This is the transcript of a recent presentation I delivered entitled: WTF?
So – WTF? Let’s get started.
WTF? of course, stands for ‘What The Finovate?‘
It’s not often I start a presentation with a question, let alone a questionable acronym.
But I want to start with a book recommendation. I’m just tuning into Brian Solis’s book WTF (which is where I got the inspiration for my title today). What’s the Future of Business? is not a question—it’s an answer. It explains how experience design helps your business and how you can harness its power for business growth. Solis’s book introduces a new movement that aligns the tenets of user experience with innovation and leadership – it may also may inspire us to rethink our business models and approach to client and employee relationships to create amazing, real-world experiences.
But for now, let’s ask our original question: What The Finovate? So WTF? What is this magical conference?
I’ve coined the conference the Disneyland of Fintech – that’s what I consider it – the most wonderful place on earth (next to Paris) – at least for financial technologists. What’s the background for the conference?
Finovate is the premier technology conference in the financial services industry. Period, end of story. While there are conferences I really enjoy, from Future of Money to NetFinance to Money2020 to NextBank (and a several others I’m forgetting), this is my favorite format for seeing new technology.
Finovate was started in 2007 by Jim Breune (of blog and banking consulting group – NetBanker and Eric Mattson. It’s grown from its original locations in San Francisco and New York, areas with heavy VC and technology development, to now include London and Singapore. Financial technology development, and disruptive efforts are occurring in every corner of the globe – so the conference has grown to match that geography.
So who goes to Finovate? What organizational titles make up the more than 1300 attendees? Surprisingly more senior, and more from financial services itself now (this is a huge change from 2007 when less than 400 people came and the attendees were dominated by investment firms and fintech players large and small. Now this is where everyone wants to be.
The format is part of why people want to come. 7 minute demos, live product demonstration, no video, no product mock ups allowed – just live applications that (hopefully) clearly demonstrate the value proposition to potential investors and partners. San Francisco’s event showcased 72 companies demoing over two days – which means 504 minutes of live fintech – nearly 8 1/2 hours. What does this feel like?
This conference feels like a firehose.
Where do the demoing companies come from? All over the map – literally, including more and more from Asia, Europe, and the Middle East. It’s important to look at the financial technology landscape as a global set of providers – our larger competition is looking for best of breed partnerships and investment opportunities – looking at all areas to ensure their relevancy by partnering with the fintech equivalent of Facebook.
To the demoing companies, it can look like this (slide with stage viewpoint). Not just because they have only 7 minutes in front of 1300 people – some of which are two and three person companies headed by people in their twenties, but because they are doing a live demo through a desktop, mobile, or tablet application that relies on wifi. Thankfully, it’s really good wifi. They also have to fear the gong – because literally they have to stop at seven minutes and their have been people gonged off stage at that mark. It even has it’s own twitter hashtag – #fearthegong
So attend at your own risk. Your results may vary.
The great thing is that if you missed any of the presentations, their now available on demand at finovate.com – all 6 years worth. What did the demos cover this year? Like the presenting companies, it was all over the map, but there were underlying themes.
‘Security’ drove 20% of Finovate presentations. Through many demos, we saw the idea that Payment behavior is really driving ‘banking’ relationships, especially for younger generations that have been taught credit is bad – you should only use your debit card – and what are checks for anyway? As always, User experience (UX) matters – but now more than ever. Financial data is driving contextual, personal, meaningful applications that are nibbling at ‘banking’ experiences at every step. The idea of Crowdfunding and P2P Lending becoming a real alternative – especially on the investment side with changes dictated by the Jobs Act. The demos showed ‘Big Fintech’ players to be less nimble, less critical unless they partner with smaller more agile technology firms. We’re seeing a new reliance on application programming interfaces (APIs). Overall, there’s a renewed sense of urgency around partnerships for execution and delivery – as if we were re-arranging deck chairs on the Titanic. Every area of banking revenue is being targeted and slowly being disrupted. So let’s dive in.
‘Security’ drove 20% of Finovate presentations. Through many demos, we saw the idea
So where would the industry place its bets? During the conference, Oregon based financial consultants Mindful Insights partnered with Finovate within their mobile conference app to ask conference-goers where they would invest a dollar of their own. The results were interesting because only a few lined up with the eventual Best of Show winners.
D3 banking, Mint and MoneyDesktop took the top dollar investments. Each aided cross sell within online and mobile banking and could most easily be translated to eventual ROI. I won’t talk about Mint so much today, but know that Mint is replacing FinanceWorks within Online Banking – but there are some interesting alternatives to this path – I’ll touch on that later when I talk more about MoneyDesktop and PFM. Encap and Trusted Knight add layers of protection for online and mobile banking applications – and offer alternatives to Trusteer.
I’ll talk about Better ATMs in a little bit, but overall it looks like a solid offering and worthy of investment. Moven is Brett King’s startup that is in current beta phase – you’ve heard me talk about them before – it’s really focused on changing the way people think about the utility of banking by creating interactions through mobile at the transaction level – before, during, and after the transaction itself – something that is driving trends throughout fintech. Signifyd fights fraud by using social media to enhance KYC (Know Your Customer) and fight fraud – again, another ongoing trend in fintech solutions – using the social footprint and larger data trail consumer leave behind.
Rounding out the ‘investments’ is Live Plan, which helps businesses understand the KPIs (Key Performance Indicators) that drive their business and how to improve their profit by pairing up business owners with experts in their field, as well as mapping data from the Quickbooks API to bring a data driven story to their own business financials. Wallaby is an open mobile wallet where you place all credit and debit cards in one place to optimize spend to maximize rewards across any payment activity. I’ll talk about BrightFunds and TipFunds in a little bit – but another two great ideas around cause investing and adding transparency to financial analysis.
What other demoing companies were interesting?
Security, security, security. It was everywhere at Finovate. EyeVerify leverages the existing mobile camera to compare your eye’s vein patterns (apparently as unique as fingerprints) to initiate login and additional secure elements of online or mobile banking applications. Other new security elements being demo’d include four factor authentication by ValidSoft and IBSS (voice, face), a single web and mobile ID across all applications (One ID), one time QR codes (Microstrategy), as well as a national private database for ID verification (Picture ID). There are other firms, like TrustedKnight, that offer alternatives to Trusteer on the browser. Security is not going to go away, and while it’s like catnip, we feel we have to load up on it because our regulators say we have to – we just have to make sure it doesn’t get in the way of the user experience.
How can ATMs become a source of income outside of foreign interchange? The answer is pre-paid cards. Better ATMs technology enables ATMs to load, activate and dispense specially designed prepaid cards just like cash directly from ATM cash trays. Our current product line includes ATM-dispensed Visa prepaid gift cards and Discover multi-merchant cards. We are partnered with the world’s major ATM deployers, ATM manufacturers, card brands and card payment networks to capture a share of the more than $549 billion loaded onto prepaid cards in 2012. This new card design is now approved for use by financial institutions throughout the U.S. and international approvals are underway. Financial institutions can now automate their prepaid programs through their existing ATM fleets.
Kofax shows how to capture account on-boarding info like a license or a utility bill using the customer’s mobile phone camera. The product leverages a now ubiquitous technology (mobile camera) to solve an annoying, tedious, practical problem — manual account verification. Kofax will demonstrate how banks can onboard customers to specific products, services or accounts and capture customer content, data, and documents in support of the onboarding process directly from the mobile device. Customers will be prompted to submit information that is automatically extracted, validated for accuracy, and then utilized in the decision process.
GoBank is the first bank account designed from scratch to be opened and used on a mobile device. With GoBank, users have full access and control of their money from their smartphone or tablet, have no overdraft fees or minimum balance requirements, and can withdraw cash from more than 42,000 fee-free ATMs in the U.S. Complete on-boarding from a mobile device, mobile RDC, design your own debit card from your photo, mobile PFM, and a Fortune Teller to assist in purchase decisions. Go Bank’s parent company is Green Dot, a publicly traded bank holding company – and it shows what a bank can do through investing/acqui-hiring a financial non-bank P2P pre-paid startup.
Braintree is the fastest growing payment platform for online and mobile businesses, offering all the tools merchants need to accept payments and provide consumers a frictionless experience at checkout. Braintree operates internationally and allows merchants in 40 countries in North America, Europe and Australia to accept payments in over 130 currencies. Braintree’s consumer brand, Venmo, offers a digital wallet and person-to-person payment application that makes it easy for consumers to make payments on mobile devices. Venmo Touch eliminates the need to constantly re-type your credit card information when making purchases on your mobile device. It provides a connective layer across all the apps on your smartphone.
Credit Sesame is the consumer’s credit and lending expert, providing smarter financing for your life. They provide a complete picture of your credit and loans in one place, including your credit score, credit monitoring, personalized financing analysis, and unbiased, pre-qualified loan and savings recommendations — all for free. You receive unbiased recommendations on mortgages, auto loans, credit cards and other loans, customized for your financial goals. Their smartphone app comes with integrated Goals, Visual Mortgage Comparison Tool and Free Credit Monitoring. They already have $2M users, over $60B loans under system management, and have identified $600M in user savings. They have 32 employees and have raised over $19.35M in initial investments. Based in Mountain View.
BrightFunds is where the mutual fund model meets philanthropy. Bright Funds brings an investment approach to individual philanthropy, a $300 billion market in the U.S. alone. By combining the sophistication of investing with innovations in design and technology, Bright Funds provides a financial service that addresses a growing need in online charitable giving. Users can invest in a portfolio of pre-defined “funds” associated with high level causes — like poverty, education, and environment as well as design their own funds. It’s available as white label to banks and investment firms, as well as 401K programs like what the bank offers.
Balance Financial is a digital work space for finance professionals to interact privately with their clients. It provides a secure network for securely transmitting data and documents between clients and financial institutions. Balance helps financial advisors, loan officers & private bankers drive revenue growth, improve client engagement and scale service delivery with a powerful suite of client facing technologies. Their white-labeled digital workspace application includes common PFM features, bill payment, file sharing and more. How could this help communications bewteen the bank and its clients?
Kabbage has pioneered the first financial services data and technology platform to provide funding to small businesses in fewer than 7 minutes. Kabbage leverages data generated through business activity such as seller channels, social media, shipping data, and other sources to understand performance and deliver financing to small businesses. Kabbage has partnered with Intuit to provide simple and easy access to funding for QuickBooks customers. Kabbage is the first company on Intuit’s QuickBooks Financing Platform to underwrite customers solely based on QuickBooks data. With Kabbage, customers receive instant approvals; funds can be available within minutes when they use PayPal to receive funding.
Despite the current limitations on equity crowd funding, the industry continues to gather steam; in 2012, crowd funding raised $2.7 billion compared to $1.5 billion a year earlier. While Propser and Lending Club are P2P lending heavy weights, business crowd funding is a bit different model (brought about with 2012’s JOBS Act) – essentially asking people for money to fund a project, business or charitable endeavor.
As it stands now, the general population is limited to donation or reward-based crowd funding through platforms such as Kickstarter. People hoping to raise money through crowd funding can give out products or prizes in exchange for donations, but not equity stakes in the business. Once fully enacted, the JOBS Act removes some of the barriers to direct investing by non-accredited investors.
One such firm already gaining steam (initially starting with accredited investors) is Finovate presenter P2B Investor. They provide businesses with competitively priced working capital while offering the crowd returns of 7-12% APR. Their website is operational and open to Accredited Investors, average earnings are 9.5% APR. Investors own a percentage of every invoice in a portfolio and earn their returns in cash every month. Investors can liquidate part or all of their portfolios without fees with 60 days notice. Buying a proportionate percentage of every invoice in the portfolio [remember, receivables financing, so you are lending against the small businesses pending payments from larger customers that are more secure]
On April 5, 2012, the Jumpstart Our Business Startups Act or JOBS Act, a law intended to encourage an easier path toward funding of US based small businesses by easing various securities regulations was passed, including the way investors are have to be accredited and raises the number of shareholders a company can have before it is forced to go public. Congress is now pressuring the SEC to complete the plan to enact the law by fall 2013.
Realty Mogul is a marketplace for investors to pool money online and buy shares of pre-vetted investment properties like apartment buildings, office buildings and retail centers; it’s crowdfunding for real estate. Similar to P2P lending, they are asset based investments, already live and running, initially with Accredited investors only until the JOBS Act is finalized.
BBC Easy offers cloud-based software that automates the collection of financial data from borrowers. Data is read directly from borrower accounting systems and is used to provide financial insights to lenders on the risk and trends of their commercial borrowers. BBC Easy reads lender-specified data directly from the borrower’s accounting systems for verifying loan compliance and financial viability. They fully calculate the borrowing base certificate for borrowers saving time for lenders and borrowers.
Narrative Science was one of two providers (the other is Yseop out of Israel) that is automating business analytics through natural language communication technology that helps organizations transform data into narrative insight. Their artificial intelligence engine, Quill automatically analyzes data and creates stories that are contextually relevant and personalized to any audience. Narratives can be produced in many formats, including business reports, articles, summaries, visualizations, headlines, and Tweets, allowing companies to improve decision-making, create new products, and optimize customer interactions. One of the first financial players working with this solution is Personal Capital – aimed at delivering daily contextual, personal, and relevant insights into their investor’s portfolio.
At the end of each day of presentations, conference attendees select their best of show and these are tabulated to show the winners. The top 5 vote getters win each Finovate – and no one gets to know who the top selection is – their all winners for being named Best of Show.
FamZoo’s online and mobile banking helps parents teach kids good personal finance habits through real-world, hands-on practice. Parents set up a private, fully customizable “Virtual Family Bank” to manage their children’s earnings, spending, saving, and charitable giving using IOU accounts or optional prepaid card accounts. They also offer a co-branded version to banks with a built-in targeted marketing platform that allows financial institutions to deliver youth financial education while promoting their brand, expanding their family product offerings, cross-selling related products, and establishing a long-term relationship with their next generation customers.
LendUp’s target audience are people who have been declined for conventional loans. They believe these borrowers deserve “something better” than predatory payday and title loans. Loan amounts are initially kept small to mitigate risk is that borrowers can build up their credit ranking to score bigger and better loans.
TipRanks online tools collect performance data for stock analysts and pickers, then rates them, with scores – much like baseball batting averages. The company uses public data – mainly past picks and stock performance data – to generate its scores and provide a mechanism to rank analysts and hold them accountable for their public recommendations. Their singular goal is to give power back to the individual investor. TipRanks ensures accountability, objectivity, and is proudly unaffiliated with any investment firm.
PayNearMe operates a cash transaction network that allows consumers to pay with cash for a range of goods and services from companies in e-commerce, property management, consumer finance, and transportation. Consumers can pay their bills with cash at thousands of participating merchants (including 7,000 7-11s). Its primary market are unbanked/underbanked consumers who may not have checking accounts but who want to avoid the steep fees some money order retailers impose. PayNearMe is a white-label treasury services product that any financial institution can offer to their merchants.
PFM juggernaut MoneyDesktop debuted analytical tools that are designed to help financial institutions gain deeper insights into what their consumers need and offer more targeted products and services. MoneyDesktop now serves over 400 financial institution clients. See there demo here.
This is a just a slice of disruption from Finovate. There are hundreds (if not thousands) of companies like this in U.S. alone. Many solutions are potential partners for banks, not outside disruptors. The most important elements are trends that erode banking’s traditional ability to profit from financial credit and payment transactions. Fee income is changing, payment income is changing, credit is becoming more and more competitive. The changing banking model should consider partnering/investing in these type of companies. So we need to really look at where we can gain efficiencies from partners, by simplifying, by pairing back services, and focusing on what’s relevant for the future.
But the most important thing we can learn after attending a conference like Finovate is something I heard from Neff Hudson of USAA this week (now, a month back):
‘What The Finovate?’ isn’t really a question in the end – it’s an answer.
I hope to see you in New York in September.
While I can’t share the entire presentation deck, I wanted to share some of my recent thoughts on Finovate, partnerships, and the process of innovation in financial services. Parts of this content is borrowed from the official Finovate site and combines thoughts from several analysts and Twitter fintecheratti. We’re all moving the conversation forward – now let’s move banking forward.