editions

Dealing with issues in trade settlement has historically been a fragmented process, where participants must manually resolve errors over email chains. The biggest players are investing in AccessFintech’s centralized (and secure) data-management network because its collaborative workflows reduce the time and costs for all involved.  

By promising to streamline transaction processing, AccessFintech is winning converts: More than 100 organizations use its platform to share data and BNP Paribas just joined a slew of other top financial firms that contributed to its Series C funding, including BNY Mellon, JPMorgan, Citi, and Goldman Sachs.  

“We are excited to participate in this initiative and help the financial industry evolve its operating model,” a BNP Paribas exec said of the deal.  

By making data exchange and communication easier between all the participants in a given trade, AccessFintech reduces manual work and human error, thus speeding up transactions and lowering overall costs. For example, after a year of using AccessFintech’s network, Citi and JPMorgan reported a 30% reduction in trade fails and a 76% drop in operations-related email traffic. 

AccessFintech provides both regulatory and cost benefits, a spokesperson told Insights Distilled: It “increases efficiency and reduces human error and trade fails – directly impacting revenues and the bottom line.”  

The evolution of Fidelity’s relationship with Shoobx – from partner to parent company – highlights how fintech partnerships can be a good testing ground for deeper connection.  

Fidelity and Shoobx just took their relationship to the next level.  

Fidelity Investments and the equity management firm first began partnering in 2021 to provide financial tools to private companies (Fidelity administers the stock plans of nearly 700 firms, but most are publicly traded).  

“Given the success of our commercial relationship with Shoobx and the increasing demand from private companies to support them as they scale and grow … acquiring Shoobx was a natural next step in our relationship,” Fidelity’s head of workplace investing, Kevin Barry, said. 

The acquisition will allow Fidelity to bake in additional benefits and co-create new tech-related features. For example, with its acquisition, Fidelity will offer automatically created due diligence documents, data rooms for securely sharing confidential business information, and analysis tools for investment planning.  

“The combined Fidelity/Shoobx solution allows start-ups and entrepreneurs to spend less time on administrative needs and more time focusing on growing their business,” a Fidelity spokesperson told Insights Distilled. Additionally, it can “provide peace of mind by reducing unnecessary risk and cost associated with overlooked mistakes and by streamlining processes and making better use of resources.”

This was Fidelity’s first takeover in seven years, following its 2015 acquisition of wealth management firm eMoney Advisor. 

Initial partnerships like Fidelity’s or investments through corporate venture arms gives FinServs a way to test the waters before diving in with an all-out acquisition. For more on that, hear from Synchrony’s head of strategy below…  

To avoid decreasing valuations, late-stage fintechs are more hesitant to go public or raise additional private capital, which creates a great environment for incumbent financial firms to partner with them. 

While there are certainly downsides to the current market conditions, it’s a perfect time for fintech partnerships, according to a top exec at Synchrony, the $15 billion market-cap credit card issuer and bank.  

Late-stage fintechs are putting off IPOs and avoiding new fundraising, which is “leading to a whole set of new opportunities for Synchrony that we wouldn’t have seen one or two years ago,” chief strategy officer Trish Mosconi said during a recent podcast interview with Tearsheet. 

To drive revenue, fintechs are looking for partnerships “in ways that you didn’t see happening previously, because they would have been very focused on their exit,” she said. This creates a “win-win” situation, where incumbents can use these relationships to test new products “to really understand what’s going to stick and what’s not.”  

Beyond traditional partnerships, startups are also more open to strategic investments from corporates, which don’t necessarily create new valuations. Synchrony’s investment arm has 14 active investments and commercial relationships with 7 of those firms. For example, its portfolio company Prove provides identification and authentication for Synchrony’s loan underwriting.  

You can listen to the entire podcast episode here.   

Sustainability continues to be a hot topic for regulators and corporate boards alike. Financial firms have a vested interest in supporting partners focused on building robust, transparent infrastructure for environmental commodities, so they can best support their clients’ ESG goals. 

Bank of America and Goldman Sachs joined a $125 million investment into Xpansiv, which provides market infrastructure and data platforms for carbon credits, renewable energy certificates, and valuing commodities based on their environmental impact.  

Large financial services firms ultimately want to help their clients achieve their ESG goals, which requires mature and robust market infrastructure for environmental commodities. Xpansiv aims to transform a still opaque and fragmented ecosystem with transparency and centralization. By investing in Xpansiv, BofA and Goldman are helping it build out that vision and its platforms.   

 As one Bank of America exec put it, the firm invested in Xpansiv to “support innovation” in voluntary carbon trading and environmental commodities:   

 “Sustainability is part of discussions in boardrooms and with investors,” president Jim DeMare said. “Robust technology, reliable data, and accessible spot markets are crucial to promote liquidity and scale growth” in these “evolving markets.”   

Nova Credit’s software integrates and standardizes international credit data, which ultimately reduces the effort and cost for lenders to serve these customers. 

San Francisco-based fintech Nova Credit just received permission from the Financial Conduct Authority to operate in the UK.  

Immigrants are often “credit invisible” because different countries have very different credit reporting systems, causing lenders to either struggle with the underwriting for credit cards or loans, or decline to provide them at all.

But through deep relationships with global credit bureaus and its API-driven credit risk technology, Nova Credit makes financial history from one country usable in another. This allows lenders to offer fairly priced credit-based products to immigrants faster, without the manual process of requesting documentation from abroad. 

“Nova Credit’s technology lets lenders make more real-time application approvals without any added risk and at a greater scale to a previously untapped audience,” a company spokesperson told Insights Distilled.  

Helping the under-banked have better access to loans is a boon to both society and banks’ bottom lines: The immigrant population is one of the fastest growing demographics in the UK, Nova Credit’s tools make it more efficient to serve them, and its authorization comes only months before the UK’s new consumer duty regulation comes into effect.   

Nova Credit has received backing from HSBC’s venture arm, as well as from execs at Goldman Sachs, JPMorgan, and Citi.  

By using artificial intelligence to surface patterns in a potential borrower’s transaction data and make forward projections, banks like Westpac can make better lending decisions, faster.

Australian “Big Four” bank Westpac has partnered with fintech Rich Data Co to supercharge its bankers’ abilities to provide credit to businesses. RDC’s tools comprehensively analyze a loan applicant’s performance, for example, seeing past seasonal volatility to provide a more holistic view on its credit potential. Integrating these abilities lets Westpac accelerate its lending “in a safe and controlled way,” according to an exec.  

“We want to give our customers fast decisions and provide a simple and informed experience,” said Shane Howell, managing director of business lending at Westpac. “This work gives us a deeper understanding of our customers.” 

RDC also includes a two-sided digital finance application form, which allows both customers and bankers to jointly work on an application for a faster experience.

While the firm is focused on business lending, other fintechs provide similar services for consumer loans, including Insight Partners’ portfolio company Zest AI, which counts FNBO, Akbank, and Discover Financial Services among its customers.  

Recent personnel news and banks’ fourth quarter earnings contain hints on how much FinServs are spending on technology and how tech improvements are making a dent in their businesses. 

Capital One is laying off 1,100 people from within the agile development group of its tech department – but counter-intuitively, the bank says it’s a sign of progress for its larger transformation initiative: It has learned to apply the relevant frameworks to its development, it said, to increase its overall “collaboration and delivery speed.”     

“The agile role in our tech organization was critical to our earlier transformation phases but as our organization matured, the natural next step is to integrate agile delivery processes directly into our core engineering practices,” Capital One said, adding that affected workers can apply for other open tech roles across the org.  

In addition to Capital One’s personnel news, the latest earnings cycle – and bank CEO’s comments at Davos last week – gave us another peek behind the curtain at how big FinServs are quantifying their digital transformations.  

Citizens Bank announced its “Top 8” strategic program, which includes cloud migration and closing data centers and standardizing its tech platforms, and which it estimates will have a “run rate of about $100 million of pre-tax benefits by the end of 2023, with that split about 80-20 between efficiency and revenue-oriented initiatives.” 

PNC said it’s increasing its annual technology development program goal to $400 million, Fifth Third said it will grow its technology expenses by 10% to support its digital transformation, including to “drive automation into our most labor-intensive processes,” and Wells Fargo’s tech spend reached $902 million in Q4 as it aims to cut down on its “huge amount of manual processes” and “duplicate systems.”  

Meanwhile, Ally Financial said it would be looking to fintech layoffs for talent, JPMorgan’s Jamie Dimon said the bank was still in “hiring mode,” and Citi CEO Jane Fraser said that she supports workers having hybrid work privileges, but they’ll be asked to come back into the office for coaching if the bank finds that their productivity is slipping.

Banks want to defend their customer relationships from popular digital wallet providers, but to succeed they will need to get a handle on their tech and fraud dispute issues, according to an analyst.  

The seven big banks that own Zelle parent company Early Warning Services – including JPMorgan, Bank of America, Wells Fargo, and Capital One – plan to launch a digital wallet that people can use to shop online.  

The offering is still in the works, according to a Wall Street Journal report on Monday, and is motivated by a desire to fend off services like Apple Pay, PayPal, Amazon’s “Buy with Prime,” and Venmo on Amazon, which erode banks’ direct relationships with their customers. 

This effort’s success will rely on consumers’ sense of trust in the banks’ solution over those from tech firms – but right now that’s not a given.  

While these banks “can’t ignore the opportunity of expanding their network with retailers,” they need to work out some issues first, Richard Crone, owner of Crone Consulting LLC, told Insights Distilled. 

The announcement comes hot on the heels of scrutiny from lawmakers about Early Warning’s lack of accountability and reimbursement for fraud on Zelle and a Bank of America glitch last week that temporarily led to money disappearing from users’ Zelle accounts. “What happened was a mismatch of legacy – dare I say antiquated – code running afoul of the real-time payments processing that’s initiated by the Zelle network,” Crone said. And worse, users weren’t offered easy ways to get help or information.  

These kinds of issues need to be thoroughly addressed ahead of any new product launches, for the sake of consumer protection and banks’ own reputations.  

“Before they expand to the point of sale,” the banks behind Zelle “must first create consumer-friendly policies and procedures for transaction repudiation, chargebacks, and disputes,” Crone said. “These will have to address bona fide nefarious actors and ‘friendly fraud’ for payments not recognized from consumers, as well as system outages from their participants in the banking industry, as evidenced by the Bank of America incident last week.” 

As open banking legislation rolls out around the world, the lines between fintechs and incumbents are blurring and collaboration is the hottest game in town. 

Citi’s treasury and trade solutions division (TTS) is laser-focused on becoming a better partner to fintechs this year, according to exec Chafic Haddad. 

TTS’s fintech business “has been the fastest growing segment over the last four or five years, if not longer,” Haddad said in a podcast interview with Tearsheet published this week. “It’s effectively growing about 25% to 30% year on year.”   

With Haddad’s appointment late last year, the group is focused on becoming a “one stop shop” for its fintech clients to reach their global ambitions, through offering them payments, receivables, card, or cash-management services.  

This emphasis on banking-as-a-service – where non-bank businesses integrate banking services into their own products – is gaining steam as a wave of open banking legislation around the world forces banks to become more collaborative.  

It’s also often a two-way street, Haddad said: 

Fintechs “often start off as clients and become partners, or they start off as partners and become clients,” he said. “This is a space where it’s not only an opportunity for us to plug these fintechs into our capabilities, but for us to plug into theirs as well.” 

You can listen to the entire podcast episode here. 

Artificial intelligence is a transformative tool for the banking industry, and access to the right talent is one of the biggest challenges right now. JPMorgan has hooked workers by emulating the practices of tech firms, a new report finds. 

JPMorgan has topped a new index that ranks some of the world’s biggest banks on their competence in artificial intelligence.  

The new Evident AI Index covers the 23 largest banks from North America and Europe and draws upon millions of data points across 143 individual indicators, like total patents, investments, and partnerships. JPMorgan ranked highest for its artificial intelligence use overall, as well as for its volume of AI developers.  

To attract and retain talent, banks should emulate tech companies with strategies like AI-specific recruiting, innovation hubs, and giving workers clearance to publish research papers, according to the report.  

“Banks need to create the right environment,” Evident cofounder, Alexandra Mousavizadeh, told Insights Distilled. “It’s existential.” 

Artificial intelligence offers a wide range of use cases for the banking industry, including fraud detection and prevention, customer service, trade finance, risk assessment, credit underwriting, portfolio management, and more.  

For a deeper dive, check out the full report here, which also includes data related to banks’ original AI research, patents, partnerships, investments, and transparency, among other themes. Relatedly, the United States’ National Institute of Standards and Technology just released risk management guidelines for organizations using AI systems.