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PayPal is hiring for hundreds of jobs amid the coronavirus slowdown. A hiring executive there lays out the exact skills you need to nail an interview.
While the coronavirus pandemic is causing massive layoffs around the country, some tech companies are still...While the coronavirus pandemic is causing massive layoffs around the country, some tech companies are still hiring. PayPal is one of them. As more people are social distancing to avoid the spread of the virus, mobile payments are becoming more in demand. In 2019, PayPal ranked No. 5 on Forbes' list of the 250 best-regarded companies. This, combined with PayPal's long history in Silicon Valley, makes it one of tech's most sought-after places to work. We spoke with PayPal's head of technical-talent acquisition to understand the soft skills the company looks for in all their new hires. Click here for more BI Prime stories. While many Silicon Valley startups are starting to see massive layoffs due to the coronavirus pandemic, that doesn't mean big tech is facing the same challenges. As the virus is leading many in the US to rethink their daily behaviors, like how they commute and pay for things, mobile payments are starting to become more mainstream. That means more hiring for some of these companies. Payments giant PayPal has hundreds of job openings, including in software engineering, product management, communications, and sales. And it's not just hiring at its San Jose, California, headquarters. The company is recruiting in several regions, including North and South America, Europe and the UK, the Middle East, and Asia-Pacific. In 2019, PayPal ranked No. 5 on Forbes' list of the 250 best-regarded companies, which measures how well firms do as employers, as well as their trustworthiness, quality of products, and social conduct. This, plus PayPal's long history in Silicon Valley, makes it one of tech's most sought-after places to work. While the company doesn't disclose the acceptance rate for its job applicants, a spokesperson said hiring was competitive. The tech and payments giant was founded in 1998 by a team that included Max Levchin, the founder and CEO of Affirm, and the billionaire venture capitalist Peter Thiel. In 2002, the company went public and was subsequently bought by eBay, which spun off the company in 2015. PayPal has since grown to 23,200 employees and has 50 global offices. Business Insider spoke with Michael Kascsak, the company's global head of technical-talent acquisition at PayPal, to understand what it takes to land a job at the tech giant. Résumé do's and don'ts PayPal, like most companies, lists its open roles online, and interested candidates can apply by submitting a résumé and cover letter. At this stage, PayPal looks for candidates who can clearly articulate what they're doing, what their goals are, and why they're interested in the company. And while candidates often worry that their résumés won't be seen unless they plug in the right keywords, Kascsak advised against that notion. "Sometimes a recruiter will look at a résumé, and all it has is a bunch of keywords on there because they think that there's an algorithm that's going to pull their résumé to the top, and that's all that they do," Kascsak said. That's not to say that candidates shouldn't use keywords in their résumés, but they need to be deliberate in their use. "You've got to be able to share what you're doing with those with the keywords," Kascsak said. How to ace the phone interview If your résumé and cover letter stand out, the interview process kicks off with a phone conversation with a PayPal recruiter. During this interview, candidates typically discuss their past experiences and what they're looking for in future ones, Kascsak said. "It's really an opportunity for you to give the recruiter your story and where you see your career going," Kascsak said. If the recruiter thinks the candidate is a good fit for PayPal, they offer a recommendation to a hiring manager. The hiring manager or a member of their team will also conduct a phone interview, which is typically more focused on the candidate's expertise. "That's dedicated to really talking through the tangible examples of what you've accomplished, what you know, and what your expertise is," Kascsak said. If the hiring manager thinks the candidate is a good fit for the role, that's when PayPal invites them on campus for in-person interviews. At this point, PayPal is really looking for a culture fit. On-campus interviews If you get invited to PayPal's campus for a day of in-person interviews, the company starts looking at more than just your technical qualifications. "We've gotten you to the point where we know that from an expertise perspective, you are somebody we're interested in," Kascsak said. "So now we really want to get to know you as a person." On that day, PayPal tries to keep it to four or five interviews per candidate, Kascsak said. "We feel that if you come to our campus, you should come and meet all the people you need to meet," Kascsak said. PayPal focuses on a candidate-friendly approach, he said, with the goal of making the process as streamlined as possible. "For those that come onto our campus, we want to make sure that it is an inviting experience for you," Kascsak said. It is an opportunity for candidates to sell themselves to PayPal, but PayPal is also pitching itself to candidates. "We want to make sure you understand all of the value props that we have to offer as an employer," Kascsak said. The day often includes a tour of the office and gives candidates opportunities to ask more questions about what it's like to work at PayPal. PayPal also has policies around diversity for its hiring process, Kascsak said. "We want to make sure that we're creating a diverse set of candidates to give to our hiring managers," Kascsak said. "In return, we also want our candidates to be able to interview with a diverse set of hiring managers as well." PayPal talks about diversity as "a mirror and a window," Kascsak said. "We'd like to make sure that you're able to see inside of PayPal all of the diversity and people from all different walks of life," he said. "But also you want to be able to see the mirror," Kascsak said. "You want to be able to see and talk to people from your background and share your thoughts and ideas with them." The on-campus day should mark the end of the interview process, Kascsak said. There are a few things that PayPal looks for every step of the way, no matter the type of role you're applying for. Here are some of the soft skills that will land you the job. Demonstrate an innovative mindset "Getting the attention of PayPal, it's showing true examples of your work," Kascsak said. Both recruiters and future teammates want candidates to showcase innovative or disruptive projects they've worked on, which demonstrate their ability to challenge and change the status quo, Kascsak said. And PayPal pays attention to candidates who are eager to showcase these skills. "We try to create as many opportunities for you to showcase your expertise and your abilities as possible," Kascsak said. Whether it is through LinkedIn or at meetups that PayPal organizes, candidates should take advantage of these opportunities to ground their skill sets in experiences. "Make sure you're presenting examples, and make sure you're showing tangible results, whether it's through your résumé, through your cover letter, when you're at a meetup," Kascsak said. For students and graduates, this could be a school project. And for professionals, it's important to demonstrate the ways you've innovated in previous roles. Doing so is a key way to stand out in a competitive job market, Kascsak said. Leverage your network Aside from LinkedIn and meetup networking, it is helpful for candidates to have an employee referral at PayPal. "The employee-referral program is one of the most utilized sources of employment for any company really, when you're doing it right," Kascsak said. And that goes both ways, Kascsak said. His team occasionally asks PayPal employees for recommendations of candidates they should reach out to. "Great talented people know great talented people," he said. Don't be afraid to ask about what matters to you Before it extends an offer, PayPal wants to make sure that both the company and the candidate think it's the right fit. And that's why Kascsak stressed the importance of asking questions. "Every candidate has their own priorities and passions that they want with their career. So you should ask us how those fit into your goals," he said. "Any hire should always be a mutual fit, and we aim for that to happen." Whether it's around company culture, diversity and inclusion, or even the day-to-day experience of working at PayPal, candidates should be inquisitive about the things that are important to them. "We never want to hire someone without them having the opportunity to interview us as well," Kascsak said. Be engaged in your community Demonstrating a sense of community engagement is important, Kascsak said. "We look for people that take care of themselves and take care of other people," he added. PayPal is looking for employees who want to be involved, including in philanthropic initiatives at the company and its various affinity groups. PayPal has several affinity networks, such as groups for black employees, Latinx workers, LGBTQ team members, employees with disabilities, and women. Each network is open to all employees. "We are very much vested in our community, and so we like people that care about their community," Kascsak said. "We always say we don't want to be guests in our own community. We want to be active participants." Look for internships, recent-graduate programs, and other targeted hiring opportunities For PayPal's most junior positions, internships and recent-college-graduate programs are the two major points of entry. The 12-week internship program is for students, and Kascsak said that on average, PayPal extends full-time job offers to between 70 and 80% of participants. The recent-college-graduate program is geared toward those looking for full-time work. In addition to their daily responsibilities, RGC employees are given career-development resources like mentors and buddies and networking opportunities to get them situated within the company. PayPal also has a hiring program for veterans and a 16-week paid technology bootcamp for women returning to the workforce after a career break. SEE ALSO: Silicon Valley is betting $750 million that people don't want to buy stuff anymore. These 14 startups are bringing the sharing economy to sailboats, swimming pools, and luxury watches. DON'T MISS: Payments giants like PayPal and Amex are making hundreds of startup bets to transform how we shop and pay — and it's part of a $1 billion-plus wave of VC investment UP NEXT: Here's how to land a spot in real-estate giant CBRE's ultra-competitive sales internship program that's harder to get into than Harvard Join the conversation about this story » NOW WATCH: Why fighting is allowed in pro hockey — and why the NHL has no plans to ban it
$35 billion fintech Stripe just inked a deal with hospitality PoS-maker Lightspeed — and it's a case study in navigating the tricky world of payments
Lightspeed is a point-of-sale software provider for hospitality companies, restaurants, and niche retailers, and it just...Lightspeed is a point-of-sale software provider for hospitality companies, restaurants, and niche retailers, and it just launched a payments product in partnership with payments startup Stripe. Lightspeed's partnership with Stripe is big, but there are still gaps in the payment world that Lightspeed will need to fill with other payments processors. CBD merchants, for example, are restricted from Stripe's network. Here's what the Lightspeed partnership with Stripe means in the context of payments, and where Lightspeed plans to go next using Stripe's other products. Click here for more BI Prime stories. Montreal-based point-of-sale software company Lightspeed announced a new partnership with the buzzy $35 billion startup Stripe last week. But Lightspeed's Stripe partnership, which will power Lightspeed's online and in-store payments product, isn't so cut-and-dry, highlighting some of the complexities of the payment world. Behind the scenes, payments are complicated with a multi-pronged network of players on the value chain. There are layers of payments processors, facilitators, and, ultimately, both online and in-store checkouts that the end consumers see. It can be hard to sort out who owns what in the multi-layered process that happens behind the scenes each time a consumer makes a purchase. Not only that, but what's being sold can also impact the type of payments companies you work with. In this case, Stripe Connect won't be able to power all of Lightspeed's payments. Lightspeed's customers are mostly hospitality companies, restaurants, and niche retailers that are based across the globe. Their products and services are very broad and range from reptile pet supplies to CBD. However, payments related to the sale of CBD, gambling, or adult entertainment, for example, are restricted from the Stripe platform, according to its website. In a blog post, Stripe explains that given their partnerships with financial institutions like Visa and Mastercard, it needs to work within the requirements of those companies. So in that case, Lightspeed would choose to use a different payments facilitator. "We might have to create partnerships with more specialized payments companies that will accept merchants that sell CBD, or adult, or a number of things that could be restricted items," Lightspeed CEO Dax Dasilva told Business Insider. Prior to the Stripe deal, Lightspeed also had partnerships with payments infrastructure startup Finix (which just raised a $35 million Series B led by Sequoia Capital) and FIS' Worldpay. Sequoia Capital also invested in Stripe. Finix allows companies to build their own payments systems instead of relying on an outside firm like Stripe. Lightspeed declined to confirm what partners it would depend on for different types of transactions, while a Finix spokesperson confirmed that Lightspeed remains a customer. Platform2 Lightspeed offers online and in-store PoS systems to hospitality companies and retailers. Its products include inventory management, accounting, customer loyalty programs, and also payments, which initially launched last year. Lightspeed Payments will now be rolled out in partnership with Stripe Connect and Stripe's in-store PoS terminals. Stripe Connect is a payments platform designed for other platforms and marketplaces like social media companies, ride-sharing services, and ecommerce players. With its infrastructure, clients with multiple buyers and sellers can onboard new sellers and manage payments in and out through one system. Connect customers include Facebook, GitHub, Lyft, and Shopify. Stripe charges its Connect customers 2.9% plus 30 cents for every successful card transaction processed on behalf of those kinds of companies on its network. In an earnings call last week, Lightspeed finance chief Brandon Blair Nussey noted that the company expects the cost of the Stripe partnership to be comparable to its existing processing relationship. Lightspeed, like Lyft and Shopify, is a platform for sellers, but Lightspeed caters to more complex businesses, Dasilva, the company's CEO, told Business Insider. It works with bike shops, golf courses, jewelry stores, and other businesses that have large or high-value inventories and multiple sales channels, like rentals or on-site restaurants. In addition to providing online payments via Stripe Connect, Lightspeed's brick-and-mortar customers will use Stripe Terminal in-store payments hardware. Lightspeed and its customers will be able to customize Stripe's terminals with their own branding. Stripe opens the door for Lightspeed to do more, like lending Part of the reason Lightspeed is partnering with Stripe, Dasilva said, is because of the other products Stripe has to offer. In addition to payments, Stripe has rolled out card issuing capabilities, small business lending through Stripe Capital, and a corporate card product. Lightspeed, in turn, is considering doing its own lending to businesses through Stripe Capital, among other things. "There are different tools for us to do things like same-day funding, credit, and lending," Dasilva said. "That's certainly one of the attractions of the partnership is the innovation curve that we'll get to ride of Stripe," Nussey said in the recent earnings call. "And of course, they do have a capital solution. So that's one of the things that attracted us to the partnership." "Lightspeed initially wanted to become a payment facilitator, which means that they would play a very direct role in the payment processing value chain," Jordan McKee, research director of customer experience and commerce at 451 Research, told Business Insider. But acting as a payments facilitator ("payfac" in industry lingo) requires substantial investments in tech and headcount. So software companies like Lightspeed, GitHub, and Lyft often opt for payfac providers like Stripe. "Stripe is now the payment processor that Lightspeed Payments is built on top of," said McKee. "What that means is that Lightspeed is now out of the flow of funds, so they don't have to deal with some of the regulatory burden and the risk management associated with that."SEE ALSO: A startup aimed at disrupting payments and taking on Square and Stripe just raised a $35 million Series B led by Sequoia Capital SEE ALSO: We talked to 4 VCs who backed fintechs like Stripe, Square, and TransferWise about the hottest trends to watch in the payments space Join the conversation about this story » NOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.
Fintech has become a buzzy label that often doesn't really mean anything. We asked execs at 21 startups like Brex, Kabbage, and N26 what really counts.
Business Insider surveyed 21 startups about how they define the word fintech, and their responses varied...Business Insider surveyed 21 startups about how they define the word fintech, and their responses varied widely. Beyond Big Tech and Wall Street, startups most would call "fintechs" are scooping up billions in VC funding from traditional venture firms and corporates alike. Some of the people we asked see fintech as an emerging sector, while others pointed out that the ATM, invented in the 1960s, was the first fintech innovation. And some wondered whether big tech firms experimenting with checking accounts and payments products could or should call themselves fintechs. As the term has grown to the point where it's a buzzword for asset management, banking, payments, and more, the line between fintechs and financial services firms can start to blur. This is part of a broader survey of 44 executives across the industry, including those at powerful Wall Street firms and big-name investors. Click here for more Prime stories. Last year, we saw some unexpected players dip their toes into financial services. Tech giants, from Apple to Facebook to Google to Uber, have begun to wade into (or at least adjacent to) the highly-regulated financial waters. And the big banks partnering with those tech giants also like to call themselves tech companies, and are spending billions each year on IT. Beyond big tech and Wall Street, startups most would call "fintechs" are scooping up billions in VC funding from traditional venture firms and corporates alike. So we asked: Does everybody want to be a fintech? What qualifies as a fintech? What's the difference between fintech and financial services? 21 startups weighed in, and their responses varied. Some wondered whether big tech firms experimenting with checking accounts and payments products could or should call themselves fintechs. And while many see fintech as an emerging sector, others pointed to the ATM — first rolled out in 1967 — as the start of fintech. Whether a new tech craze or a long-established part of financial services, fintech is broad, covering asset management, banking, lending, trading, insurance, payments, and more. And as the segment grows, the lines between big tech, buzzy startups out of Silicon Valley — and Alley — and the legacy players of Wall Street are blurring. Here's how these 21 startups define fintech. This is all part of our broader survey of 44 execs at powerful Wall Street firms, hot startups, and big investors, who we asked to weigh in on the buzzy but hard-to-define term.Michael Praeger, cofounder and CEO of AvidXchange For me, fintech is simply a universal term that has emerged to describe how technology is applied to either solve a problem or create a new solution related to delivering a financial offering. Fintech is a rapidly growing area of technology investment that's impacting everything from how we make purchases, secure loans and invest money to how businesses pay vendors and monitor their cash flow. It's thinking about how we move money in new and innovative ways, while creating connections and sharing information. Fintech is often thought about as a relative newcomer to the technology conversation, but in reality, it's been around for over a century, as some of the first business applications for technology were focused on financial process and electronic ledger evolution from paper-based processes. The first electronic fund transfer system dates back to the early 1900s, but there are many people who note the first ATMs as the official "birth" of fintech – so it just depends on how you define it. Jon Stein, cofounder and CEO of Betterment The term fintech means many different things to different people. Broadly, "fintech" refers to the innovative use of technology in the design and delivery of financial services. For Betterment, "fintech" is defined by much more than the products and services that it provides, but rather by the outcome(s) it brings. A true fintech company puts technology at the heart of its financial services offering, inspiring technological change that fundamentally changes the way financial services are accessed, or provided. ... When we think about fintech, it's more than a company using technology to simply blow up the status quo in an unsustainable way, or chasing tech fads in order to attract customers. Rather they are tackling some long-standing issues that the financial services industry has long faced — such as high fees, complex products and lack of transparency. Read more: The CEO of Betterment, a roboadviser with $20 billion in assets, lays out the next stage of evolution for wealth tech Eyal Lifshitz, founder and CEO of BlueVine A fintech company can be one of two things. 1. A provider of technology services or products to financial institutions or other fintechs. 2. A direct-to-consumer service or product that leverages technology to improve the financial lives of their consumers, which in our case is small businesses. Fintech companies require deep domain expertise in several areas. First, in order to improve or disrupt an industry such as financial services, you will need to have extensive knowledge of the existing systems, which can be quite complex and involve many players. Second, an understanding of the evolving threat landscape is critical in order to keep your customers — whether it is a bank, business or a consumer — safe and secure. Third, you must build a culture of compliance and be vigilant about keeping up with evolving regulations, constraints, and requirements. A core component of being a fintech company is managing risk, thus establishing sophisticated monitoring and data analytics is necessary to protect yourself and customers from potential loss. I think some misconceptions are that fintechs are just applying a nice UI/app on financial services. This is not the case. Specifically, fintech companies require managing risk, compliance, capital, and complex operations. The benefit to consumers is not just driven by better UI, but a whole different way of doing business. Many established, large companies are dabbling in banking such as Google or T-Mobile, however, that doesn't make them fintech companies. Fintech companies have deep DNA in building financial services. Some of the companies I mentioned are more partnering with white-label solutions who power their products rather than building the solutions themselves. Read more: Small business lender BlueVine just nabbed $102.5 million in funding on the heels of its banking launch Henrique Dubugras, cofounder and co-CEO of Brex Fintech is anything that provides, or something that replaces, any function that a traditional financial services institution would do. So products that a bank would offer — any company that is offering any of those products for sure is in the category of fintech. And I think the second category is software that is adjacent or that interacts directly with financial service institutions. I'd put in that category Plaid or any software that the banks buy to use internally. I think that the center of it is traditional banks and financial services. So anything that replaces any of their offerings or anything that interacts in a deep way with them. Max Branzburg, head of consumer product at Coinbase Fintech is the sector of technology companies that is modernizing financial services. It includes companies making it easier to pay people and businesses on top of the existing banking system, like Google Pay, but also companies that are developing fundamentally new infrastructure for payments, investing, and broader financial services like Coinbase. Sebastian Kanovich, cofounder and CEO of dLocal Investopedia defines it as "new tech that seeks to improve and automate the delivery and use of financial services." But when people talk about fintech, they tend to think about two broad categories of companies. 1. Companies that challenge the traditional banks (think about neo-banks, e-wallets, P2P lenders, robo-advisors). 2. Companies that provide technology that enhance the efficiency of banks and other players. But in our view, what really defines fintech is the junction of great technology with the right regulatory framework to provide truly customer-centric services (both end users and enterprises). ... Fintech is first and foremost about consumer centricity. The whole DNA of a successful fintech company revolves around user experience. Many banks have failed in usability, especially because of the way they are structured, with IT being just one of many departments, and IT focusing on security over usability. It will be hard and expensive for banks to change, but they will do it, probably via acquisitions. Read more: Payments startup dLocal just expanded its Amazon partnership. We talked to its CEO about how to build infrastructure that lets Uber and Netflix accept local payments around the world. Ram Palaniappan, founder and CEO of Earnin Traditionally, money is the only thing where the digital version moves slower than the physical version. This year at CES we heard how many technologies are set to impact the fintech sector — from security and AI to 5G. The exciting part of fintech today encompasses the broad set of technologies that are increasing the speed and ease of digital money movement, and leveling the playing field so there is more fairness in the financial system. What's exciting about fintech is that it has the possibility to change the world for people - not just large institutions and the wealthy. Phill Rosen, CEO of Even Financial From my perspective, fintech really is just tech companies that are looking to enable better, more efficient, modern financial services, principally through technology. I think the label often can be abused. We're seeing, through this notion of partnership, financial services being layered in pretty much everywhere, from the Google's to the Amazon's and elsewhere. ... Fintech, in a way, is a sexy name for something that has been happening for a long time. Before we really thought of this as being a tech startup thing or a new generation of companies, Wall Street was populated by hundreds, if not thousands, of companies that were using technology to make financial services better. A great example of that is Bloomberg. They're a tech company, New York City's big tech success. They were using technology to deliver better financial services. They ended up being competitive with some previous systems that banks and traders were using, but they weren't competitive necessarily with the core Wall Street offerings around banking and capital markets. Mike Cagney, CEO of Figure Fintech is a bit of a misnomer, as it implies there isn't tech in financial services. The reality is the top few banks spend multiples more on technology than all the financial technology startups combined. ... The benefit startups have is that they have long runways and aren't bound to quarterly earnings — they can embark on endeavors that could upend how financial services works today without worrying about cannibalizing their own working business lines. To me, this is what fintech really is — technology centric companies approaching the financial services market in revolutionary ways that could disrupt current models and transfer $trillions of market capitalization. The flipside to this is until a fintech is profitable, it is still dependent on the whims of private capital — and those whims can be fickle. Ironically, the successful fintechs of today — the ones who build disruptive and sustainable businesses — will be the incumbents of tomorrow, only to eventually be disrupted by the next wave of financial technology startups. Richie Serna, cofounder and CEO of Finix The term fintech has evolved over the past few decades. As most people understand it up to now, fintech means adding technology to a traditional financial service product — asset management, insurance, payments, etc. — either through selling to the incumbent or competing with them. Think of the startup Venmo competing with banks vs. the technology provider that worked with the banks to build Zelle. But we're entering into a new era of "fintech." The term will no longer be used to define a certain type of company. Rather, financial services will be an embedded component in every software company's tech stack. Similar to how we went from talking about "internet" companies to assuming that all companies use the internet as a component, the role fintech plays in our world moving forward will become vastly more ubiquitous and embedded, to the point that we won't even use the term "fintech" anymore. Tyler Winklevoss and Cameron Winklevoss, cofounders of Gemini We think of fintech companies really as technology companies that happen to be innovating in the financial sector. Financial institutions that adopt technology to enhance their existing services are very different than companies like Gemini that could not exist without the very technology they were built with and for. Read more: The Winklevii just hired a co-founder of Starling Bank to run Gemini's UK and European business. Here's why the neobank exec made a jump to crypto. Aldi Haryopratomo, CEO of GoPay Financial technology is ultimately a means to an end. In markets like the ones we operate in, it's about enabling a son or daughter to go to college, helping a newly married couple buy their first home, or supporting a person who is ill to access the finance they need for treatment, in addition to facilitating fast and easy payments. Seth Ross, chief of enterprise partnerships at Green Dot For a company that is a tech-forward, tech-focused company that is creating services that interact with people's money, I think you can rightly call yourself a fintech. And there are different levels to that. You've got the tech companies that really are service providers to other banks that don't really touch consumer money and don't really interact with the payment systems in quite the same way. I'm sort of a big-tent fintech guy. I don't mind them calling themselves fintech because they also are tech for the financial services industry. Kathryn Petralia, cofounder and president of Kabbage I think if you look at all of the fintech companies that have launched since 2003, the theme has been: how do you take a single product that has historically been offered by a bank and offer it directly to a customer or to an end user using the internet. And now you have this rebundling. Kabbage was only providing small businesses access to capital until recently. Square was only providing small businesses with access to payment services. And now all those things are converging. Read more: SoftBank-backed small-business lending startup Kabbage is moving into payments. Its execs explain why combining the 2 services makes sense. Steve Allocca, president of LendingClub The original fintech innovators, like Charles Schwab, Intuit, PayPal, LendingClub, and most recently Plaid, have something in common. These companies are first about being customer-centric, and then about having a focus on helping customers leverage the better information and reduced effort required to benefit from the increasing digitization of money and payments. ... As we start 2020, we think it might be time to retire the concept of "tech-enabled financial services" in favor of something that is truly differentiated – aligning a company's business strategy with the financial success of their customers – which is not how retail banking works today. Today, the fintech sector is not differentiated. We have companies that fall into two categories: Traditional financial institutions that will continue to deploy tactics that separate you from your money. New companies that will continue to create products and services that make it easier for people to make smart decisions that make their money grow. There will always be a debate on whether they can work together. The reality is they won't unless both are committed to putting the customer's interest ahead of their corporate interests. Read more: LendingClub's turnaround hinges on repackaging consumer loans to win back big investors. The 20-year Morgan Stanley veteran behind those efforts explains how she's tackling the peer-to-peer lender's revamp. Nicolas Kopp, US CEO of N26 Fintech is an emerging sector that uses technology to improve, enhance and innovate within financial services, making it more accessible and user-friendly for both consumers and businesses. Fintech challenges traditional banking methods to offer services that are faster, easier, cheaper, or all of the above. Fintechs need to offer the agility and innovation associated with a technology company but within a framework that is highly focused on regulation, data privacy and security. Scalability is also fundamental as the market scope is huge and fintechs need to be able to work with some of the largest systems and datasets while building trust, transparency and consumer confidence as a responsible keeper of consumer's finances. Bill Phelan, CEO of PayNet To me, fintech means two things. First, it's about capital. It's about some form of helping a business or a consumer deal with money. So 'fin' is a really key piece of this whole thing. And money is what makes the US economy go, especially in banking. Banks keep one dollar for every ten dollars they make available through payments or credit. So there's a levered aspect, and risk aspect to the market for fintech. ... What the banks need to do is to automate and get their systems upgraded. Right now, they use a lot of manila folders and steel file cabinets. They have to get into using software to automate, and that's where the fintechs are playing. Fintechs are very good with technology and they can actually get that technology and they can be the white label private technology base for the banker or lender. Brandon Krieg, CEO and cofounder of Stash Fintech companies revolutionize and innovate traditional financial services products and practices. Ultimately they're changing the way people interact with their money — making money management and financial tools more accessible and a part of customers' everyday lives. It's a heavily regulated industry — whether through SEC, FINRA, SIPC, etc. — so there's a lot of investment and prioritization around legal and compliance efforts. It's also absolutely essential that our customers trust us and know that we're always putting them first and working in their best interests. Finance is the ultimate center of peoples' lives — current and future. Leveraging technology and personalized advice, you can help make a significant difference in their lives. But, it's impossible to make a real impact without that trust. Harsh Sinha, CTO of TransferWise A fintech company puts technology at the heart of a financial service offering (i.e. banking, payments, insurance, lending) to give customers a better alternative to traditional financial products. By not being tied to legacy technology, fintechs can offer cheaper, faster, and more convenient products. Financial service companies and banks tend to have strong competency in the regulatory and compliance domain. Technology companies are stronger in adopting new technologies and pushing the envelope in technological innovation. Successful fintechs walk the line and establish competencies in both aspects - they build a compliance and regulatory competency just as strong as traditional financial services while adopting new technologies and using it to their advantage as tech companies. The compliance, regulatory, and technological barriers to entry are all quite high for fintechs. The largest barrier to entry fintechs face, however, is making consumers aware that they're being underserved by finance companies. Read more: Cross-border payments startup TransferWise just inked its first US bank partnerships, including one with digital bank Novo. We chatted with its CEO about the launch, and why an IPO is still far off. Matt Hawkins, CEO of Waystar When people think of fintech today, they typically think about companies that fall into five distinct categories — payments, lending, insurance, investing and banking. Many don't consider the fact that fintech companies aren't actually limited to these categories — fintech can be used to improve financial processes across a number of industries, such as retail, logistics and healthcare. More attention needs to be paid to the real applications that fintech has for other industries, as there is a huge opportunity for fintech to disrupt the consumer experience and simplify a number of financial pain points. Bill Clerico, cofounder and CEO at WePay "A 'fintech' is a non-bank company that uses technology to provide a better financial services product or service to customers, usually in partnership with or built on a separate bank. By the nature of this construct, they can focus their resources on creating a specialized and differentiated experience while leaving the core capabilities and infrastructure to a bank."
Cars will start paying for their own gas and parking as soon as this year. Here's why Visa is betting on a world of invisible payments.
The internet of things (IoT) refers to the network of everyday objects that are plugged into...The internet of things (IoT) refers to the network of everyday objects that are plugged into the internet. And as IoT continues to mature, experts and industry leaders are exploring applications through something we all do — buying stuff. Visa is exploring IoT payments through cars, and it thinks cars could pay for their own parking in as soon as 12 months. Citi Ventures is also eyeing the space. It's backing CarIQ, a startup that's already exploring payments initiated from vehicles without needing a credit card. But VCs at Edison Partners caution that while the funding is there for startups launching IoT platforms, it may not happen as quickly as we'd think. While tech moves fast, legacy infrastructures and consumer behavior could delay IoT adoption. Click here for more BI Prime stories. You probably have heard of the so-called internet of things (IoT). It refers to the network of everyday objects that are plugged into the internet. Think: phones, refrigerators, cars, even lightbulbs. Talks of IoT often conjure up fears of Black Mirror-esque dystopian realities. If the things you use every day are connected and communicating with each other, it's easy to see how privacy and security become top concerns. IoT devices can collect data including location, spending habits, and health information. It's that rich trove of data and always-watching connectivity that has caught the attention of one of the world's biggest payments players, as well as venture investors and startups. And as IoT continues to mature, experts and industry leaders are exploring applications through something we all do every day — buy stuff. They're eyeing not only your wallet, but your car as the next opportunity to roll out IoT payments. We talked with payments experts to learn what's possible when it comes to smart devices paying bills, and what some of the big hurdles to adoption will be. Card network giant Visa has been investing in IoT payments for the past couple of years, Bisi Boyle, vice president of IoT at Visa, told Business Insider. Boyle heads up efforts around connected payments and is leading Visa's charge to make sure the card network's rails are connected on the IoT. And for 2020, she's focused on rolling out invisible payments in cars. "We saw the opportunity because of this explosion of connected devices that make up the internet of things that people use every day now" said Boyle. Cars are first on the list, she said. The four use cases Visa is exploring with cars are fuel, parking, food, and tolls. Cars, Boyle said, will likely be the first place consumers will see IoT payments — and she predicts that capability could arrive as soon as next year. "The idea is you're just living your life and all these payment experiences happen," said Boyle. Take parking, for example. IoT enabled cars will be able to find open street parking and pay the meter, all without the driver needing to pull out their phone or wallet. Visa is betting that fuel and parking use cases will surface in the 12 to 18 month range, said Boyle. And the card company has already partnered with car companies like Honda to start rolling out the tech. Paying for parking and gas are just the beginning, though. Boyle sees drive-thru and curbside food pickup as the next step for the tech within three years. Tolls are another area with potential, but Boyle thinks adoption will take closer to the three years. The idea is to bring the toll payments into the cars using IoT, as opposed to the existing electronic toll providers like New York's E-ZPass and California's FasTrak. "You have to work with different governments and municipalities, so that's why that one takes a little bit longer," Boyle said. And while these payments may be "invisible," Boyle does not see a world where machines are initiating payments without the involvement of the owner themselves. To be sure, IoT payments will eliminate the need to take out a wallet, but users will still need to authorize payments made by machines. "I don't mind it paying for me, but I want it to ask me first, and I want it to know that it's me," said Boyle. "You have to design the payment experience in a way that people feel that they can trust it," she added. Cars paying for their own gas Like Visa, Citi Ventures' co-head of venture investing, Ramneek Gupta, is betting on cars to drive the first wave of IoT payments. "It is a little bit nascent today — but I think there will be a lot more value creation there from the startup ecosystem—is the emergence of non-human or machine-originated payments," Gupta told Business Insider in November. As everyday devices like cars and phones get smarter, Gupta thinks IoT payments are inevitable. "It's the natural next step," he said. Gupta expects these machine-initiated payments to surface in the next two to three years. Citi Ventures backed an India-based startup called CarIQ, which is already exploring payments initiated from vehicles without needing a credit card. The startup raised $5 million in a Series A in June, and in August, automotive manufacturer Varroc acquired a 74% stake. Product-agnostic platforms are what some VCs are looking for CarIQ's platform model is one way for startups in the IoT payments space, said Dan Herscovici, partner at Edison Partners. The other is a product-driven approach. "It's a very interesting conundrum, and has lived in IoT for a long time. It's the point solution versus the platform," said Herscovici. Home appliance manufacturer LG, for example, could create an IoT-enabled washing machine, then partner individually with repair servicing companies or payments networks. "That's impractical," said Herscovici. "When we look at startups in the space, we're looking for people that are providing platforms or ecosystems as opposed to singular point solution ones that are agnostic to the device in which they're being inserted." While building out a platform can be costly, the funding is out there, said Chris Sugden, managing partner at Edison Partners. If you build it, they will fund While large players like LG or Visa are making big pushes in IoT, winners in the space are far from being established. Sugden thinks startups, flush with VC cash, can compete. "I think that can come from the startup world because the $50 million and $100 million and the multiples of $100 million rounds are available. That didn't actually exist in the past," Sugden said. Sugden mentioned the so-called SoftBank syndrome — the concern around megarounds and over-funding of startups like WeWork — but with a great business model, investors are willing to provide enough capital to chase what some might see as lofty ideas, he said. "We're seeing those things get funded now in areas where you couldn't actually get them funded to really take the market," said Sugden. "Someone else would actually frankly steal your idea before you got the scale." Cars aren't the only use case, but it will take time And while IoT payments may materialize in cars over the next couple of years, Sugden and Herscovici think other use cases will take longer than 10 years. While tech moves fast, legacy infrastructures and tough-to-change consumer behavior could delay IoT adoption. In the home, for example, appliances like washing machines are purchased and replaced less frequently than cell phones. Some of these appliances can last in the home for more than 10 years, Herscovici said. Smart phones, on the other hand, have high market penetration and are replaced often. And that paves the way for business to use IoT payments wherever there's a smartphone present. Amazon is exploring IoT through smartphones with the launch of its IoT-powered Amazon Go convenience stores. There are currently more than 20 of the cashierless stores open in Chicago, New York, San Francisco, and Seattle. Amazon is reportedly aiming to open 3,000 Go stores by 2021. Using the Amazon Go app, shoppers can scan their phones to enter, take whatever they want from the shelves, walk out, and get charged automatically after they leave the store. The ceilings in the stores are lined with cameras and sensors to keep track of your virtual cart. There's no checkout, so shoppers never have to pull out their wallets to pay for their snacks. Still, it's a long road ahead for the tech "In fintech and financial services more broadly, and payments even more specifically, everyone thinks it's going to happen faster than it does," said Sugden.SEE ALSO: WALL STREET 2030: Here are 26 predictions that tell you everything you need to know about the future of finance Join the conversation about this story » NOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.
Ally's head of strategy told us how one of the first digital banks picks fintechs to partner with, invest in, and buy
Ally Financial's Ally Bank, one of the oldest digital-only banks in the US, may be branchless,...Ally Financial's Ally Bank, one of the oldest digital-only banks in the US, may be branchless, but it's not a neobank. In addition to credit and savings accounts, Ally offers mortgages and trading accounts. We spoke to Dinesh Chopra, Ally's head of strategy, about his outlook on M&A, partnering with other fintechs, and Ally's venture investing. In April, Ally announced it had teamed up with mortgage startup Better.com. Ally's venture arm also invested in Better's Series C fundraising round. A bank can expand its product lineup in a few ways. It can build in-house, buy a company that has already built that product, or partner with a fintech. "We as a company wrestle with that decision on a day-to-day basis," Chopra said. "We also look at what our exit strategy is. Because when you enter into a partnership, you always have to plan for the worst," Chopra said. Click here for more BI Prime stories. Ally Financial's online bank is one of the oldest digital banks in the US. But it's not a neobank. It may be branchless, but Ally has a banking charter, so it's regulated like any other retail bank. Most neobanks don't have bank charters, instead partnering with banks like Bancorp or GreenDot, which provide the core banking processing and FDIC insurance. Ten-year-old Ally Bank is nevertheless part of the cohort of digital-only banks that includes startups like Chime — which are attracting VC backing and gaining users and deposits. Ally is leaning on adding new products for growth, as startup neobanks lure customers with high-yield savings accounts and banking giants build out their own digital capabilities — and how exactly it goes about doing that is a critical question. "We believe that there is a structural tailwind behind digital banking," Dinesh Chopra, chief strategy and corporate development officer at Ally Financial, told Business Insider. "Digital banking overall is only 8% of the market," he said. Legacy players like Chase, Bank of America, Wells Fargo, and Citi account for most of the country's consumer deposits. Chopra heads up Ally's corporate strategy team, which includes oversight of mergers and acquisitions, strategic partnerships with fintechs, and Ally's venture capital arm. He's responsible for Ally's strategic roadmap, deciding when to build new products and when to partner with or acquire fintechs. Prior to joining Ally in 2017, Chopra was head of strategy for Citigroup's retail bank as well as its mortgage and payments businesses. As of the first quarter last year, Ally was the 15th largest bank in the US in terms of total assets, according to the Federal Reserve. Chopra said consumers want more than high-yield savings — they want to borrow, save, invest, and protect their money. "We're trying to get into other verticals like wealth management," said Chopra. "I think to have a sustainable banking practice, you have to have a more holistic value proposition than just one product." Deciding when to build, partner, or buy A bank can expand its product lineup in a few ways. It can build in-house, buy a company that has already built that product, or partner with a fintech. "We as a company wrestle with that decision on a day-to-day basis," Chopra said. Building new products in-house can be expensive and delay time to market, meaning partnerships are often a more attractive option. "We don't believe we have to do everything ourselves," said Chopra. "The world is moving towards growth through partnerships." In April, Ally announced it had teamed up with mortgage startup Better.com on digital home lending. Ally's venture arm also invested in Better's Series C fundraising round. Through its partnership with Better.com, Ally is able to offer fully digital mortgages on its website and app, meaning customers can apply, receive, and pay down a mortgage online. "It is completely end-to-end digital. You can get your mortgage application done in less than five minutes on a mobile phone," said Chopra. Ally had a mortgage business prior to its Better.com partnership called Ally Home, which launched in 2016. To apply for a mortgage, customers would have to fill out a form on Ally's website, then wait for a phone call from a company representative to complete the application. Making sure you have an exit strategy Ally considers a few things when looking externally for a partner or possible acquisition, Chopra said. For one, it looks for a partner that has created a compelling product. "We have a very high bar for what we share with our customers," said Chopra. "We are trying to look for something that is differentiated and disruptive." Then, Chopra has to decide if the money makes sense by looking at a potential partner's business plan and revenue-share agreement. "We might find a candidate that has something we want and it makes sense to partner with them because the time to market can be quicker, but the economics may not work out," he said. Chopra also considers the risks of depending on a partnership to support a growing product. "We also look at what our exit strategy is. Because when you enter into a partnership, you always have to plan for the worst," Chopra said. While signing a partnership is one way to grow, Ally has also bought its way to new tech through strategic acquisitions. In 2016, Ally acquired online broker TradeKing, which was rebranded as Ally Invest. And in October this year, it jumped into healthcare financing when it acquired point-of-sale lender Health Credit Services. Ally's venture arm can feed its M&A pipeline M&A and partnerships are closely tied to Ally's venture strategy. Ally has invested in Greenlight, a startup that offers debit cards for kids and teens, as well as Modal, a digital sales platform for car dealerships that billionaire tech investor Peter Thiel also backed. "We make small investments in early stage companies with the primary purpose of getting a tap into the market," said Chopra. And when the venture business is looking for a new investment, it also considers how that investment could play into Ally's future. "We look at companies which could be in the pipeline where we could either partner or acquire them in future," said Chopra. "It's not like a traditional VC firm where we are trying to make a 100x return on two or three investments. It's more strategic." The Ally we know today traces its roots back to 1919 as General Motors Acceptance Company (GMAC), the captive finance arm of GM, handling the car manufacturer's auto lending business. Before the Ally rebrand, GMAC offered more than auto loans. It also had a subprime mortgage arm, ResCap, and a direct banking channel called GMAC bank. The global financial crisis hit GMAC hard as delinquencies on mortgages and auto loans rose. In 2008, the company received a $17.2 billion bailout from the US government, which it wouldn't exit until 2014. In the aftermath of the global financial crisis, GMAC rebranded as Ally Financial in 2010. ResCap filed for bankruptcy, and Ally started to distance itself from GM.Join the conversation about this story » NOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.
The Winklevii just hired a co-founder of Starling Bank to run Gemini's European business. Here's why the neobank exec made a jump to crypto.
Gemini Trust, the cryptocurrency exchange founded by the Winklevoss twins, just hired Julian Sawyer, co-founder and...Gemini Trust, the cryptocurrency exchange founded by the Winklevoss twins, just hired Julian Sawyer, co-founder and COO of UK neobank Starling Bank. Sawyer will run Gemini's European operations. Gemini was founded in 2014. Similar to Coinbase, it offers users a platform to buy and sell cryptocurrencies like Bitcoin. Starling was also founded in 2014, but its younger competitors have outpaced it in customer acquisition. Gemini's goal is to build the future of money. Leaning on space travel imagery, they call themselves a "galaxy-changing team", and employees the "astronauts." "Having the opportunity to build a bank is probably once in a career. I've done that," said Sawyer. Click here for more BI Prime stories. Gemini Trust, the cryptocurrency exchange founded by the Winklevoss twins of Facebook founding fame, just hired Julian Sawyer, co-founder and COO of UK neobank Starling Bank, to run its European operations. While some caution of the crypto winter that followed a 2017 boom (when the price of bitcoin rose to $20,000), crypto is still hot in the fintech world. Coinbase was valued at $8 billion following its 2018 fundraise, and Gemini just made its first acquisition. Facebook has announced ambitions to launch its own cryptocurrency, Libra. "I think this is the perfect time, because the crypto market is coming to age," Sawyer told Business Insider. In crypto, Sawyer sees unexplored crypto use cases as opportunities to take on incumbents. Sending money cross-border, for example, can take a few days with a traditional bank. Using blockchain and a stablecoin, it can be done instantly, he said. "Having the opportunity to build a bank is probably once in a career. I've done that," said Sawyer. "To me, it was a natural step. I've done the future of banking, so now I'll do the future of money and find out where this is going to go." Gemini was founded in 2014. Similar to Coinbase, Gemini offers users a platform to buy and sell cryptocurrencies like bitcoin. Sawyer sees part of his role in building out Gemini's European footprint to be raising awareness of possible crypto use cases. Crypto is more than just bitcoin, he said. "If you think of the traditional bell curve of product adoption, you've got the innovators and early adopters—and we're clearly in that space I the moment and need to continue in that space—but we also need to start getting to the mass market," Sawyer said. 'Crypto Without Chaos' Cryptocurrency requires strong and secure infrastructure, said Sawyer. Gemini, which markets itself as the "regulated crypto exchange," has been a slow-and-steady player in the crowded and volatile bitcoin world. Earlier this year, Gemini launched a marketing campaign featuring slogans like "Crypto Without Chaos," and "The Revolution Needs Rules." "It's about doing it right," said Sawyer. "You can cut corners in compliance, how you store client money, payments infrastructure, and service levels, et cetera. But that is the wrong way of building a business, and we all know that." Referencing Maslow's hierarchy of needs, Sawyer stressed the importance of security in fintech. "If your money, your investments, and you payments are not safe and secure, you're not going to use it," he said. "Therefore, you've got to go regulation first, security first, and compliance first." Read more: The Winklevoss twins explain why bringing regulation to the crypto market isn't a zero-sum game "It may take us longer. But we're not in it for the short term, we're in it for the long term," said Sawyer. Gemini's goal is to build the future of money. Leaning on space travel imagery, it calls its employees "astronauts." In 2018, Gemini launched the industry's first regulated "stablecoin," which is a cryptocurrency pegged 1:1 to a fiat currency like US dollars. It's called the Gemini dollar, and it's backed 1:1 to a reserve of US dollars held at State Street Bank. Gemini hopes that embracing regulation will help bring Wall Street money into the crypto space. In 2018, JPMorgan launched its own stablecoin to move client money, and Wells Fargo followed suit in September. Key hires Gemini has been beefing up its executive ranks, hiring experienced leaders from financial services incumbents. Noah Perlman came on as chief compliance officer in September after 13 years as a managing director at Morgan Stanley. Robert Cornish, who spent 17 years at ISE Holdings (a Nasdaq subsidiary) and was most recently the chief information officer of the New York Stock Exchange, joined Gemini as CTO last year. "What the founders and executives have done is they've hired lots of really good people who come from the financial services industry," said Sawyer. In addition to growing its European footprint, Gemini recently made its first acquisition - a blockchain startup called Nifty Gateway, also run by identical twin brothers. Starling has seen high turnover in its top ranks. Sawyer, who left Starling Bank in July, was one of four execs to leave the UK-based challenger bank this year. Starling, like other neobanks, is challenging the traditional brick-and-mortar retail banking models of incumbents. Starling was founded in 2014, but its younger competitors have outpaced it in customer acquisition. Its CEO, Anne Boden, told Business Insider that the neobank was closing in on 1 million customers in September. Monzo, one of Starling's top UK-based competitors, secured 3 million customers in September. Germany's N26, which just launched in the US, announced 3.5 million customers in July. Monzo was founded in 2015 by a group of former Starling execs, including Tom Blomfield (former CTO), Gary Dolman (former CFO), Paul Rippon (former CRO), Jason Bates (former chief customer officer), and Jonas Templestein (former software engineer). Monzo secured a $2 billion valuation after a $113 million funding round from investors including fintech accelerator Y Combinator Continuity, venture capital firm General Catalyst, and the buzzy $35 billion fintech Stripe.Join the conversation about this story » NOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.
San Francisco-based Prosper Marketplace, the first peer-to-peer lender in what later became an entirely new industry,...San Francisco-based Prosper Marketplace, the first peer-to-peer lender in what later became an entirely new industry, has been exploring a sale, according to people familiar with the process. The lender has, over the last few months, contemplated a sale and reached out to at least one prospective buyer directly, one of the people said. Prosper and others, including larger competitor LendingClub, offer an installment loan online that many people use to pay down revolving debt. During its roughly 12 years in business, Prosper has been through three management teams. Click here for more BI Prime stories. Prosper Marketplace, a pioneer of the peer-to-peer lending industry, has been exploring a sale, according to people familiar with the process. The San Francisco-based lender has over the last few months contemplated a sale and reached out to at least one prospective buyer directly, one of the people said. Business Insider couldn't learn whether the company and CEO David Kimball had officially hired bankers or otherwise started a more formal process. A Prosper spokesperson declined to comment. A sale of Prosper, which was founded in 2005, would mark a seminal moment in the marketplace lending industry, which centers on the making of loans on the internet with money provided by individuals and, increasingly, other institutions. Companies like Prosper and LendingClub act as the middlemen between the two. The industry sprang up during the financial crisis and gave millions of consumers an alternative to high-cost credit card debt. Prosper and others, including larger competitor LendingClub, offer an installment loan online that many people use to pay down revolving debt. Prosper spawned a host of copycats, which have taken away some of the business enjoyed by the larger platforms. The company's growth has also been limited by the cost of acquiring customers and other operational challenges. Losses and management turnover The company struggled to turn a profit. In 2018, Prosper reported net losses of $39.9 million, an improvement from $115.2 million of losses in 2017, according to quarterly financials released by the company on its website. In the third quarter, Prosper reported net profits of $10.8 million. During its roughly 12 years in business, Prosper has been through three management teams. After founder Chris Larsen left in 2012, the business was run by Stephan Vermut, and then his son Aaron, and Ron Suber. The trio came onboard in 2013 with backing from Silicon Valley heavyweight Sequoia. In 2015, that management team raised $165 million at a post-money valuation of $1.9 billion, according to Pitchbook. Vermut stepped down in November 2016, handing off to CFO and former USAA Americas CFO Kimball. According to media reports, it lost its unicorn status in 2017 when its valuation was slashed to $550 million in a $50 million fundraise led by FinEX Asia. Larger rival LendingClub has a market capitalization of about $1.2 billion. In total, Prosper has raised $416 million over 16 fundraising rounds, according to Crunchbase. Venture firm Accel led the company's seed round in 2005, while Omidyar Network and Benchmark Capital were also big investors, according to CrunchBase. Now some of Prosper's venture investors are getting antsy for an exit, according to one person familiar with the situation. A deal would also be complicated by the fact that debt holders would likely have a say in any change of control, meaning Prosper needs to get a lot of people to agree, according to a second person. A tough time for the marketplace lending business The marketplace lending industry suffered an existential crisis in 2016 as the institutions providing capital largely stepped away, and LendingClub became embroiled in a scandal that brought a regulatory investigation, a precipitous share price drop and the resignation of its CEO. The valuations of the marketplace lenders never recovered. Prosper soldiered on, lining up a consortium of investors in 2017, who committed $5 billion to lend on the platform in return for warrants and other protections. In April this year, Prosper agreed to pay the SEC a $3 million fine to settle claims that it miscalculated returns of investor lending on the network. Prosper did not admit nor deny the findings. Join the conversation about this story » NOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.
2020 will likely be about big bets in payments, with processors either doubling down on all-in-one apps or opening up to more partners
Consulting firm Deloitte expects "big bets" from payments companies in 2020, and says they'll have to...Consulting firm Deloitte expects "big bets" from payments companies in 2020, and says they'll have to choose between "open" or "closed" strategies. Open strategies are all about zeroing in on a specific product, and then partnering with other companies. In a closed approach, a company is looking to build out a collection of its own products. "Ultimately, it's two strategic choices on how to serve the customer," Zachary Aron, US payments leader at Deloitte Consulting told Business Insider. Click here for more BI Prime stories. Next year will likely be marked by payments companies either going all in on all-in-one apps, or branching out as much as possible by opening their products up to partners, according to consulting firm Deloitte. Payments companies will have to choose between "open" and "closed" strategies to scale their businesses and grow their customer bases, a report from the firm said, which likely amounts to a big wager in 2020 on what people actually prefer to use and where their brand allegiances lie. "Ultimately, it's two strategic choices on how to serve the customer," Zachary Aron, US payments leader at Deloitte Consulting told Business Insider. Cross-border payments startup TransferWise has been working the open strategy. The UK-based fintech has a number of partnerships with other startups, like digital banks Monzo and Novo. Instead of going directly to TransferWise's website to make an international transfer, Monzo or Novo customers can use the TransferWise services within the banks' systems. On the other hand, Stripe and Square, which started as payments companies, are examples of the closed approach. They have launched several new products under their own umbrellas, including lending, fraud prevention, and payroll services. Open strategies are all about zeroing in on a product or piece of the payments space, and growing through integrations with other companies that want to offer that product to their customers. In a closed strategy, a company is looking to build a front-to-back collection of products. Aron said that the challenger banks are one group that is leaning toward the open model. "They're providing their own products and services, but there's a lot of integration and partnership going on," he said. Larger players like credit card networks also tend to be more open, given a core part of their business is to offer a platform to process transactions. The partnership-focused open strategy is a way for payments companies to grow their customer base without having to build new products. Instead, the companies use open APIs to integrate into another company's existing platform. These companies may be more adaptable to changing consumer needs. Mobile wallets, for example, require payments processing technology. From Starbucks to Apple, consumers have several options to pay with their phones. A payments processor with an open strategy could integrate with any digital wallet, regardless of provider. "If your customer oscillates on preferences, say they moved from wallet A to wallet B, you'll be able to plug and play that wallet into your platform," said Aron. By being wallet agnostic, an open strategy can mitigate the risk of losing business due to customers' behavior or preference. Read more: Cross-border payments startup TransferWise just inked its first US bank partnerships, including one with digital bank Novo. We chatted with its CEO about the launch, and why an IPO is still far off. But, Aron said, there are some drawbacks. Sitting within another company's app means the payments company gives up some of its control. "If you don't have the ability to influence or support all aspects of the customer experience, you aren't necessarily gaining the full economic value of that experience," Aron said. If a company wants to expand its suite of services without putting them on a partner's platform, it would choose the closed strategy. "You're able to design every element of that customer experience because you're controlling every aspect of that experience," said Aron. But it may be more challenging for closed-strategy companies to adapt to changing customer tastes, given the scale of their own products and platforms. Read more: The president of $20 billion Stripe explains the 3-pronged master plan as it opens a new service for small business loans Deciding factors Deloitte highlighted several ongoing trends that will help drive companies to decide between open and closed models. The economics of payments are changing. New fintechs are driving fees lower, which puts pressures on incumbents. There are also public-sector players that will influence the payments space. The Federal Reserve has announced its ambition to release a 24/7 real-time payments service called FedNow as soon as 2023. If the public sector is processing payments in real time, private providers will need to keep up. And companies will compete on more than just their simple payment processing capabilities — aside from price, there are differentiators that can win or lose customers. "It's not just the function of processing a payment," said Aron. "It's in different aspects, like trust and security, or the ability to do things that are customized." Whether closed or open, payments companies will likely need to deploy creative products to make money, according to Deloitte. "They may need to make strategic positioning choices on where to compete, what products/services to offer, and how to design their growth models to meet customers' ever-increasing appetite for innovative payments solutions," the report said.Join the conversation about this story » NOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.
Credit Karma is launching its first-ever savings account, but its CEO says it doesn't want to become the next neobank
Credit Karma is launching a high-yield savings account offering 2.03% APY. This is the first financial...Credit Karma is launching a high-yield savings account offering 2.03% APY. This is the first financial product it has offered, but CEO Ken Lin said at an event that "we don't want to be a neobank." Savings account yields in general have been falling, tracking the Federal Reserve's cuts to interest rates. Credit Karma has built its brand around credit score transparency and personal finance content for its more than 100 million users. Click here for more BI Prime stories. Credit Karma, known for helping people track credit scores and compare financial products, is now offering a more direct way for people to plug into savings accounts. It unveiled Credit Karma Savings, its first ever financial product, on Thursday. It will offer a high-yield savings account with no fees or minimum balance requirement, and roll it out to 90 million US customers later this month. The account is starting out with a 2.03% annual percentage yield — not the best on the market, but higher than the current national average savings rate of 0.09% according to the FDIC. But Credit Karma says it does not want to become a lender itself, and has no aspirations to become a digital bank. "We don't want to be a neobank, and we don't want to be a lender," said CEO Ken Lin at a press event on Thursday night. "You can't be unbiased and objective if you're providing the products you're trying to help your customers understand." Like fintechs offering financial products, Credit Karma is working with a partner bank — MVB Bank in this case. MVB will hold the funds deposited into the savings account and offer FDIC insurance up to $5 million. Using Credit Karma's existing network across over 800 banks, its savings rate will move competitively with the market, so customers won't have to monitor rates across banks to ensure they are getting a high rate. Read more: $4 billion Credit Karma's CEO reveals how a single meeting in 2008 saved the company from going under The $4 billion startup made its name providing free credit scores. It also provides financial advice and content, including lists of best credit cards, personal and auto loan recommendations, and unclaimed money searches. Credit Karma hopes that the product will appeal to their existing users, who may not understand the benefits of high-yield savings. The platform will include a savings simulator, where users can toggle recurring contribution amounts over time to see how their savings will grow. Leaning on its consumer-focused brand, Credit Karma could be well positioned to build out its banking consumer base using the high-yield savings, before venturing into other offerings like retirement products. With the Federal Reserve's recent rate cuts, the high-yield savings market has seen a decrease in APY across the board. Marcus by Goldman Sachs, which also offers a no minimum balance, no fee account, initially offered 2.25% APY, cut to 2.15% in July, then again cut to 2.00% in August. Fintech Betterment is offering up to 2.11%, if you get on the waitlist for their upcoming checking account. Competitor Wealthfront offers 2.07% on its high-yield account. Read more: Here's how the Fed sets interest rates and why it mattersJoin the conversation about this story » NOW WATCH: This is the shortest route for a road trip across the US to see 50 national landmarks
TransferWise, a fast-growing money transfer startup valued at $3.5 billion, just turned in a third straight year of profit
TransferWise, a UK-based money transfer startup, reported revenue growth of 53%, and post-tax income of $12.7...TransferWise, a UK-based money transfer startup, reported revenue growth of 53%, and post-tax income of $12.7 million for the year ended in March. That comes as some upstarts in the financial services industry have struggled to turn profits as they spend on scaling their businesses and adding products. International expansion is a top priority for the fast-growing fintech. Click here for more BI Prime stories. UK-based money-transfer startup TransferWise logged a surge in revenue and higher profit for the year ended in March, and is focused on international expansion. That comes as some other upstarts in the financial services industry struggle to turn a profit while keeping prices competitive and spending heavily on growing their businesses and adding new products. The cross-border money transfer firm was founded in 2011 and has consistently reported profits since 2017. UK-based neobank Monzo, for example, has reported wider losses even as its net interest income grows. This is a common theme, where hiring costs and product development slow profitability. TransferWise achieved its first profit six years after its 2011 launch. Even so, back in 2015, co-founder Taavet Hinrikus told Business Insider: "Profitability is something that on a market by market basis we're obviously looking at very carefully. As a business as a whole, we're happy to be not profitable for a while to come." TransferWise is backed by investors including Lead Edge Capital (which also backed Uber and Spotify), Andreessen Horowitz (early backer of Facebook and Lyft), Valar Ventures (backer of Stash and N26), and entrepreneur Richard Branson. To date, TransferWise has raised a total of $689 million, and was last valued at $3.5 billion as of May, following a secondary share sale. Read more: We spoke with MoneyGram execs about the company's push into digital P2P payments and how it's playing catch-up with Venmo Last year, TransferWise launched a borderless account and multi-currency debit card in partnership with Mastercard. Initially piloted in the UK, the account and debit card was rolled out to US customers in June. With 6 million customers globally, TransferWise processes $4.9 billion in payments each month. TransferWise charges fees around 1% for cross-border transfers, whereas the global average cross-border transaction fee is closer to 7%. TransferWise says that more than 20% of its transfers are delivered in less than 20 seconds. TransferWise said revenue jumped 53% revenue to $222 million for the fiscal year ending March 2019. Net income after tax was $12.7 million, up from $8 million in 2018. In Europe, TransferWise has established partnerships with BPCE Groupe, France's second largest bank, and UK-based neobank Monzo. In the US, the TransferWise borderless debit cards is the first product of its kind on the market, according to the company. TransferWise is competing with legacy US firms MoneyGram and Western Union, who are also working to streamline multi-currency P2P transfers. "International expansion has stayed at the top of our agenda," CEO and co-founder Kristo Käärmann in a statement. In June, Western Union announced a partnership with Visa Direct to provide direct to Visa debit card cross-border transfers. Last week, MoneyGram announced a similar partnership with Visa, focusing first on US transactions before expanding to multi-currency P2P transfers.Join the conversation about this story » NOW WATCH: What El Chapo is really like, according to the wife of one his closest henchman