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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Launched in 2019, Piermont Bank aims to blend the best of modern banking and agile fintech. Piermont Bank’s peer banking approach provides customers with technology-enabled, human-delivered solutions, opting for dedicated bankers over “1-800 numbers or chatbots.”
Last month, Piermont Bank celebrated three years of innovation. The woman-founded and entrepreneur-led financial institution currently has more than $420 million in total assets, and offers an end-to-end, digital banking-as-a-service platform with more than 40 fintech clients already onboard. More than 50% of Piermont’s loans since inception have been made to low- and moderate-income communities, as well as women- and minority-owned businesses.
The genesis of building Piermont was actually really simple. A lot of entrepreneurs would tell you they had this grand vision. For me, it was actually just very two practical reasons. The first was seeing the impact and the speed of impact that fintechs were making on consumer banking … The second reason was: I’ve been in banking for 26, 27 years. (And I’ve seen) the same pain points repeatedly from both the customer (side) as well as internally as an operator … So basically I said, “Okay if I could start with a blank slate, how would I build this? How would I build a fully digital-native, totally tech-enabled bank to do commercial banking faster and more efficiently?
On the evolution of financial services in recent years
My industry, historically, doesn’t change. It doesn’t go that fast. These days, I say that if the CEO is still working off their three-year strategic plan, if it’s in their third year, the board should fire that person. I mean, are you still even relevant in terms of your products (or) the way that you’re delivering these products? So I think the biggest change is just the speed, the speed of change, the speed of innovation.
I was taught and it’s still true banking is a risk management business. So it’s a little bit counter-intuitive if you think about it, this so-called “innovation.” But you absolutely can innovate in a risk management business.
On the advancement of women into leadership roles in financial services
I find myself able to make the biggest impact in the day-to-day: hiring based truly on skill sets and meritocracy, being gender-blind, age-blind … I know that sounds weird but, as an executive, as somebody who is doing the hiring, as somebody who’s doing the promotion, if I can just say, is this person the best person for the job? That’s more than half the game. I know that doesn’t sound very inspiring or trailblazing, but it is actually the day-to-day that makes a huge difference. Empower women, give them the job opportunity, give them the opportunity to rise to the occasion. That’s how we get there.
If there were a Challenger Bank Hall of Fame, then rest assured that Anne Boden, who founded U.K.-based Starling Bank in 2014 and is the challenger bank’s CEO, would be prominently featured therein. As we learned in our conversation with Ms. Boden, her inspiration for founding the U.K.’s first digital bank was driven by both the opportunities presented by new technologies as well as a banking industry that was still significantly shell-shocked from the Great Financial Crisis of 2007 and 2008.
Headquartered in London, Starling Bank now has more than three million accounts and four different account types. Voted Britain’s “Best Current Account” five years in a row, Starling Bank maintains offices in Cardiff and Southampton, as well as London, and still has zero brick-and-mortar branches. Starling Bank secured its banking license from the Bank of England in 2016, launched its first mobile personal current account in 2017, and introduced the country’s first digital business bank account in 2018.
On the decision to launch a fully-digital challenger bank
(T)he banking sector, back in 2014, was still looking backwards. They were still looking at the financial crisis, trying to repair their balance sheets, trying to repair their financials, and they weren’t really looking forward about what they could do to improve customer experience or customer satisfaction. I went around the world, talking to big banks and talking to technology companies and asking what they were doing. I came to the decision in 2014: wouldn’t it be great to start a new bank? Wouldn’t it be great to have a new bank with all new technology, a different way of engaging with customers, being fair to customers? And here we are in 2022 and things have gone from strength to strength.
On the challenge and opportunity of digital transformation in financial services
Organizations have become far more fixated on minimizing the risk of change. “Let’s do small projects around the core. Let’s not change the core. Let’s make big decisions at the senior level. Don’t empower people.” But in order for big banks to be more successful and compete with the new startups such as Starling, they have to have new technology, but above all a culture of being prepared to change. I am trying to empower people – the CTOs, the CIOs – to knock on the door of the CEO and say: “We can be better. We can embark upon technology projects. And we can compete with the new guys.”
On the present and future of Starling Bank
In the U.K. we’re very, very successful. We’ve built a whole new technology stack. We have a new banking license, three million customers, (and) we have something like eight percent of market share in business banking. That is huge. We’ve done in three years what some banks have done in 300. But that’s because we have this remarkable technology stack which we call Engine, and we have lots of banks around the world asking us if they can use Engine. We don’t plan to get a banking license in the States, but banks in the States will be able to use our Engine technology. So we’re going to be software-as-a-service, based on Engine, so lots of businesses around the world can have a bit of the Starling magic.
Innovation and regulation are the ying and yang of financial technology in many respects. To this end, we caught up with Justin Beals, co-founder and CEO of Strike Graph, to talk about the relationship between fintech innovation and fintech regulation, and why compliance is something that successful fintechs are taking seriously.
Founded in 2020 and headquartered in Seattle, Washington, Strike Graph specializes in helping companies secure critical security compliance certifications. These are the certifications that can both impact revenue and reduce the time to close, as well as demonstrate the maturity of an organization.
Why banks and financial services companies need a compliance partner.
The challenge (for banks) is that the standards that you’re trying to meet can be complex. It’s important to not only have technology, but (also) a provider of that technology with intelligence about how to meet the standard so that you don’t essentially spin your wheels trying to do things that don’t necessarily make you more secure and don’t necessarily impact compliance.
So when revenue is on the line – and that’s what the challenge is here – being unable to represent a security posture that meets certain standards (means) you might not get that partnership, you might not get that contract … You really need to do it efficiently and effectively and be able to maintain it for a long period of time.
On the role an effective compliance partner can play to help financial services companies
I think one of the secrets about compliance practices is that if there’s some aspect of your business that isn’t applicable to the standard, you’re actually not required to be assessed to it. And so what’s really important is to customize your security posture according to the types of risk that your business is meeting in the marketplace, and then respond to those risks. Then, (you are) able to talk to the assessor and say, “hey, look, you know we don’t necessarily have this particular risk. It’s not something we solve for and therefore it’s not something we need to be assessed for.” That way you get through the compliance process as efficiently as possible.
On Strike Graph’s approach to helping financial services companies meet compliance obligations
The secret sauce at Strike Graph is that we have a very intelligent SaaS platform that helps our customers customize that particular security posture based upon the risks that are impacting their business.
This is impacting any B2B company that’s sharing data. And that’s really how we describe our marketplace. And, of course, fintech handles some of the most precious transactions and pieces of data, and they have a long history of things like PCI DSS where compliance is really important. So they really do understand the value of having a good compliance practice.
The metaverse, decentralized finance (DeFi), and crypto are rising up to become some of the hottest themes in fintech this year, taking the place of AI, digitization, and customer experience.
So how should firms in the traditional finance (TradFi) realm prepare for the road ahead? We spoke with NimbusPlatform CEO Alex Lemberg to get his thoughts on the intersection of DeFi and TradFi.
What changes will we see in crypto and DeFi this year in comparison to years past?
Alex Lemberg: A month ago my answer to this question would have been slightly different than today. We still believe that a great deal of capital inflows will come more and more from financial and institutional organizations. This will cover the gambit from high net worth individuals to hedge funds and family / PE offices alike. We are now also witnessing major use cases related to regions in conflict and faced with sanctions. Also the advent of SWIFT as a new means of restrictions will make sovereign groups look closer to crypto markets as well in the future.
How can traditional financial institutions prepare themselves for these changes?
Lemberg: Financial institutions are extremely well prepared to handle both client activities in the space as well as their own. The main precursor is better understanding of filing and reporting requirements to regulators. I strongly believe that even though most of the innovations we are seeing do come from private markets, the largest impact will come from institutions beginning this year.
The U.S. recently issued a discussion paper on a government-issued CBDC. What do you envision the role of TradFi will be if the U.S. government issues a CBDC?
Lemberg: It is too early to discuss impact, as too many things are still in discussion regarding structure. It could eventually provide some upheavals in the payments space and user data controls which are both quite ripe for it.
Does the recent rise in DeFi indicate an end to paper and coin currency?
Lemberg: Absolutely not in the immediate future, nor do I believe would it be the case for quite some time. That said, let us remind ourselves that 90% of the world’s currency is digital and has been for some time. Yes, this will add to that digital transactional landscape, but certainly as an addition and not a replacement of any meaningful sort.
Headquartered in New York City, Tern is a fintech as a service innovator dedicated to enabling startups and established financial institutions alike to launch embedded banking and payments services products. The company, founded in 2015 by CEO Brion Bonkowski, offers a multi-currency, multi-language prepaid and stored-value platform with embedded AML, KYC, CIP, and fraud mitigation solutions.
We caught up with Brion to discuss a variety of critical topics in fintech – from the power of embedded finance and the future of neobanks, to the rise of BNPL and the challenge from Big Tech and Big Retail. We also discussed how Tern enables more companies to fulfill the promise of the banking as a service (BaaS) phenomenon.
What problem does Tern solve and who does it solve it for?
Brion Bonkowski: Tern is a fintech infrastructure company that exists to help virtually any company launch fintech products. Launching fintech products is hard and expensive. Anyone who has done it before knows the pains of contracting with banks, processors, and networks. Combined with long project timelines, these obstacles sadly prevent many programs from ever launching.
The emergence of Banking as a Service (BaaS) was the market’s initial reaction to try and serve this need. It was a way to package program management, processing, and banking under one roof. But BaaS had a narrow mandate aimed at serving startups for the most part when, in reality, the number and type of companies interested in launching financial services offerings is much broader.
Tern is the next evolution of BaaS in that we’re building tools that allow virtually any type of company to launch fintech products. This could include an early stage fintech startup, a legacy fintech, or a big global brand that wants to provide value-added financial services products to their existing customer bases. By offering no code (white labeled UX), low code (embeddable widgets), u code (API) options, we are striving to be every company’s answer to launching fintech products quickly and compliantly.
The rise of embedded finance has been one of the biggest trends in fintech of late. How do you see this trend evolving in 2022?
Bonkowski: We see a definite trend with more traditional enterprise players launching embedded finance applications, aiming to add stickiness to their service offering and additional lines of revenue to increase ARPU (average revenue per unit). The problem is, it is really hard to prototype, A/B test, and launch pilot programs to test a particular thesis in the market. We find marketing and product teams attempting to prototype and launch products quickly, however the problem is the complex compliance and regulatory oversight required. In response to this growing demand, technology providers will need to make their tools easier to deploy (with compliance baked in) to keep up with ambitious project timelines. Tern, for example, launched low code widgets to enable companies to launch core fintech services, such as onboarding, account issuance, and payouts, quickly and inexpensively.
Looking ahead, the real uptick in embedded finance will come when enterprise legacy companies, with established customer bases, realize the ROI of launching fintech services across a broad range of industries, and have a deployable vehicle to bring them to market. So, really, I would say we’re still at the beginning of this trend, and that’s exciting.
Another major trend in fintech is the proliferation of neobanks – especially those serving specific communities and consumer segments. What is driving this and how sustainable is it?
Bonkowski: New neobanks are popping up all over the place, and for good reason. Consumers have decreasing loyalty to traditional banks, so when a new online bank with messaging targeting a specific demographic appears, that demographic will typically at least test the waters, especially if motivated to do so by their peers. This is especially true if the account is free and offers services traditional banks do not, like earned wage access (EWA). Challenger banks like Chime started the wave of EWA programs and we find this function to be a big driver for neobanks to differentiate themselves and add new customers. Unfortunately, outside of EWA offerings, many of these neobanks have little to no differentiation. Many rely on celebrities and influencers to get the word out which is definitely not sustainable. Coupled with a bullish fintech venture market, we are sure to see some major casualties in the coming years.
Neobanks with specific functionality catering to their audience, however, still have a fighting chance at disruption. These differentiators vary, but even something like lowering the friction of moving funds into or out of accounts, or adding a utility like crypto or remittance to a portfolio, can be very powerful.
We’ve seen a number of different types of industries – from Big Tech to Big Retail – move into the banking services space. What kind of challenge does this represent for both “traditional” fintech providers as well as for banks?
Bonkowski: One distinct advantage that Big Tech and Big Retail have over banks and “traditional” fintechs is data. They know who their customers are, how they spend their time, and what they buy, which gives them a significant leg up in offering financial services and credit products. Traditional banks and processors see transaction data and know if you have paid your bills on time, but they haven’t a clue as to who their customers are and what makes them tick. Big data is playing an increasing role in establishing very specific cohorts of users. Within this construct, they can facilitate the orchestration of a variety of financial services, offered in different formats with cohort specific messaging, to see which one works.
The one saving grace traditional banks have is regulation and oversight, two things Big Tech and Big Retail want to stay as far away from as possible. They are already under the federal microscope, and the thought for some is that adding banking regulatory obligations could stifle growth and innovation. This has moved Big Tech and Big Retail to partner with banks, rather than compete against them…at least for now.
The Buy Now Pay Later e-commerce phenomenon seems very much in a boom phase. Is regulatory scrutiny inevitable and how might it change the way BNPL services are offered?
Bonkowski: BNPL feels like it’s the wild west of payments right now with little to no oversight. These services are, in fact, credit products and we feel they will eventually be treated as such by the CFPB. We expect new regulations and standards for things like fees, disclosures, payment due dates, penalties, etc. Our fear is these new regulations may stifle the BNPL form factor by adding steps to the process or forcing consumers to accept multiple onerous disclosures. This may increase shopping cart abandonment, the very thing BNPL is looking to obfuscate. With many products and programs, we feel the best and cleanest end use experience will prevail. BNPL providers need to remain agile and incorporate these new regulations as they come up with the least amount of end user friction possible.
This fall Tern announced a partnership with TransferMex. How did this collaboration come about and how does it help fulfill Tern’s mission?
Bonkowski: TransferMex is a great case study on the power of partnership. In 2020, Tern was approached to help an institutional Mexican labor supplier issue bank accounts for H2 Visa workers. The driver for the program was to service the employers by eliminating paper checks and, in turn, the exorbitant cost for employers to track down workers that have to leave unexpectedly to deliver their final paycheck. Looking to add value to not just the employer, but the workers, Tern suggested adding simple and inexpensive remittance capabilities to the program and TransferMex was born. The TransferMex team had limited technical resources or fintech experience so they chose to use Tern’s No Code deployment option, essentially outsourcing the entire program to Tern.
Today, the TransferMex program is live and is seeing dramatic increases in the number of workers and employers using the service. The TransferMex team does all of the marketing, onboarding, and customer support, while Tern hosts and manages all of the technology, applications, and fintech components. Tern sees growing demand for this model of issuing prepaid cards with remittance capabilities to existing brands, and will be launching two telecom companies with similar functionality in early 2022.
Asked what she was most proud of after a year as CEO of IDology, a GBG company and a leader in identity verification and fraud prevention, Christina Luttrell gave a big tip of the hat to her team.
“Without a doubt, I am most proud of what our team has delivered to IDology customers and the difference they have made,” she said. “For example, our dedicated fraud team recently spotted a new fraud vector utilizing tumbled email addresses and collaborated with IDology’s product innovation team to build, test and deploy a capability that mitigated the risk head-on, within weeks. Their dedication to serving our customers is energizing and I’m humbled by their contributions every day.”
In over 10 years at IDology, Luttrell has significantly advanced the company’s technology, forged close relationships with IDology customers, and driven the development of technology innovations that help organizations stay ahead of constantly shifting fraud tactics without impacting the customer experience.
We caught up the IDology’s Chief Executive in the wake of the company’s victory at the Finovate Awards, where IDology was named “Best Identity Management Solution.”
IDology won Best Identity Management Solution at the Finovate Awards this fall. What is unique about IDology’s approach to fraud fighting and identity verification?
Christina Luttrell: First, thank you for the honor. I am exceptionally proud of my team and thrilled about upcoming innovation we’ll be introducing into the marketplace.
Regarding the IDology difference, it’s based on our philosophy and relentless focus on customer success. From a business value perspective, we facilitate more revenue with less friction and fraud while enabling compliance. What makes IDology unique is how we go about it. We always consider ourselves a product company with a solution offering that utilizes vast and diverse data sources, acquiring deep fraud expertise, and building our consortium network for collaborative cross-industry fraud insights and combining all of these elements into one single integrated flexible platform called ExpectID.
We pioneered multi-layered identity verification by fusing physical and digital identity attributes. When we conceived identity verification orchestration and built the ExpectID platform we wanted to go beyond basic data matching to leverage thousands of diverse, high-quality data sources, correlate multiple identity attributes such as location, device and activity-based data, and use advanced algorithms and rules engines to analyze and evaluate risk factors. We were especially intentional to empower customers to customize a nearly infinite number of identity attribute combinations to gain more control of data and better understand risk.
We are innovating the ExpectID platform to new levels with anti-fraud machine learning layers, adding cross border verification, enriching data intelligence and launching more mobile capabilities so our customers can keep ahead of fraud and stay ahead in their business.
Can you discuss the importance of data diversity in the identity verification process and the challenge of achieving it?
Luttrell: Single sourcing identity data for verification is dangerous. With massive breaches, entire identity data pools have been compromised, packaged and sold on the Dark Web for new account fraud and account takeover schemes. This can be especially problematic when financial institutions use the same data sources for identity verification as they use for credit risk analysis.
Diversifying data from multiple streams and sources, whether public sources or digital attributes, such as email or mobile phone providers, and fusing them together, enables a more complete identity profile and deters schemes, such as synthetic identity fraud. The challenge isn’t so much in accessing identity data feeds, but in designing and orchestrating effective technologies and skill sets to create decision engines with precision and accuracy that can quickly adjust as fraud and consumer behaviors shift. Doing so takes years to develop, deliver, harden, and prove.
What role do configurability, flexibility, and orchestration play in an identity verification regime?
Luttrell: Our research shows that 90 percent of businesses view identity verification as a strategic differentiator. However, that competitive advantage is only realized when businesses are empowered to verify who they want, when they want, and which attributes they want, with economy and precision.
As a result of COVID and its implications on businesses and consumers, the identity attribute data and fraud landscapes are changing at faster rates than ever before, resulting in a growing number of elements that need to be tweaked, tuned, and verified to validate a consumer’s identity.
At the same time, we found that 70 percent of Americans think companies collect personally identifiable information (PII) online about them without their knowledge. Needless to say, consumers want to provide as little PII as possible. They also express intense dislike for encountering unnecessary verification steps and will abandon account creation if they feel the identity collection process isn’t secure or is overly complex. All of these factors point to real challenges for businesses.
The ability to build, customize and evolve their identity verification programs to suit the unique requirements, risks and opportunities of their industries, use cases, customers, and compliance needs – and defend against ever-evolving fraud schemes – is critical for businesses.
The ideal identity verification solution empowers businesses to customize and fully flex transparent validation checks, workflows, and attributes economically, at any time throughout the customer journey. When looking to mitigate fraud, either upfront in the customer journey or upon re-entry, the desired solution will provide a high level of flexibility to validate customer leads without sacrificing risk protection and compliance or generating front- or back-end friction.
A superior solution will enable businesses to pick and choose, mix and match identity attribute proofing and curate workflows, based on their unique needs.
Last but not least, the orchestration of multiple systems and services is key. At IDology, we’ve embedded flexibility for seamless orchestration across services and systems to our solution for over 14 years. Coordinating with many data sources and services, while offering deep “home-grown” analytics based on hundreds of combined years of experience in fraud and identity can enable businesses to onboard legitimate customers without friction while keeping the fraud out. Our orchestration platform is a one stop shop for managing KYC / CIP, validating emails, geo location, phone numbers, identity signals, and access to the largest consortium network in the country, offering dynamic and seamless escalation for methods such as document verification-based smart rules controlled by the business.
One of the more important developments in AI technology is the idea of explainable AI which enables the results of a solution to be understood by human agents. Is explainability a similarly important concept in the world of digital identity verification?
Luttrell: Artificial Intelligence (AI) and Machine Learning (ML) are hot buzzwords that often seem to be used interchangeably. Although widely used, there are major misconceptions about what these words actually mean. True AI means that a machine knows what to do with zero human interaction. When companies talk about using AI today, they’re really talking about using machine learning, which is an application of AI in which the system is “trained” by feeding it huge amounts of data and allowing it to adjust and improve.
As an early adopter of machine learning, we believe it plays an important role in building trust, removing friction and fighting fraud. By applying machine learning to the identity verification process, we have the power to analyze massive amounts of digital transaction data, create efficiencies, and recognize patterns that can improve decision making. At the same time, we recognize that machine learning alone is not enough.
Counter to the many benefits of utilizing machine learning are risks in its propensity for bias, lack of data transparency, and absence of governance. While machines are great at detecting trends that have already been identified as suspicious, a critical blind spot is their inability to detect novel forms of fraud. This is why we believe in a hybrid of machine learning and human intelligence.
Since 2016, we’ve supplemented machine learning with our fraud review team and today, continue using data, technology and expertise to meet the business needs of customers by verifying identities with high locate rates, low friction and less fraud. With the powerful combination of machine learning and human fraud expertise, we can analyze large amounts of data at scale while leveraging the intuition and expertise of our fraud review team to detect novel fraud, govern AI models to eliminate bias and reduce risk, and provide closed-loop data transparency.
Among the more recent challenges to identity verification is synthetic identity fraud. How significant is this problem and what needs to be done to combat it?
Luttrell: Synthetic identity fraud (SIF) continues to trouble businesses, causing financial institutions alone $50-$250MM in financial losses each year. The growth of this type of fraud can be attributed to its effectiveness for criminals and how difficult it is to detect.
Although there are no silver bullets, eradicating SIF requires businesses to monitor diverse data sources and employ multiple layers of integrated identity intelligence supplemented with system-specific SIF attributes, such as location, device and activity factors. This, along with dynamically evaluating a combination of cross-industry fraud data, machine learning, and human intelligence, has the potential to help businesses pinpoint instances of SIF.
You took over the top spot at IDology a year ago. What are you most looking forward to in your second year?
Luttrell: Going into the new year, I am excited about multiple things. For starters, GBG’s acquisition of Acuant opens up all kinds of possibilities to serve our customers with new innovation. I am also excited about global identity verification and making ExpectID the ultimate cross-border verification platform for easy and flexible international compliance and privacy from one single system. From tokenized identities to blockchain and advancements in machine learning, we are going into the next year with momentum and energy from the bottom up.
Speaking of accomplishments, you were recently named Woman of the Year at Golden Bridge Business and Innovation Awards. What does this recognition mean to you? What advice do you have for women who are pursuing leadership opportunities in technology today?
Luttrell: I have a great deal of gratitude and am humbled by the recognition. I see the recognition as a reflection of the excellence and talents of the entire IDology team. It also shows that I’ve been blessed with meaningful mentors along my career journey. At IDology in particular, dedication to our customer’s success is a value that has served me and the company well.
The advice I would offer women, and anyone for that matter, is to place the customer at the center of everything you do. Lead with confidence, but balance it with humility. Set and focus the business goals, persevere and stay positive. At the end of the day, we are all in this together so the kinder, the better.
Last year, while the pandemic was heating up, banks’ attitudes toward small business lending turned cold. With lockdown measures in place, underwriting became difficult and risk increased across commercial lending.
We tapped ForwardAICEO and Co-Founder Nick Chandi to discuss what the current lending environment looks like, how data can help, and what we can expect to see in 2022.
A serial entrepreneur, Chandi co-founded ForwardAI, a fintech that helps banks, lenders, and businesses access and analyze small business data. The company launched earlier this year to help fill the gap in small business-focused technology available to companies that serve small businesses.
What are some unseen advantages in leveraging financial data when underwriting small business loans?
Nick Chandi: The trend I’ve seen has been a shift to leveraging direct financial data, as in connecting to banking, accounting, payments, and commerce software using APIs instead of having potential borrowers export to spreadsheet or PDF. In the past, all lenders did the latter option and that caused a huge hiccup. After all, whereas with accounting data you can see insights like client base diversification, profits and loss statements, and more, that data can be manipulated to look better than reality. With banking data, it’s the opposite; data is often context-less but it’s practically impossible to fake.
Previously, when lenders looked at financial accounting data, they would have to manually cross reference transactions. This was a tedious task often taking weeks, but one that with API technology these days can be done in seconds using machine learning and AI. This can lead to exceptional savings for banks and lenders in their loan underwriting time.
In 2021, what kind of appetite have you seen from banks when it comes to small business lending? Has the pandemic caused more hesitancy than in years past?
Chandi: For a while in 2020, many lenders completely stopped lending to small businesses. In 2021, we saw much of the industry has returned to or pretty close to business as usual.
Have you noticed a specific type of lender take on more small business loans?
Chandi: We have seen that revenue-based financing has become very popular in the last year. This can be seen from the valuation of Pipe ($2 billion in May 2021) as it provides an opportunity for entrepreneurs to transform their future revenue into an asset with instant access to annual cash flows.
Previously, it cost lenders about the same amount to review a business for a $50k application as it did for a $250k application. As lenders begin to incorporate automation and process loan applications faster, that cost goes down and becomes more profitable. I have noticed lenders are incorporating more small business loans into their offerings, even if it wasn’t a market they put significant effort into previously.
What trends do you expect to see in small business lending going forward into 2022?
Chandi: The biggest trend change is going to be that direct data access I mentioned earlier. Simply put, with modern lenders using direct access to permissioned data instead of spreadsheets and PDFs, we can expect lenders to process significantly more financing applications and faster than ever before. Traditionally, SMBs have been a market that most companies haven’t focused on, but after the pandemic I think a lot of the public sentiment has shifted towards desiring and expecting more support for struggling small businesses in their community.
Going into 2022, I expect to see financial institutions and fintechs across the world upgrade their services and begin offering better products; enhanced financial management portals, expedited lending options, personalized financing offers based on predictive data, and proactive cash flow alerts may soon one day be normal. That’s part of the reason we created ForwardAI.
Watch ForwardAI’s demo from FinovateFall 2021 below:
We spoke with Pauline to discuss the importance of DEI in current fintech trends, the benefits of finding one’s community, and her journey to founding Pasito, the fintech that delivers financial wellness through inclusive employee benefits.
Pauline will be joining our Women In Fintech Power Panel: Paving The Way For The Next Generation Of Female Founders & Executives – How Can We Reach A Gender-Neutral Future In Financial Services? at FinovateFall next month.
Tell us about yourself.
Pauline Roteta: I went to college to be a Civil Engineer. Growing up in a small town in Argentina, I was awestruck by the sheer size of development in New York and wanted to be part of that continuous cycle of growth. While I cherish the process thinking engineering gave me, after a couple of civil and construction internships, I was hired by Goldman Sachs for the summer and have never looked back.
In finance, I found a community of the sharpest minds tackling global challenges and saw the opportunity to effect impact at scale.
Now a decade later, I can safely say that finance has given me the development and growth I was after. I’ve been part of teams that grew multi-billion dollar businesses from scratch, led acquisitions, raised private equity funds, and I have been the most senior female investor of a private markets investment fund. In 2021, with this experience under my belt, I co-founded Pasito, a female-led fintech delivering inclusive benefits for working parents. As a founder and business leader, I am now even more excited than at the start of my career for the tremendous growth opportunity ahead for fintech companies like Pasito.
How have you seen the industry change across your career?
Roteta: So much has changed in 10 years. When I first joined BlackRock, we were focused on the European Debt Crisis and unraveling legacy portfolios from the 2008 Financial Crisis. While technology was important to the business model, most of our analysis and delivery was in person. The active-passive debate was just starting. Fintech wasn’t mainstream and wasn’t seen as a threat by incumbents.
Fast-forward to today: we’ve seen a proliferation of fintech companies that are effectively competing with long-time incumbents in wealth, banking, and payments. In the space where we are building, there has been less disruption. Plan administrators continue their manual processes. Technology looks like it’s from the first days of the internet. Customers haven’t yet been delighted. Pasito is working on changing that.
Where do you see fintech heading in the next 12 months?
Roteta: After the events of 2020, financial health and diversity, equity, and inclusion will remain top of mind for businesses and the government. We’re seeing employers treat financial and mental wellness with the same care that they treat physical health. That’s a huge win for the retail consumer and creates an opening for new business models in fintech to fill in the gap left behind by wealth management.
When it comes to DEI, we see fintech pushing the boundaries of financial product and service personalization.
While we’ve seen an explosion in fintech, it’s important to remember most of the big problems remain without a solution. The U.S. has never been more unequal. The wealthiest families, who are primarily white, own most of the stock market. Black and Latinx families have limited access to financial advice, and their assets amount to a fraction of the average American household wealth. At Pasito, we are working on closing this gap, one product at a time. Our hope is that more fintechs will build with this mission in mind, rather than continuing to develop products that solidify the status quo.
What more do you think can be done to support women in fintech?
Roteta: We have a long way to go in fintech to reap the benefits of a diverse workforce. The easiest way to begin this work is for leaders in the space – both men and women – to first look inward and ask:
What am I doing to actively advance women in fintech?
How am I contributing to female-founded and women-led companies and initiatives?
How many women are working for my company? (if the answer is not many, then ask WHY?)
How is my culture inclusive and inviting to women?
The second easiest way to support women in fintech is to simply listen. What do women need to join the industry? If you ask, they will tell you. (Hint: it usually boils down to equal pay, family-friendly benefits, and flexibility.)
Lastly, invest social and financial capital in women. Women with powerful ideas will not only increase the return on your investment, but also the overall positive impact you can have on the world.
Where did you find support in the fintech world?
Roteta: We’ve seen tremendous support from Startup Boston, Parenthood Ventures, The Capital Network, other fintech founders, and personal mentors. The insight and community from these networks have been invaluable for Pasito’s early growth stage. Our leadership team is now paying it forward to other founders, so we can collectively level the playing field in hiring, building, and fundraising.
What advice would you give to women starting their careers in the industry now?
Roteta: Be confident. Find your community. Listen to founders who have been there before. Conduct market validation before spending your money. Be selective of your investors. Above all else, stay true to your mission and values.
Fintech’s innovations in the real estate market for homebuyers have prompted the emergence of an entire new kind of fintech company, the mortgagetech, that specializes in leveraging technology to improve the homebuying experience for all parties involved.
Less discussed are the ways that technology is helping those involved in the commercial end of the real estate market do their jobs better and more efficiently. To this end, we caught up with Tim Milazzo, co-founder and CEO of StackSource, a company that connects borrowers and lenders seeking commercial real estate financing.
Headquartered in New York City and founded in 2015, StackSource recently made fintech headlines with the appointment of commercial real estate industry veteran Richard Caldwell as EVP – Head of Originations. We talked with Milazzo via email about his company, how it serves the CRE industry, and the importance of blending technical innovation with human experience and talent.
What problem does your technology solve and who does it solve it for?
Tim Milazzo: StackSource simplifies the process of finding the best commercial mortgage for a given property investment by tracking the loan programs of hundreds of active lenders and offering borrowers a transparent experience.
Commercial mortgage brokerage has traditionally been a local, relationship-driven game. If you’re buying a home in 2021, you can know your rate and get pre-approved for a mortgage in minutes. But in commercial real estate, finding the right financing is only unlocked by developing relationships with the right set of lenders based on dozens of variables from the property’s asset type, location, income, and physical characteristics, as well as the borrower’s track record, financial strength, and business plan. We’ve streamlined that process of finding and connecting with suitable lenders to boost the investors’ financial returns with the right debt.
What in your background gave you the confidence to tackle this challenge?
Milazzo: My first exposure to commercial real estate was through family ties. My father was a successful commercial real estate broker in New York City, so I’d hear stories about office building negotiations at the dinner table growing up. While I went to college to study Finance, I interned at a large real estate firm, where I was known as the smart spreadsheet kid that sat in the corner. Honestly, I didn’t come away with a big interest in the industry at that time; my eye was on big tech companies. I went on to work in advertising technology, first with Google and later with Facebook. I came back to commercial real estate because I found an area where online technology could deliver a superior value proposition: helping investors find the best financing for a commercial property investment without the need to track hundreds of lenders’ programs themselves.
What do you think is the most misunderstood aspect of investing in commercial real estate?
Milazzo: Many old-school brokers are quick to point out that commercial real estate is a “relationship business.” And that’s true. But what’s missed is the fact that it’s also an information business. If you can leverage the correct information, you can scale beyond your local relationships in the capital markets, which is a significant advantage.
You recently launched a new Chrome browser extension to make the discovery process easier. Can you tell us more about this feature?
Milazzo: We’ve been delivering competitive financing quotes to real estate investor clients for a couple of years now. Still, we wanted to go the extra mile in the name of transparency and efficiency. We came up with a tool that draws on our pool of loan quote data to allow real estate investors to apply financing quotes to any commercial property listing across the web and analyze potential investment opportunities. Sourcing acquisition opportunities is a competitive process, and this tool can add speed and accuracy to acquisition analysis. It’s completely free and open, with no obligation to use our financing service.
One interesting aspect of StackSource is how you combine a technology platform with a fleet of experienced industry veterans. How do you see the balance between enabling technologies and “the human touch”?
Milazzo: The commercial mortgage space is not nearly as commoditized as residential mortgages. Even in the most “simple” commercial mortgage lending scenarios, where we can go as far as automating an instant soft quote, these are major financial investments, and borrowers want the guidance of an experienced Capital Advisor from submission to close.
How did COVID-19 impact your business and customers?
Milazzo: We doubled our market share in 2020 as many investors were looking for answers on how to secure the best financing for their real estate investment properties. People were staying home, and our online process is easy to access from anywhere, which was especially attractive. At the same time, funding from many local banks was pulled back in response to the pandemic. We even saw many traditional financing sources get distracted by things like issuing PPP loans, while we kept our focus on the long-term and stayed exclusively focused on commercial real estate.
What can we expect from StackSource over the balance of 2021?
Milazzo: We just raised our first proper fundraising round for the company in Q2, allowing us to push the limits of how efficient the commercial mortgage origination process can become. Think automated quotes on specific qualified properties and integrating additional data sources seamlessly into the investment and financing process.
From Big Tech to Big Retail, banks and other traditional financial services providers are facing a unique and potentially existential challenge These companies are leveraging their technology-first platforms, powerful brands, and history of innovation to draw customers away from relying on banks for a growing amount of their financial and banking needs.
We caught up with Richard Steggall, CEO of Urban FT, to talk about the world that banks find themselves in today and what they need to do in order to better engage their customers and ward off the challenge from Big Tech and Big Retail.
A Finovate alum for more than six years, Urban FT offers a white-label, B2B digital banking platform and includes financial institutions, brokerages, insurance companies and non-traditional FSOs among its customers.
How big is the threat that banks – smaller banks in particular – face from Big Tech companies?
Richard Steggall: When it comes to the threat regional banks and credit unions face from big tech, we’re seeing a true David versus Goliath moment play out. There is unprecedented pressure mounting for small FIs to digitize – fast – and for the majority of FIs, the pace is much faster than what their capabilities and resources allow. As FIs continue to fall behind the tech curve in delivering on the convenience consumers demand, they’re losing customers in the payments arena to the ‘Fantastic Four’ in payments (Paypal, Stripe, Square and Adyen). And in the long term, FIs risk leaving the door wide open for tech giants like Apple, Amazon and Google to become our bankers.
According to a recent report from McKinsey, in order for regional banks and credit unions to preserve their market share, they must find a way to digitally transform the end-to-end “customer journey” by the end of 2022. No matter how large of a budget an FI has, that certainly does not leave much time for the digital overhaul that’s needed to achieve this lofty goal. As the same report outlines, transaction banking trails nearly a decade behind the technology industry when it comes to practices in customer-management and sales. These delays make a successful digital transformation of the customer journey a decidedly formidable – but certainly not unfeasible – vision for small FIs.
How can banks leverage their strengths to better compete with tech giants that are entering the banking services space?
Steggall: As I mentioned, the financial services industry is in the midst of a David vs. Goliath scenario. With big tech continuing to invade financial services – such as the November 2020 relaunch of Google Pay – some are prematurely saying that small FIs will soon become casualties of war. But, in reality, we’re still in the early battles and there’s no clear frontrunner yet. While regional banks and credit unions may not boast the tech savvy of fintech giants nor deep pockets of large bank conglomerates, they have a potentially more powerful weapon: the hearts of customers.
Reinforced by close community ties and unmatched trust, small FIs are ideally positioned to deliver personalized, innovative user experiences (UXs) that unlock meaningful, local economic development value rather than line the pockets of predatory big tech elites. This area is their strength and they need to home in and capitalize on it.
Moreover, they can benefit from the chinks in the armor of their competitors, as big tech’s approach to financial services is far from flawless. According to a recent Ponemon study, 86% of consumers are “very concerned” about how tech companies are using their personal information. Moreover, in good news for FIs, consumers still overwhelmingly trust banks more with their data than other industries, according to a report from nCipher Security.
This is the opportune moment for small FIs to cut in, striking a balance of innovation and ethics in digitizing. While big tech hoards consumer data to bolster other revenue streams like advertising, FIs can “wow” customers by using ethically sourced data to drive responsible personalization and superior UXs that safeguard privacy.
How do banks make the best of their newly-created digital experiences in a post-COVID world in which human-to-human interaction is again possible, if not preferred?
Steggall: While regional banks and credit unions have a leg up in trust and transparency, they also need to understand where their own weaknesses and risks lie. This exposure is largely in the 3Ds: data, digitization and deployment (of technology).
Customer data is truly the holy grail because it allows FIs to better serve consumers no matter where they lie on the financial spectrum. For example, if an FI knows a customer has college-aged children, there is a strong opportunity to be the thought leader on student lending. But there’s a fine line; in an environment where consumers feel surveilled, catchphrases like “convenience”, “personalization” and “user experiences” may lose their appeal.
By upholding the old adage “with great power comes great responsibility”, FIs can rise above big tech and continue to learn about their customers in organic ways that don’t find them creeping in on online activity. Rather, the purpose of technology deployment is to infuse ethically enhanced human touchpoints in all processes, such as allowing customers to provide pertinent financial information voluntarily that might help an FI build a profile.
Given that banks will never out-tech the tech titans, what is the most constructive way for financial institutions to understand and invest in technology, especially digital technology?
Steggall: In terms of digitization and technology deployment, one of the most pressing issues facing small FIs is the disjointed manner in which they’ve been innovating. To date, most small FIs have contracted with various third-party fintech vendors to complement their traditional commercial offerings with piecemeal digital tools and services, including remote deposits, remote credit card processing and wealth management dashboards.
While FIs need to rapidly adopt fintech and digitize their service offering to keep pace with consumer demands, digital transformation has largely been happening within a temporary, makeshift model. Though this ‘band-aid’ approach to innovation has bought FIs some time, it hasn’t healed the fundamental problem that’s restraining digitization. Rather, this framework has inadvertently staggered an infinite and vast maze of third-party fintech platforms – all using different forms of connectivity and technology languages. Sometimes, tools are not even directly connected to the banking core. Moreover, the countless agreements require ongoing vendor due diligence, contract reviews and audits. This cumbersome approach to fintech has overwhelmed some FIs with a complex labyrinth, deepening the innovation gap for regional banks and credit unions, in particular.
Small FIs must break free of this constrictive fintech investment model and focus on centralizing the digital ecosystem so they can become more malleable, agile, and nimble in responding to surging digital demands. Rather than let the labyrinth get more twisted, a fintech banking core can serve to connect core banking functions with digital technology. In the long term, an effective fintech core will help FIs better scale and maximize the investments they make in technology.
What role does Urban FT play in helping banks and other businesses close the technology gap?
Steggall: At Urban FT, our mission is succinct but powerful: “Dream Big, Deliver Exceptional.” We’re focused on empowering FIs – especially local and regional banks and credit unions – to better scale continuous innovation so they can gain a competitive advantage and protect their market share from the likes of big tech. We see ourselves as the bridge between FIs and fintech innovation.
As an example of our commitment to help close the technology gap, our X-35 FinTech Core is an API-first, developer-friendly and cloud-based technology hub that operates alongside and in tandem with an FI’s banking core or payment processor. Essentially, it consolidates any existing tools and all fintech solutions an FI wants to deploy. By placing all solutions within one centralized platform, the full digital ecosystem becomes accessible as part of a singular vendor relationship that’s governed by one contractual relationship. X-35 has been designed to enable FIs of any size to rapidly and continuously launch to market truly innovative products. And now they can do this without the prohibitive expenses they were previously faced with.
Urban FT helps advance innovation once thought of as impossible for small FIs, providing both the foundation and the plumbing so that our clients can deliver tomorrow’s fintech innovations today.
Are there factors that tend to make a given company’s digitization initiative more likely to succeed than not? Do the success stories have a similar theme?
Steggall: While digital transformation certainly needs to be a priority for FIs of all sizes, innovation for the sake of innovating is not the answer. In today’s fast-paced marketplace, consumers are signaling desires for more human touchpoints and sometimes this touch can get lost in the midst of technology adoption – especially when resources are limited.
To create long-term value, small FIs should continue their humanized, high-touch approach to banking. This means deeply understanding the most pressing pain points their customers and potential customers are facing. Being a problem-solver will help FIs reach broader audiences, attract more customers, launch more services and clear more transactions. For example, at least 6% of the population – over 14.1 million adults – are unbanked in the United States. By exploring how to serve the unbanked and underbanked, FIs can tap into new segments of their communities and connect them with tailored services that improve their financial health.
In particular, a successful digital transformation requires an FI to think carefully about how two very different operating models – one current and one future state – should be integrated and operate in tandem under the same roof. Broadly speaking, there are three models for this integration: full integration, a digital center of excellence, and a separate digital department. For most small FIs, a fully integrated model is not scalable whereas a separate digital department does not engage enough of the organization. We see the most success when the digital center of excellence is set up, building a bridge to fintech innovation.
As Finovate Global has chronicled, the boom in fintech investment in Latin America is one of the most interesting trends in global fintech right now. From challenger banks to MSME lenders, a growing number of entrepreneurs and businesses in Latin America are bringing innovative, digital solutions to problems of financial opportunity and financial inclusion.
We caught up with Pablo Viguera, co-founder and co-CEO of Belvo in the wake of the company’s $43 million Series A round announced earlier this month. Dubbed “the Plaid of Latin America” by TechCrunch, Belvo offers an open finance API platform that facilitates data connections between apps, banks and other financial institutions, gig economy companies, and more.
What does this new investment mean to Belvo?
Pablo Viguera: We are extremely proud of this milestone and believe that it’s the result of the rapid growth our company has experienced during the last year – underpinned by the continued and unprecedented expansion of fintech in Latin America in the last 18 months.
The funding demonstrates that open finance represents a truly transformational opportunity for Latin America’s financial sector in the next decade. Investors believe that Belvo is poised to continue building category-defining infrastructure and API tools to power the next generation of financial services in the region.
The newly raised funds will help us scale and enhance our product offering, continue expanding our geographic footprint, and double the size of our team.
What is the distinction between open banking and open finance?
Viguera: Open finance is the next step after open banking. If the first aimed to make banking data available to third parties through APIs, this new model extends its scope to financial data from other sources beyond banks.
This is particularly important in regions where a big percentage of the population is still unbanked or underserved, such as Latin America. In these cases, the more financial data sources you have on your platform, the better it is for companies building innovative financial services or innovative apps on top of it.
One example of how this works is the use of financial data from gig economy platforms such as Uber and Rappi in Latin America.
Thanks to open finance APIs, companies can access one-of-a-kind financial data from these alternative sources, not accessible anywhere else, to build new and more inclusive financial services. It’s the case for Minu, a startup offering financial services for gig workers in Mexico, that uses our platform to connect their app with financial data from one of the largest delivery companies in Latin America.
What is driving the embrace of open finance in Latin America?
Viguera: One of the keys to our growth lies in our nature as an infrastructure company that offers its services to the rapidly expanding fintech sector. As this sector grows, as has been the case in recent years (and even more so since the onset of the pandemic, which has accelerated the adoption of digital financial services), we grow as well.
The trend that this sector is experiencing in Latin America is a tailwind for us. If only 12 months ago we had a handful of clients, today we have over 70, and we see that demand continuing to grow.
What are some of the chief obstacles to the broader adoption of open finance?
Viguera: Probably the biggest challenge today is the fact that we operate in a market where open finance is still a young concept and relatively unknown to many. There is still a lot of work to be done to make visible the benefits it offers, both to the companies that implement it and to its end users, in order to increase adoption.
However, we believe that this is the direction in which the market is heading. As has happened in other regions such as Europe and the United Kingdom, this aspect will improve as regulations progress.
Where do you see the greatest untapped opportunities right now?
Viguera: Latin America is possibly the most exciting and dynamic place to be in right now, given the exponential growth that the fintech sector is experiencing. It is also a great place to build infrastructure for the next generation of financial products for a huge market.
We believe it’s only going to get more exciting over the next decade as open banking and open finance will continue to be a key transformational driver for the entire region.
What can we expect to see from Belvo over the balance of 2021?
Viguera: This year we will focus on continuing to scale our product development efforts to meet rapidly increasing market demand and support its exponential customer growth. Our focus will be on expanding our offering of data enrichment solutions (beyond our income verification product) across markets and launch our bank-to-bank payment initiation offering in Mexico and Brazil.
In addition, this year will continue to explore opportunities to expand our open finance platform to new countries within the Latin American market. We expect to double our existing financial data providers’ connection coverage, reaching over 80 integrations by the end of the year.
The new funds will also be used to strengthen our team across functions and locations. We currently employ 70 people and we plan to double our headcount by the end of the year. As part of this plan, we will be hiring more than 50 engineers in Mexico and Brazil in the upcoming months.
As the price of bitcoin returns to old highs, we see a renewed appetite for cryptocurrencies and digital assets of all kinds. Add to this a new generation of investors raised on the wealth-building possibilities of alternative assets like private securities.
The result is a range of new opportunities – as well as customer expectations and regulatory obligations – for financial services firms and fintechs alike to deal with.
We checked in with Scott Purcell, CEO and Chief Trust Officer of Prime Trust, to discuss this new landscape of digital asset investment and management, and find out what we should expect in terms of innovation in this space in 2021.
Many longer-time Finovate watchers will recall the work you did with FundAmerica, which was acquired by Prime Trust a few years ago. Tell us about what you are doing as CEO of Prime Trust today?
Scott Purcell: I am very proud of the work we did for the crowdfunding industry with FundAmerica, and in fact it continues to provide escrow, compliance, payment processing, and other services to about 75% of the market – just now under the Prime Trust umbrella. My role has evolved rapidly as Prime Trust has grown to provide services to new industries, most notably blockchain, real estate, and the next generation of alternative trading systems (ATS), which are exchanges for private securities.
We are one of the top financial institutions servicing the cryptocurrency market, and by far the leading infrastructure provider for ATS. That means a lot of growth, which has taken me away from being hands-on with sales, product development, operations, and accounting to a point where I now have an incredible team of people who are responsible for those areas, and frankly they are way better than me at doing them.
This has set me free (well, if 12-hour days are considered “free”) to focus on the vision and product roadmap, overall market strategy, and closer engagement with key investors, partners, vendors and customers. It’s fun to see the company grow and we are incredibly excited about the things on our plate for 2021.
Prime Trust recently announced a partnership with Zytara to help them launch their stablecoin. How did this relationship come about and what do you believe will come of it?
Purcell: Zytara is built on the Stably stablecoin platform which integrates into Prime Trust’s API’s for back-office infrastructure. As the online gaming industry continues to grow, so does the need for a common stablecoin that can be used across multiple platforms. Zytara will be covering this and also plans to bring a variety of other items to involving digital assets to the gaming community. We are excited to see Prime Trust infrastructure being leveraged for video gaming as a new industry sector with unlimited upside.
There’s been a resurgence in interest in cryptocurrencies of late – and the rise of stablecoins has been a part of this. What do you think are the key drivers of interest in stablecoins right now? How powerful and enduring do you believe those drivers to be?
Purcell: Prime Trust provides services for over two dozen stablecoins, so I’ve got pretty good visibility into what works and what doesn’t. The key thing is utility. People need to have a frictionless and compelling reason to use a stablecoin. Zytara is a great example of that, as it will be used for easy transactions in a gaming environment. Others are specifically built for use on crypto exchanges as a mechanism to de-risk from volatile crypto or to take a break from trading, while keeping funds in electronic form so they are easy to re-engage in the markets. The more that stablecoin issuers can add utility and ease of use, then the more enduring they will become.
Let’s talk about Prime Trust more broadly. When it comes to fintech headlines, financial infrastructure companies are among some of the most critical – and sought after – partners in financial services right now. What role are financial infrastructure companies like Prime Trust playing in helping facilitate the next generation of fintech apps and innovations?
Purcell: Every single fintech innovator needs a set of financial services in order to build their businesses, with APIs to integrate into. And surprisingly there are very few who do this. That’s why you’ve seen Robinhood, CashApp, Chime, Acorns, Betterment, and so many others scramble around cobbling together different bank, compliance, custody and other vendors. The set of services these innovators need is common across all markets and includes payment processing, compliance, custody of alternative and traditional assets, accounts for individuals, businesses and retirement programs, trusted transaction settlement, reporting, escrow, debit cards, and (especially in crypto) fiat on/offramps and liquidity.
Prime Trust is the only partner from start through growth that fintech innovators can rely on as a single API-driven source for all of these services. Thus, the next generation of fintech success stories can build and launch their businesses in record time to market, and confidently scale their back-office operations.
This fall you launched a core accounting and customer asset management platform, PrimeCore. What capabilities does this platform provide banks, exchanges, and other financial institutions? How has the solution been received?
Purcell: The traditional bank core systems – FIS, Fiserv, and Jack Henry as well as traditional trust company core systems, SunGard, Innovest and others – are expensive, slow and clumsy at handling non-traditional business models … which is what fintech innovation is all about. For instance, none of them can hold assets out to 18 decimal places of precision, which both fractionalized and digital assets require, and none provide multi-asset transaction settlement systems. And they are incredibly slow at onboarding new customers and enabling modules on-demand.
So, we built PrimeCore out of frustration at trying to work with some of these vendors, who just weren’t interested in the rapid innovation and speed of service required for new and emerging markets. Not only does this give us control over our costs and our product rollouts, it also provides a much better experience for our B2B customers (and, thus, their retail and business customers).
How has the COVID-19 pandemic impacted Prime Trust’s operations – as well as those of your company’s clients and partners?
Purcell: The good news is that we’ve continued to grow like crazy during the pandemic. It’s been incredibly frustrating to not be able to hop on planes to visit customers, partners, vendors, and our investors in person. And it’s caused some havoc at times when employees or their relatives tested positive, and we had to send the whole company home until people tested negative. This may not be a huge problem for some departments, such as engineering or sales, but it is hard on compliance, the wire room, accounting and the executive team.
Also, as a financial institution, each employee is required to take at least one contiguous week a year of vacation, and at this time that’s not exactly fun telling them “okay, just stay home even more now!” Like everyone else, we can’t wait for this to be behind us so we can get back to business … and living our lives.
What trends this year in the financial services industry do you see as becoming even stronger in 2021? In what way will Prime Trust be a part of those trends?
Purcell: Payments is a $110 trillion annual market and, with the pandemic, the drive to “contactless” and remote systems has been exponential. And the fractionalization of traditional and alternative investments, which has been a proven trend by WealthFront, Acorns, and others, will drive an entirely new phase for capital markets. Prime Trust is looking forward to servicing these trends as they continue to build momentum and disrupt the status quo of financial services in 2021. It’s going to be a great year!
