The Fintech Fix 27/07/2022

Welcome to The Fintech Fix, where we cover the biggest stories of the financial week. Whether it’s the next groundbreaking trend in cryptocurrency or Blockchain technology, a new partnership about to change the global, economic landscape or an upcoming startup generating a huge following.

Hot Topics – Kicking off this week’s roundup, we head to Starling Bank, who recently announced its first full year of profitability! Considering only 3 digital banks in the UK are profitable (Starling, OakNorth Bank and Zopa), this typifies the continued success of the organisation. The digital bank swung to a pre-tax profit of £32.1 million for the financial year ending 31 March 2022 from a pre-tax loss of £31.5 million for the period to 31 March 2021. Revenue for the same period to 31 March 2022 was £188 million. Does Starling now stand apart from both the old banks and other challengers?

Cross-border payments have no doubt been revolutionised in recent years. According to CEO and President of Buckzy Payments Inc, Abdul Naushad, artificial intelligence has been a central factor in the process by improving the efficiency and security of transactions. However, some fintechs are not incorporating AI into their entire operating strategy, therefore risking themselves with a significant disadvantage compared to rivals who do. Find out what benefits Nashaud thinks are lost when companies fail to embrace AI in their customer-facing products and back-end systems.

In our latest Virtual Arena, we spoke with PPS’s Louis Joubert and Ruuky’s Deepankar Jha about how to scale a fintech organisation. With huge regulatory overheads and customer demands from payments, is now a hard time to scale? Is there a ‘golden period’ when companies should look to expand? And what key ingredients will take your fintech to the big leagues as more organisations strive for global recognition?

The relationship between fintechs and traditional legacy banks has been redefined in recent times, from once fearful competitors to now in more of a conciliatory partnership. Despite this, European Merchant Bank CEO, Sarp Demiray, shared his extremely interesting insights on why fintechs are underserved by legacy banks. The global fintech market is expected to be worth $324 billion by 2026 with a CAGR (Compound Annual Growth Rate) of 25.18% between 2022 and 2027; the potential is there, but will legacy banks improve their part in reaching that goal?

Often, our industry is preoccupied with the question of how to attract the best of the best to work in our industry. However, what about the creation of economic opportunities for those who are struggling? First Step Staffing, after being awarded a $5 million grant by Truist Foundation, looks to provide opportunities and paths to self-sufficiency for individuals with barriers to employment, including those who are experiencing or have recently experienced homelesslessness. Amelia Nickerson, CEO at First Step Staffing, highlighted how “homelessness and poverty in the U.S. are increasing, and most individuals living in these situations have little opportunity to change their story. Housing is one part of the solution. Income is the other.”

In 2021, First Step helped more than 8,000 individuals get a job – let’s hope this mission continues!

Big Partnerships To Watch – Morgan Stanley Investment Management and iCapital announced an expansion of their US partnership to provide more banks and wealth managers globally with access to a suite of private markets funds managed by MISM. iCapital’s market-leading technology platform and solutions have effectively and efficiently diminished the historical barriers that wealth managers and their clients have faced when investing in private markets by automating the subscription, administration, operational and reporting processes for the life of the investment.

The payments ecosystem is constantly evolving, as Pecunpay, a strong Spanish fintech, have announced a partnership with Visa to launch Visa Direct, a new solution that will allow Pecunpay customers to send and receive money instantly in Spain, as well as the European Economic Area. 40% of Spaniards admit to having used their cell phone to make a payment on at least one occasion, according to data from Visa and Pecunpay; this partnership just makes sense in filling the demand for digital payments.

There aren’t many companies building both quantum annealing and gate-based quantum computers. In fact, D-Wave Systems Inc. is the only one! With that in mind, D-Wave has partnered with Mastercard to champion the acceleration and adoption of quantum computing solutions. This will specifically involve collaboration for the research and development of quantum-hybrid applications in areas such as consumer loyalty and rewards, cross-border settlement and fraud management. According to Alan Baratz, CEO of D-Wave, “quantum will have far-reaching and industry-disrupting impact, especially in the financial services sector.” Is this the next wave of computing to unlock more value for customers?

Funding – FairPlay, the world’s first ‘Fairness-as-a-Service’ solution for algorithmic decision-making, announced it raised $10 million in Series A funding. FairPlay uses AI fairness techniques to reduce algorithmic bias for people of colour, women and other historically disadvantaged groups. The funding will be put towards furthering investment into products, growing the team and bringing Fairness-as-a-Service to new markets.

Transfer News – Curve have appointed Eyal Galina as their new Chief Product Officer. Galina will be responsible for Curve’s product roadmap and strategy as the team moves to the next stage of its mission to become the Operating System for Money. Galina will be pushing forward Curve’s goal of continuing its market-leading success in the UK and Europe, and growing the business’ foothold in the US.

AXA XL’s cyber insurance business announced the creation of two new roles and several regional underwriting management appointments. Rachel Rossini has assumed a new role as Product Manager for Cyber and Technology E&O, and Vern Suckerman is stepping into the newly created role of U.S. Head of Complex Accounts. According to Jeremy Gittler, AXA XL’s Head of Cyber Insurance in the Americas, “as digital threats grow more sophisticated and malicious, we keep enhancing our underwriting approach to help our clients manage cyber risks. These new roles will help us direct more focus on our growth strategy and find innovative ways to address our clients’ more complicated cyber & tech E&O risks.”