January 24

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.