Finovate Spring 2014 (Fintech Meetup Panel Notes)


This week was Finovate, the Disneyland of Fintech

My hats off to the dozen-strong Finovate team. Jim Breune and Eric Mattson really know how to put on a great show. It’s an amazing effort. Well done.

moneysummit-3

Last night I was fortunate to take part in a great panel discussing what was demo’d this week (thanks to Billy Robins of PayNearMe and Vincent Turner of Planwise for planning such a great monthly fintech meetup in San Francisco, and to Rocket Studio for hosting).

I thought I would share my notes for the panel (below). We had some great questions from the audience, and we met some cool new friends.

fintech-meetup

I also have some links to Finovate related posts at the end of my notes, and you can see the result of my live blogging on MoneyDesktop’s new Money Summit Blog alongside industry veteran Eric Dunstan.

moneysummit-5

Together we wrote eight posts about Finovate (Eric’s were far more interesting, so start with the content from the bottom of this link).

http://www.moneysummit.com/the-summit?tag=Finovate  

Have a great weekend everyone.

@leimer

 

Finovate Panel Information

FinovateSpring (Panel/SF/May 1, 2014)

Spring Finovate: First Reactions (aka MMQB)

Rocket Studio 180 Sansome Street, San Francisco, CA 6 – 8:30 PM

http://www.meetup.com/fin-tech-org-sf/events/176480452/

Panel Moderator

Ari Levy, Bloomberg

Panel Members

Dan Ewing (McKinsey), Walt Cox (mFoundry/FIS), Matt Wreford (Vernier Partners), Brad Leimer (Mechanics Bank)

Themes

Crowdfunding, Private Equity Investment, Social Investment, Authentication/Security, Extended Data/Validations, Automation/APIs

Finovate Best of Show

finovate-winners

Almost Winners

CUNeXus (Perpetual Credit Offers/FI, Fintech Partnered with Digital Insight, others on the way; great demo showing VIN scan of a Jeep onstage and immediate loan; full disclosure (I am an advisor), more at cunexusonline.com);

cu-nexus

Qapital (Personalized Goal Setting/PFM/Arsenal Example/Images and Personalization);

qapital

Coinbase (29,000 BTC merchants on the platform? Come on!).

coinbase

 

Very Interesting Too 

Radius B2B prospecting and targeting solution software (stop subscribing to lists). D3 Banking has pivoted from PFM provider Lodo Software, now has open-architecture online/mobile suite (just like how far they have come). TD Ameritrade & LikeFolio Leverage Social Media to Generate – and Test – Investment Ideas. Realty Mogul is crowdfunding for real estate, the world’s largest online marketplace for real estate lending.

Missing In Action (aka I wish they were there)

MoneyDesktop, Backbase

Always Interesting

Personal Capital (showed their advisor dashboard and client interaction through one click proposals); ZenPayroll shows payday is a special moment; it’s a chance for business owners to thank people for their contributions and for employees to feel appreciated. LendingTree has facilitated more than 30 million loan request and $214 billion in closed-loan transactions; demo’s their home loan product.

Surprises

Ukrainian ATMs from PrivatBank; Fiserv demoing Google Glass and wearable payments (and not their real time P2P with US Bank); Almost zero wearable, Glass demos; Very little mention of crypto-currency/BTC (only one demo, Coinbase); Less focus on payments than is present in overall fintech landscape;  Almost zero-PFM (more PFM 2.0/Savings focus like through Qapital).  Fair Lending Analytics from Visible Equity ensuring your lending practices aren’t discriminating. TrueLink’s prepaid card protecting seniors from fraud and gray charges. Rippleshot protecting both the integrity of consumer credit data and the merchant payment network (merchant focus and visualization was interesting). Market Prophit, WePay and TD/LikeFolio the only demos to focus on consumer/social sentiment and it was investment focused. mShift launched AnywhereMobile payment network (weren’t they sold?). SelfPay helps merchants engage each shopper in-aisle, item in hand and on their mobile device (uses iBeacon).

Kind of Confusing (or I was not paying enough attention)

Pixeliris Clinkle-like audio/sonic authentication for P2P payments. Id.ME ties affiliate groups to retail  and authenticates ID across network. Tacfi, a website that helps borrowers select a mortgage provider (just a lead gen?). OnBudget (PFM envelope budgeting tool) just not a good showing. Jumio has great technology (that is awful close to Mitek) but showed a better demo/use case with Endeavor/Zoot. CREALOGIX has seamlessly integrated an e-learning management system into its online banking suite (Swiss based, confusing). Quisk digitizes cash and empowers financial institutions and others to prosper in the new, mobile economy. Kofax is demonstrating how its new Mobile Capture Platform can help customers automate the process of checking balances on their retail gift cards. TextKey is the next-generation authentication system that turns common SMS-based authentication models upside down. Roostify offers a web and mobile service designed to enhance home financing, making it easier for buyers and lenders to navigate the frustrating and time-consuming process to apply for and close a mortgage (just a lead gen?).

Financial Institution Focused

Security/Controls/Authentication  

on-dot

OnDot (any card) and Red Giant (pre-paid card) – Card Control, spending management tools through geo-fencing, category control (really liked OnDot). Zumigo ties phone to payment mechanism (card+) and secures geo-fenced transactions. Encap Fair Lending Analytics from Visible Equity ensuring your lending practices aren’t discriminating. Vorstack‘s VFS solution for financial services is a distributed analytics and correlation platform for multi-party coordinated cyber defense.

Lending/Savings/Traditional Account Opening/Insurance/Digital Banking/Payments/Infrastructure

CUNeXus (Perpetual Credit Offers/FI, Fintech Partnered); LendUp leverage the first RESTful API Lending Platform. Custom integration for consumer lending with a focus on market solutions to subprime or payday lending. Endeavor/Jumio and Zoot for their digital on-boarding tool (also gets the award for most condescending lead presenter). Digital Insight demoing Promotion Suite for Mobile, an enhancement to Digital Insight’s current Promotion Suite that brings highly personalized, relevant, cross-sell offers from financial institutions to their customers – showed geo-fenced auto loan generator and notifications. Verde’s Aurora sets itself apart from the limited decision-making capability of today’s loan origination systems. Sureify launches its Unbiased, Simple-to-Understand, Life Insurance Education Solution. D3 Banking has pivoted from PFM provider Lodo Software, now has open-architecture online/mobile suite. Insuritas Launches SmartCART Technology to Show Bank Clients Insurance Options. SmartAsset stepped up to demo its new mobile app that empowers users with personal finance knowledge. Loop is apparently looking for FI partners for distribution.

Bank Rewards/Offers/Savings Engagement

StrategyCorp brings non-banking benefits to consumers using checking products; merchant and service marketplace in mobile; also seen in past Finovate’s from Intuition Intelligence, Cardytics, Bankons, and more. Idea to generate more engagement, loyalty to checking account, driving debit card usage and interchange income.  SaveUp rewards savings related activity and gives credits/rewards for good behavior.

Targeting

Radius B2B prospecting and targeting solution software (stop subscribing to lists). ChiaraMail‘s Envelope-Content Splitting Technology Authenticates the Email Sender and Receiver Without Extra Friction

Rise of the API/Automation Ecosystem

LendUp (custom integration for consumer lending with a focus on market solutions to subprime or payday lending), Speedly (an industry API for consuming card data (hotel, ticketing, restaurant, and transportation). LendingRobot helps investors get the best returns by scanning investment opportunities. Yseop automates investment reporting (and anything you throw at it). Interactions (fantastic demo, similar to Personetics, Nuance).  Dealstruck online investor API specifically catered to the institutional investor, allowing them to access all data for individual borrowers and to tailor investment decision-making criteria for whole loan and fractional loan investment flexibility. WePay, launching their Veda Risk Engine and Risk API for online marketplaces, crowdfunding websites, and small business software companies. FlexScore gives you total financial clarity wrapped up in a single score. Until now, there has never been a product or service that truly meets the needs of both the financial advising community and your average everyday household.

Side note…Any thoughts on Plaid?

plaid

Select Finovate Coverage

http://finovate.com/2014/04/

http://finovate.com/2014/05/

http://www.walt-cox.com/

http://beyondthearc.com/blog/

http://www.moneysummit.com/the-summit?tag=Finovate

http://ericdunstan.com/

http://csbcorrespondent.com/blog/what-we-learned-community-bank-day-1-finovate

http://csbcorrespondent.com/blog/finovate-roundup-new-bank-tech-could-make-difference

http://www.bankinnovatorscouncil.org/blog/

http://smefinanceforum.org/post/finovate-san-jose-2014-a-surprising-amount-for-sme-and-emerging-markets

http://www.forbes.com/sites/dansimon/2014/05/01/tech-entrepreneurs-are-here-to-run-your-bank/

http://m.moneymarketing.co.uk/2009734.article?mobilesite=enabled

http://m.moneymarketing.co.uk/2009778.article?mobilesite=enabled

http://finsider.com/?p=2526

http://www.americanbanker.com/issues/179_84/five-companies-to-watch-from-finovate-1067246-1.html

Just one more thing for weekend pondering…

PayPal mobile volume hockey stick graph.

paypal-mobile-trans

WhatsApp, Simple, NextBank, And The Financial Services Delivery Model


The majority of this post was written Wednesday night at 38K feet. I held off publishing earlier because Simple’s being acquired by BBVA was pertinent to the conversation.

Wednesday, February 19, 2014. Somewhere Over Wisconsin, Iowa, and Nebraska 

I am really excited. Like, too much caffeine excited. Or perhaps sleep deprived excited, it’s hard to tell the difference lately. The past few months have been incredibly invigorating, as we’ve completed important app updates and initiated long term planning for the next few year’s digital strategy at our bank’s home offices. Lots of changes going on would be an understatement. But that’s the financial services industry right now – lots of disruption.

I’ve also been very fortunate to have had weekly engaging conversations with various founders and fintechers, a variety of interesting opportunities to learn from others in the space and contribute ideas and content, as well as what has seemed like a continuous run of good news for so many of my friends in fintech.

The year has been personally rewarding as well. I’m out speaking a bunch more and I’m helping plan a few fun industry conferences. One of the four companies I advise, CUneXus, will present at Finovate Spring and two companies I advise (CUneXus and Nerture) will be presenting at Bank Innovation’s DEMOvation. I’m really excited for them both.

So you can see it’s been a busy year already. This week was no different.

hatching twitter

SFO – BOS – SFO NextBank Advisory Board Meeting 

In the past day, I’ve travelled between San Francisco and Boston and back (in the air almost as much as on the ground it seemed), read Hatching Twitter cover to cover (about time, right?), saw some snow for the first time in quite a while (I’ll try to send some back home – we need it in California), and spent much of the day with my fellow Advisory Board members planning the next iteration of NextBank (today’s meeting included Brett King, Jim Marous, Beth Lee, and Phil Swisher – and with additional input coming from JP Nicols and Ron Shevlin – a great group to be involved with).

adv-board

After talking about many great potential topics and speakers and different ways to position NextBank within the crowded conversation of the future of financial services, we got on the subject of external industry innovations.  I jumped in by extolling some of my ideas on how IFTTT and actionable personalization may change the way we think about financial services delivery (extending the push toward a Primary Financial Application connecting actionable services through APIs). We talked about future revenue models, the internet of things, the importance of visualization, of the evolution of customer experiences, and how to best engage an audience used to an onslaught of seven minute demos and vendor case study after case study. We even had a bit of a tussle about the future use of bank branches. Imagine that. Overall, a great session meeting to discuss topics, agenda, and planning for the event.

Learn more about NextBank – hopefully we’ll see you in Boston in June.

nextbank

WhatsApp + Facebook: What’s That Again? 

My twitter blew up at 5:08 ET after Techcrunch posted the first of what would soon be dozens and dozens of quickly written articles. This was just about ten minutes before I boarded my flight home to the Bay Area. Great, it looks like I’ll be paying for on-board wifi again while watching the Olympics (thanks VirginAmerica for both options).

WhatsApp Acquired By Facebook For $19 Billion read the first article. Then from the Verge, then more from Techcrunch…it didn’t stop.

Boom. Zuck drops the mic. Nice job Mark.

zuck-2012-disrupt

Not SnapChat. No, the $3 billion that seemed so big was obviously far too small.

WhatsApp. $19 freaking billion dollars. Holy shit.

whatsapp

After reading on the flight over to Boston about Zuckerberg losing out on his attempts to acquire Twitter, and after SnapChat’s recent very public rebuff, the Facebook founder clearly is trying to re-establish his deal-making prowess, stealing some of the other valley giants recent thunder. Zuckerberg action showed he will do everything to keep Facebook relevant. He wants Facebook to be the first 2 billion, 5 billion, 7 billion user company. I hoped this works to revive whatever mojo he needed recharging after being rejected one too many times in his own living room or while on one of his Jobs-like walks with other young founders (What is it with these guys and walks anyway? From plotting revolutions to coding revolutions, coffee shops are the source of all disruption).

My favorite tweets about the WhatsApp deal came from Box’s Aaron Levie, who said “Zuck is literally the most badass ceo of all time. This guy doesn’t screw around with innovators dilemma” and from Startup L. Jackson “A good founder plays where the Zuck is. A great founder plays where the Zuck is going to be” as well as “And that is the sound of every startup in the Valley pivoting to messaging.” Indeed.

Clearly the valley was abuzz.

What’s Special About WhatsApp? 

What likely worried Zuckerberg was that WhatsApp had a more compelling product than SnapChat, a cross-device dead simple chat product that appealed to a much larger and more diverse global audience. One that was mobile only, and one that was on a trajectory to be the first billion user mobile first application (the graph above = hockey stick). After reading Wired UK’s great overview of WhatsApp and its founders, I really get it.

whatsapp-growth

I can certainly relate to the founders message about wanting to build a simple tool that facilitated communication between users across networks that could also be archived, because it was most often used between friends and family (not that I ever bought into the idea that SnapChat was all about sexting teens, but it’s stealth nature of disappearing images with squiggles did rule out grandma using it a little bit). I could also relate to the idea of of the founders not wanting to advertise (I’ll have to create a whole other post about transaction based rewards and alternative revenue paths and transaction based monetization – I don’t think future revenues are obvious…and I think WhatsApp holds some clues). After reading that Wired profile, I have a lot of respect for both WhatsApp founders.

whatsapp-noads

While images (and voice) are a huge part of WhatsApp, it was a very different model than what the narrower SnapChat offered. Rather than focus on deleting your past, WhatsApp focuses on facilitating your present, curating a dialogue of your connections from your contacts across devices, and this simple app helps preserve those communications (and why not integrate to dedicated cloud storage and take that one step further, but I digress).

snapchat-uh-oh

WhatsApp Lessons For Financial Services? 

What are some lesson for banks and payment providers? Really, it’s a continuation of disruption’s course de rigueur. WhatsApp, driving more messages than the entire SMS network and likley more shared images than Facebook and Instagram combined, reflects the larger changes and the simpler needs of communication trends. Other interesting points about the WhatsApp deal (especially for app developers and their UX counterparts) were brought up by Andreessen Horowitz‘s Benedict Evans on the valuation and what it means in the larger picture.  

(The WhatsApp acquisition) is interesting in all sorts of ways – it illustrates most of the key trends in consumer tech today in one deal. First, it shows the continued determination of Facebook to be the ‘next’ Facebook….

Second, the winner-takes-all dynamics of social on the desktop web do not appear to apply on mobile, and if there are winner-takes-all dynamics for mobile social it’s not yet clear what they are. There are four main aspects to this:

  • Smartphone apps can access your address book, bypassing the  need to rebuild your social graph on a new service
  • They can access your photo library, where uploading photos to different websites is a pain
  • They can use push notifications instead of relying on emails and on people bothering to check multiple websites
  • Crucially, they all get an icon on the home screen.

Any smartphone app is just two taps away – a desktop site can crush a new competitor by adding it as a feature with a new menubar icon but on mobile there isn’t room to do that. Mobile tends to favor single-purpose, specialized apps.

Third, the sheer scale of the numbers involved is a good illustration of what the shift to mobile means. I produced a presentation here to try to drive home this point: mobile is the next computing platform and it is several times larger than the desktop internet.

There are now roughly the same number of smartphones and PCs on earth – those PCs are mostly shared and immobile or locked-down corporate boxes, while the smartphones are mobile and personal.

Meanwhile, the widely-discussed collapse in the cost of creating a startup in the last decade combines with both the much larger scale of mobile and the routes to market and virality offered by mobile platforms to mean that if you’re very good (and lucky) you can get to astonishing scale in a short time. This scale is at the heart of the valuations we’re starting to see – WhatsApp is probably now sending more messages than the entire global SMS system.

Video, Imagery, Simplicity, And User Focused Design  

Brett King brought up another salient point during our NextBank planning session about the future belonging more and more to video (and I’d echo that with the continued onslaught of photos, shared imagery). People want to tell stories, share their own stories, and connect…and more and more that is a visual connection. Where is visualization in banking? What’s the SnapChat, WhatsApp equivalent in financial services? We have a few neo-banks like Simple leveraging embedded images (to provide connections to receipts, or photos associated with experiences tied to transaction level data), and we have some pretty established banks leveraging Mitek and Kofax to leverage the camera, but I think there will be a host of image related financial innovations this year. People underestimate the power of personalized visualization within financial application user experience design.

After more conversation, Brett challenged the group with ‘where is the Elon Musk of financial services?’ Considering Elon helped bring about PayPal, I’ll let him slide a bit on that one…but I get the idea. And I think we’ve already had the Steve Jobs of banking, as the iPhone simply changed everything (and there’s only one Steve Jobs, sorry @jack). I’d be happy if we had a Mark Zuckerberg of banking, or even the equivalent of WhatsApp’s founders as builders of financial applications.

In some ways we do. At least, we collectively have the intellectual fire power being aimed at cracks in the banking system. I meet these people all the time. Founders of payment companies, small teams of developers, corporate rebels pulling innovation along within financial institutions of all sizes. Some of their efforts are getting a lot of traction with small to mid-size FIs (my friends at perennial Finovate Best of Show Money Desktop come to mind), others are being acqui-hired by incubators or venture arms of bigger (often international) banks (from Finovate companies to two person shops, great little applications abound), others are making inroads within banks and larger fintech players.

That’s all great, but it’s still not enough.

With the pace of disruption in payments alone (there are now over 977 payment startups on AngelList alone), talented developers are looking at the possibilities to improve banking in many interesting ways, as I’ve detailed pretty well in what some people call my Manifesto for Financial Services. Why do we make financial related experiences so difficult? Why is the U.S. the most backwards, least innovative financial landscape in the world? OK, that’s a little harsh, because there are a lot of great financial innovations slowly moving this great battleship, but come on. Signature cards, three day transfers, complicated product sets. And as you move from retail to small business to corporate and wealth, it only gets worse.

payments-feb-20-2014

 Fintech Investment Starting To Heat Up  

The amount of fintech deals by VCs last year was around what, $2 billion? And the industry we’re talking about disrupting is multiples of trillions? There is a disconnect. Maybe disappearing images and multi-national multi-network chats are sexier, but I’m thinking 2014 is going to see a lot more investment in both fintech and ancillary services in the financial ecosystem. Just like enterprise apps, financial services may not have the glitter, but when you’re talking about experiences that touch multiple billions of people on the globe, there’s a lot to potentially tackle…albeit with plenty of profit for embedded players and niche disruptors. While the amount of movement toward larger disruptions in the financial space is moving toward simpler experiences that benefit the customer, that enhance the customer experience, it’s still not fast enough. Not at the speed driven through changes in customer behavior driven by social and mobile experiences.

Like Facebook, payment providers and financial giants will be making more investments to acquire people and truly build great experiences. (When I talk about Simple a bit later, this tweet came to mind – click through and follow this thread…VCs are very interested in financial services…expect a lot more interesting deals in the coming years).

My last tweet before I boarded my flight to Boston:

You don’t have to be a twenty-something founder (or thirty or forty year old founder as in the case of WhatsApp) to be excited about that. It’s not about a billion dollars (or 16 billion) being cool anymore, it’s about changing the role of money in society. Like the power of social, mobile, and technology trends enabling and wrapping themselves around changing human behavior, this revolution is already happening. Most of us are merely foot soldiers in this great endeavor, but change in the financial services space is only starting to accelerate.

We ain’t seen nothing yet. That’s exactly why it’s exciting.

And then the next day we woke up to the news about Simple.

Thursday, February 20, 2014. Somewhere On Highway 80 With Simple 

I’m driving into the office and my Twitter feed erupts again with the Simple news. Here we go again. Different valuation, different model, different scale, but the inevitable comparisons and navel gazing. Obviously very different topics, but almost as interesting to those of us who have rooted for Simple from the start. For me, a sort of melancholy ending.

bb-26

What should we learn from Simple-BBVA partnership? Start at how the company was formed. Like many people involved in fintech and digital strategy, I was very excited and supportive when Simple was first announced. I always felt they could carve out a successful niche in banking, whether they partnered with a bank (or even several), established their interface as a white label offering, or if they took the time and considerable effort to get a full banking license.

simple-thank-you-service-photo

What the team at Simple likely discovered is what everyone in the industry already knew: it’s hard to be a bank (or even a payment provider due to the regulation and transmitter license requirements), it’s hard to partner with banks of almost any size and get beyond their risk aversion, and it’s even more difficult to start a de novo bank with the capital requirements and regulatory burden. This is the case even for a branchless digital only de novo. So their pivot to partner with Bancorp Bank made perfect sense.

Simple’s journey in building out a savings focused application with limited negative customer impact was inspiring. As was their focus on simplified onboarding (with a cheeky waiting list to boot), welcoming Apple-like debit card packaging and delivery, trickle of application updates bringing thoughtful touches of user-focused innovation (Safe to Spend, debit card toggle, user embedded transaction based images, Dropbox integration); it was all there, with much more in the hopper. Then you add a non-bank like transparency and personally engaging un-bank-like social media strategy on top of customer focused simplified experiences – this was a winning combination.

I know very few people I truly respect in the industry that didn’t appreciate what Simple accomplished in the past four years. Josh and Shamir simply made banking a better place.

simple-basics

While critics took their swipes (and some things could have certainly been improved), Simple customers didn’t care. Nor would they even know, because critics were generally from the industry Simple was attempting to disrupt, and average consumers outside of industry weren’t going to find much disparaging coverage in the mainstream press.

The eventual issue likely came down to running out of money as Simple required additional investment to grow. Burning through their initial $15-16 million investment, the revenue model needed to expand as much as their team in Portland. With a transparent goal of reducing bank fees, credit products and traditional loan income needed to be bolted
On. A deposit focused NeoBank could not live on interchange alone.

Do I think Simple had been quietly shopping itself for much of the past year? I’ve had several people tell me that, but I don’t know for sure. They needed additional investment to grow, that’s all but certain. They needed an expanded customer base to grow profit from key credit segments, and a critical flush of cash or outright purchase made perfect sense. I’m surprised it hadn’t happened earlier to be honest.

Something needed to change.

Enter BBVA.

simple-blog

BBVA + Simple: What Next?

What should we learn from BBVA’s acquiring of their new trinket? That the cofounders are great salesmen for one. They got one hell of an valuation for such a small customer deposit base in my opinion (update: more people seem to thinking was too low). There’s been plenty of coverage of their price per user, and far too many comparisons to WhatsApp this week. It’s just a little silly to compare the two, but in some ways the lessons are the same: building simplified digital experiences, especially in financial services is critical to institutional survival.

Is BBVA trying to build a global direct bank brand through Simple? Possibly, at least they’ll now need to work with the Simple team to figure out how to scale this in multiple markets. Would this compete with BBVA Compass? Certainly, but who cares? Let customers choose their own flavor. Markets will do the rest.

Was it an acqui-hire for the 90-plus Portland based Simple team? With the rise of more and more direct digital only versions of foreign banks, BBVA is smart to lock in this talent for a while and learn from their efforts. My only fear is that with the inevitable departure of the founders, what has really been gained? More in that in a minute. The team at BBVA is a technology forward, aggressive minded Spanish bank with a broad global footprint. Like Citi Ventures, Amex, NAB, Standard Chartered, and countless other bank incubators and innovation arms, early development fintech firms and leading technologists are being courted and constantly evaluated. The Simple team was a valuable prize.
We’ll likely see much more acquisitions of this type in the next few years.

There Will Be Blood: Part II

Simple’s acquisition further proves to me that the coming contraction in the banking industry is not only real, but this reality should drive bank’s primary strategy to focus in building scale and profit through digital (this contraction is here to stay, whether through unprecedented M&A, mass customer migration toward larger deep pocket national and super regionals, or the rapid influx of foreign banks like BBVA, Santander, and BNP Paribas. Will BBVA + Simple become a new powerhouse bank, challenging top 10 global financial brands? Maybe. But does it matter when in less than ten years time, most banks in our market will have to be over $50 billion in assets just to compete for relevancy? That doesn’t leave very many financial institutions from the sub-14K we have today. Moving right along.

bb-16

Other quick lessons from Simple’s acquisition: Reducing friction, adding transparency, and driving toward customer focused design within beautifully crafted applications is critical not just for messenging or social media apps, they’re a necessity for financial institutions as well. Social media in financial services should be fun, and focused on solving a customers problems, engaging customers in personal ways, and is a 24/7 role. Banking can be inspiring as long as the people building the bank are as well.

simple

You know from this blog (and from Twitter) that I am a huge Simple supporter. I’ve had several conversations and countless chats on Twitter with Simple’s co-founders Josh and Shamir over the years and I always found them incredibly genuine, passionate, focused, and acutely aware that Simple shifted some of the conversation around innovation within financial services.  Whether the story of Simple will go down as part of their founder’s myth, or whether they continue to make a dent in the banking universe remains to be seen. I, for one, see their influence in the financial space as only beginning. And we should be inspired and thankful for it.

My congratulatory tweet said something to this effect: Thank you @i2pi (Josh) and @shamir_k and the @simple team for building a bank that ‘doesn’t suck.’

We should all be focused on a similar mission.

josh-shamir

The email that started Simple…hopefully something that will be tacked up on the wall at BBVA (and a few startups I can’t talk about).

simple-email

Related Articles

WhatsApp 

Facebook buys Whatsapp for $19 billion: Value and Pricing Perspectives (Aswath Damodaran)

WhatsApp And 19Bn (Benedict Evans)

WhatsApp: The Inside Story (Wired UK)

How Things Change (Techcrunch)

5 Lessons Bankers Can Learn From WhatsApp(Jim Marous) 

Simple

The Next Chapter (Simple Blog/Joshua Reich)

BBVA Buys Simple in Path to Digital Transformation (Bank Technology News)

Why BBVA Is Good For Simple (Felix Salmon)

Simple: In Name Only (Ron Shevlin)

Simple Acquired For $117 (Techcrunch)

For BBVA, Simple Deal Can’t Be About Its Business (Bank Innovation)

BBVA’s Simple Purchase Reflects Mobile Banking’s Sizzle (American Banker)

Delayed Thoughts On Finovate Spring And The State Of Financial Innovation


This is the transcript of a recent presentation I delivered entitled: WTF?

So – WTF? Let’s get started.

wtf

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.

solis

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?

disneyland

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.

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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.

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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.

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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.

p2b

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.

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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.

fam

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

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

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.

paynear

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.

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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):

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‘What The Finovate?’ isn’t really a question in the end – it’s an answer.

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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.

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