Good morning! FINTECH BRIEFING is delivered first thing every morning exclusively to Business Insider Intelligence members and BRIEFING subscribers.
REVOLUT MAY BE IN TROUBLE OVER NEW SECURITY CONCERNS: UK neobank Revolut, which has onboarded over 4 million customers since its launch in 2015, has been accused of failing to block potentially suspicious transactions on its platform, according to the Telegraph. From July to September of last year, Revolut turned off an automated system designed to stop dubious money transfers, which could have resulted in illegal transactions passing through the bank's system. Revolut internally investigated the issue in late 2018, but only after a whistle-blower contacted Revolut's board about it. Tom Hambrett, head of legal at Revolut, told the UK's Financial Conduct Authority (FCA) in September 2018 that its internal investigation concluded that the decision to turn off the transaction-halting mechanism was a mistake.
- Revolut's system to detect illegal transfers was switched off after it wrongfully blocked transactions. Revolut decided to turn off the system after it made 8,000 false positive flags, resulting in legal transactions being blocked. It then changed to a compliance system that flags transactions, but doesn't automatically disable them. On September 16, 2018, Revolut reactivated its previous system, and has since then introduced a completely new one. While the neobank contacted the FCA about the incident, it doesn't believe that it's broken any laws.
- This is not the first time Revolut has raised security concerns. In July 2018, the neobank had to inform the National Crime Agency (NCA) and the FCA about suspected illicit activity on its platform. This has raised questions about whether Revolut's compliance checks are sufficient, with the latest incident only reinforcing these concerns. Additionally, this turmoil comes amid the government bodies in Lithuania calling for an unprecedented third investigation into the bank after granting it a banking license last year.
- Revolut has struggled to retain employees, especially compliance employees, which could have left it more vulnerable to illegal activity. Eighty percent of 147 former Revolut employees worked for the neobank for less than one year, per analysis from Wired. Additionally, Revolut lost two chief risk officers, its chief compliance officer, and two money laundering reporting officers over the past two years, according to the Telegraph. Further, it was reportedly trying to hire its third head of compliance in 18 months in August last year, per The Times. Revolut's lack of compliance talent in particular could suggest the neobank struggled to safeguard against illicit activity, making it more susceptible to suspicious transfers.
Even if the FCA decides to not take action in response to the latest incident, Revolut would be wise to up its compliance processes. The fact that Revolut had to reach out to regulators twice in one year about security concerns indicates that it's been struggling with compliance. Even if it will not be fined by the FCA for this incident, its reputation and consumer trust will likely suffer under the allegations. Additionally, the FCA is still investigating a marketing campaign from Revolut, which may have misled consumers regarding the use of their data in an ad. With new neobanks cropping up regularly alongside many established players, including Monzo and N26, Revolut risks losing customers to the competition if it doesn't realign its strategy to retain employees, prioritize compliance, and ensure that it remains sensitive to consumers' data-privacy concerns before launching its next ad campaign.
FIGURE TECHNOLOGIES RAISES $65 MILLION: US-based blockchain lending startup Figure Technologies secured $65 million in a Series B funding round led by RPM Ventures, per a press release. This puts its total equity funding to date at over $120 million. Figure offers a fixed-rate home equity loan product, allowing clients to borrow against the equity in their homes, and has funded more than 1,500 loans across 36 states over the past six months. It also offers an alternative to reverse mortgages, dubbed Figure Home Advantage. The startup originates, finances, and sells its loans on blockchain, enabling it to approve home equity loans in as little as 5 minutes, while funding can be released within five days compared with the 45-day process traditionally required by lenders.
Figure will use the funds to expand its product selection and better educate customers, which will likely spur growth. The lender is planning further use cases on its blockchain platform, such as investment funds, for this year, while a number of other originators are expected to use its distributed stakeholder blockchain by mid-2019. Figure is also working to improve its financial education tools, which is a good initiative since it's conventionally easier for individuals to qualify for home equity loans — because homes are being used as security — and it's important for customers to understand the product and whether it's a good financial decision for them. By leveraging blockchain technology, the startup is able to offer a better consumer experience, speed up the application process, and significantly cut fees, while investing in financial education resources empowers individuals to make smart decisions. Educational resources are gaining popularity among fintechs and represent an opportunity for Figure to increase traffic on its website and attract more clients to its products.
Not a Business Insider Intelligence subscriber? Check to see if your company has access.
N26 TO EXPAND TO BRAZIL: Germany-based neobank N26 plans to expand its services to Brazil, according to Reuters. N26 is already live in 25 European countries, with 2.5 million customers, and it's gearing up to launch its services in the US this year. Eduardo Porto will be the general manager of its Brazil office, after previously working for Santander and other startups, per TechCrunch. The neobank will partner with a local bank in Brazil to offer banking services, and has not yet applied for a Brazilian banking license. N26 will have to compete against the country's local neobank Nubank, which already has over 5 million customers. However, given that Brazil has a population of over 209 million, with 55 million unbanked consumers, it seems likely that there will be enough demand for more than one neobank to flourish. Other fintechs, including US-based corporate credit card provider startup Brex, are eyeing Brazil for expansion plans, suggesting that the country's fintech industry is heating up.
UK CAR INSURTECH BY MILES RAISES $6.65 MILLION: UK-based insurtech By Miles, which focuses on car insurance, has raised a £5 million ($6.65 million) Series A funding round led by Octopus Ventures, per Intelligent Insurer. Additionally, existing investors including JamJar Investments and InMotion Ventures committed further investments. The fresh capital will be used to develop in-app claims handling and to roll out more car insurance products. By Miles targets infrequent drivers and uses Miles Tracker, which is installed in a user's car, to track how much someone drives. Users pay a set fee annually, and then pay an additional fee for each mile they drive, which can be relatively inexpensive for those driving under 7,000 miles a year. There are 19 million drivers in the UK who drive under 7,000 miles a year, per By Miles, but still have to pay the same amount for insurance as those who drive more regularly, suggesting that By Miles has a large addressable market and will likely see high demand.
LATEST RESEARCH FROM BUSINESS INSIDER INTELLIGENCE:
Fintech valuations hiked up in 2018, and this will greatly affect IPOs this year. Fintechs continue to struggle to match large valuations, they'll likely be cautious about going public in the coming year. Read (Premium Subscription Required) »
The top 11 fintech investments of 2018 accounted for 47% of total funding globally. Fintech mega-rounds, consisting of investments of over $100 million, totaled $24.9 billion across 52 deals. Read (Premium Subscription Required) »
Incumbents can appeal to SMBs by focusing their Open Banking services around financial management. While the offerings that resulted from the regulation are still limited, it seems that a number of small- and medium-sized businesses (SMBs) would engage with such services. Read (Premium Subscription Required) »
Tidak ada komentar:
Posting Komentar