Goldman and Truist roboadvisors; Protecting Maker & DAI from sanctions; Alloy raises @$1.5B for fraud prevention

Hi Fintech Futurists —?

You are the best, today’s agenda below.

1. ROBOADVISOR: Goldman Closes on NextCapital Purchase: Tech Roundup (link?here) and Truist launches robo-advisor (link?here)
2. DEFI:?One Does Not Simply Destroy DAI: Maker Founder's 'Endgame' Proposal (link?here)
3. SECURITY: Fintech startup Alloy leans on fraud prevention to land new $1.55B valuation (link?here)
4. LONG TAKE: Uploading a Digital Twin of the financial system into DeFi, with MakerDAO and HVBC (link?here)
5. PODCAST: Teaching financial AI to be ethical and fair, with Fairplay CEO Kareem Saleh (link?here)

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Short Takes

ROBOADVISOR:?Goldman Closes on NextCapital Purchase: Tech Roundup?(link?here) and Truist launches roboadvisor (link?here)

Goldman Sachs acquired retirement- focused roboadvisor NextCapital for an undisclosed amount. The platform will be incorporated into Goldman’s Asset Management’s Multi-Asset Solutions business, and about 150 employees will join the bank. Goldman will add roboadvisor functionality to defined contribution retirement plans, which translates into personal managed accounts for more customers. Reminder — Goldman manages about $2.5T in assets under supervision.

In other large bank digital wealth news, Truist recently launched Truist Invest (a roboadvisor) and Truist Invest Pro (a hybrid investing solution). The company is the merged name for the B&T and SunTrust Banks, and is worth about $60B in public marketcap. Its new solution will provide clients with a daily portfolio analysis, automated rebalancing, tax loss harvesting, and the option to update their financial situation and investment answers. In other words, roboadvisor features from 2010.

We highlight these two stories to show how roboadvice is still being integrated into the financial industry. Smaller investors are plugged into automated product to help manage their savings, and wealthier clients graduate to a hybrid approach with a human to cover. The same can be applied to retirement funds, providing more custom solutions without the manual labor.

It has been over a decade since Betterment launched, and we are *still* not done in reformatting wealth management. The same can be said for neobanks, digital lending, and payments. Of course then Web3 is going to take another 10 years to become this normalized and predictable.

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DEFI: One Does Not Simply Destroy DAI: Maker Founder's 'Endgame' Proposal (link?here)

Following the?sanctions on Tornado Cash, one message for DeFi is to kiss the ring — abide by KYC/AML regulations — or be unceremoniously excised. MakerDAO and its decentralised stablecoin DAI could be subject to similar pressure in the future. Rune Christensen, the founder of Maker, published?a proposal?suggesting ways to make DAI more resistant to such censorship, recognizing that Maker is not engineered to be directed by a centralised authority or to be easily blocked at the address level. Thus it may have no choice but to look to maximal decentralization. For more background,?you can listen to our podcast with Rune here.

The outcome maybe be to reduce the real-world asset (RWA) exposure for DAI loans, thereby limiting the “attack surface” to regulation, targeting a maximum relative exposure to RWA of 25% ... ?? read more here

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SECURITY:?Fintech startup Alloy leans on fraud prevention to land new $1.5B valuation (link?here)

New York-based Alloy, founded in 2015, raised $52MM at a $1.5B valuation, after raising $100MM in Series C funding at a $1.3B valuation. We are still in a market when fintech valuations and fundraising are struggling. This raise indicates the continued demand for onboarding and identity fintech solutions, and its counter-cyclical nature. Reminder that even Coinbase is trying to move?from brokerage to subscription revenue.

Alloy works with banks and fintechs to provide automated onboarding, identity, transaction monitoring, and credit underwriting services through API and SaaS offerings. The company has 300+ customers that connect to 160+ data sources using the software. As a result, Alloy processes more than a million decisions per day, its ARR has doubled in the past year, and it recently announced?expansion into 40 countries.

One of the key reasons for the interest in Alloy is the evolving complexity of fraud threats, with criminals using stolen or synthetic identities to create accounts and steal user funds as more of our life is digital. The other key value proposition is reducing the time to market for fintech products — a game that is important for every VC backed company. Therefore investors likely also see it as a way to build out the ecosystem, playing for the whole industry rather than a particular B2C footprint.

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Long Take:?Uploading a Digital Twin of the financial system into DeFi, with MakerDAO and HVBC (link?here)

Maker has issued a $100MM loan to Huntingdon Bank. But there is much more to this story, and we dig into the details of the structure, the politics of the MakerDAO, the dangers of over-regulation, and the choices to be made in regards to digitization.

As the financial world attempts to upload traditional assets into DeFi, real challenges are emerging in human organization, as well as the various associated markets.?Can a DAO commit to real world assets when those assets subject it to lethal danger?

?? Read Long Take

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Podcast conversation: Teaching financial AI to be ethical and fair, with Fairplay CEO Kareem Saleh (link?here)

In this conversation, we chat with?Kareem Saleh,?CEO of Fairplay — FairPlay is the first Fairness-as-a-Service? solution for financial institutions and a fascinating company.

Kareem has been working on financial inclusion and underwriting hard-to-score borrowers his entire career. At ZestFinance (now Zest.ai) he served as Executive Vice President where he led the go-to-market strategy for the company’s AI-powered b2b SaaS underwriting platform and negotiated software licensing, partnership, financing and other commercial deals with Fortune 500 firms, credit bureaus and financial infrastructure providers.

?? Listen on Apple Podcasts

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