Artificial Intelligence: How AI is changing the banking industry

https://www.mobilepaymentstoday.com/whitepapers/artificial-intelligence-how-ai-is-changing-the-banking-industry/
Artificial Intelligence: How AI is changing the banking industryPublication Type:
White Paper

Published / Updated:

Both challenger and traditional banks are growing their focus on helping consumers save money. As customers increasingly look to save money for a rainy day and become more fiscally responsible, many banks have reacted by providing a variety of services.

According to a 2018 report published by the World Economic Forum, in collaboration with Deloitte, 76 per cent of Chief Experience Officers in the banking industry agree that Artificial Intelligence (AI) is a top priority because it is critical for differentiation.

https://www.mobilepaymentstoday.com/whitepapers/artificial-intelligence-how-ai-is-changing-the-banking-industry/

The Tightly-Knit Mortgagetech Sector Gets Even Tighter as Ellie Mae Acquires Capsilon

https://finovate.com/ellie-mae-to-acquire-capsilon-for-undisclosed-amount/

Ellie Mae announced today it has acquired fellow mortgagetech company Capsilon for an undisclosed amount. This news comes after Ellie Mae was acquired by Thoma Bravo earlier this year for $3.7 billion.

With a mission to “automate everything automate-able” when it comes to the mortgage process, Ellie Mae sees today’s acquisition as a step forward. “This is a significant day for the mortgage industry, as with the acquisition of Capsilon we are bringing together two market-leading companies and adding to our platform the pioneer of AI-powered intelligent automation leveraged by some of the largest lenders and servicers in the industry,” said Ellie Mae President and CEO Jonathan Corr.

Ellie Mae will combine its Encompass digital lending platform with Capsilon’s technology to create a more fully digital mortgage solution. Specifically, Ellie Mae will leverage Capsilon IQ, which is used by six of the top 10 mortgage loan originators to automate manual tasks; and Capsilon Instant Underwriter, which the company launched earlier this year to bring consistency and accuracy to the underwriting process.

“By joining forces with Ellie Mae, we are excited to extend our capabilities and deliver unprecedented functionality through deep integrations with the Encompass Digital Lending Platform,” said Sanjeev Malaney, CEO and Founder of Capsilon.

Mortgagetech is one of the least crowded sub-sectors in fintech, and partnerships among players are common. In the past few years both companies have partnered with Finicity, while Capsilon has partnered with Blue Sage, Home Point Financial, and Optimal Blue; and Ellie Mae has teamed up with AI Foundry, Roostify, First Data, Blend, and Lender Price.

Founded in 1997, Ellie Mae demonstrated Encompass Consumer Connect at FinovateSpring 2017. The online lead generation tool turns consumer interest into a mortgage application by letting the borrower complete an application, provide and receive information, and order services from a single platform. Ellie Mae is headquartered in California.

Founded in 2004, and with eight offices around the globe, Capsilon processes 15% of U.S. mortgages. At FinovateSpring 2019 the company demoed how its instant, digital underwriting solution helps lenders make more informed decisions.

Capsilon, which processes 2 million pages of mortgage documents per day, has 450 employees and 100,000+ users. The California-based company has raised $21 million.

https://finovate.com/ellie-mae-to-acquire-capsilon-for-undisclosed-amount/

Fintech News Issue #241

https://www.fintechweekly.com/fintech-news/fintech-news-issue-241

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https://www.fintechweekly.com/fintech-news/fintech-news-issue-241

Currencycloud Spark Powers Multi-Currency Accounts

https://finovate.com/currencycloud-spark-powers-multi-currency-accounts/

International payments innovator Currencycloud revealed a new solution this week that will help banks and fintechs go global. The new tool, Currencycloud Spark, will enable financial services companies to offer multi-currency accounts to their business customers. Using the multi-currency accounts, businesses can collect, store, convert, and pay in more than 35 currencies. Currencycloud will offer competitive foreign exchange rates and complete visibility of the entire payments process.

In a blog post, Currencycloud CEO Mike Laven explained the impetus behind the new launch. “Financial institutions have long struggled to help business customers compete on a global scale, relying on a patchwork of banking providers to carry out international transactions, as there was no credible alternative,” he said. “Currencycloud Spark levels the playing field and allows any financial institution to compete in an increasingly inter-connected world.”

Currencycloud Spark is in beta with select customers and will be generally available in the first half of 2020.

The new offering competes with Transferwise, which launched its Borderless Accounts in early 2018. And while it technically does not offer a multicurrency account, Revolut has a competitive offering that allows cardholders to spend in more than 150 currencies at the interbank exchange rate and make exchanges in more than 30 fiat currencies. Less well-known in this space is Spain-based Neo, which launched in 2017 to serve small businesses.

At its most recent Finovate appearance, Currencycloud debuted Global Collections, a tool that issues clients with local accounts to speed up payments in the U.S. and Eurozone. The company, which offers an API integration and white label access, has four flagship products: Collect, Convert, Pay, and Manage which help companies manage their cash flow and monetize their foreign exchange offerings.

https://finovate.com/currencycloud-spark-powers-multi-currency-accounts/

The Clearing House: FedNow could create ‘bifirucation’ in real-time payments

https://bankinnovation.net/allposts/biz-lines/payments/the-clearing-house-fednow-could-create-bifirucation-in-real-time-payments/

The Clearing House launched its real-time payments (RTP) network two years ago with the goal of bringing instantaneous payments to financial institutions in the U.S. So far, more than half of the transaction accounts in the U.S. are on it. The goal is to reach all accounts by 2020. But news that a real-time payments network operated by the Federal Reserve may throw a wrench in those plans.

Tim Mills

In August, the Federal Reserve announced plans to launch a separate real-time payments network, called FedNow, by 2023 or 2024. In the past, The Clearing House told Bank Innovation this additional development could slow the process of making real-time payments ubiquitous in the banking industry. 

According to Federal Reserve Governor Lael Brainard, FedNow will allow banks of every size in every community across the country to provide real-time payments to their customers. From her point of view, FedNow’s “nationwide reach” means it has a different value proposition than a real-time payments network operated by the private sector.

“Acting alone, a single private-sector [real-time payments network] will face significant challenges in establishing an accessible infrastructure for faster payments with nationwide reach,” Brainard said in a recent presentation.

On the margins of the recent American Bankers Association annual convention in Seattle, Bank Innovation met with Tim Mills, vice president of business development and product management at The Clearing House. The discussion focused on RTP and the impact of the proposed launch of FedNow. Responses have been edited for clarity.

What are your concerns around a federally-regulated entity getting involved in real-time payments?
The Fed plays two roles in the marketplace. They’re a payment system operator like The Clearing House, and they’re also a regulator. There’s a separation between those two functions. What the Fed does as a payments service operator is supposed to be completely removed from what they do as a regulator. The expectation is that the Fed as a regulator would treat those systems equally. The Monetary Control Act, requires the Fed to operate on a level playing field. You wouldn’t expect the Fed, as a regulator, to show favoritism.

What are some of the problems in your mind with FedNow?
We live in a free market. If there’s competition, so be it. What the industry needs to think about is, “Does it facilitate the growth in the journey to ubiquity, or does it provide distractions and challenges?”

If you have another entrant that shows up and they build a network without interoperability, all you’ve done is create a bifurcation. There’s also uncertainty. With FedNow, we don’t have a definitive idea of what is coming. You could, in theory, end up with a first-class and second-class configuration. It really hinders ubiquity instead of growing it.

Has The Clearing House altered its plans for RTP since the FedNow announcement?
Not really. Our focus is to grow the network. The Fed is talking about a timeline that ends four or five years from now. We’ve been in this space now for two years. We’re seeing scale, so we’re continuing to focus on how to grow this network and how we can help financial institutions.

Who do you see as the primary clients for the RTP network?
Financial institutions connect and serve as the gateway to the network itself. It’s through those financial institutions that we reach end users, whether it’s fintechs, consumers, small businesses. Right now, we have 17 of the top 25 banks in the country on the network. That’s critical, because it brings us volume. We’re now starting to see that next tier coming in. We’re seeing community banks implementing it. Banks like Avidia of Massachusetts, First Bank of Colorado and Cape Cod 5, to name a few. 

What are some of the challenges of reaching smaller institutions?
[I would say] it’s developing the capability to integrate into their legacy systems. The majority of bank core systems are not realtime. Smaller banks, in most cases, are connecting through a technology provider, so it’s ensuring those technology providers have what they need. Small banks also are thinking about how they monetize RTP. They realize it’s becoming table stakes, but at the end of the day, they still have to support themselves.

Bank Innovation Build, on Nov. 6-7 in Atlanta, helps attendees understand how to “do” innovation better. It is designed to offer best practices, to guide the innovation professional to better results. Register here

https://bankinnovation.net/allposts/biz-lines/payments/the-clearing-house-fednow-could-create-bifirucation-in-real-time-payments/

Zero Financial releases mobile banking app on Android

https://www.mobilepaymentstoday.com/news/zero-financial-releases-mobile-banking-app-on-android/

Zero Financial releases mobile banking app on Android

Zero, the San Francisco-based banking app, announced that it is now available for Android after its launch earlier this year on the iOS platform. 

Zero provides a Zero Checking account and a credit card that provides users with the chance to earn a minimum of 1% cash back, with up to 3% back on certain purchases. The mobile app and card are offered at four different levels, including Quartz, Graphite, Magnesium and Carbon, with each level representing a different opportunity to earn points and additional features.

“At Zero, we bring our users a seamless experience unlike most financial platforms on the market today,” Bryce Galen, founder and CEO at Zero, said in a company release. “Through Zero’s ‘debit style experience,’ users can anticipate their spending and avoid tempting unnecessary purchases.”

Zero has FDIC insurance through a partnership with WebBank and the checking account product is offered by Evolve Bank and Trust. 

Cover image: Zero.


Topics: Mobile Apps, Mobile Banking, Mobile Payments


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https://www.mobilepaymentstoday.com/news/zero-financial-releases-mobile-banking-app-on-android/

UK Treasury Committee says regulators must act to reduce IT failures in financial services

http://www.linklaters.com/en/insights/blogs/fintechlinks/2019/october/uk-treasury-committee-says-regulators-must-act-to-reduce-it-failures-in-financial-services

Ageing IT systems, failed outsourcings and cyber-attacks have been common causes of disruption to business in the financial services sector. A parliamentary committee has concluded that the current level and frequency of disruption and consumer harm in financial services is “unacceptable” and “prolonged IT failures should not be tolerated”. The ball is now in the regulators’ court to respond.

The shift to digital services

Following a number of high profile service disruption incidents in the financial services sector, the House of Commons Treasury Committee has published a damning report on IT failures in the financial services sector. The Committee reports that incidents are increasing in number and can have significant impacts which may go beyond consumer harm to undermining the viability of a firm and potentially even to the stability of the financial system as a whole.

The report suggests that root cause of the problem has been the shift to more digital financial services and examines common causes of IT incidents and emerging risks to operational resilience. The main thrust of the report, however, is the role of the various regulators in the sector in both reducing the number and impact of IT failures in financial services.

Regulatory recommendations

The report sets out a series of recommendations with some key messages for regulators: 

  • Focus on operational resilience welcomed: The Committee calls on the UK financial services regulators to prioritise their policy work on operational resilience which should include “practical and effective” requirements and clear guidance to firms on impact tolerances. 
  • Regulating the cloud: The market for cloud services stood out as a source of concentration risk during the inquiry. According to the Committee, the case for the regulation of cloud service providers is “overwhelming”. 
  • Applying the Senior Managers Regime to market infrastructure: The Committee urged the Government to extend individual accountability rules for banks and insurers to also apply to financial market infrastructure overseen by the Bank of England such as payment systems. 
  • Bearing teeth: The Committee considered that regulators must “have teeth and… be seen to have teeth”, i.e. use their enforcement tools to hold individuals and firms to account for their role in IT failures and poor operational resilience. 
  • Regulators need more resources: The Committee suggested that regulators should increase their expertise dedicated to operational resilience, particularly at senior levels, and increase industry levies if needed to cover the cost. 
  • More incident reporting may be needed: The Committee recommended that the regulators assess the accuracy and consistency of incident reporting and consider whether current requirements should be expanded to cover more services. 
  • Resilience disclosures: The Committee proposed that firms should be required to provide more prominent public information about their resiliency to allow customers to make informed decisions about which provider they use. 
  • Discriminatory technology: According to the Committee, the regulators should monitor the discriminatory potential of artificial intelligence and machine learning and set clear guidance for the sector. In the Committee’s view, firms should not use this technology if these risks cannot be rigorously identified and mitigated.
What happens next?

The report concludes the Committee’s inquiry into IT failures in the financial services sector which was launched in November 2018. A separate inquiry by the Committee into service disruption at TSB in 2018 is ongoing.

We are also awaiting the Bank of England, PRA and FCA consultation papers on operational resilience which are due to be published shortly.

http://www.linklaters.com/en/insights/blogs/fintechlinks/2019/october/uk-treasury-committee-says-regulators-must-act-to-reduce-it-failures-in-financial-services

Kount launches service to catch criminal and 'friendly' cyber fraud

https://www.mobilepaymentstoday.com/news/kount-launches-service-to-catch-criminal-and-friendly-cyber-fraud/

Kount launches service to catch criminal and 'friendly' cyber fraud

Kount, a Boise, Idaho-based cybersecurity firm, launched what it calls the industry’s first comprehensive service that protects digital companies against both criminal and friendly fraud.

Kount said the service, called the Friendly Fraud Prevention Solution, is designed to protect merchants and other companies against hackers and first person fraud, which is sometimes called chargeback fraud or consumer abuse. 

“Digital businesses today face many threats, from organized criminal fraud rings to competitive threats to threats against their own customers,” Brad Wiskirchen, CEO of Kount, told Mobile Payments Today via email. “Friendly fraud, made up of chargebacks and lost goods due to intentional and unintentional exploitation of disputes by real customers, can account for up to 40% to 80% of all fraud losses.”

He said the Kount service, which utilizes AI and machine learning, detects pre- and post-transaction fraud and provides a first-line defense against transaction disputes.

The service features a technology called Visa Merchant Purchase Inquiry, which is part of Visa’s claims resolution process, which is designed to reduce chargebacks and cut dispute resolution time. 

Cover image: Kount.


 


Topics: Card Brands, Mobile Payments, Retail, Security

Companies: Visa, Kount


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https://www.mobilepaymentstoday.com/news/kount-launches-service-to-catch-criminal-and-friendly-cyber-fraud/

JD Power survey shows small businesses finally embracing mobile banking

https://www.mobilepaymentstoday.com/news/jd-power-survey-shows-small-businesses-finally-embracing-mobile-banking/

JD Power survey shows small businesses finally embracing mobile banking

Mobile banking has finally crossed a bit of a threshold with small business customers, as customer satisfaction ratings are up in new J.D. Power survey, while banks are beginning to see reduced reliance on customer account managers.

The J.D. Power 2019 U.S. Small Business Banking Satisfaction Survey shows that 61% of small business customers now use their bank’s mobile app, compared with 53% of small business customers in the 2018 survey. 

“Bank investments in mobile offerings are starting to pay off in the form of higher satisfaction scores as a critical mass of small business customers adopts the technology,” Bob Neuhaus, vice president, J.D. Power Banking Intelligence, said in the press release. “This has been a major challenge for banks for many years as they’ve tried to balance the high touch customer service needs of the small-business banking segment with the high cost of providing hands on account management.” 

Among regional bank brands, Huntington ranked the highest in the Midwest, with a score of 852 out of 1,000 followed by Chase and PNC Bank. 

Capital One ranked highest in the Northeast with a score of 850, followed by Chase and Citizens Bank. 

TD Bank ranked highest in the South with a score o 854, followed by Chase and Regions Bank. 

Lastly, Chase ranked highest out West, with a score of 831, while Bank of the West and Union Bank came in second and third. 

Cover image: iStock
 


Topics: Mobile Apps, Mobile Banking, Trends / Statistics


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https://www.mobilepaymentstoday.com/news/jd-power-survey-shows-small-businesses-finally-embracing-mobile-banking/

Why Uber Money is an Opportunity, Not a Threat to Fintech

https://thefintechtimes.com/uber-money/

By Martin Threakall, COO at Modulr

With a stated ambition of wanting to be the ‘operating system of everyday life’, Uber Money is a natural progression for the company. That’s because payments are a central component to the majority of customer touchpoints, and regulations introduced over the past few years mean it’s now even easier to offer payments services as a non-bank.

But while Uber has the scale of users, both with drivers and passengers, as an outsider it may lack the knowledge or know-how to establish itself in what is a hugely complex financial services sector. Tech giants have deep pockets to invest, but they’re also unused to a highly regulated environment like financial services. And there have been many high profile examples of big tech falling foul of regulations within their own domains.

This is a cultural challenge and one in which they’d be better off seeking partners to help them deliver the services required, rather than building their own. Many of the most innovative new FinTechs and consumer-facing services are built on partnerships – it’s how the industry works today.

Tech giants have deep pockets to invest, but they’re also unused to a highly regulated environment like financial services.

Uber will clearly need to collaborate if it wants to scale and grow quickly. And the best partners to collaborate with are going to be the nimble, fast moving FinTechs already operating in this space.

Within the fintech industry there are many points along the value chain, with some, like ourselves, operating as the tech behind the tech, solving the regulatory burden and providing a robust platform upon which customer-facing companies can build innovative products. So rather than a threat, the fintech industry should see this as an opportunity.

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https://thefintechtimes.com/uber-money/

Wildfires and disasters- ecosystem opportunity to leverage InsurTech and innovation

https://dailyfintech.com/2019/10/31/wildfires-and-disasters-ecosystem-opportunity-to-leverage-insurtech-and-innovation/

Disaster_Recovery_Plan_TierPoint_blog

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Take a US $8 billion dollar insurance business that serves more than 7 million customers annually regarding residential real estate assets valued at more than US $5 trillion, that’s working in a regulated, politically hyped environment and one might see opportunity for innovation.  Throw in significant exposure to regional wildfires and urban area earthquakes, and consider- where does InsurTech go next in the state of California?  Or any other disaster-prone area?

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

Clearly there is evidence that natural disasters’ frequency and severity is growing, whether hurricane, typhoon, flooding, or wildfire.  Throw in potential earthquake occurrences and weather-related agriculture losses and the need for the insurance industry (primary and reinsurance) to be attentive and apply a sense of urgency is heightened.

The California wildfires are an apt study for how InsurTech/insurance players and innovation efforts are or can react to the industry’s needs- property owners, carriers, agents, adjusters, regulators, repair industry, response industry, and politicians.   Not through individual efforts to innovate pieces of the industry, but macro approaches to managing before, during, and after efforts.

To date there have been many industry reactions to the wildfires Californians have experienced during the past two years, even the inclusion of at least one property carrier that has failed due to unexpected volume and severity of homeowners claims.  Setting aside the tragic loss of life, one can say that every other aspect of risk sharing and management has been a victim of the depth and breadth of the fires.  This suggests that each aspect is an opportunity for review and potential revision of how disasters are planned for and responded to, and how (or if) the insurance industry can integrate disaster planning into regular business.

Some thoughts:

Underwriting and Recovery

Wildfires pose an interesting challenge to traditional underwriting as there is a higher percentage of probable maximum losses within wildfire areas, and wildfire zones are growing in projected size and frequency of being affected.  Hazard Hub (industry experts at scoring physical risks within the US) indicate that 16% of California locations are rated ‘D’ (high) risk score or higher.  That’s 1.3 million dwellings in the state with that level of wildfire risk.  During the past two years (2017-18) it is estimated that 30,000 structures have been lost to wildfires, with many of the 30,000 being dwellings.

The past two reporting years have also shown homeowners insurance to be an ‘upside down’ business, with incurred losses for multi-peril and fire policies equaling $29 billion, and earned premiums during the two year period of $15.7 billion, a loss ratio for the period of 191.2 %.  Yes, there were many prior years where LR were lower and it could be said that surpluses were acquired, but considering the average HO policy premium in the state runs around $1200 and the median value for houses in the state is just over $500,000, it’s easy math to run comparing $8 billion annual premium on a housing stock of $4 trillion in value.  And- if wildfires continue to occur close to San Francisco and Los Angeles, the relative value of potential losses increases and perhaps  appetites to remain a homeowner line carrier begin to wane.

How can innovation/technology step in to adapt underwriting to these imbalances?

The easy answer is to raise deductibles (like EQ or windstorm), but that doesn’t eliminate the outcomes of the high probabilities of maximum losses, just reduces the dollar effect a little.  Can high and extreme fire risks become unwritable for carriers?  If an ‘F’ risk per Hazard Hub suggests a one in fifteen probability of wildfire risk, then a carrier can calculate that risk by property into a premium, and there will be some premium shock.  So yes, but regulators may push back.  Can other perils become policy victims in order to rescue fire, e.g., convert water or other perils to parametric outcomes to provide a sublimit position for that peril- more predictable financial outcome and potentially less proposed premium.  The depth and breadth of claim and risk data could surely produce underwriting rules to reflect the new risk paradigms in disaster prone areas.

The California legislature has been active in enacting laws that increase policyholder policy benefits due to the fires, including extension of statutory lawsuit periods, enhanced periods for Additional Living Expenses (ALE), and reducing the burden of personal property inventory preparation when a total loss occurs, all reactions rather than ‘pro-actions’.  Encouragement of disaster-response industry sandboxes might be a proactive option to consider, unless the state thinks this year is the last for occurrences.

Municipally sponsored parametric benefits can be devised to assist when mandatory evacuations are ordered, a benefit to all property owners before any claim is filed.  This is an easier tech adaptation (just ask the good folks at Jumpstart) that would have immediate effect at the onset of a regional fire, and would serve to preempt the requirement that an emergency or disaster be declared.  Classic parametric trigger- mandatory evacuation, and tech exists now that could help development of an action database, or even (shudder) blockchain handling of address data and payment actions.

ALE services such as Temporary Housing Directory (THD) could open its database to evacuees to facilitate relocation- temporary or post-loss- or dovetail its services with those of forward-thinking carriers such as Hippo Insurance.  When Hippo reaches out proactively the message could include evacuation routes, potential lodging options, connection with emergency authorities to communicate evacuation progress, and so on.  These are tech advances that might not generate premiums but would surely lead to retention.

Recovery and Rebuilding

The very fact that laws had to be enacted to change policy benefits from one or two years to three suggests that wildfire recovery is daunting.  Consider the city of Paradise, where little rebuilding has occurred even after a full year.  Contamination, consternation, and coordination issues abound.

Tech advances in property location, ownership information (reduce the reliance on ledger books at the town hall), automated code compliance, virtual transmission/approval of building plans, virtual confirmation of insurance for the owner and contractor, and overlay maps of utilities (buried and other) would set the foundation of recovery.  Mortgagee resolutions based on immediate virtual dwelling insurance settlements would remove the paper chase for mortgage releases.

Rebuilding brings a new set of concerns with shortage of contractors, materials and oversight.  A clear recognition of rebuild cost spikes could be adapted by primary estimating platforms like Xactimate and Symbility Mobile Claims to reflect real-time materials and labor costs and reduce the urge to pad projects.  Confirmation of contractor licensing through automated means, online data for total loss dwelling calculations, and use of drone surveys of damage areas to confirm scope of loss (this is happening now) would remove many admin barriers to recovery.  Hardware/firmware innovations can make online an expectation rather than an exception after a major event.  What if major recovery efforts simply did not need cohorts of catastrophe adjusters to be on site, but allowed virtual handling of much of the work?  These improvements exist now, would simply need to be scaled and coordinated for macro use.

And worst case scenario- if rebuilding is simply not a practical option due to site or risk issues, identification of non-viable areas can be handed off to FEMA for potential property buyouts without the years of proving each case.

Reinsurance and Backstopping

If severities continue at the current pace the unknown for reinsurers will be reduced- the treaty thresholds will be expected to be met or simply be moved higher, and rates will harden.  Of course primary carriers will have few options since gross severities cannot be expected to fall.  Rei price then rolls into premiums, and the process repeats until the next occurrence. ILS vehicles could evolve and be parametric program partners (say that three times), with a reduction of some unknowns for those investors.  Sure that would raise the cost of ILS or cat bonding but would be more predictable than current handling.  Ironically as major events occur the nature of associated risk data would become more robust and predictions more fine tuned, and reinsurance triggers easier to gauge.

These are some thoughts focused on the California wildfires, but thoughts that could in most instances adapt to other natural disasters in any jurisdiction.  InsurTech resources have been searching for collaboration partners-  disasters are the  testing grounds for pretty much anything InsurTech wants to do.  There may not be a financial quid pro quo from coordinating one’s efforts with others in a disaster scenario, but it’s certain- any efforts taken to improve how the industry and all its partners plan and react to significant events will cause improvements that can be implemented in mainstream insurance, and disaster efforts help restore local economies where all insurers want to be.

If the reader thinks this message is focused on US disaster prep/recovery only- the same principles apply to plan for wildfires outside of Athens, flooding in Tewkesbury, typhoons in Honk Kong or Japan, earthquakes in Indonesia, flooding in Brazil, hurricanes/landslides in Central America, tsunamis in Chile, typhoon flooding in Mozambique, or monsoon effects in Bangladesh.  Planning, coordination, reaction and risk management.

And as all the disruptors can tell you- that’s where the real money (and benefit) is.

https://dailyfintech.com/2019/10/31/wildfires-and-disasters-ecosystem-opportunity-to-leverage-insurtech-and-innovation/

Digital financial services to generate $38b in southeast Asia, study finds

https://bankinnovation.net/allposts/biz-lines/payments/digital-financial-services-to-generate-38b-in-southeast-asia-study-finds/

Digital financial services from lending to asset management are expected to generate at least $38 billion of annual revenue across Southeast Asia by 2025, more than tripling from $11 billion in 2019, according to a new study by Bain & Co., Google and Temasek Holdings Pte.

Online lending will comprise about half that total for the region, which houses some of the world’s fastest-evolving internet and mobile industries. Growing smartphone penetration promises to unlock internet-based services such as insurance to more than 70% of an adult population neglected by traditional banks, according to the report.

The region has seen a rapid adoption of digital finance since Southeast Asian ride-hailing giants Grab Holdings Inc. and Gojek funneled some of the billions they raised into in-app payments and financial services. Other segments like lending and insurance remain in their nascent stages, said Aadarsh Baijal, leader of Bain’s digital practice in Southeast Asia.

“As payments grow like WeChat, we see other services following quite quickly,” he told reporters in Singapore on Wednesday, referring to Tencent Holdings Ltd.’s signature messaging product. “The payments adoption is becoming the gateway to the growth of other financial services.”

Even Uber Technologies Inc. is moving into financial services by launching a new division, Uber Money. The San Francisco-based company is taking its cue from Gojek and Grab, which have successfully developed new revenue streams by branching out. “There are definitely encouraging signs that Southeast Asia would be a hub of innovation, with Uber’s new payments play learning from companies from this side of the world,” Baijal said.

There are no clear winners yet in Southeast Asia’s fragmented digital financial services market. But traditional banks will play an important role because of their access to capital, said Rohit Sipahimalani, joint head of the investment group at Temasek. Lenders like DBS Group Holdings Ltd. and United Overseas Bank Ltd. have teamed up with Gojek and Grab, respectively. Thailand’s Kasikornbank has partnered with Shopee, one of the biggest e-commerce platforms, to provide digital loans to sellers.

“Fintech companies will need to partner with banks to be able to have access to balance sheet,” he said. “And banks will need to partner with consumer fintech companies because they don’t have reach to tap into the under-banked population.”

Indonesia and Vietnam are projected to grow fastest in terms of digital financial services revenue, according to the report by the three companies, their first on the region’s digital financial services industry. Their expansion already underpins a $100 billion Southeast Asian internet economy, the firms said in a broader survey published earlier this month.

Southeast Asia, a region that houses more than 600 million people, is rapidly warming to online finance as governments craft investor-friendly policies to encourage everything from blockchain startups to digital banking. Investors poured a record $735 million into fintech ventures in Singapore alone in the first nine months of this year, according to research from Accenture Plc.

Liberalization is key to the region’s rapid adoption of online financial services. Singapore and Thailand have instituted so-called sandboxes, or systems that let companies experiment under regulatory supervision. Both countries have also established standardized QR codes for mobile wallets. Digital payments in the region are projected to exceed $1 trillion by 2025, from $600 million in 2019.

Depending on how the region’s governments approach fintech regulation, digital financial services revenue could conceivably reach $60 billion by 2025, well above the $38 billion estimate, the study’s authors added.

https://bankinnovation.net/allposts/biz-lines/payments/digital-financial-services-to-generate-38b-in-southeast-asia-study-finds/

Insurtech Zego Partners with Vehicle Movement Firm Engineius

https://thefintechtimes.com/insurtech-zego-engineius/

London-based insurtech Zego has partnered with vehicle movement firm Engineius enabling it to extend its reach across 30 European countries.  

Zego will provide a first-of-its-kind pay-by-the mile policy for Engineius’ 35 fleet customers, covering its drivers on a range of vehicles up to 32 tonnes under just one product – traditionally a complex area which requires various policies from different insurers.

For Engineius, who was previously only able to collect and deliver vehicles from Europe to the UK by transported means, the partnership has enabled it to offer driven movement services outside the UK for the first time. This will help the firm to cut costs, improve efficiency and do far more business with existing clients, including Hertz and Drover.

Both companies will also benefit from their shared focus on data. Engineius currently records journeys through GPS tracking, speed monitoring and timestamping and this transparent approach gives Zego and its underwriters confidence that driver behaviour is being monitored and recorded.

Since launching in 2018, Engineius has acquired customers across all major automotive sectors, including corporate fleet, leasing, rental, dealership and servicing. Its business model is entirely on demand – ordering takes 30 seconds, the user is quoted a price for their movement and Engineius manages everything after the order is submitted. Every vehicle movement is tracked and managed in real-time using Engineius’ industry-leading mobile app and desktop portal.

Zego, which offers a range of policies from minute-by-minute insurance to annual cover, was founded in 2016 to provide flexible insurance for the gig-economy and has since expanded its usage-based products to the B2B market to cater for the growth of new mobility services. Its bespoke models are already having a profound impact on self-employed delivery and transport workers in the UK, as well as innovative car-leasing businesses, including Splend and WeFlex.

Sten Saar, CEO and Co-Founder of Zego, said: “Engineius, is one of the most innovative companies in its market and up until now, the insurance industry has failed to truly cater to its business model. By working with Zego, we believe they have opened the door to exciting growth opportunities and we’re very happy to be part of this journey.

The partnership has also allowed us to gain a foothold in a new area of the new mobility sector and once again, we have proven our credentials as an insurtech which can create products to suit any type of business.”

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https://thefintechtimes.com/insurtech-zego-engineius/

Contactless cards driving move away from cash in UK

https://www.mobilepaymentstoday.com/articles/contactless-cards-driving-move-away-from-cash-in-uk/

The U.K. is facing a crisis of sorts. The number of ATMs in the country is dropping as merchants and consumers are relying less on cash for payments. 

That could be viewed as a good thing, but not if you live in a rural area without a nearby ATM or you are someone who is dependent on cash for day-to-day living. 

The country’s move away from cash was not based on any particular campaign, according to the head of strategy at Link, which oversees the country’s network of cash machines. Rather, it was due to the rapid and very natural adoption of contactless cards. 

“Consumers — and more importantly retailers — are seeing the speed and convenience of contactless,” Graham Mott told the crowd at an ATM Industry Association conference in Rome last week. “In a busy environment like a bar or cafe where time is of the essence, contactless offers great opportunities.”  

Mott predicts the same thing will happen in other countries that are cash dependent now.

“My feeling is the countries that have high cash usage — Italy, Ireland and others — will move rapidly into a less cash environment as contactless cards become more established,” he said, adding that he believes the transition could happen “quicker than you might expect.” 

Because contactless cards allow consumers to tap and keep going, they offer greater speed and convenience. Merchants don’t have to dole out change, and they can process more customers — a huge advantage in a busy bar or fast food restaurant. 

As a result, people in the U.K. are making fewer trips to ATMs. 

For years Brits were visiting ATMs 2-3 times per week, Mott said. Now less than 50% are using ATMs once a week or more.  

As a result, the country. has seen a dramatic drop in ATMs — from over 70,000 machines in 2015 to 62,000 in 2018. In the last 18 months, the number of ATMs has seen its biggest decline, particularly free-to-use, non-branch ATMs.  

“More importantly, we have far fewer free ATMs than we had before,” he said. 

Link is committed to protecting free access to cash for as long as consumers want it.  

“If ATMs are disappearing, what we don’t want is consumers who live in remote or private areas to not have access to cash.”

One of the first things Link did was commission the independent Access to Cash Review to get a handle on what was happening. The full report came out in March. Mott called it an “important milestone to what was happening to cash in the U.K.”

Other programs Link is behind include subsidizing ATMs in the most deprived areas and protecting free-to-use ATMs. 

Link is now accepting applications for free-to-use cash machines in locations where there is no ATM nearby.

“We will fund an ATM directly,” Mott said, adding that the campaign thus far has been a great success. 

“So far, we have had over 50 (potential) sites come through.”

 

https://www.mobilepaymentstoday.com/articles/contactless-cards-driving-move-away-from-cash-in-uk/

Starling Bank Launches Euro Debit Card

https://thefintechtimes.com/starling-euro-debit-card/

Starling Bank, the UK digital bank, has made its debit card smarter, giving business and personal customers the power to spend directly in pounds or euros with a single debit card.

The dual currency card feature goes live on the same day as Starling launches its Business Euro Account. The new account will help Starling’s 77,000  business customers make transactions across the Eurozone and reduce currency exchange costs.

The Starling Business Euro Account is ideal for small businesses that want to:

  • Pay overseas suppliers
  • Receive payment from customers in the Eurozone
  • Rent out European property as a business
  • Receive payment for services in euros, as a self-employed contractor

For those who conduct a lot of business in euros, the new Starling account can also help to reduce exchange rate risks, and unlike similar offerings on the market with other banks, there are no fees for euro to euro transactions.

The Business Euro Account is available to both new and existing Starling business account customers. Once it’s open, they can transfer money from their business account to their euro account with a single tap in the app. Customers will be charged a flat fee of £2 per month to use the Business Euro Account and transfers into the account will be made at the prevailing exchange rate, plus a 0.4% fee (of the transaction value).

The new account will help Starling’s 77,000  business customers make transactions across the Eurozone and reduce currency exchange costs.

In another new development, Starling is now extending its international currency transfer service to weekends, so customers can convert currency via the Starling app instantly, 24/7. This new feature will give users greater flexibility and peace of mind should they need euros in an emergency.

Because currency markets don’t operate on weekends Starling will calculate an exchange rate that takes into account the risk of currency fluctuations. Customers will always see the exchange rate before the conversion is made, so will have the option to wait until Monday morning. 

To start using the new Euro Card feature Starling account holders, both business and personal, must open a Euro Account. Their existing debit card can be switched on (in-app) to operate in either pounds or euros, depending on the currency of the transaction.   

starling bankAnne Boden

Anne Boden, CEO and founder of Starling Bank, said: “A single card that can buy things in both euros and pounds is long overdue and something that we know our customers will value both in their personal and business lives. 

Businesses of all sizes have customers and suppliers spread across different countries. Our new Business Euro Account will make a huge difference to these kinds of business customers, who are regularly carrying out international transactions whilst operating on a tight budget.

These latest features represent another milestone in our mission to transform banking into a truly international, 24/7 service and demonstrate once again that we have come a long way towards that target in a short space of time.”

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https://thefintechtimes.com/starling-euro-debit-card/

Wildfires and disasters- terribly good opportunity to leverage InsurTech and innovation

https://dailyfintech.com/2019/10/31/wildfires-and-disasters-terribly-good-opportunity-to-leverage-insurtech-and-innovation/

Disaster_Recovery_Plan_TierPoint_blog

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Take a US $8 billion dollar insurance business that serves more than 7 million customers annually regarding residential real estate assets valued at more than US $5 trillion, that’s working in a regulated, politically hyped environment and one might see opportunity for innovation.  Throw in significant exposure to regional wildfires and urban area earthquakes, and consider- where does InsurTech go next in the state of California?  Or any other disaster-prone area?

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

Clearly there is evidence that natural disasters’ frequency and severity is growing, whether hurricane, typhoon, flooding, or wildfire.  Throw in potential earthquake occurrences and weather-related agriculture losses and the need for the insurance industry (primary and reinsurance) to be attentive and apply a sense of urgency is heightened.

The California wildfires are an apt study for how InsurTech/insurance players and innovation efforts are or can react to the industry’s needs- property owners, carriers, agents, adjusters, regulators, repair industry, response industry, and politicians.   Not through individual efforts to innovate pieces of the industry, but macro approaches to managing before, during, and after efforts.

To date there have been many industry reactions to the wildfires Californians have experienced during the past two years, even the inclusion of at least one property carrier that has failed due to unexpected volume and severity of homeowners claims.  Setting aside the tragic loss of life, one can say that every other aspect of risk sharing and management has been a victim of the depth and breadth of the fires.  This suggests that each aspect is an opportunity for review and potential revision of how disasters are planned for and responded to, and how (or if) the insurance industry can integrate disaster planning into regular business.

Some thoughts:

Underwriting and Recovery

Wildfires pose an interesting challenge to traditional underwriting as there is a higher percentage of probable maximum losses within wildfire areas, and wildfire zones are growing in projected size and frequency of being affected.  Hazard Hub (industry experts at scoring physical risks within the US) indicate that 16% of California locations are rated ‘D’ (high) risk score or higher.  That’s 1.3 million dwellings in the state with that level of wildfire risk.  During the past two years (2017-18) it is estimated that 30,000 structures have been lost to wildfires, with many of the 30,000 being dwellings.

The past two reporting years have also shown homeowners insurance to be an ‘upside down’ business, with incurred losses for multi-peril and fire policies equaling $29 billion, and earned premiums during the two year period of $15.7 billion, a loss ratio for the period of 191.2 %.  Yes, there were many prior years where LR were lower and it could be said that surpluses were acquired, but considering the average HO policy premium in the state runs around $1200 and the median value for houses in the state is just over $500,000, it’s easy math to run comparing $8 billion annual premium on a housing stock of $4 trillion in value.  And- if wildfires continue to occur close to San Francisco and Los Angeles, the relative value of potential losses increases and perhaps  appetites to remain a homeowner line carrier begin to wane.

How can innovation/technology step in to adapt underwriting to these imbalances?

The easy answer is to raise deductibles (like EQ or windstorm), but that doesn’t eliminate the outcomes of the high probabilities of maximum losses, just reduces the dollar effect a little.  Can high and extreme fire risks become unwritable for carriers?  If an ‘F’ risk per Hazard Hub suggests a one in fifteen probability of wildfire risk, then a carrier can calculate that risk by property into a premium, and there will be some premium shock.  So yes, but regulators may push back.  Can other perils become policy victims in order to rescue fire, e.g., convert water or other perils to parametric outcomes to provide a sublimit position for that peril- more predictable financial outcome and potentially less proposed premium.  The depth and breadth of claim and risk data could surely produce underwriting rules to reflect the new risk paradigms in disaster prone areas.

The California legislature has been active in enacting laws that increase policyholder policy benefits due to the fires, including extension of statutory lawsuit periods, enhanced periods for Additional Living Expenses (ALE), and reducing the burden of personal property inventory preparation when a total loss occurs, all reactions rather than ‘pro-actions’.  Encouragement of disaster-response industry sandboxes might be a proactive option to consider, unless the state thinks this year is the last for occurrences.

Municipally sponsored parametric benefits can be devised to assist when mandatory evacuations are ordered, a benefit to all property owners before any claim is filed.  This is an easier tech adaptation (just ask the good folks at Jumpstart) that would have immediate effect at the onset of a regional fire, and would serve to preempt the requirement that an emergency or disaster be declared.  Classic parametric trigger- mandatory evacuation, and tech exists now that could help development of an action database, or even (shudder) blockchain handling of address data and payment actions.

ALE services such as Temporary Housing Directory (THD) could open its database to evacuees to facilitate relocation- temporary or post-loss- or dovetail its services with those of forward-thinking carriers such as Hippo Insurance.  When Hippo reaches out proactively the message could include evacuation routes, potential lodging options, connection with emergency authorities to communicate evacuation progress, and so on.  These are tech advances that might not generate premiums but would surely lead to retention.

Recovery and Rebuilding

The very fact that laws had to be enacted to change policy benefits from one or two years to three suggests that wildfire recovery is daunting.  Consider the city of Paradise, where little rebuilding has occurred even after a full year.  Contamination, consternation, and coordination issues abound.

Tech advances in property location, ownership information (reduce the reliance on ledger books at the town hall), automated code compliance, virtual transmission/approval of building plans, virtual confirmation of insurance for the owner and contractor, and overlay maps of utilities (buried and other) would set the foundation of recovery.  Mortgagee resolutions based on immediate virtual dwelling insurance settlements would remove the paper chase for mortgage releases.

Rebuilding brings a new set of concerns with shortage of contractors, materials and oversight.  A clear recognition of rebuild cost spikes could be adapted by primary estimating platforms like Xactimate and Symbility Mobile Claims to reflect real-time materials and labor costs and reduce the urge to pad projects.  Confirmation of contractor licensing through automated means, online data for total loss dwelling calculations, and use of drone surveys of damage areas to confirm scope of loss (this is happening now) would remove many admin barriers to recovery.  Hardware/firmware innovations can make online an expectation rather than an exception after a major event.  What if major recovery efforts simply did not need cohorts of catastrophe adjusters to be on site, but allowed virtual handling of much of the work?  These improvements exist now, would simply need to be scaled and coordinated for macro use.

And worst case scenario- if rebuilding is simply not a practical option due to site or risk issues, identification of non-viable areas can be handed off to FEMA for potential property buyouts without the years of proving each case.

Reinsurance and Backstopping

If severities continue at the current pace the unknown for reinsurers will be reduced- the treaty thresholds will be expected to be met or simply be moved higher, and rates will harden.  Of course primary carriers will have few options since gross severities cannot be expected to fall.  Rei price then rolls into premiums, and the process repeats until the next occurrence. ILS vehicles could evolve and be parametric program partners (say that three times), with a reduction of some unknowns for those investors.  Sure that would raise the cost of ILS or cat bonding but would be more predictable than current handling.  Ironically as major events occur the nature of associated risk data would become more robust and predictions more fine tuned, and reinsurance triggers easier to gauge.

These are some thoughts focused on the California wildfires, but thoughts that could in most instances adapt to other natural disasters in any jurisdiction.  InsurTech resources have been searching for collaboration partners-  disasters are the  testing grounds for pretty much anything InsurTech wants to do.  There may not be a financial quid pro quo from coordinating one’s efforts with others in a disaster scenario, but it’s certain- any efforts taken to improve how the industry and all its partners plan and react to significant events will cause improvements that can be implemented in mainstream insurance, and disaster efforts help restore local economies where all insurers want to be.

If the reader thinks this message is focused on US disaster prep/recovery only- the same principles apply to plan for wildfires outside of Athens, flooding in Tewkesbury, typhoons in Honk Kong or Japan, earthquakes in Indonesia, flooding in Brazil, hurricanes/landslides in Central America, tsunamis in Chile, typhoon flooding in Mozambique, or monsoon effects in Bangladesh.  Planning, coordination, reaction and risk management.

And as all the disruptors can tell you- that’s where the real money (and benefit) is.

https://dailyfintech.com/2019/10/31/wildfires-and-disasters-terribly-good-opportunity-to-leverage-insurtech-and-innovation/

SparkPost to Acquire eDataSource for Undisclosed Amount

https://finovate.com/sparkpost-to-acquire-edatasource-for-undisclosed-amount/

Predictive email intelligence firm SparkPost
announced
plans to acquire eDatasource this week. Terms of the
deal, which marks SparkPost’s second acquisition, were
undisclosed.

SparkPost sought eDataSource, an email delivery solutions and
insights company, for its inbox performance insights and reputation
management tools in hopes to create a fully integrated email
sending and analytics platform.

“The industry has long accepted a certain level of lost
subscribers, however, those stakes are considerably higher based on
some of the email provider changes over the last few years. Today,
a miss at the sending layer will result in a significant hit to a
marketer’s total acquisition costs, and can be avoided by making
small adjustments,” said SparkPost CEO Rich Harris. “By
combining forces, we can now integrate insights with your sending
for direct action and measurement. Our two companies coming
together solves this problem.”

The new offering from the combined companies will offer:

  • Enhanced predictive inbox performance insights
  • Increased email engagement and conversion
  • Illustration of how emails are performing in the context of a
    larger marketing campaign

SparkPost plans to ship new offerings in the “next few
quarters.” On that list are an automatic seeding tool and a
real-time blacklist alert that is weighted to actual sending
patterns.

At FinovateSpring 2019, SparkPost demoed
Signals, a tool that analyzes email sending and data from across
the company’s email network to warn users about email issues.
Founded in 2008, SparkPost powers the delivery of more than 37% of
all B2C email across the globe.

The post
SparkPost to Acquire eDataSource for Undisclosed Amount

appeared first on Finovate.

https://finovate.com/sparkpost-to-acquire-edatasource-for-undisclosed-amount/

FinovateMiddleEast Sneak Peek: Flybits

https://finovate.com/finovatemiddleeast-sneak-peek-flybits/

A look at the companies demoing live at FinovateMiddleEast on November 20 and 21, 2019 in Dubai. Register today and save your spot.

Flybits enables financial institutions to deliver hyper-personalized customer experiences, leveraging contextual intelligence and AI.

Features

  • Transform your mobile app into a sales channel
  • Assemble proprietary, public, and device data to deliver contextual experiences
  • Lower marketing costs and raise conversion rates

Why it’s great
Flybits powers mobile, in-app marketing and sales for banks.

Presenters

Amir Yazdanpanah, Managing Director (MENA Region)
Yazdanpanah is an entrepreneurial IT executive with extensive experience in software product development, product sales and marketing, business operations, and P/L management.
LinkedIn

Rebecca Engelberg, Market Intelligence Manager
Engelberg specializes in Market Intelligence, monitoring industry trends and translating them into actionable insights for sales, marketing and product strategy.
LinkedIn

https://finovate.com/finovatemiddleeast-sneak-peek-flybits/

Revolut Makes Use of Open Banking with New Quickbooks Integration

https://finovate.com/revolut-connects-to-small-businesses-through-quickbooks/

Revolut announced a partnership today that is a direct result of new open banking standards. The U.K.-based challenger bank has integrated with QuickBooks to enable Revolut for Business customers to sync their transactions with the bookkeeping software.

In a blog post, Revolut said that this “demonstrates a huge step forward for U.K. businesses” and it’s the first time the company has collaborated with a third party provider to use the new Open Banking APIs.

“It was only natural that we would team up with QuickBooks for this project, not only is it the world’s largest cloud accounting provider, but we also share the same customer-driven values; to deliver a best in class service through innovation,” said Domenico De Fano, Product Owner at Revolut for Business. “We understand the importance of accurate, secure and fast information to our customers, that’s why we invested the time to get the best connections in place with QuickBooks.”

Merchants that connect their business accounts with Quickbooks will receive real-time updates on payments, expenses, and cash balances to help them manage payroll, invoices, and taxes.

Revolut debuted its digital banking technology at FinovateEurope 2015 in London where the company’s CEO and founder Nikolay Storonsky showed off the app’s money transfer capabilities that help users avoid banking fees without actually using a bank.

Earlier this month the company tapped investment bank JP Morgan to conduct a $500 million funding round and issue it a $1 billion convertible loan, which will turn into shares if Revolut receives a U.S. banking license. Last week, the company launched in Singapore and announced plans to make its products available in the U.S. in the next couple of months.

https://finovate.com/revolut-connects-to-small-businesses-through-quickbooks/