the tools and technologies to augment customer knowledge by activating every single customer through automated AI and Cognitive data insights, and the second aims at delivering tailored experiences that trigger new targets, portfolios, and customer lock.
By encompassing the Customer Value Augmentation and Enhance Customer Experience modules, the solution provides banks’ full control of the customer journey from planning to execution, focusing on building the technology capabilities to get more intelligence about customers’ needs, and how to best serve them.
Starting in Q2 of this year, Mastercard customers will be able to get a new, “augmented” understanding of the benefits and rewards available to them as cardholders. The augmented reality app, announced by Mastercard late last week, will offer cardholders a virtual tour of three different portals representing Mastercard’s three reward categories: Experiences, Everyday Value, and Peace of Mind.
Each category inside Mastercard’s augmented reality environment has its own appearance: a home setting for Everyday Value, for example, and a spa for Peace of Mind. Within each portal is a virtual room with various benefits denoted with representative symbols and avatars (i.e, tapping on a golf club image generates a pop-up option to explore Mastercard’s Priceless Golf benefits).
Mastercard chief marketing and communications officer Raja Rajamannar put the app in the broader context of the company’s ongoing efforts to provide more engaging, interactive experiences. “At Mastercard, we’re using our technology and solutions to deliver multi-sensory experiences for consumers every day – whether they’re shopping, taking transit, or exploring the card benefits they care about,” Rajamannar said.
AR as a marketing solution for fintechs is a use case familiar to Finovate audiences. Alums ranging from ebankIT (and its parent company, ITSector) to Fiserv has demonstrated how they have leveraged AR to deliver compelling marketing content to customers.
Augmented reality in fintech will featured in a keynote address at FinovateEurope in Berlin next month. When Will AR & VR Become Meaningful Tools in Customer Engagement? will be held on Tuesday, February 11 on the Future Tech Industry Stage.
On Finovate.com
2020: A Breakout Year for Fintech in Emerging Markets? – From major investments in fintechs in Latin America and Africa to the challenger banking “space race” in Singapore, 2020 could turn out to be a breakout year for fintech in many growing economies around the world.
8 Banks You’ll Compete with If You Offer More Than 2% on Savings – Banks are facing an increased number of competitors these days. Not only are traditional banks vying for customer deposits, but fintechs and challenger banks want part of their funds, as well.
China Says 你好 to American Express – The People’s Bank of China (PBOC), China’s Central Bank, announced it has accepted an application from American Express (AmEx) that expressed the company’s intention to operate in China.
Future Banking: Creating an Incumbent Challenger – Finovate talks with Ronit Ghose, global head of banks research and co-head of the fintech theme group at Citi about the future of challenger banks and why some shouldn’t be calling themselves a “fintech” at all.
Treasury Management Innovator HighRadius Earns Unicorn Status – HighRadius, a company that offers AI-powered order-to-cash and treasury management solutions, announced today that it has raised $125 million in Series B funding. The investment boosts the Houston, Texas-based firm’s valuation to $1 billion, earning it the status as one of the first new fintech unicorns of 2020.
Sprint and Wirecard to Deliver the Internet of Payments – Telecommunications giant Sprint and German financial services provider Wirecard announced they are teaming up to deliver the Internet of Payments.
Influencers as Innovation: Fintechs Turn to the Famous in Bid to Boost Visibility – As Snoop Dogg celebrates his first anniversary as a high-profile Klarna shareholder and RDC announces that it has hired a network of social media influencers to help promote its new digital banking app, it’s clear that firms are all-in when it comes to using celebrity to showcase everything fintech.
banqUP, PSD2, and the Future of Open Banking in Europe – We reached out to banqUP CEO and founder Krzysztof Pulkiewicz to talk about the company’s latest accomplishments in open banking, as well as what the landscape for fintech innovation is like inside and outside the CEE region.
ING’s Katana Becomes a Standalone Fintech – Dutch financial services corporation ING announced today it is spinning off Katana into its own entity called Katana Labs. As a part of its move to independence, Katana has closed $3.9 million in funding, half of which ING contributed “to enable further growth and to pave the way for an independent future for Katana.”
Finovate Podcast Episode 21: Romeo Maione, Launchfire – New Year and a new episode of the Finovate Podcast! Romeo Maione, Director of Business Solutions, Lemonade by Launchfire, joins host Greg Palmer to discuss marketing through training, and why the U.S. could be falling behind on digital adoption.
Bankjoy and Zogo Finance Team Up to Onboard and Educate Gen Z Customers – Bankjoy and Zogo Finance are betting that helping credit unions and community banks educate their members rather than “sell” to them is the key to better engagement for CUs and better financial health for consumers.
The Digital Identity Infrastructure and What it Has to do with Fintech – The last decade brought about a lot of discussion around digital identity. Dozens of security companies created new solutions to help banks authenticate their user’s identity and verify their personal information.
Proptech Advances in Latin America As Loft Raises $175 Million in New Investment – The $175 million in Series C funding raised by Latin American digital real estate platform Loft this week offers an insight into how proptech is providing new investment opportunities within the emerging markets of countries like Brazil and Mexico.
Nebula Merges with Open Lending, Forming a New Publicly Traded Company – Lending solutions provider Open Lending has agreed to merge with Nebula Acquisition Corporation, an acquisition company sponsored by True Wind Capital.
Alumni News
DAVO Technologiespartners with restaurant management platform Toast.
Clearview Federal Credit Union partners with Insuritas to launch an insurance agency.
