What’s Hot and What’s Not in U.S. Fintech

We teamed up with the Fintech Cocktail Club earlier this month to play another game of Fintech Tinder (otherwise known as hot or not).

Here are the rules– we shouted out a list of 20 fintech trends and our cocktail-fueled audience shouted their opinion on whether the trend is hot or not*. The result was a not-quite-scientific analysis of what is trending in U.S. fintech.

The hottest

  • Regtech
    I was fairly surprised to hear the audience react so strongly to this trend, since the U.S. is lagging in regtech startups and adoption. Out of all 20 trends, however, Regtech was the clear winner.

What’s hot

  • AI
    Artificial intelligence has been experiencing increased attention in the fintech community since late 2015. As we close out 2017, players in the fintech sector seem to be in all out hype mode on the subject.
  • Open Banking
    Though the U.S. doesn’t have any pending open banking regulation, folks still seemed quite optimistic about this trend. It is worth noting here that most of the audience from whom we received feedback represented non-bank fintech startups.
  • Mobile account opening
    Certainly a necessity for mobile-centric onboarding, mobile account opening has been around for awhile. It seems to have received new life with many enabling technology developments and IoT device launches throughout the years. For example, many companies have incorporated biometrics and Apple Watch capabilities into their mobile onboarding processes. In the future we can expect this trend to surge once again when we see augmented reality incorporated into mobile account opening.
  • Blockchain
    Possible use cases for the blockchain transcend far beyond bitcoin into implementations such as identity management and smart contracts. The audience was apparently well-aware of this, as they almost unanimously categorized blockchain as “hot.” Interestingly enough, our U.K. audience offered a more undecided, split vote regarding blockchain use.
  • Gamification
    It’s good to know that gamification still has skin in the game, so to speak. Using behavioral economics to incentivize behavior pre-dates fintech, and it appears that as techniques improve fintechs are still open to leveraging gamification to motivate user action.
  • Augmented Reality
    With the launch of iOS 11 opening developer capabilities for augmented reality, this is a rising topic in fintech. Expect to see value-added use cases in banking and fintech in the next year.
  • Challenger banks
    With the lack of challenger bank launches in the U.S. (that is, compared to the U.K.), it was surprising to see the group cheer on challenger banks so vociferously. Perhaps a sign that more challenger banks are coming to the U.S.?
  • Insurtech
    Insurtech was another hot-button topic. The audience seemed to heavily favor this trend over others, despite the relative lack of insurtechs in the U.S.

Not hot

  • Chatbots
    It was surprising to hear the audience classify chatbots as “not hot,” given that chatbots have been on the rise in fintech lately, and their inclusion among the FinovateFall Best of Show winners. Finn.ai, a Canada-based chatbot, was one of seven Best of Show award winners among the 70 demoing companies at FinovateFall 2017.
  • Roboadvisory
    The wealth tech boom seems to have subsided for a bit. It hit hard between 2014 and 2015, when new roboadvisors– each with its own unique investing algorithm– were launching on an almost daily basis.
  • ICO’s
    Initial Coin Offerings (ICO’S) have been the talk of the fintech town lately. However, because of risk and regulation concerns, many see this fundraising technique as nothing but a fad.
  • Alternative credit scoring
    Recent questions regarding the fairness of traditional credit scores combined with the implementation of enabling technologies such as artificial intelligence and machine learning landed alternative credit scoring in the “not” category.
  • Voice banking
    Voice banking received a few head nods during the demo portion of FinovateFall 2017, but most argued that this is just another solution looking for a problem.
  • Mobile wallets
    I mostly threw this on the list to get a reaction from the crowd– and quite a reaction I got! It’s 2017, and mobile wallets barely have a pulse.
  • Biometric authentication
    This is yet another trend I was surprised to see land in the “not” category. Perhaps the audience was feeling salty by the time they reacted to this trend. I think we’ll continue to see biometrics– in multiple different forms– trend in fintech for years to come.
  • Card-linked offers
    Card-linked offers was another trend I added to the list to illicit a colorful response from the crowd. A trend from 2012, card-linked offers has made an appearance in a few new fintech solutions, but mostly as just an add-on.
  • Virtual reality
    I whole-heartedly agree with the assertion that virtual reality in banking is not hot. The enabling technology has a place in gaming and not as a new channel through which consumers will check their credit score or bank balance.
  • Alternative lending
    This trend peaked in 2015 and began declining in 2016. While many alternative lending companies are still profitable (and thriving) the ones that have landed on profitability and regulatory difficulties have caught a lot of media attention, leading to an overall downturn in this space.

What’s ?

  • Mortgagetech/ Proptech
    This was the last trend the audience voted on, and I think the cocktails had taken their toll by this time, because almost everyone in the crowd seemed to be confused. My take: it’s hot.

Opinions: U.K. vs. U.S.

You may remember our analysis from earlier this year in our piece Playing Fintech Tinder in which we analyzed the opinions of a U.K.-based audience on 11 fintech trends. The results were surprisingly similar, with only two differences. While in the U.K., the audience was split and/or undecided on two trends– blockchain and challenger banks, the U.S. audience was more vocal and decided about the trends, voting both as “not hot.”

*Note: the actual terminology for feedback was “sexy or not”, since “hot” sounds similar to “not”

Swych Seals Series A Funding

Digital gifting platform Swych has closed its Series A round with a “major strategic capital investment” from UAE Exchange Group. The amount of the investment was undisclosed.

“Swych’s global gifting technology and vision fits well with our strategy to foster purpose-based money transfers,” UAE Exchange Group CEO Promoth Manghat said. “As a group, we are always on the lookout for opportunities to partner with organizations that drive innovation, provide differential services and promote digital initiatives,” he added. “In Swych, we see a unique value proposition that checks all these boxes.”

Swych’s platform gives users the ability to send “swychable” digital gifts from their mobile device that are redeemable for electronic gift cards from more than 120 retail partners. Users can also upload their plastic gift cards to the Swych mobile app and checkout using their smartphone to scan the bar code at the register. They can also earn rewards points that can be used to buy “swychable” gift cards. Businesses can use the company’s GiftBot platform or its “Gifting-as-a-Service” APIs to produce their own customized digital gift cards.

UAE Exchange and Swych will work together to develop digital gifting services for international markets, with a U.S.-to-India service under consideration as an initial launch. Swych founder and CEO Deepak Jain underscored the opportunity of leveraging UAE’s international reach, saying it would “greatly accelerate Swych in its mission to become the leader in digital cross-border gifting services globally.” A money transfer, foreign exchange, and payments solutions provider, UAE Exchange has in excess of 200,000 agent locations in more than 160 countries and 15+ million customers worldwide. UAE Exchange was established in 1980 and is headquartered in Abu Dhabi, UAE.

Plano, Texas-based Swych won Best of Show for its demonstration of the Swych Mobile Gifting Platform at FinovateFall 2016. The mobile app is available for free at both the Apple App Store and Google Play.

Finovate Alumni News

On Finovate.com

  • Swych Seals Series A Funding.

Around the web

  • Pendo Systems Launches the Pendo Machine Learning Platform.
  • The Wall Street Journal features GreatHorn CEO Kevin O’Brien.
  • Neustar Partners with KUBRA to Deliver TCPA Compliance Data Verification Solutions to Utility Clients.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

With New Funding, Prosper’s Valuation Stands at $550 Million

U.S. peer-to-peer lending giant, Prosper has landed $50 million in a Series G funding round. The capital come from Hong Kong-based FinEx Asia and LPG Capital and raises the San Francisco-based company’s total equity funding to $410 million.

Prosper will use the financing to make strategic investments in the company’s platform and products. “This investment is a strong signal of confidence in our business fundamentals and the momentum we are seeing right now,” said David Kimball, CEO of Prosper Marketplace. “Over the past year, we’ve shown that we can build a sustainable business that continues to redefine the online lending experience for our borrowers and investors. We believe this partnership will open up additional opportunities for our business as we continue to grow.”

According to Lend Academy, Prosper’s valuation is now $550 million; a 70% drop from the company’s estimated 2015 valuation of $1.87 billion. However, Lend Academy also noted that Prosper’s decline aligns with competitor Lending Club’s valuation, which experienced a share price drop of 68% since April of 2015.

Marketplace lending as a whole has experienced a downturn in the past couple of years, and Prosper had to endure a stumbling block of its own in July of this year when it shuttered its Prosper Daily app. Aimed at prospective borrowers, the app was built from Prosper’s purchase of BillGuard in 2015 for $30 million.

Despite the setbacks, Prosper reported relatively strong second quarter performance this year, with $775 million in loan originations. This represents a 32% quarter-over-quarter increase and 74% year-over-year increase. Overall, the company has facilitated more than $10 billion in consumer loans over its platform since launching in 2006.

Prosper presented at FinovateSpring 2009 as well as the inaugural Finovate in 2007. Earlier this year, the company appointed Usama Ashraf as Chief Financial Officer and in November of 2016, selected David Kimball to succeed Aaron Vermut as CEO. Forbes interviewed Kimball in a feature this spring.

Kasasa Rolls Out Kasasa Loans

Financial technology and marketing services company Kasasa unveiled its newest offering this week. The Austin, Texas-based company launched Kasasa Loans, a loan product that lets consumers pay ahead to reduce debt, and take that extra money back if they need it.

Kasasa is calling it a Take-Back, and it works similar to a regular loan agreement in which the borrower repays according to a regular payment schedule. Here’s how the Take-Back works: every month, the consumer has the option to overpay on their loan repayment and at any time in the future if they need to access cash quickly, they have the option to “take-back” any portion of the overpayment.

The new loan offering aims to broaden financial institutions’ loan portfolio while enticing their clients with a flexible borrowing solution that is unique to Kasasa bank clients. It fits with Kasasa’s mission to “create products that are good for both consumers and community financial institutions” and helps financial institutions compete on something other than interest rates.

“Until now, there has been no way to differentiate loan products beyond interest rates – Kasasa Loans is changing that,” said Gabe Krajicek, CEO of Kasasa. “We are revolutionizing the customer experience of paying off debt early by introducing the first loan with take-backs. Kasasa Loans allows borrowers to pay off their loan faster but leverage take-backs to access extra payments in times of need, eliminating that fear of parting with ‘extra money’ while also enabling the consumer to make better financial decisions.”

In conjunction with this launch, the company began offering a new marketing automation platform, Connect. Kasasa was founded in 2003 when it launched its flagship REWARDChecking account to help community financial institutions compete against big banks. Since then, the company has expanded to 350 employees and now offers a full suite of branded bank products. Kasasa debuted at FinovateFall 2009 under its former parent company, BancVue. The company split from BancVue last July. Last month, Kasasa was named a Best Place to Work in Austin for the third consecutive year.

Tuition.io Raises $7 Million in Series B

In a round led by Wildcat Venture Partners and featuring participation from current investors Mohr Davidow Ventures and MassMutual Ventures, student loan repayment assistance platform Tuition.io has raised $7 million in new funding. The Series B round brings the company’s total capital to more than $15 million.

“We are committed to expanding our student loan assistance offerings and driving mass adoption until student loan repayment assistance becomes a national and even international employee benefit standard,” Tuition.io CEO Scott Thompson said. Thompson also referred to student loan repayment assistance as a global competitiveness issue for companies “in the increasingly aggressive race to hire and retain top talent.”

Scott Thompson, Tuition.io CEO, discussing the challenge of helping millennials manage student loan debt with Finovate Director of Strategy Lisa Moyle at FinovateFall last week.

“Tuition.io’s value to our partners and their employees is clear,” General Partner at Wildcat Venture Partners Bryan Stolle added. “The company is changing the face of employee benefits while helping address a national crisis that is only slated to get worse,” Stolle said.

In addition to the funding, the company also announced a new office in San Mateo, California, which will be staffed by a pair of new executives: Scott Simmons and Danica Bracy. Simmons will serve as Chief Operating Officer/Chief Financial Officer. Bracy will oversee management of the client portfolio as Senior Director of Partner Success.

Founded in 2011 and headquartered in Los Angeles, California, Tuition.io demonstrated its technology a year later at FinovateFall 2012. The company was named a preferred provider by global health, wellness, and career consulting leader Mercer in September. This summer, Tuition.io announced that it would administer the new Student Loan Reduction Program for the City of Memphis. CEO Thompson participated in our Finovate Talks interview series during FinovateFall this year, opining on the topic “How Can We Help Millennials Work Through the Student Loan Debt Crisis?”

AutoGravity Teams Up with Hyundai Capital America

Thanks to a new partnership between Finovate Best of Show winner AutoGravity and Hyundai Capital America, California car buyers using AutoGravity have new financing options when looking to buy a Hyundai, Kia, or Genesis vehicle. “With the growing number of consumers embracing AutoGravity, as well as the seamless integration of AutoGravity with dealer process, we felt that this was the perfect opportunity to test the platform,” Hyundai Capital America President and CEO Ross Williams said.

AutoGravity founder and CEO Andreas Hinrichs said the partnership with Hyundai Capital America – which does business as Hyundai Motor Finance, Kia Motors Finance, and Genesis Finance – will give users of the auto buying and financing app a greater range of financing options. “AutoGravity brings the car financing experience into the digital age where today’s consumer wants to find it: in the palm of their hand,” Hinrichs added.

Available in at both the Apple App Store and at Google Play, AutoGravity’s free app digitally connects prospective car buyers and leasers with lenders and dealers. Partnerships with leading banks and captive lenders like Hyundai Capital America enable car shoppers to arrive at the dealership with everything from vehicle selection to financing already ready-to-go. Since its launch in 2016, more than 700,000 consumers have downloaded AutoGravity’s app.

Founded in 2015 and headquartered in Irvine, California, AutoGravity demonstrated its app at FinovateFall 2016, winning Best of Show. Last month, the company was highlighted by GoBankingRates as one of the best personal finance apps and featured by AutoFinance News as one out of 10 auto finance and mobility companies leveraging AI. AutoGravity announced an investment from VW Credit, Volkswagen’s finance division in July, a partnership with Fletcher Jones Auto Group in June, and won the 2017 North American Frost & Sullivan Entrepreneurial Company of the Year Award in May.

A Look Back at FinovateFall’s Four-Day Flow

Adding a pair of Discussion Days to Finovate’s traditional Demo Days format, has made it that much easier for Finovate attendees to answer the question perennial post-conference question: “So. What did you think?” Two days of keynote speeches, panels, and presentations – to say nothing of another two days of networking – gave Finovate attendees time to digest, discuss, and debate many of the ideas, technologies, and solutions that dominated the conference.

Indeed, with more than 500 minutes of live demos on Days One and Two, and twin-track, double-barrel breakout sessions and panels on Days Three and Four – it seems like the only more valuable commodity than cool fintech last week was the time to take it all in.

So with that in mind, here are a trio of Big Themes that go a long way toward defining both the content of and conversation around FinovateFall 2017.

Best of Show 2.0

Bringing our Best of Show winners on stage to kickoff the Discussion Days was a great opportunity to once-again highlight the achievements of some of our most innovative companies – as chosen by Finovate attendees. In addition to giving those who missed parts of our Demo Days the opportunity to meet our Best of Show winning companies, our panel also gave the companies the chance to reintroduce themselves and their technologies, as well as talk about their overall Finovate experience.

The Best of Show panel also helped shine a spotlight on which subsectors within fintech are really experiencing significant innovation. Think PFM is dead? Meet Envestnet | Yodlee, a multiple Best of Show winner with a new, less sophisticated take on promoting and supporting financial health and wellness. Have a hard time telling one chatbot from another? Not those who voted for Finn.ai, another multiple Best of Show winner, whose virtual banking assistant continues to impress.

From new payment technologies (Jiffee) and security solutions (SpyCloud) to customer insight technologies (Sensibill), more social approaches to investing (Voleo), and an easier way to contribute to your favorite causes (Sustainably), the Best of Show panel was a well-placed bridge to the broader discussions and deep dives on Days Three and Four.

Power to the Panel!

When it comes to getting down to fintech’s brass tacks, give me a stage filled with some of our industry’s most loquacious luminaries. Whether the topic is banking for the underbanked or blockchain technology, there’s nothing like a panel of fintech potentates to remind us of what matters to consumers, merchants, and financial institutions alike.

And what did we learn? From panelist and keynote speaker alike, it is clear that the rise of AI will be the most dominant feature of our technological future – and this will be as true for fintech as for any other subset such as biotech or insurtech. Dave Birch, Director of Innovation for Consult Hyperion, announced during his keynote speech, “Your AI will be selling financial services to my AI,” while members of our AI showcase discussed the numerous ways AI is already helping us meet challenges ranging from customer engagement to workflow automation to fraud management.

And of course big props to Day Four keynoter Tim Urban of @WaitButWhy fame whose “The AI Revolution and the Road to Superintelligence” provided a thoughtful, rousing, occasionally frightful but always entertaining exegesis on AI.

In addition to artificial intelligence, there was plenty of old school human brain power at work, as well. Consider Bradley Leimer’s interview with Jon Stein of Betterment, the informative exchange between John Waupsh and Jim Bruene on community banking, and Ghela Boskovich discussing women and investing during the Wealth Management & Investing Summit track for just a few samples of the high-calibre conversation during our Discussion Days.

Where All the Fintech Women At?

There is no doubt that fintech – like the rest of technology – is becoming a more diverse place for entrepreneurs and technologists of all backgrounds. Sometimes the networking sessions at a Finovate conference can resemble a gaggle at the United Nations as the mix of Baby Boomers, GenXers, and Millennials from across the world come together to talk fintech.

Gender diversity is another area where fintech in general and Finovate in specific have made strides. In what might be the largest number of women leading or participating on the Finovate stage, our Demo Days featured Olivia Lovenmark (Voleo), Ana Silva and Sara Martins (ITSector), Janice Diner (Horizn), Meggie Ladlow (United Income), Nikhita Iyar (Moxtra), Inbal Tirosh (Endor), Izabella Gawron (ING Bank Slaski), Sarah Clark (Mitek), Elisabeth Asirifi (cyberProductivity), Ellison Anne Williams (ENVEIL), Lauren Matheson (PromonTech), Diana Winstanley (ebankIT), Harini Padmanabhan (Envestnet | Yodlee), Lisa Shields (FI SPAN), and Donna Tilden (RateSeer).

But our work is far from done. As more than one attendee noted, our panel on fintech incubators on Day Four featured 14 startups showcased by seven accelerators – but nary a woman on stage. “Let’s fix this!” one attendee tweeted – and we agree. For those of us who play any role in helping encourage and enable the next generation of fintech entrepreneurs, ensuring the representation of #womenintech needs to be job one.

We hope you enjoyed our expanded FinovateFall 2017. For more coverage of the conference, check out our Best of Show review, our Twitter coverage, and our upcoming Finovate in the Press feature!

Feature Friday: Sweep Accounts for the Mass Market

Does anyone remember when sweep accounts were all the rage? They were disruptive technology in the 1980s. The idea was to automatically sweep idle cash from non-interest bearing accounts to savings or investment accounts with higher yields. It’s still a core feature in treasury management accounts for large businesses, but you don’t hear much about it these days on the retail side.

Why? The small differential between checking and savings or money markets hardly justifies the trouble. If the average annual amount swept to savings was $2,500, it would only net an extra $1 or $2 annually (after tax) from a typical large U.S. bank, or up to $10 in a “high interest” account from a community bank or credit union.

But if instead of sweeping idle cash into savings, what if you could use it to pay down, even temporarily, a personal loan or revolving credit balance? All of a sudden, that $2,500 cushion is worth $300 or more annually (assuming 12% APR), 150x the return of sweeping to a bank savings account. That’s enough to get your customers’ attention.

Some overdraft credit lines work this way. You can freely transfer money between credit line and checking to minimize interest charges. I had the feature at US Bank years ago. During cash-strapped times, I would keep $0 in checking and every time I wrote a check it would trigger an automatic (and fee-free) credit line advance. It was a great system, but when the bank started charging fees on each automatic transfer, I abandoned my “sweep account” hack.

Fast-forward 10 years and Kasasa has reinvented the credit-line sweep with its hybrid loan product launched today. Kasasa loans offer a “take back” feature which allows consumers to pay down their loan balance at any time, and then get those extra funds back at any time in the future free of charge. Basically, in banking jargon, it’s a fixed-rate installment loan (with a repayment schedule), married to a credit line that allows you to move money in and out up to the extra amount you’ve paid in (see note 1). One sees this in the home equity space, but not in the personal loan arena.

A key part of the account’s appeal is the Loan Management Dashboard. Without the dashboard, the changing balances and available “excess” would be a customer services nightmare to explain and track. The dashboard makes it (relatively) simple to move money back and forth. There will be some customer service questions, but they should primarily be one-time only.

Bottom line: Kasasa’s hybrid loan is a winning concept, especially for its community bank and credit union clients looking to differentiate themselves from the big banks and online lenders. It’s a user-friendly approach that should play well with their loyal customer/member bases. The laon does have the downside of cannibalizing deposits while lowering loan balances. But with proper marketing, a Kasasa speciality, the incremental loan balances (and customers) should far outweigh the lower deposit totals.

Author: Jim Bruene (@netbanker) is Founder & Senior Advisor to Finovate as well as Principal of BUX Advisors, a financial services user-experience consultancy. 

(1) Unlike a credit line where you can always borrow to the maximum credit line, in the Kasasa Loan, you can only borrow back your excess contributions. This is a benefit for consumers who prefer the discipline of a fixed repayment period rather than an open-ended credit line.

Finovate Alumni News

On Finovate.com

  • With New Funding, Prosper’s Valuation stands at $550 Million.
  • Tuition.io Raises $7 Million in Series B.
  • AutoGravity Teams Up with Hyundai Capital America.

Around the web

  • Infosys Finacle partners with ToneTag to leverage sound wave technology to drive contactless authentications and transactions.
  • PYMNTS interviews Jumio CEO Stephen Stuut on the challenge of combating cybercrime in “real time.”
  • Xero teams up with TradeGecko to help Singapore’s SMEs Go-Digital.
  • Bento for Business appoints Jeff Pomeroy to the role of Vice President of Product.
  • ThreatMetrix Announces Smart Authentication Platform.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.