Eagle Home Mortgage, Blend launch mobile app for loan officers


Eagle Home Mortgage is moving its loan application process to a mobile format through a new tool from underwriting company Blend. The app, Blend Loan Officer, was launched this month. It allows Eagle loan officers to work with customers, guiding them through loan applications on smartphones. Eagle Home Mortgage is the financial services arm of …Read More

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Weekly Wrap: Visa acquires Plaid and retailers embrace fintech


Welcome to the latest episode of our Weekly Wrap video series, for the week ending Friday, January 17, 2019. In this episode, editors discuss the following news developments:

View the Weekly Wrap podcast here:

The Weekly Wrap is also available as a video here:


MUFG taps math expert as CEO to lead digital transformation


Mitsubishi UFJ Financial Group Inc. named Hironori Kamezawa as chief executive officer, turning to a math expert to help Japan’s biggest bank forge a path in the digital era.

Kamezawa, 58, will take the top post on April 1, the Tokyo-based bank said in a statement on Friday, confirming news reports from earlier this week. He succeeds Kanetsugu Mike, 63, who is stepping down after just a year at the helm but will remain chief of the main lending subsidiary.

Currently deputy president and a leader of the lender’s technology overhaul, Kamezawa faces the challenge of reshaping a domestic business that’s being squeezed by low interest rates and costly branches.

“We expect MUFG to accelerate its digital efforts with the promotion of Kamezawa,” Rie Nishihara, an analyst at JPMorgan Chase & Co. in Tokyo, wrote in a note. “Also, speed of management is expected to increase by dividing the roles of the holding company head and the bank head.”

A University of Tokyo mathematics graduate, Kamezawa is a rare breed in an industry where most of the top echelon have either law or economics backgrounds. As chief digital transformation officer, he has been leading efforts including the development of MUFG’s digital coin.

“Large overseas banks have similar anxiety over digitalization,” Kamezawa said at a news briefing after the announcement. “The biggest task is how we strike a balance between ensuring security and convenience.”

Split Roles
Mike’s retention of the banking unit chief role brings MUFG into line with its two main domestic rivals. Both Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. have separate heads of their holding company and lending units, and MUFG had been urged to do the same to better manage operations that have grown and diversified.

Mike told reporters that he was appointed to the two posts to speed up the bank’s overhaul, with the understanding that he would hold them both for a short time. The lender is now ready to split the roles, he said.

In MUFG’s annual report last year, Tsutomu Okuda, an outside director who chairs the nominating and governance committee, defended the bank’s decision to let Mike have a “dual-hat leadership,” while adding that it was “not desirable” from a governance perspective.

MUFG has been cutting branches and revamping others to replace rows of tellers with tablet computers and video booths — a move to help customers migrate to digital platforms.

The bank booked a 94 billion yen ($853 million) writedown last fiscal year after scrapping an information-technology upgrade at its credit card unit that couldn’t keep pace with changes in payments technology. It’s now building a new blockchain-based payments system with Akamai Technologies Inc.

 — Taiga Uranaka and Yuki Hagiwara (Bloomberg)


How Citi Ventures builds internal fintech startups


Citi Ventures, Citibank’s corporate venture arm, is building startups within the company to incubate new product ideas. D10X, which stands for “Discover 10 Times,” is Citi Ventures’ internal lab to build new solutions for Citi customers.

In this bonus episode of “Fintech Unfiltered,” Executive Editor at Bank Innovation and CEO of Royal Media JJ Hornblass spoke with Rachel Moore, senior vice president of Citi Fintech, and Alex Sion, director and co-head of D10X. Sion oversees the unit while Moore, an internal entrepreneur, leads Out of the Red, an initiative to assist Citi customers with debt management. The discussion was based on an event hosted by Bank Innovation in early January.

Like other startup founders, internal creators must consult with experts and pitch their ideas to internal executives.

“How can we possibly solve [a problem] and help people change the world and have it make sense for Citi?” Moore asked. “You have to convince a growth board, who are senior executives at Citi that there is a need, and you have to pitch just like you would to a VC.”

The event also featured a live Q&A with Sion, who elaborated on how Citi Ventures implements new concepts and ideas and how it sets priorities. “Sometimes I want to build stuff — I don’t want to be a venture investor, but I want to build that thing myself, and that’s where D10X comes in, he said.

Bank Innovation Ignite, which will take place March 2-3 in Seattle, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. This is an exclusive, invitation-only event for executives eager to learn about the latest innovations. Request your invitation.


MUFG Union Bank turns to cloud for speed and agility


MUFG Union Bank is on track to move to a cloud core banking infrastructure system within two years, an initiative that will let the bank build and release new products more quickly, the company told Bank Innovation this week.

“It’s all about cloud, native cloud and the ability to move data quickly, safely, securely in a real time, in a fashion that helps drive that buying experience,” said Chris Higgins, chief information and operations officer at MUFG Union Bank. “The level of automation from an endtoend perspective, from idea generation to working proof of concept to full blown implementation on a minimal viable product basis, is much faster.”

Union Bank is co-creating the core platform, its Modern Banking Platform, with banking technology provider FIS. MUFG Union Bank is the first global financial institution to use the platform. According to FIS, the cloud-based core infrastructure will allow banks to bring products to market faster, with personalization and regulatory compliance capabilities.

Higgins said the cloud transition will allow the bank to develop new products and bring them to market within three to six months, marking a significant improvement over the legacy infrastructure currently in place, in which it takes 18 to 24 months to build and release a product. 

The transition to the cloud also allows the bank to recruit top talent, including senior engineers. Union Bank will be hiring 100 people in the Phoenix area to support this project, Higgins said. 

See also: FIS to help stand up digital-only banks within 90 days 

The “secret sauce” of the new platform is its ability to be configured easily according to client needs.

 “The new modern architecture allows us to highly configure versus code differentiation into our environment,” Higgins said, adding that the cloud platform allows the bank to seamlessly tend to customer needs, both online and offline. 

Eric Byunn, partner and co-founder of growth equity firm Centana Growth Partners, recently told Bank Innovation that banks are only beginning to shift to cloud infrastructure. 

“The vast majority of banks are not using the cloud for critical loads and are just now really thinking about making some of those transitions, he said. “In financial services, it is still a new and exciting trend, and sometimes in the technology community, we forget that the cloud hasn’t had much penetration yet.” 

Andrew Beatty, senior vice president of next generation banking at FIS, said the core platform is API-enabled “by design,” which allows for digital onboarding, efficient customer service delivery and upgraded payments solutions. It will also generate cost efficiencies, he added. 

The end result of the deployment, noted Higgins, is the ability to deliver on the client experience. 

“It’s a more efficient platform,” he said. “It’s safe, it’s secure and we will be able to really focus on meeting and exceeding our clients’ needs and expectations.” 

Bank Innovation Ignite, which will take place March 2-3 in Seattle, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. This is an exclusive, invitation-only event for executives eager to learn about the latest innovations. Request your invitation.  



Expensify targets socially-conscious companies with charitable rewards card


Expense management startup Expensify is including charitable donations as a perk for its corporate cards. The product, which launched in beta in October, became available to the public this week. It allows employees to make donations to different causes for every purchase they make. “Most people who have a rewards card lose more money through …Read More

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How Upstart and Cross River Bank are automating credit card payments


Despite advances in banking and personal finance technology, paying credit card bills in a simple, time-efficient way is still a pain point for many consumers. According to recent research, 37% of U.S. households revolved credit card debt from month to month last year. 

Now, loan startup Upstart and Cross River Bank are adding automation to the process through a direct credit card payoff feature they debuted last month. With the new featureUpstart steps in and pays the card provider through a personal loan, taking the burden off the consumer.  

“We wanted to do something that could potentially nudge the consumer to what’s best for them,” said Dave Girouard, co-founder and CEO of Upstart. “There’s pretty clear evidence that when loan proceeds go to pay off credit cards, the loans perform better.” 

As a growing number of consumers rely on personal loans, the 8-year-old Upstart is streamlining the process for its customers. The loans, which are funded by the New Jersey-based Cross River Bank, present less risk to Upstart because the debt paid off automatically.

Alyson Clarke, principal analyst at Forrester Research, pointed out that Upstart paying the credit card debt itself won’t improve consumer repayment behavior. According to Clarke, most consumers with credit card debt fall into two categories: those with an expensive one-time bill such as a medical expense, and those who overspend. 

According to Girouard, the majority of Upstart’s loans are used to pay off credit card debt. Upstart considers employment history, education, cost of living and credit reporting data when underwriting its loans, so it already knows how much credit card debt a customer is carrying. When customers apply for a loan, Upstart asks consumers if they would like Upstart to pay off the credit cards. If they accept, customers pay back Upstart through an installment loan.  

See also: Upstart CEO Girouard: ‘FICO is extremely limited and backward-looking’

Upstart acts as a front-end underwriting and customeracquisition business, but the loans are funded by bank partners. The only bank partner funding the direct credit card payoff feature is Cross River Bank, but Girouard said Upstart hopes to add more bank partners later this year.

Loan terms are set by the bank partners, but they start with APRs as low as 3%, and the highest rate Upstart allows is 35.99%, with terms lasting three or five years. With the direct credit card pay off, Cross River offers a 100basis point — or 1% — reduction on the loan APRs. 

Its easier for the consumer, and it’s less effort, Girouard said. “On the bank side, you’re getting a customer who is doing the right thing financially.” 

Bank Innovation Ignite, which will take place March 2-3 in Seattle, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. This is an exclusive, invitation-only event for executives eager to learn about the latest innovations. Request your invitation


Visa, Mastercard, AmEx win easier access to China market


The biggest U.S. card companies just moved a step closer to gaining access to China’s $27 trillion payments market.

China said it won’t take longer than 90 days to consider applications from providers of electronic-payments services such as Mastercard, Visa and American Express Co., according the text of a landmark trade agreement with the U.S. It should be an especially welcome reprieve for Mastercard and its partner NetsUnion Clearing Corp., which set up a venture in March that is still awaiting approval from the People’s Bank of China to begin operations.

“China is a vital market for us,” Seth Eisen, a spokesman for Mastercard, said Wednesday in an emailed statement. “We continue to make every effort to secure the requisite license to be able to operate in China domestically. This deal is a step forward in that process.”

The move shows progress in the U.S. payment networks’ battle for access to mainland China, which has been a point of contention in the trade dispute. Officials from the world’s two largest economies finalized a bevy of deals before signing off on the first phase of a sweeping trade agreement, which they have sought to cast as a major breakthrough in relations.

Mastercard Chief Executive Officer Ajay Banga and Visa CEO Al Kelly were in attendance at Wednesday’s festivities at the White House for the trade deal announcement. In a statement, Visa said it sees potential to help further develop digital payments in China through the 2022 Olympics in Beijing and that it’s approaching entry into the country “with a long-term focus.”

“Visa is working closely with the Chinese government, including the People’s Bank of China, throughout the application process for a bank card clearing institution license,” the company said in the statement, welcoming the signing of the trade agreement.

China in June 2015 allowed foreign bank-card clearing providers to obtain licenses by setting up units or acquiring a local company, ending a monopoly by state-run China UnionPay Co. But progress has since been slow for Visa and Mastercard, the world’s largest payment networks. American Express cleared a key hurdle in early January when regulators accepted its application to start a bank-card clearing business with a Chinese partner.

“We’re pleased with the progress we’re making to become the first foreign network to receive a clearing and settlement license to operate in mainland China,” Leah Gerstner, a spokeswoman for AmEx, said in a statement. “We will continue to work through the regulatory approval process through our joint venture in China.”

As part of Wednesday’s agreement, the U.S. also pledged not to discriminate against China UnionPay, or CUP, or other Chinese electronic payment services.

Mastercard and Visa have long complained that their delayed entrance into China means they’ll be pitting themselves against large domestic players in a market that’s seen mobile payments explode in recent years. Mobile transactions topped 190 trillion yuan ($27 trillion) in China in 2018, making it the world’s largest such market, according to iResearch. Ant Financial’s Alipay and Tencent Holdings Ltd.’s WeChat Pay are the dominant mobile payments firms.

They won’t be starting from nothing. Mastercard and Visa have long worked with Chinese banks to slap their brands on cards to facilitate transactions that consumers make outside China. But Wednesday’s announcement means the networks will now have a chance to compete for those cardholders’ domestic spending as well.

China had 8.2 billion bank cards in circulation at the end of September, with 90% of them debit cards.

— Bloomberg News (with assistance from Jenny Surane and David Scheer)


Third-party apps grow users faster than banking apps


As banks compete for mobile-centric Gen Z customers, new data from the mobile analytics platform App Annie suggests fintech companies are growing their app user base faster than banks. The report, titled “The State of Mobile 2020,” found that, globally, the top–10 fintech apps grew their monthly active users by 20% year over year in 2019 compared with just 15% for banking …Read More

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German fintech Raisin acquires Choice Financial as it prepares for US launch


German savings and investment platform Raisin has acquired Madrid-based Choice Financial Solutions in an effort to integrate with U.S.-based financial providers. Terms of the deal were not disclosed.

Berlin-based Raisin aims to offer U.S. customers a marketplace approach to savings account products through partnerships with financial institutions, a model it’s successfully rolled out in Europe. The company, which intends to launch in the U.S. during the second half of this year, noted that the Choice platform will help client institutions build new products quickly.

“The [Choice] platform enables our partners to quickly create innovative products and distribute them, and we bring additional distribution capabilities through Raisin,” said Raisin U.S. CEO Paul Knodel. “Another capability of the platform is record keeping. We would do all the record keeping on behalf of the bank and then feed data into the bank systems.”

Choice, founded in 2011, developed a technology product that enables financial institutions to efficiently offer savings solutions to the mass market in a cost-effective way. It has worked with a range of Spanish banks, including BBVA USA.

For Raisin, bringing Choice’s capabilities in-house helps boost plans to launch in the U.S. The company, which has not disclosed its U.S. financial institution partners, said it’s had discussions with 40 U.S. institutions, and reactions have been overwhelmingly positive. Raisin’s pitch to U.S users having the ability to choose the best time deposit account that fits their needs and requirements among a wide array of choices. Over time, said Knodel, the company is open to adding investment products to product offerings for U.S. users.

While user accounts will be held by financial institutions, Raisin will handle customer service interactions with customers who acquire their accounts through its platform. Building on its growth in Europe, the company hopes to deliver a compelling proposition to client banks as well as end users.

“We have a strong track record from Europe to deliver value to banks and consumers on our platform,” explained Knodel. “In the U.S., we’re going to bring value to our bank partners through their ability to create new products quickly and with some unique features.”

A financial industry veteran, Knodel previously held senior positions at institutions that include Citigroup, Merrill Lynch, TD Ameritrade and Wealthfront.

See also: Raisin expands financial ‘cockpit’ through fairr acquisition

Since its launch in Europe in 2013, Raisin has brokered more than $20 billion worth of transactions for more than 200,000 customers in more than 28 European countries. It currently partners with more than 90 banks.

The company, which has raised $220 million in funding, has in recent years made acquisitions to augment the platform’s capabilities, including U.K.-based customer onboarding platform PBF Solutions in 2017, as well as Germany-based MHB Bank and pension startup fairr last year. Its backers include Goldman Sachs, PayPal Ventures, Thrive Capital, Ribbit Capital and Index Ventures.

Michael Stephan, Raisin’s chief operating officer, told Bank Innovation last year that Raisin is uniquely positioned because of its appeal to both end users and client banks.

“We’re very passionate about the two sides of our marketplace,” Stephan said. “We want to make it very easy for [the consumer] to pick and choose, as well as manage, the savings products. We don’t provide a lead out to another bank; we give customer one access point to accounts at a lot of banks.”

Bank Innovation Ignite, which will take place March 2-3 in Seattle, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. This is an exclusive, invitation-only event for executives eager to learn about the latest innovations. Request your invitation


BMO’s Ben Schack on what’s next for bank-fintech collaborations


BMO Harris partners with fintech  startups through the BMO Harris Bank 1871 Innnovation Program.

The bank usually works with five to seven firms each year and announced its third cohort of startups last October. Some of the companies BMO Harris has worked with in the past include Blend, a software platform for lenders; SpringFour, which connects consumers to local financial health resources and Holberg Financial, a fintech firm that develops tools to help reduce financial stress.

In this episode of “Fintech Unfiltered,” Bank Innovation sat down with Ben Schack, head of U.S. digital partnerships at BMO Financial Group, to discuss the bank’s approach to cooperation.

Schack, who is based in Chicago, is responsible for sourcing bank-fintech partnerships. He said BMO is focused on working with startups that address pain points of its customers.

“[The partnership program] is an opportunity to find startups who might be able to complement our capabilities or help us reach a new pool of customers that we’re interested in,” he explained.

One trend Schack has noticed is the growth of socially-engaged firms that are working to address financial inclusion for underbanked communities. He argues that for banks, the biggest obstacle to reaching underserved communities is risk. “Large U.S. banks have been built on a foundation of solid risk management and that permeates everything from management to strategy. Having a different risk philosophy is really helpful when you’re trying to serve underserved communities.”

Bank Innovation Ignite, which will take place March 2-3 in Seattle, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. This is an exclusive, invitation-only event for executives eager to learn about the latest innovations. Request your invitation.


With Plaid, Visa embeds itself deeper into the fintech ecosystem


Visa‘s $5.3 billion acquisition of data aggregator Plaid puts the company’s tool set at the center of financial services innovation.

The move embeds Visa deeper into the payments infrastructure, allowing it to expand its footprint and diversify its product and service offerings.

“Fintechs are increasingly developing on bundling and repackaging financial services payment and funds, movement capabilities, all with end-users in mind, and these fintech offerings are being used more and more,” said Visa CEO Al Kelly in a call with investors Monday. Plaid will allow Visa to extend the reach of its payment solutions and value-added services, he added.

Stephen Greer, senior analyst at Celent, said the acquisition was a strategic move for both companies and that Visa will be able to play a more active role in shaping open banking through Plaid. 

“Rather than investing into interbank real-time payments clearing and settlement infrastructure (non-card rails), Visa is focusing on services on top of rails,” Greer explained, in a statement. “Helping a growing roster of fintech companies connect to traditional bank and card accounts is an important component of that strategy. Visa’s global presence will also help Plaid accelerate growth into other markets.”

With Plaid comes new revenue opportunities through access to Plaid’s client network, including support for issuer banks that intend to work with fintechs. 

“Plaid’s APIs give Visa a new pathway to data-driven revenue streams,” Richard Crone, a payments consultant, told PaymentsSource. “The popularity of embedded banking is seen in Google Cash, Libra and other forms of ‘headless banking’ where banking companies are underneath someone else’s brand or letterhead.”

See also: Plaid expands to France, Ireland and Spain

According to a presentation to investors, Plaid is connected to 2,600 fintechs and more than 11,000 financial institutions. With that network, Plaid services more than 200 million user accounts. One in four consumers with a U.S. bank account have used Plaid, according to both companies.

Meanwhile, Plaid positions Visa nicely to accommodate European banks seeking to comply with data protection regulations such as GDPR and PSD2. 

“The impacts of GDPR and PSD2 continue to be a source of concern for some investors,” a Morgan Stanley research note on the acquisition observed. “Visa and Mastercard are in a strong position to offer open banking solutions to banks and fintechs to mitigate some of these potential headwinds, and Plaid should be a nice addition to Visa’s product suite.”

The acquisition has also raised questions about the future of other aggregators. Raymond James, for example, published research examining whether wealth management tech firm Envestnet should sell data aggregator, Yodlee, which it acquired in 2015.

“It’s possible that Envestnet could shift from being the owner of Yodlee to a client of Yodlee with minimal disruption to Envestnet’s core financial advisor-client base,” the report said. “Assuming this to be the case, Envestnet’s board of directors may potentially look at the rich valuation Visa is paying for Plaid and conclude that a sale of Yodlee is in Envestnet’s shareholders’ best interest.”

Despite the promise of owning a deeper relationship with banks and fintechs alike, as well as the international expansion benefits to both companies, Visa cautioned against prejudging the results of the acquisition in the short term. According to the company, acquiring the data aggregator is a long-term move to align Visa’s business plan with the growing ecosystem of fintechs that require secure connections to account data.

“This is not a one- or two-year revenue growth opportunity,” said Vasant Prabhu, chief financial officer at Visa, during the call with investors. “This is a decadelong opportunity that, in our view, transforms both their business and ours.”

—Suman Bhattacharyya, Angely Mercado and Rick Morgan

Bank Innovation Ignite, which will take place March 2-3 in Seattle, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. This is an exclusive, invitation-only event for executives eager to learn about the latest innovations. Request your invitation


Shopify launches starter loans for merchants as low as $200


Commerce platform Shopify, which supports the operations of more than a million merchants, has launched a loan product for early-stage U.S. businesses using its platform.

Image via Shopify

Shopify, which has been offering loans through the Shopify Capital program to merchants on its platform since 2016, is rolling out starter loans to support businesses at their earliest stages of development, explained Kaz Nejatian, vice president and general manager of Shopify Financial Solutions.

He noted minimum loan amounts were previously at least a few hundred dollars, but the important selling point is the simplicity and speed of the qualification process.

“Open up a store, link your bank account and you qualify after the first month for your loan. You don’t need to have a business plan, you don’t have to have any sales information and you don’t need to give a personal guarantee or your income,” said Nejatian. “The idea here is to make it a little bit easier to buy your first marketing campaign, or buy your first inventory.”

Shopify Capital loans are available to merchants who use Shopify Payments, the platform’s payment gateway which, according to a company spokesperson, includes most Shopify merchants. Since its establishment, Shopify Capital has delivered more than $750 million in loans, which are available in 14 states.

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

With its loan products, Shopify joins a field of commerce platforms lending to businesses that use their products and services, including Amazon, eBay, Square and PayPal. Meanwhile, digital lenders including OnDeck, Kabbage, Bluevine and SellersFunding also seek to reach business customers who would otherwise be ignored by large banks. By reaching clients at an early stage, Shopify can deepen its relationships with client businesses.

“[Alternative lenders] have better data than a bank would have and can offer loans to sellers who would have no access to funding,”  Juozas Kaziukėnas, CEO of e-commerce research firm Marketplace Pulse, recently told Bank Innovation. “It’s the issue of being too small for a bank and, even if they talk to you, you don’t have enough history of business execution to be a bank client.”

Since Shopify has access to an extensive trove of customer data through client interactions, it’s able to underwrite businesses that would otherwise be turned away by large banks, noted Nejatian. Repayment terms depend on each client’s circumstances, but clients repay Shopify through a fixed percentage of sales for the life of the loan.

“I think you would have a very hard time going to bank and saying ‘Let’s loan $200 to people with no personal guarantee, no business plan, and no sales [information],’” he said. “They would look at this and say, ‘that’s a terrible idea.’ We look at this and say this will launch the next million small businesses around the world.”

Bank Innovation Ignite, which will take place March 2-3 in Seattle, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. This is an exclusive, invitation-only event for executives eager to learn about the latest innovations. Request your invitation


With point-of-sale loans, PayPal eyes millennial and Gen Z shoppers


As retailers seek to increase customer purchase volumes through point-of-sale loans, PayPal is setting itself apart from competition through its brand recognition, the speed of its underwriting process and its relationships with hundreds of millions of consumers.

Image via PayPal

It’s promoting its point-of-sale loan product, PayPal Credit, as a purchase driver for retailers.

“When [millennials and Gen Z] customers engage in personal finance, they demand frictionless, seamless experiences, and that’s really what PayPal has built our entire business on,” said Susan Schmidt, PayPal’s vice president of U.S. consumer credit, speaking at the National Retail Federation’s Big Show in New York on Sunday. “When you put PayPal credit up [on an e-commerce platform], those customers have billions of dollars of approved credit that they can use to shop on your sites.”

PayPal’s point-of-sale loan product offers no-interest financing on purchases above $99, provided customers pay back the balance in six months. Meanwhile, for purchases under $99, customers need to pay the balance in full each month to avoid interest charges.

While PayPal sees checkout loans as an opportunity, the field of companies competing for business in this area is becoming increasingly crowded. PayPal’s point-of-sale loans, which are offered in partnership with Synchrony Bank, compete with offerings from Affirm, Klarna, Afterpay and Splitit. Despite these pressures, Schmidt said PayPal’s advantages include its reputation among consumers and the simplicity of the loan approval process, which can take seconds.

See also: Affirm rolls out virtual card for checkout loans

According to Leslie Parrish, senior analyst at Aite Group, the market for point-of-sale loans can accommodate multiple players.

The point-of-sale loan pie is also progressively getting bigger. A November 2019 report from McKinsey & Company claimed that the total U.S. outstanding balances originated through point-of-sale installment lending solutions stood at $94 billion in 2018. Over time, those balances are expected to account for around 10% of all unsecured lending.

Schmidt claimed that having PayPal as a payment method on an e-commerce site means more than half of users are are more likely to make a purchase. With PayPal credit, customers’ order volumes are likely to increase, she added, noting that among millennials who use PayPal Credit, average order values rise 40% and with Gen Z shoppers, average order values jump by 72%.

With a low barrier to entry, PayPal could be carving out a niche by focusing on everyday purchases.

“It’s differentiated in that they are going so far down the scale of purchase amount, because a lot of players like Affirm are allowing [point-of-sale loans] to be used for much larger purchases, including mattresses or Peloton machines,” noted Parrish.

With the uptick of consumer interest interest in point-of-sale loans, the consequence over time, concluded Parrish, could be reduced demand for credit cards.

“This could ultimately end up shrinking the demand for credit cards, particularly credit cards that are offered through retailers — they could be the losers,” she said.

Bank Innovation Ignite, which will take place March 2-3 in Seattle, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. This is an exclusive, invitation-only event for executives eager to learn about the latest innovations. Request your invitation


Banks are underusing gamification, Javelin Strategy says


As banks seek to build relationships with customers, they’re not fully exploiting the potential of gaming as a strategy for loyalty and retention, suggest analysts at Javelin Strategy & Research. In a study released in December, Javelin argues that gamification is tool to help customers understand the longer-term evolution of their personal finance situations. It’s …Read More

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HSBC’s Alvaro Teixeira to speak at Bank Innovation Ignite


Alvaro Teixeira, executive vice president and head of customer value management at HSBC Bank USA

Alvaro Teixeira, executive vice president and head of customer value management at HSBC Bank USA, will attend Bank Innovation Ignite this March 2-3 in Seattle.

Teixeira is speaking at the Ignite Ideas session, in which financial industry leaders will highlight case studies.

“I’m excited to join Bank Innovation Ignite to dive further into how technology will continue to define the future of the banking industry and how we can better provide our customers with financial services when, where and how they want,” Teixeira said. “Technology is driving the rapid evolution of the banking industry and is providing new insights on consumer behaviors and relationships in financial services.” 

Teixeira has spent more than nine years at HSBC. He was previously head of wealth solutions and country head of premium banking in Mexico. Other Ignite speakers come from Citibank, Mastercard, Associated Bank and Kabbage. 

See also: Citi’s Rebecca Wooters to deliver fireside chat at Bank Innovation Ignite

HSBC Group, the parent company of the bank’s U.S. arm, is headquartered in London and has assets of $2.7 trillion. The bank released a report in November that singled out data-driven personalization as a competitive differentiator for banks.

Bank Innovation Ignite, which will take place on March 2-3 in Seattle, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. Other agenda items include brainstorming the next big fintech idea, lessons from big tech and making SME banking innovation work. This is an exclusive, invitation-only event for executives eager to learn about the latest innovations. Request your invitation.


Visa to buy Plaid for $5.3 billion in bid to reach startups


Visa Inc. grew into one of the world’s most valuable financial companies by serving as the pipes that help connect banks and merchants.

Now, it’s making a major bet on doing the same for data between banks and financial startups.

Visa agreed to pay $5.3 billion for Plaid, a fintech firm that connects popular apps like Venmo to customers’ data in the established banking system. The deal caps a meteoric rise for Plaid and aims to keep fueling Visa’s own ascent, which has seen its stock triple in the past five years. The sale price is double Plaid’s $2.65 billion valuation in a 2018 funding round.

Plaid’s developer tools help power a range of popular financial apps — such as Venmo, Coinbase Inc. and Acorns Grow Inc. — by channeling the banking data they need for their apps and websites. Founded in 2012, the firm now has more than 200 million accounts linked on its platform, according to an investor presentation. That access underscores the demand from consumers to send their data to services that can move funds between accounts or into cryptocurrencies, give advice on personal finances or reimburse a friend after brunch.

About a quarter of people with a U.S. bank account have used Plaid to connect to the roughly 11,000 financial institutions it works with, the companies said. At times, that’s put Plaid at the center of tensions between fintech disruptors and banks, which have expressed concerns about security and sometimes locked the outside parties out.

Data Access
“We don’t see changing Plaid’s model, we see helping them accelerate their growth,” Visa Chief Executive Officer Al Kelly said on a conference call about the way Plaid earns its fees.

But the way data is shared probably will change, Visa President Ryan McInerney said in an interview. Visa will work with banking partners including JPMorgan Chase & Co. to ensure fintechs are collecting consumers’ data “appropriately,” he said. “We have deep relationships with most financial institutions and we intend to evolve” Plaid’s data practices, he said. As a benefit, fintechs may get more reliable connectivity.

Plaid has attracted investments from Goldman Sachs Group Inc. and venture capitalist Mary Meeker. Visa and Mastercard Inc. also are investors in the company, Plaid said last year in a blog post. Visa said it expects the takeover to close in the next three to six months with the acquisition adding 80 to 100 basis points to revenue growth in fiscal 2021.

Longer-term, the deal will let Visa play a greater role in the financial industry’s tech-driven evolution, Kelly told analysts on a call. “We see this giving us options and growth potentials at least for the next decade,” he said.

In 2018, Plaid had talks with Jack Dorsey’s Square Inc. about an acquisition that would have valued Plaid at about $1 billion. In early 2019, the firm announced that it was buying one of its competitors, Quovo, in a deal valued at about $200 million.

Both Visa and Mastercard have been seeking to move beyond card payments in recent years to extend their rapid revenue growth. Mastercard bought a payments platform owned by Nets for $3.2 billion last year, using its biggest-ever acquisition to move further into so-called account-to-account payments.

Plaid has struck data-sharing agreements with major banks including JPMorgan and Wells Fargo & Co. over the past few years, seeking to head off battles over whether consumers should give up their bank username and password to share data with financial applications.

Visa’s move follows a year of frenzied consolidation in the fintech industry, as old-guard companies increasingly seek to compete with fast-growing startups. In November, PayPal Holdings Inc. snapped up online coupon company Honey Science Corp. for $4 billion. Also last year, Charles Schwab acquired of TD Ameritrade Holding Corp. for $26 billion, and Fiserv Inc.Fidelity National Information Services Inc. and Global Payments Inc. did a series of major deals in payment processing.

Plaid’s takeover by Visa — seen by some fintech disruptors as part of the more traditional banking industry — will be watched closely by Silicon Valley for any signs that more consolidation is coming. Monday’s announcement included comments from JPMorgan and PayPal welcoming the merger.

—Julie Verhage (Bloomberg)

—Jenny Surane (Bloomberg)

With assistance from Anne VanderMey (Bloomberg)


India’s about to hand people data Americans can only dream of


India has more than 560 million internet users, all generating data by the terabyte. Soon they’ll have an unprecedented amount of control over their digital financial footprints, with the ability to decide what to share, with whom, and for how long.

India’s top banks are getting ready to roll out a system that gives consumers access to a wide swath of their financial data and allows them to share it instantly. Backed by the Reserve Bank of India, it’s an ambitious approach that combines privacy protection with credit reporting: if it works, it could unlock the credit market for millions of Indians while offering new levels of data security and consumer control.

India’s effort is one of a handful of initiatives around the globe to return control of data to consumers, notably with the “open banking” movement in Europe and Australia. India’s approach is unique — it relies on third parties to mediate the often complicated process of information sharing — and so is its target population, which is predominantly poor and, as of now, excluded from the formal banking system.

“Only India has a solution for such a scale,” said Infosys chairman Nandan Nilekani, who’s been an adviser to this initiative and other major tech reforms. “This is the future.”

How it works
The “account aggregator” system will be offered by banks and licensed by India’s central bank, which will also regulate the data collection and sharing. By logging into authorized apps, users will be able to pull together all kinds of financial data — spending patterns, bill repayment, tax returns, business transactions — that they can then choose to share instantly and temporarily in pursuit of loans, investment products or even insurance.

A prospective borrower might, for example, release part of his goods-and-services tax filings to convince a lender of credit-worthiness. A vegetable vendor without collateral to back a loan might share a cash-flow statement or use a mobile phone repayment history to demonstrate reliability.

India’s newly established digital rules and practices lay the groundwork for this kind of system. The central bank now requires financial data to be reported in a standard, machine-readable format, which means it’s easier to automatically slice and share. India also has a history of collecting and protecting massive personal data sets, including biometric and payments information.

A different approach
The new system will help lenders serve millions of small Indian companies that need to borrow an estimated 1.5 trillion rupees ($21 billion) a month, said BG Mahesh, co-founder of Sahamati, a non-profit collective of account aggregators.

“Small banks can compete in this newly-leveled playing field by giving out sachet loans to businesses which have no assets other than cash flow,” he said.

Regardless, Indian users will have new, immediate access to their own financial information, and they’ll control who sees what and when. It’s a marked contrast with what happens in the U.S., where three big credit reporting agencies collect — and resell — a limited array of consumers’ financial data directly from the banks, with only cursory consent.

It’s also a different approach to data collection and privacy than Europe’s new General Data Protection Regulation, which strengthened consumers’ rights but still lets individual companies track users data.

India’s “account aggregators” are part of a broad push to comply with a 2017 Supreme Court ruling that designated privacy as a universal human right. Later this year, the Indian Parliament will renew debate on the Personal Data Protection Bill, which places new requirements on companies doing business in the country.

Encouraging users
The Reserve Bank of India has provisionally licensed over half a dozen account aggregators, including Jio Information Solutions, part of Mukesh Ambani’s Reliance Group, and NESL Asset Data, an entity set up by a consortium of the country’s biggest banks. Several have completed trials on the system already.

At the same time, Sahamati is working to convince financial institutions to embrace the new system. Later this month, it’s scheduled a demonstration to encourage tech startups to develop compatible apps. Already the State Bank of India, ICICI Bank, Kotak Mahindra Bank, and Axis Bank have signed on and are testing the system. So have the country’s leading financial regulators.

They also need to make sure people use it. India’s credit rating system is relatively new and covers only a tiny fraction of the population. The paperwork and documentation required to apply for a loan has deterred both small borrowers and prospective lenders. The account aggregators solve that problem — potentially.

“We have to ensure that hundreds of millions of Indians with varying levels of education and literacy properly understand consent,” said V.R. Govindarajan, co-founder and CEO of financial data verifier Perfios, which has received an account aggregator license. “It’s a work in progress and for the system to gain mass adoption, we need to evangelize.”

— Saritha Rai (Bloomberg)


Challenger bank hype will result in better products, says Edison Partners


The rush to be the best bank-type platform has created a crowded market, both in the business-to-business and direct-to-consumer fintech sectors. Investors are placing their bets on tools that will gain wide adoption, creating a high bar for founders and product developers.

Kelly Ford, general partner, Edison Partners

To one fintech investor, the plethora of digital banking platforms is hardly a negative development. Kelly Ford, who earlier this year was promoted to general partner at growth equity firm Edison Partners, acknowledged the herd mentality among founders and investors who support rebundled product and service offerings that manifest as challenger banks.

But despite the risks of an over-saturation of the market, the net effect will be to push the boundaries of product innovation, she argued.

“The challenger space could be considered overhyped, but in a positive way,” she said. “[With] funds flowing into it, the impact that it’s starting to have in terms of how the larger traditional institutions are responding — all of this is contributing to a buzz. Time will tell if the valuations and capital going into the space will truly pay off.”

Edison Partners, which is based in Princeton, N.J., supports high-growth companies with $8 million to $30 million in revenue. Its portfolio fintech firms include challenger bank MoneyLion, alternative investment platform YieldStreet and business payments tech company Bento for Business. She said winning companies will be those that solve compelling problem for end users, and said the bets her firm has made will make financial services accessible to a wider pool of consumers.

“We’re bullish on the challenger bank space, obviously with our bet on MoneyLion, and YieldStreet is making alternative investing accessible to the masses and at its core providing kind of a capital as a service platform for businesses,” she said. “They’re democratizing financial services, and we continue to get excited about anything that is differentiated in a way that makes financial services cheaper, more convenient and safer.”

On the business-to-business side, she noted that Edison Partners is interested in tools that help automate day-to-day tasks, and help integrate financial services functions into broader business processes, notably supply chain management.

“The intersection of vertical enterprise SaaS [software-as-a-service] with fintech is pretty exciting,” explained Ford. “Anything that removes friction associated with invoicing, payments, lending, insurance and putting that right into the flow of general business processes and the applications that support that is an interesting intersection and something I’m leaning into.”

Bank Innovation Ignite, which will take place March 2-3 in Seattle, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. This is an exclusive, invitation-only event for executives eager to learn about the latest innovations. Request your invitation


Mastercard turns to AR to visualize loyalty benefits


Payments giant Mastercard launched a new augmented reality (AR) app this month that lets cardholders get a bird’s-eye view of their benefits. It’s a move that the company hopes will drive engagement and loyalty, and add value to the offerings of its partner financial institutions.

“At Mastercard, we’re using our technology and solutions to deliver multisensory experiences for consumers every day,” said Raja Rajamannar, chief marketing and communications officer at Mastercard, in a statement. “By leveraging an intuitive AR design, cardholders can now easily find and fully explore their benefits that otherwise might have been overlooked.”

To access the app, users must scan their Mastercard to start the session to see portals corresponding to different types of Mastercard benefits. The portals offer an immersive, 360-degree experience, and users can tap on each item on their phone screen to learn about each benefit.

Cheryl Guerin, executive vice president of North America marketing and communications at Mastercard, explained that the augmented reality tools were developed after Mastercard noticed many customers did not understand the extent of their card benefits.

“It’s an ongoing challenge because you get a brochure in the mail with your card when it comes in, you may look at it then and kind of forget about it,” she said. “[With the augmented reality] you have the ability to have [information] right at your fingertips in a really easy-to-digest and immersive way.”

Guerin said some customers don’t know which card perks for which they are eligible, so Mastercard developed what it calls an entertaining way for customers to engage and learn about their benefits.

See also: What MoneyLion learned from its augmented reality experiment

In the past, other financial institutions have also experimented with virtual reality tools to improve customer experience. MoneyLion rolled out an AR tool called Grow Your Stack more than two years ago, with the objective of giving customers a visual representation of their financial holdings. MoneyLion has since retired the tool.

Other financial companies have dabbled in AR and VR technology to offer visual representations of financial products and benefits for customers. In 2018, USAA rolled out an AR-enabled car-buying tool that was discontinued after several months. Intuit has also experimented with visualizing a customer’s finances.

“It is hard, especially in consumer finance, to get your customer to change their ways, to break their routines, to add new apps or do something new,” John Caruso, chief creative officer of digital marketing and experience at design agency MCD Partners, told Bank Innovation. “There are many applications that make sense but getting the AR and VR experiences right for the customer is going to take some time.”

Bank Innovation Ignite, which will take place March 2-3 in Seattle, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. This is an exclusive, invitation-only event for executives eager to learn about the latest innovations. Request your invitation.