FinTech Zapping - 30th November

FinTech whispers

??Metromile, a Leading Digital Insurance Platform, to Become Public Company

The leading adaptable car insurance player, Metromile, is set to be public. The company is one of the pioneers across the InsurTech space, targeting a long traditional segment like personal car insurance by offering a pay per mile insurance policy that has become quite popular in the US, especially for low mileage drivers. Companies targeting the mobility space are in high demand now a days, we will for sure see more activity in the space in the near future

 ??Oportun is latest nonbank lender to seek a bank charter

We have been witnessing an ongoing transition from Lending players to other FI verticals. The alternative lending space is not only crowded but also a fierce competitive space where is very complicated to survive with just one revenue stream. Oportun has followed the same strategy as other players did (e.g. Sofi, LendingClub) in order to keep growing and stay competitive. It makes a lot of sense for an alternative lender to enrich their product catalog, and to fusion financing products with deposits, payments and current accounts. It’s interesting to see how the challenger/neobanks space is shaping, and we should definitely keep an eye how these “new” players perform

??Current snags $131 million in fresh funding

Another massive round of investment by a neobank, which actually doesn’t surprise us anymore. The need for digital solutions and massive surge for digital banking experiences in the US, have propelled Current to double is customer base to 2 million in just 6 months. Whether Current, and the rest neobanks manage to consolidate its growth and create a profitable business is something that we will have to wait and see. We are seeing a large concentration of challenger banks in the US, with other FinTechs and Non FI players targeting at mass retail users 

??Payment startup Stripe in talks for funding at $70B valuation

The largest private FinTech in the world is once again looking to raise funds at a projected valuation ~$70B (the original Bloomberg article can be found here). The boost in ecommerce activity added to the need for digital payments solutions as a result of massive migration of physical stores to online channels, is projecting Stripe (as well as other PSPs) to rich and fruitful future. With these numbers there is always the “IPO question” on the table, and if it happens, we might witness one of the largest public fillings in FinTech/FI history. For now, I will add them to my list of potential prospects for IPO in 2021 ??

??Unpacking The Overall Impact Of Fraud

In today’s digital environments it is essential to invest and implement anti-fraud solutions, as the impact of not doing it could cost a major loss for the company. The opportunity cost of not adding anti-fraud solutions can result in a reputation damage, dragging customers away from a given platform which will make pretty complicate to build new trust bridges with customers. Plenty of solutions across the FinTech space are targeting the cyber-security and fraud detection space (we cover a small piece of this world below, for those companies helping to improve the onboarding journey)

FinTech Reflection – Re-imaging the Onboarding experience

In today’s world be have a tend to compare or at least have the option to instantly search and analyze product & services before we make an informed decision. Of course, depending on the product/service this process may take longer. If we look at common denominator for most of consumer products (including FI products) throughout the purchase process, is the largest concentration of user’s churn rate happens during the onboarding/check out process. This is situation has brought more than one headache to many firms, why once the user has decided to purchase our product, she/he drops off during the final stage?…well most of the times this is due to poor experience.

The most amazing thing that FinTechs have achieved (besides pushing the overall digitalization of FI space ??) is to look at existing processes, find flaws and propose a whole new flow pivoting on an enhanced experience to make things easier for the end customer. Most of the players have mirrored to what other players (mostly startups) had developed to reduce this initial friction across other industries. Customer expectations have raised based on their experiences through other industries where ubiquity, personalization, transparency and a product led experience are driving customers’ demands (today we can see these demands on most retail banking products). But how did FinTechs manage to re-envision the onboarding journey? Well players followed “Divide et impera” approach, breaking down the onboarding journey and focusing on solving different parts of it. Let’s see below an overview of how FinTechs are targeting different stages of onboarding journey:

Trigger & Research

• FinTechs have made easier to compare financial products, and even get good deals. Some players have focused on providing a single point for users to evaluate different alternatives, through enhanced product comparison sites that do not only present different alternatives but also analyze the type of product based on user’s requirements. These were the first players to emerge, and have managed to survive over time due to the vast amount of user’s data accumulated and their referral activity
• On this end we can also find solutions that are driven by analytics to attract users to other products. If we look at players like Cardlytics helping FIs to get the best out of purchase intelligence, or Fidel which helps companies get a better understanding of Transactional data. All these solutions are targeted at pushing products to customers at the right moment avoiding the research phases

Examples: Creditkarma, Fundera, Nerdwallet, Cardlytics, Fidel

Optimizing Onboarding

• The most critical phase of the process, where customers need to face a seamless and transparent flow to help them continue and finalize the application
• Throughout this stage customers will need to introduce their personal data, which means that creating a sense of security and not asking for unnecessary information is key. On the other side, there needs to be an anti-fraud engine that ensures all information is licit. Companies like Fraugster have developed a dedicated AI-engine to analyze data and identify fraudulent activities
• Authenticate and prove their identities, the most essential component of digital registration. We have a complete array of solutions targeting the Authentication or Digital Identity space, where players like Onfido, IDnow or Jumio have created solutions that are secure and easy to plug in. Both incumbents and FinTechs rely on some of these players to improve their verification process
• Final signature and agreement to terms and conditions, last step and sometimes a confusing one for the customer if not done properly. Players like Docusign have mastered the process of digital signature of documents, helping close the process
• Behind the whole process there needs to be a solution that collects, verify and runs the data through the internal systems. This is essential for the “activation” phase as the second largest drop-ups are found at this stage, but the difference would be that now a customer not active represents a fixed cost for the company. Players driven by RPA solutions like Workfusion or Automation Anywhere are the perfect add-on for to automate data ingestion

Examples: Onfido, Jumio, Trulioo, Docusign, Fraugster, Workfusion, Mantl

Instant Activation

• Once onboarding process is done the user needs to be fully capable of transacting with the product/service, whether if it is a current account a p2p payment service or if she/he has applied for a loan, right after the onboarding process is finished
• For current accounts, digital wallets or p2p payment services it’s fundamental that the customer starts using the solution, otherwise there is a high risk that the user will become in-active, triggering a fix cost for the company and subsequent costs related to efforts to re-activate them (e.g. ad hoc campaigns to activate customers incurring in variable cost for the company)
• UIX as the glue that puts together all the pieces, making this experience as frictionless as possible. There are plenty of solutions in the space, helping FinTechs and FIs to improve and evolve their app/online platform experiences. It would depend on the type of product offered but if we look at neobanks or digital wallet players like Strands, Meniga or MX technologies are providing solutions that can be adaptable and plugged in to third party solutions
• Most of the solutions implemented are enhanced with an analytics engine that helps bring additional value to users while they are interacting with the platform, either if is in the form of account/card aggregation or by providing a simple transactional analysis

Examples: Strands, Meniga, MX technologies, Personetics, Tink, Bink

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A great number of the inefficiencies or bad experiences that we can encounter throughout Financial Services are just poor designs or antiquete processes that have not evolved. The massive migration to digital channels emphasis, even more, the need to provide frictionless experiences for customers, and if we think about it the onboarding experience is the new "first impression" that users get.