Aligning with ‘leaders’: OakNorth’s Nooriala on its partnership strategy

In a bid to grow its customer base, OakNorth Bank is partnering with Smarterly, a workplace savings and investment platform, the company announced this week. Smarterly is the first employer financial platform with which OakNorth has partnered, building on tie-ups with Monzo and Moneybox earlier this year.

The U.K.-based digital-only bank is aligning with other fintech companies to extend its reach, but the company is careful in its choice of partners, according to Amir Nooriala, chief strategy officer at OakNorth. With Smarterly, OakNorth can access more customers and integrate its offerings.

“As part of a diversification strategy, we decided to explore the possibility of partnering with other people,” said Nooriala. “The next segment we wanted to target was workplace providers; we think that’s a really interesting play in terms of hitting a lot of people at once. With workplace providers, each of companies [on Smarterly] have tens of thousands of employees.”

Smarterly, according to OakNorth, was seen as a leader among workplace financial health platforms and a good candidate for a partnership given its tie-ups with workplace loan providers Salary Finance and Neyber. Nooriala noted that the Smarterly partnership is more than just business-to-business because it also allows OakNorth to connect to companies that are partners of Smarterly. By working with OakNorth, Smarterly will offer its customers a range of savings options to suit their short- and longer-term savings plans, and it opens the door to “further product development,” Smarterly CEO Ben Pollard said in a statement.

See also: Inside the US expansion plans of OakNorth, an aspiring ‘Bloomberg of SME lending’

While the partnerships extend OakNorth’s customer reach, Nooriala emphasized that the objective of the strategy isn’t to maximize the number of partnerships. Rather, OakNorth seeks to find a select number of “leaders” in various areas of the market. For instance, with Monzo, OakNorth gains a customer base who tend to have lower savings account balances, while Moneybox clients typically have higher balances.

“What we like to do is not dilute our brand and partner with everyone,” said Nooriala. “We prefer to identify who we think are the market leaders and, through the power of our brand, come up with a mutually beneficial partnership. We’re going to continue going through the different categories of fintech services out there.”

In addition to customer reach, with the Smarterly partnership, the bank also stands to gain from diversification of funding sources. “We believe in not distracting ourselves from our core business, which is lending. Instead of us figuring out how to attract all the various different saving demographics out there, we prefer to partner with someone who’s already acquired the same savers,” said Nooriala. “It’s saving us from having to be experts in every single group within the market as a whole, and we can just concentrate on being the go-to fintech provider of savings for the market.”

OakNorth, which currently is valued at $2.8 billion, so far has raised $848 million in primary funding since its creation, including $440 million from SoftBank’s Vision Fund and the Clermont Group in February.

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 and save with early bird rates ending September 27th.

Weekly Wrap: Revolut rolls out Gen Z account, as UnionPay expands globally

Welcome to the latest episode of our weekly wrap video series, for the week ending Friday, September 20, 2019. In this episode, Suman Bhattacharyya, deputy editor of Bank Innovation, discusses the following news developments: Revolut’s launch of an account for customers under 18; China UnionPay’s latest move in its battle against global competitors, including Mastercard …Read More

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Cross River CEO: ‘High-profile fintech folks’ interested in its real-time payments rollout

Cross River Bank, the partner bank for large fintech startups like Stripe and Affirm, is using The Clearing House’s real-time payments (RTP) network to enhance service to clients and boost its value proposition to future ones.

Gilles Gade, Cross River Bank CEO

According to Cross River Bank CEO Gilles Gade, real-time payments will prove attractive to financial startups in third-party payments, cryptocurrencies and marketplace lenders. “There’s a whole industry in the payment space that we’re catering to, and they are thirsty for new products and services,” Gade said. “The onboarding process at the big banks is very lengthy with a lot of obstacles, and it’s not certain. With us, we’re trying to streamline that process and make it easy.” 

Companies using Cross River’s banking services can use the RTP network to send, clear and settle payments within seconds, and they can send real-time payments 24 hours a day, seven days a week. The service also allows companies to message customers in real time for invoices and bills.

According to Gade, the real-time payments are attractive to any company that needs to move money on behalf of customers. Although he couldn’t give any specifics, he noted that some “high-profile fintech folks” have approached Cross River Bank about the service. Without the RTP network, customers would have to use ACH payments, which generally don’t clear until the next business day.  

See also: Cross River Bank acquires business-banking platform Seed

The Fort Lee, N.J.-based bank was founded in 2008, and it strives to be a full-service sponsor bank of financial startups. In addition to Stripe and Affirm, its client list includes big names like Coinbase. In June, the company acquired the small business banking provider Seed to expand its offerings and expertise. 

The Clearing House is the only private ACH and wire company in the U.S. Founded in 1853, it is owned by 24 different financial institutions, including Bank of America, JPMorgan Chase and Citibank, and settles $2 trillion every day. Any bank that is federally insured can join the RTP network.

In the past, The Clearing House told Bank Innovation that it was trying to have all banks on RTP by 2020. However, the Federal Reserve announced in August its own plans to launch real-time payments service FedNow, which is something The Clearing House has said could stymie that plan.

Join Gilles Gade and other innovation leaders at Bank Innovation Build, on Nov. 6-7 in Atlanta, an event that focuses on how to “do” innovation better. It is designed to offer best practices, to guide the innovation professional to better results. Register here and save with early bird rates ending September 27th

Goldman shows bright future for banks, if not for bankers

(Bloomberg Opinion) — The continuing debate about the future of banking since the 2008 financial crisis has intensified recently on reports that banks are cutting jobs and slashing pay. While the outlook for bankers is precarious, the same can’t be said for the banks.

Goldman Sachs Group Inc. has featured prominently in the chatter about cutbacks, and not just because of its preeminence among U.S. banks. As Bloomberg News reported on Monday, Goldman’s compensation per employee plummeted 61% from 2007 to 2018 after adjusting for wage growth during the period, the largest decline among 12 big U.S. and European banks Bloomberg analyzed. Apparently, few at Goldman were spared a pay cut. Chief Executive Officer David Solomon was paid $23 million last year, a third of what former CEO Lloyd Blankfein was paid in 2007.

Pay isn’t the only thing declining at Goldman. Reports also surfaced on Monday that Chief Risk Officer Robin Vince is leaving, the latest in a long line of senior departures. The Wall Street Journal reported earlier this month that up to 15% of Goldman’s partners may depart in 2019, far higher turnover than normal, even as Goldman named its smallest class of partners in two decades last year.

The problem, according to Odeon Capital analyst Dick Bove, is that the “Fourth Industrial Revolution” — the widespread fear that robots will replace human workers — is already encroaching on trading and investment management, two key divisions at many big banks, including Goldman. Upstart financial firms are leveraging technology to offer those and other services at a lower cost, luring clients from incumbents such as Goldman and pressuring them to lower fees.

Suffice it to say, big banks can’t continue to carry an army of well-paid bankers while tech-savvy competitors undercut their fees. Goldman spent roughly $12.3 billion on compensation and benefits in 2018, more than half of its total operating expenses, and just $1 billion on communications and technology, which is typical of Wall Street banks.

Meanwhile, trading revenue at the five biggest U.S. banks on Wall Street shrank 8% last quarter after declining 14% in the first. In response to its own trading slump, Citigroup Inc. is preparing to cut hundreds of trading jobs this year, and it’s almost certainly not alone. “The rest of Wall Street is thinking the same way,” Jeff Harte, an analyst at Sandler O’Neill, told Bloomberg News in July.

The big banks have little choice but to deploy robots of their own. Goldman bought financial adviser United Capital earlier this year, in part to acquire its digital platform FinLife CX. That followed its acquisition of personal finance app Clarity Money last year, now part of Goldman’s online bank Marcus. Merrill Lynch, once the archetypal high-touch brokerage firm, introduced an online discount broker in 2016 and a robo-adviser soon after. JPMorgan Chase introduced similar services recently.

The move to automation is obviously bad for rank-and-file bankers, but it’s no better for their bosses because a smaller headcount requires fewer managers. So it makes sense that Goldman is culling its upper ranks. Solomon says that shrinking the number of partners is meant to restore “the aspirational nature of the partnership,” which is probably a gentle reminder that the firm no longer needs many of its nearly 500 partners.

What’s bad for bankers, however, is likely to be a boon for shareholders. Big banks are transforming into vast technology platforms overseen by a smaller core of executives and business generators. Solomon appears to acknowledge as much by aiming to keep the partner ranks weighted toward rainmakers, according to the Journal, a role that the bots can’t play. The horde of midlevel bankers will undoubtedly be thinned, too, and some of them replaced with lower-paid programmers and engineers. Automation is likely to make banks more profitable, even as fees for their services continue to decline.

The big banks also have little to fear from upstarts. Technology becomes cheaper and more widely available over time, but brand and distribution is enduring and difficult to attain. That gives Goldman and its peers a considerable edge. Remember NetBank and Bank of Internet USA? They were online banks that threatened to dethrone brick-and-mortar ones during the dot-com boom of the late 1990s. But once they demonstrated that online banking was the future, big banks rushed to offer similar services and cornered the market before the newcomers could gain traction. A similar story is unfolding with online trading, lending and money management.

Banks Are Back

There are signs that the changes underway at financial firms are already paying off. Net income margin, or earnings as a percentage of revenue, for the S&P 500 Financials Index jumped to 17.5% in 2018 from an average of 12.4% from 2009 to 2017. It’s expected to climb to 18% this year, nearly matching the previous high of 18.8% in 2006. Return on capital was the highest on record in 2018 and is expected to grow again this year.

The future of banking may not be bright for bankers, but it’s likely to be more lucrative for banks and their shareholders.

The opinion piece was written by Nir Kaissar of Bloomberg News.

United Trust Bank is using selfies for identity verification

United Trust Bank is using facial recognition technology to speed up its mortgage application process. The bank, which launched the service this week through a partnership with technology firm Nivo Solutions, is trying to eliminate the customer pain point of verifying identity, a requirement for mortgages in Britain.  United Trust claims that identity verification is …Read More

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Stripe becomes third most valuable startup in the US

Payments platform Stripe became one of the most highly valued startups in the world on Thursday, after it announced a new funding round at a $35 billion valuation. In the U.S., only vaping giant Juul Labs Inc. and the troubled We Co. are more valuable.

Stripe raised $250 million in funding in the new round, which the company said will be used to continue to expand around the world and launch new products. In September alone, it launched a new lending product as well as a corporate credit card. General Catalyst, Sequoia Capital and Andreessen Horowitz are among the participating investors in the round. Stripe’s previous valuation was $23 billion.

“Our investors sense that we are still in the early stages of our opportunity,” said John Collison, Stripe’s co-founder and president. “We’re now processing hundreds of billions of dollars a year.”

The San Francisco-based company counts both startups and tech giants among the customers for its core payments processing services, with Uber Technologies Inc. and Inc. using it for some transactions. Stripe has also continued to add more products, including fraud protection, billing and credit card services. It makes money by taking a portion of each transaction.

Stripe was founded in 2010 by John and Patrick Collison, 29 and 31, who immigrated to Silicon Valley to pursue careers in technology after growing up in Ireland. The company’s latest round dramatically increased Stripe’s value to $35 billion, not counting the more than $1 billion investors have poured into the company. Its valuation jump comes as some of the highest profile tech startups have struggled in the public markets. Uber and Lyft Inc., which both listed shares publicly this year, are trading below their IPO price, and the We Co. delayed its public offering. Recently, WeWork’s market value has been called into question by investors.

John Collison said that the company was not planning an IPO in the near future. “We’re very happy as an independent company,” he said. “We’re very fortunate to have investors that bring a pretty long-term mindset to this.”

Grasshopper Bank CEO Erwin to speak at Bank Innovation Build

Judith Erwin, CEO of Grasshopper Bank

New York City-based Grasshopper Bank is building a digital banking product ecosystem for the startup community. Grasshopper, which earlier this year acquired a banking license from the Office of the Office of the Comptroller of the Currency, is designing a banking experience with founders in mind, on the heels of the growth of direct-to-consumer challenger banks.

At Bank Innovation Build, which will take place in Atlanta on November 6-7, Judith Erwin, CEO of Grasshopper, will speak about designing the bank of the future and Grasshopper’s model for building a sustainable business. Among the topics to be discussed on the panel include design thinking applications, building innovative approaches internally and brand implications.

In a recent interview, Erwin told Bank Innovation that Grasshopper, through a full-blown banking license, can differentiate from other new entrants to the banking sphere with a self-sufficient revenue model. In the execution of its mission, Grasshopper also promotes access to resources from a diverse group of founders. In launching the bank, Judith and her fellow Grasshoppers achieved a number of firsts: the first U.S. digital commercial bank; the first new bank in New York in 10 years; and a significant fundraise — all under the leadership of a female CEO and a female chief financial officer.

Erwin is an industry veteran and former executive vice president of venture capital services at Square 1 Bank. For more than 20 years, she held a variety of banking roles in both New York and San Francisco, including senior positions at Comerica Bank and Imperial Bank. Throughout, she worked to provide venture firms and entrepreneurs with a banking partner that went above and beyond their needs.

Bank Innovation Build will take place in Atlanta on November 6-7. Other agenda items include implementing next-generation customer experience; speeding up development times at banks; operational considerations; user experience design; and bank-fintech collaborations. Register here and save with early bird rates ending September 27th

SellersFunding acquires AmzLenders in a bid to reach more Amazon sellers

SellersFunding, a Ridgewood, N.J.-based SME lender, has acquired AmzLenders to broaden its reach among e-commerce sellers.

Terms of the deal, which closed on Wednesday, were not disclosed, but SellersFunding CEO Ricardo Pero told Bank Innovation that the objective is to reach a wider group of clients. With AmzLenders, a two-year-old company focused on Amazon sellers, SellersFunding will add 20% more customers to its platform. AmzLenders, based in Jersey City, N.J., was founded by Amazon seller Steve Creasy, who will act as a consultant to SellersFunding over the transition period.

“If you are a well-established bank, there’s no need to spend a lot on driving traffic but, when you’re an online lender, there’s no branch across the street where you can talk to a real person,” Pero said, noting that the acquisition gives SellersFunding a window into a growing client base among Amazon merchants.

AmzLenders offers loans of $1,000 to more than $50,000, while SellersFunding loans typically range from $10,000 to $50,000. Prior to the acquisition, SellersFunding supported an estimated $1 billion in sales globally, according to the company. It operates in the U.S., Canada and the U.K.

To evaluate borrowers, SellersFunding integrates with e-commerce platforms, pulling in data that’s cross-checked with banking and credit information. In turn, the company uses machine learning models to support the underwriting process, which typically takes 24 hours. It has integrations with Amazon, Shopify, Walmart, Chewy,, eBay and Jet.

See also: Why SellersFunding sees an opportunity with Amazon, eBay merchants

Since e-commerce merchants can be “too small for a bank” and often don’t have sufficient business history or predictable transaction flows, banks have challenges extending credit to small-scale sellers. As a result, online lenders have rushed to fill the gap.

“Non-bank lenders are lining up to serve the sellers that are fueling [Amazon’s] marketplace,” wrote Kiri Masters, CEO of Bobsled Marketing and an Amazon seller, in a recent report. “These lenders are not looking at these credit facilities the way traditional banks are. Providing a credit facility was approved [by the bank], it would take several more weeks to fund the loan, even longer if the facility required a guarantee from the U.S. Small Business Administration.” By contrast, online lenders like SellersFunding are able to make funds available 24 hours after the underwriting decision is made.

Despite the opportunity among e-commerce sellers, however, the field of companies competing for market share is becoming increasingly crowded, with such players as Square, PayPal, Amazon Lending, Kabbage and various credit cards offering small-scale loans for online merchants.

With Wirecard, UnionPay takes aim at Visa, Mastercard

China’s UnionPay, the world’s largest card issuer with 57.6% of the world’s payment cards in circulation, has global ambitions. Its latest move is a memorandum of understanding with digital payments giant Wirecard, a partnership which will help it expand to new markets and craft new payment solutions for foreign visitors to China.

Wirecard, which has an acquiring license, will help UnionPay expand its global footprint, said Georg von Wilfendels, executive vice president of group business development at Wirecard. “We also will start to issue physical, as well as digital, cards outside of China,” he added. UnionPay could not be reached for comment by press time.

Geographic expansion plans will focus on Europe as a first step, along with the Asia-Pacific region, after which Wirecard will work with UnionPay on a plan to expand to other markets, von Wilfendels noted. UnionPay also plans to take advantage of the 2022 Winter Olympics in Beijing as an opportunity to launch a new consumer payments solution for foreigners visiting China.

UnionPay has been aggressively expanding to international markets through partnerships with tech companies. In June, UnionPay partnered with Tribe Payments, a U.K-based startup, to allow banks and startups to begin offering UnionPay cards in Europe. As a result, European companies that do business in China would be able to use UnionPay in China, and Chinese businesses operating in Europe could take advantage of consistent payment methods in Europe and China, said Tribe founder Suresh Vaghjiani in a recent interview.

See also: Wirecard’s cashier-free checkout to help retailers stand up to Amazon

UnionPay’s enhanced efforts to expand internationally may be in anticipation of further competition from Visa and Mastercard, which seek access to the Chinese market. The inability of foreign card companies to reach the Chinese market has been a sticking point in global trade talks. In 2010. the U.S. filed a WTO case against China over access to its card market. While the WTO ruled in the U.S.’ favor, implementation has been slow, with American Express acquiring a preliminary license to operate in China in November 2018.

“Visa and MasterCard are lining up to seek market access to China, [and] UnionPay realizes it needs to compete globally with the leading credit card companies in the world, both inside and outside of China,” said Xiaomeng Lu, China practice lead at public policy consultancy Access Partnership.

Within China, a key use case for which UnionPay and Wirecard are looking to find a solution is a means for foreign visitors to make payments in China, where Visa and Mastercard aren’t widely accepted. Wirecard didn’t offer details on the types of solutions it’s pursuing with UnionPay, but von Wilfendels hinted that it would incorporate both physical and digital methods.

While payment solutions for visitors to China through UnionPay solves a pain point, working around traditional systems that rely on Chinese bank accounts won’t be easy, according to Meng Liu, a Beijing-based payments analyst at Forrester Research. “For UnionPay, you need a [Chinese] bank account,” he said. “With Wirecard, they’re likely to find a more innovative, non-traditional solution.” Anti-money laundering mechanisms for the new solution also will require careful consideration, he noted.

Wells Fargo using blockchain for corporate international money transfers

Wells Fargo is turning to blockchain to speed up cross-border money transfers for its corporate clients. The bank is using the technology to create a money transfer service it’s branding as Wells Fargo Digital Cash. The technology is still in its nascent stages, but Wells Fargo wants corporate clients to use the system to transfer money around the world instantaneously.

The bank is aiming to create a seamless experience, according to Lisa Frazier, head of Wells Fargo’s innovation group. “From a customer point of view, you don’t do anything different than you do today,” said Frazier. “Today, the network is a combination of intermediaries, banks, correspondent banks and SWIFT.”

For now, Wells Fargo Digital Cash is a tool strictly for the bank’s corporate clients to send money internally to different departments in different countries. Using the tool, corporate customers will be able to carry out real-time money settlement and will be able to send money within longer operating windows. According to Frazier, corporate customers currently can only send money within a nine-hour window, five days a week. With Wells Fargo Digital Cash, that increases to 20 hours, five days a week.

Wells Fargo emphasized that the feature is still in an early development stage. The bank completed a proof of concept, and the pilot is expected to launch in 2020. Frazier didn’t disclose how many companies participated in the proof of concept or how many are expected to participate in the pilot. Although Wells Fargo’s goal is for corporate clients to instantly send money internationally and settle in different currencies, companies in the pilot will start by transferring in U.S. dollars between the U.S. and Canada. 

See also: CULedger Partners with R3 on Blockchain-Powered Cross-Border Payments

Wells Fargo, which has $1.9 trillion in assets, isn’t the only bank turning to blockchain to enable faster money movement. Medici Bank, MUFG, Banco Bradesco and credit unions are testing the technology.

Greenlight is putting education at the core of its banking offering

Greenlight Financial, which just raised $54 million in Series B funding, is acquiring customers by pitching itself as a personal finance and banking hub for kids. Greenlight is a digital-only banking startup that is designed to teach kids how to manage their finances as they grow into adulthood. The Greenlight platform, which operates on a …Read More

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Citizens Bank to push personalized ‘journeys’ based on data

On the heels of the fifth anniversary of Citizens Bank‘s IPO next week, the bank has launched a product and brand approach based on customer journeys called Made Ready.

The strategy won’t result in any immediate changes in customer experience. Rather, it’s an indication of how the bank sees the evolution of its product roadmap, particularly how different offerings come together as curated journeys based on customer insights garnered through data.

“I think about where our customers are growing and the need to meet them on their individual journeys, with personal experiences built on the data and what we know about them,” Beth Johnson, chief marketing officer of Citizens told Bank Innovation. “Everybody’s journey is unique, and those journeys are no longer linear.”

Made Ready is about organizing products around a particular customer experience and the personalized advice the bank can offer based on individual insights, including such life stages as education, home buying, retirement, small business and community. “I think the student [experience] was an example of how, through data and analytics, I know you’re starting to think about the time in your life around being a student,” Johnson said. “Or how something else that I’ve learned about you through how you interact with us helped me be a better coach to you.”

The bank’s tech investments have been the foundation for the implementation of the new approach, Johnson noted. As previously reported by Bank Innovation, Citizens has been in the midst of a digital transformation program, incorporating efforts to use data analytics and artificial intelligence to enhance customer experiences.

Made Ready is designed to appeal to younger customers with products that are likely to interest them, including point-of-sale loans and student loan refinancing. Framing a financial product as a “journey” is an approach other large banks have taken, including JPMorgan Chase, which recently helped customers conceive of home renovation projects on Pinterest boards.

See also: Citizens boosts tech spend, attacking back office and point-of-sale lending

Citizens’ approach also incorporates a brand marketing campaign, which includes earned outreach and paid advertising, including television, online, social media, radio, podcasts and streaming providers like Spotify, as well as outdoor advertising and sponsored local events at transit hubs in Boston and Philadelphia. The campaign also features a song from singer Questlove, which premieres later this month at an event in Philadelphia.

Looking ahead, the Made Ready approach helps position Citizens for the next steps in its evolution as a company, explained Johnson. “We turned the bank around and we’re on a positive trajectory, so it felt appropriate to tie Made Ready with the five-year IPO anniversary,” she said. “It’s less about individual products, as it is about support across [the suite of products].”

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 and save with early bird rates ending September 27th

How TD wants to bridge the confidence gap with AI-based tools

Canadians may accept that AI is a part of their lives, but many express concerns about the potential risks that the application of the technology presents, including biases. That’s according to a recent TD Bank survey of 1,200 Canadian adults carried out by Environics Research.

According to Matt Fowler, vice president of enterprise machine learning at TD, the bank is taking steps to build confidence among customers, including an emphasis on ‘explainability’ and building capabilities to detect bias. The survey found that 72% of Canadians are comfortable with AI if it means they’ll receive more personalized services, while 77% are concerned about the risks that AI poses to society.

“It comes back to trust,” Fowler told Bank Innovation. “We are not a technology or social media [company]; we’re not going to deploy something and then quickly take steps back.”

Just over two-thirds of survey respondents said they believed the lack of diversity among people working in the field of AI could lead to biases in how the technology is being developed. It’s a risk other large banks, including Bank of America, are trying to address. Indeed, Cathy Bessant, chief operating and technology officer, recently said, as AI and machine learning tools are deployed to assess customer behavior or creditworthiness, understanding where bias is introduced is key.

See also: BofA’s Bessant: Need to guard against bias in AI banking tools

From TD’s point of view, the issue isn’t that the data itself, or the models, are biased. “When you remove data that could present bias in the model’s output — for example, men, women or address — the models are so smart that they can introduce biases through other information [considered], including where you shop, what you buy, etcetera,” Fowler said.

To address bias, TD has developed model validation tools to understand the “explainable” variables in an AI model. In addition, the bank has back-tested all its models to ensure it’s getting the right types of output and controlling for any unintended bias, Fowler noted. TD’s efforts have been supported by Layer 6, the AI company it acquired in early 2018.

Another component to address AI biases is ensuring a diversity of people who develop and test AI tools. The bank, which this summer convened an expert panel to look into the survey findings, sees diversity as a powerful tool to help fight bias associated with deployments of AI tech. “Diversity in the team that builds AI models is key,” said Fowler, noting that 90% of the Layer 6 team actually are from outside Canada. “Diverse backgrounds, diverse approaches and [diverse] thought processes gives us a better end product.”

TD also has been working to better explain the capabilities of AI to customers, including opportunities for more personalized customer experiences. “We don’t hear about a lot of positive [aspects of AI], which is where we can offer hyper-personalized service and where branch managers would know an individual customer.”

Credibly teams up with Wirecard for instant funding, better customer data

Credibly, a small business lending company, is partnering with Wirecard to disburse instant funds and access businesses’ spending data.

The partnership is an attempt by Credibly to grow its customer base through better offerings and better risk management. By offering instant funds, the company hopes more small businesses will be drawn to the platform. Credibly also wants to use the spending data gleaned from Wirecard to improve its underwriting model, which could help it provide better loan terms and reach more borrowers.

The Credibly application

Jeffrey Bumbales, director of marketing and strategic partnerships at Credibly, told Bank Innovation the company feels its credit underwriting model is its biggest differentiator from other small business lenders like BlueVine and Kabbage. He added that the spending data from Wirecard will help Credibly reach borrowers throughout the credit spectrum.

Although he declined to give specifics, Bumbales said Credibly pulls from more than 1,000 data points to underwrite small businesses. He noted, however, that the most important data the company looks at is cash flow data, and the partnership with Wirecard greatly improves Credibly’s insight. Before the partnership, Credibly had relied on self-reported data from companies to gauge how they spend capital. In addition to refining its credit underwriting model, the company can better understand what new products to develop and improve its customer support with the Wirecard data, he added. 

For Wirecard, the partnership with Credibly is part of a larger plan to become the primary payment provider for businesses around the world. “This partnership showcases our ability to provide a one-stop payment solution with fully digitized acceptance services and issuing of digital products,” a Wirecard spokesperson said.

The Wirecard-issued debit cards, which can be either physical cards or digital cards accessed through the Wirecard app, connect to businesses’ pre-existing bank account. In the past, businesses would have to wait at least a day, sometimes two, to receive their funds through ACH. With the Wirecard partnership, businesses get the funds instantly. Bumbales said this can make an especially big difference for businesses during the upcoming holiday season, when small businesses need to quickly order more merchandise or hire more people to meet increased demand. 

For its part, Credibly offers working capital loans and merchant cash advances of up to $400,000, which can last up to 18 months. It also offers business expansion loans of up to $250,000 between 18 and 24 months.  According to Bumbales, the average loan is between $55,000 and $65,000 and 11 and 13 months. All the loans have a 2.5% origination fee.

See also: German payments giant Wirecard targets US with new app

Credibly, which is headquartered in Troy, Michigan, was founded in 2010 and has raised $70 million in capital so far. According to the company, Credibly has lent more than $1 billion through more than 23,000 financings. Germany-based Wirecard, meanwhile, provides payment solutions to brands and retailers. The company recently launched a new app for U.S. customers to increase its presence in the country.

Credibly faces an increasingly competitive field in the small business lending space. Competitors like Kabbage, which has raised a total of $2.5 billion, and OnDeck, which has raised a total of $1.2 billion, are growing their own market share with small businesses. 

David O’Connell, a senior analyst at Aite Group, recently told Bank Innovation a looming recession could make the small business lending market even more challenging. “The lending cycle is going to peak sometime in the next 24 months,” he said. “These are tricky times to be in the credit market.”

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 and save with early bird rates ending September 27th

Mastercard’s Miebach: Prepaid cards are not a niche business

Mastercard is doubling down on its prepaid card business, which it sees as fuel for the rise of many consumer-facing fintech companies. During its investor day on Thursday, the payments giant said its prepaid card business grew 19% in gross dollar volume from the first half of last year. Furthermore, the company expects its prepaid …Read More

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Retail rewards as in-app cash: Venmo embeds with loyalty programs

Brands have begun to Venmo their most loyal customers with rewards points converted to Venmo cash.

Image via PayPal

PayPal-owned Venmo this week rolled out a partnership with PepsiCo’s loyalty program Pepcoin, in which customers who buy a PepsiCo beverage and a Frito-Lay snack together can earn up to 10% in cashback rewards, paid out in Venmo cash after the customer scans the product bar codes. It’s PayPal’s latest effort to grow adoption and maximize reach for Venmo through retail and brand partnerships. It’s also the most recent initiative to dole out rewards through the Venmo platform, after Chipotle rolled out a similar program on a limited-time basis in March.

According to a PayPal spokeswoman, the brand’s decision to roll out rewards via Venmo was based on customers’ desire to receive rewards as quickly as possible and for the flexibility to spend rewards currency however they want. “As more and more people rely on Venmo and PayPal for everyday purchases, it made perfect sense to connect our brands, so PepsiCo customers can earn digital cash back and use their rewards to shop more places with Venmo and PayPal,” she told Bank Innovation in an statement.

For PayPal, sending rewards currency as Venmo cash serves two objectives: to help grow Venmo’s users numbers and user engagement on the platform and to encourage users to spend Venmo cash directly at retail stores with which it partners. Over the past two years, the company has been working with retailers to add Venmo as a payment option, which is marketed to them as a purchase driver. According to the company, millions of e-commerce merchants accept Venmo as a form of payment, including such known brands as Uber, Forever 21, Fandango and Foot Locker. Retailer partnerships are seen as a key driver for Venmo monetization.

For brands, aligning with Venmo helps them reach a customer base that’s actively using the peer-to-peer payments platform. According to PayPal, Venmo has 40 million users. “PepsiCo is trying to appeal to millennials and Gen Z by rewarding them where they are — on Venmo,” said Talie Baker,  senior analyst at Aite Group. “[Venmo] gets more brand recognition, and it might help drive adoption.”

According to PayPal, PepsiCo is funding the cashback rewards for its loyalty program. Cashback rewards, with their high perceived value, are a useful engagement driver, but the challenge is to draw return on investment for the high cost of customer acquisition, noted Sean Edison, loyalty lead at T3, a digital marketing agency that works with brands and retailers. “Credit cards have been buying loyalty currency for a very long time as a way to drive user acquisition and engagement,” he said. “They’re borrowing that tactic from credit cards and applying it to peer-to-peer payments technology. This 10% rewards ratio — no matter who’s funding it — is pretty expensive.”

Last month, PayPal reported Venmo’s total payment volume hit $24 billion during the second quarter, a 70% year-over-year increase.

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 and save with early bird rates ending September 27th

Weekly Wrap: Varo drops goals-based savings, as banks woo SMEs with faster payments

Welcome to the latest episode of our weekly wrap video series, for the week ending Friday, September 13, 2019. In this episode, Suman Bhattacharyya, deputy editor of Bank Innovation, discusses the following news developments: How digital-only banks are attacking overdraft fees; Why banking startup Varo dropped goals-based saving after two years; and How banks are …Read More

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Jack Dorsey’s Square is testing a new free stock trading service

Jack Dorsey’s Square already lets customers buy and sell Bitcoin on its popular Cash App. Soon, it may let them buy and sell stocks.

Square is testing out a new Cash App feature that would enable users to make free stock trades, according to a video outlining the product’s features seen by Bloomberg. While the exact date of its launch is yet to be determined, employees began testing the new feature in recent weeks, according to a person familiar with the company who asked not to be identified discussing private matters.

A spokesman for Square declined to comment.

The free stock trading feature would position Square as a direct competitor to fintech startup Robinhood Markets Inc., which has gained millions of customers by offering no-fee trading, and most recently garnered a valuation of $7.6 billion. Robinhood has since expanded into other offerings such as options trading and margin trading, which would not be offered in Square’s initial product, the person said. Eventually, Square’s new service and others like it could pose a challenge to more established online brokers, like E*Trade Financial Corp.

Square’s Cash App started out by letting users send money to friends, and has since expanded into debit cards and bitcoin trading. While Square doesn’t consistently give updates on how many people are using Cash App, the company said it had more than 15 million monthly active users as of last December. Though there isn’t an immediate path to profitability for most free financial products, the race to add more users to platforms like Cash App has been fierce, with other businesses like PayPal Holdings Inc.’s Venmo also seeing big growth.

Right now, fintech companies offering such products largely make money on the interchange fees when customers use their debit cards or on fees they charge for transferring funds to banks instantly. In its most recent letter to shareholders, Square said that revenue from Cash App was $135 million for the quarter, excluding Bitcoin. In a note published earlier this month, KeyBanc analyst Josh Beck said revenue from Cash App could reach $2 billion over the next three years.

US Bank’s White: Digital banking is now more than DIY

As digital banking goes mainstream, banks are recognizing that a mobile app that lets customers carry out day-to-day tasks isn’t enough. It’s a reality for which U.S. Bank has been preparing, especially as it reports that 72% of its customers are considered “digital-active” and 50% are using mobile channels.

Derek White

“Digital and do-it-yourself (DIY) are the basic table stakes,” said chief digital officer Derek White, speaking at the bank’s investor day on Thursday. “The real power comes to life as we use our data and we make our billions of interactions with our customers smart — this is the long game.”

For U.S. Bank, implementing such a change has internal organizational and product development implications. White, who was appointed to the position in April, is responsible for the company’s enterprise-wide digital strategy.

In recent decades, success in digital customer engagement was judged by “eyeballs,” but expectations are changing, White noted. To meet customer needs, U.S. Bank is exploring how it can use data at the back end to offer customers actionable insights as they use its digital banking platform. As a result, DIY day-to-day transactions can no longer cut it in a mobile banking experience, and it’s imperative for institutions to offer additional value.

Right now, 74% of functions carried out in a branch can be done through the U.S. Bank app, according to White. “The average human customer walks into a branch 10 times a year; they’re visiting a mobile banking application 300 times a year; and they’re visiting digital ecosystems 3,000 times a year,” he said. A big-tech approach is required, he argued, with a focus on scale, increasing the amount of interactions and time spent on the platform and, in turn, monetize those transactions.

See also: US Bank expands AI insights in its mobile app

U.S. Bank has been considering competitive pressures from not just banks, but big tech platforms on the one hand — including Amazon, Apple and Google — and fintech companies like PayPal, Square and Stripe on the other. It is a point CEO Andy Cecere also highlighted in his investor day commentary.

From a user experience perspectives, U.S. Bank is taking a two-pronged approach. According to White, it’s focusing on perfecting the front-end user experience (“above the glass”), along with the technology behind it that enables “smart and personalized” interactions (“below the glass”) based on data. Recent examples include the recently revamped mobile banking app, which offers a suite of different products to consumer and business use cases; personalized insights; help points; and enhanced card controls. Meanwhile, the bank has enhanced onboarding mechanisms for its digital mortgage product, streamlining the application process, digitizing document flow and cutting down on decision times.

In order to continue to innovate on the product side, the bank has rolled out “agile studios,” or internal innovation labs that work cross-functionally across the company, covering every function and business line, White explained. The goal is to iterate faster and accelerate product creation time lines to months instead of years. It’s an approach other institutions — including BNY Mellon, for example — are employing to make workflows across large, bureaucratic institutions operate more efficiently.

“We’re collaborating across every part of the organization,” said White. “One of the biggest surprises to me, having worked in other organizations, is that risks are sitting at the table embedded in every single one of these studios, helping us shape and design the future rather than sitting and watching from the outside trying to control it.”

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 and save with early bird rates ending September 27th

Numerated raises $15m to enhance underwriting tools for banks

Numerated, a real-time marketing and sales platform for banks, raised $15 million this week to enhance its tech stack and grow its customer acquisition capabilities. Patriot Financial Partners led the funding round, with Venrock, FINTOP Capital and Hyperplane participating. The Boston-based startup, which offers software designed to help banks find new corporate clients, pulls from …Read More

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