Amazon is Testing Biometric Payments at Whole Foods, Stripe Gets into Lending, InsurTech Funding Surpassed $3B in 2018, Railsbank Lands $10M

This week (2-6 September) was yet another interesting one in the world of FinTech. Investment in the global InsurTech market grew by 84% in 2018, topping the $3 billion mark, Amazon is testing biometric technology that will let Whole Foods shoppers pay for their groceries by waving their hands, Stripe gets into lending and much much more.

Without further ado, let us dive into what has happened in the financial technology sector this week.

InsurTech Funding Surpassed $3B in 2018

Investment in the global InsurTech market grew by 84% in 2018, topping the $3 billion mark.

The funding increase has also led to a greater number of digital policies for consumers as more InsurTech startups emerge, according to research from analytics firm GlobalData.

The study, Digital Challengers in Insurance, highlights the number of new ventures offering 'on-demand' policies where consumers can buy coverage by the hour, day or week via an app for certain personal lines such as motor, gadget and home insurance.

While InsurTech funding still lags other industries such as transport and entertainment, the success of startups offering more flexible services is forcing traditional providers to respond with their own innovations, said Ben Carey-Evans, insurance analyst at Global Data.

For example, UK insurer Aviva has launched Aviva Plus, which allows insureds to pay monthly subscriptions while adjusting levels of coverage. Meanwhile UK bank Lloyds has recently partnered with US-based InsurTech Trov, using the latter's white-labelled platform to develop a series of digital insurance products for customers. 

“Established UK players have to adapt to progress made by start-ups or consumers will begin to go elsewhere," said Carey-Evans. "They can no longer rely on their trusted brand names, as they are not just competing against start-ups but can be left behind by their competitors partnering or investing in them.”

Norwegian Bank Sparebanken Øst Invests in Crypto Exchange

Norwegian savings bank Sparebanken Øst has bought a stake in a local cryptocurrency exchange founded by airline magnate Bjørn Kjos.

Sparebanken Øst paid NOK15 million (about US$1.65 million) for a 16.3% stake in Norwegian Block Exchange (NBX), which has yet to launch.

Kjos - who made his fortune as founder and CEO of Norwegian Air Shuttle - has been developing NBX since last year, promising to offer digital asset trading, payment and savings solutions, and other blockchain-based services.

In a statement, Sparebanken Øst notes the potential for collaboration between NBX and Norwegian Air Shuttle on payments.

Explaining the investment decision, the bank says it wants to build up its knowledge around crypto and blockchain, and "learn from and understand disruptive initiatives".

Accion Raises Funds to Invest in Seed Stage Financial Inclusion FinTechs

Non-profit group Accion International is boosting its investment initiative for seed stage FinTech startups working on financial inclusion, raising $23 million from investors and adding another $10 million from its own pocket.

Launched in 2012 with $10 million in capital, Accion Venture Lab invests in startups that use technology to increase the reach, quality, and affordability of financial services for the underserved.

The lab has built up a portfolio of 36 companies in Asia, Africa, Latin America and North America, working in areas such as InsurTech, agricultural finance, digital lending, holistic MSME finance solutions, and personal financial management.

For every dollar Accion Venture Lab has invested, its portfolio companies have raised an additional $13 in equity capital from later-stage investors. The lab also provides firms with strategic and operational support.

Now, the lab is getting a hefty financial injection, with Visa, the Ford Foundation, and the French Development Agency's private sector financing arm among those contributing to a new $23 million coinvestment vehicle. Accion is making its own, separate $10 million investment.

Michael Schlein, President and CEO of Accion commented:

FinTech startups are finding new ways to provide products and services that help these underserved people. Yet often startups lack the capital and strategic support they need to grow and scale their impact. Accion Venture Lab addresses this need.

Accion also works with VC Quona Capital on separate fund focused on growth stage fintech startups in emerging markets.

Amazon to Let Whole Foods Shoppers Pay With a Wave

Amazon is testing biometric technology that will let Whole Foods shoppers pay for their groceries by waving their hands, according to the New York Post.

Code-named Orville, the system will let Amazon Prime customers take a scan of their hands at Whole Foods and then link the data to a credit or debit card. Customers can then check out by waving their hands past a scanner.

The technology is being tested by staffers at vending machines at Amazon's New York offices, says the Post, and could be introduced at a handful of Whole Foods stores by early next year ahead of a full roll out.

However, Amazon engineers are still tweaking the technology in an effort to improve accuracy from one ten-thousand of one per cent to a millionth of one per cent, source tells the tabloid.

Amazon has been experimenting with another payment option at its Go stores, which have no cashiers, instead using "just walk out" technology, which taps sensors and cameras to track what items customers take from the shelves and then automatically charges through an app.

Amazon says that both options make paying faster and more convenient for customers, but tech ethics researcher Stephanie Hare tells the Post that shoppers should be wary about handing over potentially valuable biometric data to companies.

Citi Ventures Invests in Even Financial

Citi Ventures has co-led a $25 million funding round for Even Financial, the startup that uses an API to help banks find and connect with consumers via channel partners.

MassMutual Ventures co-led the round, which was joined by LendingClub and existing investors American Express Ventures, Canaan Partners, F-Prime Capital, GreatPoint Ventures, and Goldman Sachs.

Founded in 2015, Even Financial is a B2B2C FinTech company looking to solve a significant pain point in financial services acquisition by seamlessly connecting supply and demand via its API, turning any consumer touchpoint into an ROI-driven, programmatic acquisition source.

The firm has secured big name users, including AmEx, Goldman Sachs and SoFi, as well as channel partners such as TransUnion, Credit Sesame and Empower.

The new money will be used to scale the Even platform and move into new areas, such as mortgage, insurance and student loans market places.

Phill Rosen, CEO of Even, said:

At Even, we believe the future of financial services acquisition is native, programmatic, and highly personalized.

This strategic funding will allow us to execute our vision more rapidly as we grow our network of partners, bolster our product offering, and scale our operations to continue to build the definitive search, comparison, and recommendation engine for financial services.

Stripe Gets into Lending

Payments giant Stripe is stepping up its diversification efforts, launching a cash advancement service for the internet firms that already use its services.

Stripe says that banks have slashed their lending to SMEs almost in half over the last decade. Those that do get loans, typically have to spend 25 hours on the paperwork and then wait weeks or months to access their funds.

From today, Stripe Capital promises to make the process faster and easier for American online firms by taking advantage of its existing integration with them. The FinTech unicorn is promising no lengthy applications or collateral obligations, with funds hitting approved applicants' Stripe account the next day.

Eligibility is determined based on a company’s history on Stripe, with algorithms analyzing hundreds of relevant signals for each business, including payment volume, percentage of repeat customers, payment frequency, and changes in revenue growth.

Repayments are automated and flexible: businesses repay money as they make money. They repay the loan with a fixed percentage of daily sales; there are no recurring interest charges or late fees.

And, in addition to businesses running on Stripe directly, Stripe Capital is also available to platforms and marketplaces on Stripe Connect.

Will Gaybrick, Chief Product Officer at Stripe, commented:

Businesses, especially small businesses and startups, are the engines for job creation in our economy. It should be trivially simple and lightning fast for them to access the capital they need to smooth their cash flow and invest in their own growth.

The service - which is similar to offerings from rivals PayPal and Square - is the latest move by Stripe to move beyond its core business of making it easy for online sellers to accept card payments.

Already worth more than $22 billion, the company is planning to continue is raid growth by entering new areas, including in-store payments and the upcoming launch of a business credit card.

ING Partners with Dutch Supermarket to Trial Cashierless Store

ING has teamed up with Dutch supermarket chain Albert Heijn and US tech startup AiFi to pilot a cashierless store where customers tap their bank card as they enter, pick up their groceries, and walk out.

The partners have built a tiny, 14 square meter, store in the city of Zaandam to test the concept.

Customers wave their bank card at the store entrance to open the doors. Then, as they take items from the shelves, cameras and weight sensors record the process.

When the shopping is completed, the customer stands at the exit, sees the amount spent on a display, and the payment - up to €25 - is processed.

The system is similar to that being used by Amazon Go stores in the US. However, ING says that its effort is particularly smooth because there is no need to register or download an app.

And, with privacy a growing concern in the digital age, AiFi says that its technology only registers shapes and arm movements and does not require facial recognition.

The system will be tested by staffers over the next couple of months, before moving to another store later in the year.

Digital Bank Chime Offers Overdraft Protection To Its 5M Customers

Chime, a digital banking startup based in San Francisco, said it has reached a threshold of five million customers and plans to introduce a new overdraft initiative to help them.

The startup is an FDIC-insured mobile bank that has no physical branches and pledges to offer customers fewer fees.

The banking startup recently had a Series D funding round that raised $200 million. At the time, it said it had about three million customers, which means the remainder were added within the last few months.

The overdraft initiative, called SpotMe, is geared toward customers who live paycheck to paycheck and deposit all of their earnings into their Chime accounts. Consumers who are direct-depositing at least $500 per month are eligible for the service.

“A few small purchases each month can wind up costing Americans hundreds of dollars per year in overdraft fees when using traditional overdraft protection,” the bank said in a blog post.

Once users are signed up, they won’t be penalized if they keep spending with a debit card after a balance drops to zero, with an overdraft limit of up to one hundred dollars. When the next paycheck comes in, it will automatically pay for the negative amount without any overdraft fees. People who use Chime can also leave tips for other users who need a hand.

Railsbank Open Banking Platform Lands $10M For Global Expansion

Railsbank announced it has raised $10 million in a Series A funding round led by Moneta Capital.

CreditEase, Clocktower Technology Ventures, Singapore Life and existing investors including Firestartr also participated in the round. The funds will be used to help the bank continue its global expansion in the United States, Australia and Southeast Asia, as well as enhance its core product proposition from banking, payments and cards into APIs for other financial services.

“We are delighted to welcome our new investors who join our amazingly supportive investor list,” Nigel Verdon, co-founder and CEO of Railsbank, said in a press release. “Railsbank is at a key stage of its development and we are moving into a period of sustained expansion. Our industry leading products and highly skilled management team are being leveraged across a growing customer base, and we are continually being presented with opportunities on a global scale.”

Railsbank also opened an office in Singapore, which will act as a gateway in Southeast Asia and beyond. The initial team has already been hired, with more joining in the coming months.

Western Union, TRUE North Offer X-Border Tuition Payments

Western Union is teaming up with TRUE North to offer students a simplified payments platform to pay tuition and expenses, Western Union said in a press release on Thursday (Sept. 5). 

The new process will help funds to arrive on time and in full, without hidden charges to the educational institution.

“We are proud to collaborate with TRUE North to integrate our payments solution into their platform,” said Roy Farah, vice president of sales for Canada, Western Union Business Solutions. “By simplifying payment tracking and reconciliation, TRUE North’s education institutions can free up valuable financial and administrative resources.”

The collaboration will leverage WU GlobalPay for Students and gives students, parents and agents a chance to compare prices and review payment options before locking in exchange rates. After receipt by Western Union, payments are usually delivered to the school within 24 hours.

With a choice of over 70 local currencies and multiple payment methods, the solution offers users options and flexibility. People can pay with Visa, Mastercard or UnionPay without educational institutions incurring merchant fees. Users can also set up in-country bank-to-bank transfers, e-transfers, mobile e-wallets and credit cards.

In June, Western Union partnered with Visa to expedite the movement of money globally — and digitally — across a range of use cases. Western Union is leveraging Visa Direct, the card giant’s real-time push payments platform, to offer end-users — consumers and businesses — expedited global, push-to-card transfers. The companies said in a release that the pact helps scale real-time, cross-border payments across more than 200 countries and territories, and 130 currencies.

FinTech Chipper Cash To Expand Into Nigeria

Chipper Cash, a no-fee, cross-border payment company started by Ham Serunjogi and Maijid Moujaled, has expanded into Nigeria.

The company, which is based in San Francisco and has offices in Ghana and Kenya, will give people in Nigeria access to its peer-to-peer (P2P) payment service through a partnership with payment gateway company Paystack.

The company, which launched in October of 2018, will set up shop in Lagos. Abiodun Animashaun, the co-founder of the Lagos-based ride-hailing startup Gokada, will serve as country manager.

Animashaun is not the only person leaving a successful African tech venture to join Chipper Cash. Alicia Levine, who works at BRCK, an internet hardware and service startup, will become the company’s chief operating officer.

Both Chipper Cash founders emigrated to the United States to study and work in Silicon Valley. Chipper Cash has more than 70,000 active users and has processed around 250,000 transactions.

In addition to its main product, Chipper Cash also started Chipper Checkout, a fee-based mobile payments product that will also be available in Nigeria within several months.

Serunjogi said the reason for the move to Nigeria was fairly obvious. “Nigeria is the largest economy and most populous country in Africa. Its FinTech industry is one of the most advanced in Africa, up there with Kenya and South Africa,” he said. “I think for any company doing FinTech across borders that is looking to be successful in Africa, it’s imperative [to] have a presence in Nigeria.”

US Payment Card Market Tops $6T

Commercial and consumer cards issued in the U.S. generated $6.13 trillion in spending for goods and services in 2018, The Nilson Report said in a press release Thursday (Sept. 5).

Commercial card spending is up 11.7%, compared to consumer card spending, which grew by 10.1 percent. Commercial card spending was $1.39 trillion last year. Consumer card spending was $4.74 trillion.

“Consumer card spending is higher, but every year spending generated by commercial credit and debit cards used by employees of private companies, government agencies, and nonprofit organizations accounts for a larger component of overall card spending,” said David Robertson, publisher of The Nilson Report.

Visa's commercial card was 43.2% in 2018, up from 42.5% in 2017. Conversely, American Express'es and Mastercard's commercial card market dropped. American Express dropped to 29.4% from 29.8% in 2017. Mastercard declined to 27.4%.

Commercial card spending accounted for 24.8% of all purchase volume at Mastercard in the U.S. and 16.3% at Visa.

Founded in 1971, The Nilson Report provides news and information about the global card and mobile payment industry. It directly surveys more than 2,000 financial institutions to produce statistics about issuers, acquirers and technology providers.

Firms are eager to seize the opportunity to move trillions of dollars that cross borders away from checks. One way to cut the paper chase is for companies to embrace commercial card products, which can speed payments and aggregate information alongside those payments, while reducing errors and eliminating security risks typically associated with ACH transactions.

But on an international stage, cross-border corporate payments can present challenges, especially when it comes to getting suppliers to adapt to digital payments. Cross-border “scheme fees” paid to the networks, as well as currency conversion and costs, eat into operating profits, as do interchange rates, which collectively are lucrative for issuers and the networks, but may make suppliers balk.

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About: I am a business developer, sales professional, FinTech strategist, as well as Cryptocurrency and Blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at a global payments startup where I'm leading company's expansion into Europe , I'm an active member of FinTech community and a TechFin evangelist.

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