After almost three decades of ever-increasing disruption in financial services, the fintech sector seems poised to continue its remarkable run in 2020. Mohamed Dabo looks at ten startups in the space that are showing potential for real breakthrough in the coming year.
The global fintech ecosystem continues to mature at an accelerating pace. The fintech phenomenon, which began to flourish in the 1990s when internet and e-commerce business models arose, now practically defines the financial industry.
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The technological innovations that forced a shift in traditional financial services, reshaped consumer demand, and compelled an industry to re-evaluate the way it does business will continue to step up in 2020.
Ambitious and promising companies will continue to emerge, helping businesses and consumers to better manage their financial operations and processes.
New global tech hubs will continue to crop up. Favourable regulations will be further tailwinds, as authorities everywhere seek to foster growth in the sector.
More money will continue to flow into the industry, as public and private sector banks look to maintain their competitive edge amid growing competition and shifting consumer preference.
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By GlobalDataAnd there’s every reason to expect another record year for deals and financing in 2020.
Pioneers across the globe
Meanwhile, the fintech phenomenon has gone global. The locations of the ten companies we came up with after an exhaustive search of the field bears that out. These innovative companies at the crossroads of technology and financial services practically span the globe.
One thing that the vibrant startups we feature in common is the potential to make considerable difference in their respective field of activity. To attract more customers, more funding, and to continue their disruptive innovation.
Among them are avant-garde businesses bent on bringing millions of unbanked populations into the global financial system. These fintechs are in China, Latin America, and Africa. One company is out to make insurance simple, transparent, and accessible to everyone in the Middle-East.
Another one is leveraging big data in a bid to fight the scourge of financial crime. Yet another makes easily accessible loans to millions of consumers and small businesses shunned by traditional lenders.
All of the following fintech hold the promise of making life easier for their users, and potential profits for investors. In short, they are all disruptive innovators prepared to rattle their corner of the financial industry in 2020.
The hottest emerging startups
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Look Who’s Charging (Australia; founded: 2016)
This fintech startup from Sydney, Australia helps banks and consumers identify who has charged their credit cards.
It’s estimated that more than 1.5 billion card transactions are not recognised by British and Australian consumers each year. The fintech company uses a proprietary search engine to go through a multitude of data sources and unearth copious merchant details on transactions.
It does this for over 95% of the 13.5 million transaction descriptions per credit card statements in the Australian market.
The service therefore provides rich information on Australian merchants based on the 40-character Transaction Descriptions which appears on bank statements.
Limited information
One reason card holders don’t recognise transactions is that the information provided to them is limited. Often, this is little more than the name of the store or even its parent company, which may be unknown to the customer.
As time goes on, the card holder’s ability to reconcile transactions for specific purchases diminishes. This common confusion results in millions of wasted hours by card holders every year. It also means millions of phone calls and bank branch visits and millions of unnecessary chargebacks.
The information provided by Look Who’s Charging improves a bank’s ability to quickly recognise fraudulent transactions and to understand how and where their customers are spending money.
Banks therefore use the data to improve fraud detection and prevention algorithms, as well as to understand customer spending patterns. Companies also use the data to keep track of business spending on corporate cards.
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Anyfin (Sweden; founded: 2017)
Anyfin allows anyone to competitively consolidate and refinance their existing loans or credit cards. The startup pays off your old debt and issues a new loan with better terms. It earns money from interest on the loan.
Anyfin uses AI, publicly available consumer data, and a photo of the client’s existing loan statement and payment history, to provide a more complete picture than credit score alone, the main data point of most original lenders.
The company was formed by former employees of major Swedish technology companies (iZettle, Klama, and Spotify) with experience in risk assessment, credit, and technological development. They are specialists in design and programming, artificial intelligence, and credit counselling.
Big impact in the Swedish market
Since its founding, the company has helped thousands of debtors in Sweden by lowering their interest rates on consumer loans by an average of 50%.
Anyfin is only available in Sweden, with ambitions for wider European presence. “Fixing mispriced consumer credit represents a €24bn revenue opportunity in Northern Europe alone,” said Gareth Jones of fintech Collective.
Aside from a better rate, the terms of the existing loan mirrors those of the original contract.
“Unsecured consumer credits are growing at an increasing rate,” says Anyfin founder and CEO, Mikael Hussain. “Most customers are paying far too much interest on these loan—often, in excess of 25% annually on part-payment of credit cards, even for those with good credit scores.
Notable investors into the startup include Northzone, Accel, and Global Founders Capital. In mid-2019, Anyfin raised €8m in an extended Series A round, after taking in €4.8m in February.
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WeBank (China; founded: 2014)
WeBank is a digital bank that makes loans to small businesses and individuals.
The Shenzhen-based company offers small loans and investment products through its online platforms. It uses facial recognition security software, and is the first online-only bank approved by Chinese regulators.
While China now has the world’s second-largest economy, and some of the world’s biggest banks in terms of asset, the country is also home to the world’s largest unbanked population. An estimated 225m adult Chinese currently lack a bank account.
Small and medium sized companies also find it difficult to access financing. This fact is behind the growth of shadow banking and alternative financing.
WeBank was launched with the aim of providing “affordable, accessible, appropriate, sustainable to consumers and businesses” whose need are not met by incumbent banks.
Leveraging Tencent’s resources
WeBank’s largest shareholder is the global Chinese tech company Tencent, with a 30% equity stake. The new startup quickly leveraged Tencent’s ecosystem, technology, and R&D resources to develop a disruptive credit profiling system.
Its Wei Li Dai financial product was the first in China to provide consumers with a complete online lending process, from application and approval to the provision of funds.
Borrowers are not required to provide collateral for credit. They only need to provide their identification numbers and mobile phone numbers to obtain consumer loans of between 500 and 200,000 yuan (£55 to £22,000).
The product has achieved immense popularity across China. WeBank continues to leverage the vast user base of Tencent WeChat and QQ social media and messaging platforms.
With its large potential customer base, WeBank has plenty of room to scale up, grow it revenues, while driving financial inclusion.
China’s national blockchain network has tapped WeBank to be the first infrastructure provider for the network. WeBank will provide its Blockchain-based Service Network (BSN) with its patented open consortium chain FISCO BCOS.
Rather than a single blockchain, the consortium is a set of blockchain applications to serve the general public, according to the company.
Welcoming foreign investors
The Shenzhen-based consortium has announced that as part of its efforts to go global, it has opened up its observatory membership to foreign companies. The move was largely welcomed by participants who have particular interest in leveraging blockchain technology to offer innovative business solutions in their respective fields and markets.
All four of China major tech players (Alibaba, Baidu, Tencent, and JD.com) have made incursions into financial services. Between them, they have tentacles in banking, broking, insurance, payments, consumer finance, and wealth management.
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Aqeed (United Arab Emirates; founded: 2017)
Aqeed is an insurance technology company that aims to make insurance simple, accessible, and transparent.
The company claims customers can compare, customise, and buy insurance in less than two minutes.
In mid-2019, the Dubai-based startup came up with cloud-based tools, Aqeed Sales and Aqeed Broker, to assist insurance brokers online.
The company describes Aqeed Sales as a Shopify-like platform SaaS that enables offline insurance brokers to set up their own digital store and sell insurance online.
Aqeed Broker, on the other hand, will supplement the front-end store, serving as a back-end tool. It will enable insurance brokers to manage policy issuance, verify documents, update policies, add new products, and manage renewals.
Ambitions for a technology nerve center
The United Arab Emirates (UAE) is striving to position itself as a the fintech nexus in the Middle East and North Africa (MENA) region. The country has launched its National Innovation Strategy, a nationwide initiative aimed at creating an innovation-friendly ecosystem.
Fintech is expected to play a key role in the project. In 2016, Abu Dhabi launched its Regulatory Laboratory (RegLab) with the implementation of its fintech legislative framework. The RegLab is a tailored regulatory regime designed for fintech participants.
The goal is to foster innovation within the UAE financial services markets. The legislation seeks to entice new entrants and encourage existing financial institutions.
In January 2019, Aqeed used an $18m funding from its corporate backers to expand into the crowded space of cloud-based HR software. The new AI-powered platform, Aqeed People, allows small and medium-sized businesses to manage their insurance, payroll, and human resources, all in one place.
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Cellulant (Kenya; founded: 2004)
Cellulant is a one-stop payments system operating in 34 countries across Sub-Saharan Africa. Operating from a single, connected payments platform, the company claims to process 12% of Africa’s digital payments.
Customers use the system to pay for utilities, phone and internet airtime, or to do shopping.
Cellulant also provides a secure end-to-end payments channel for merchants. It allows any user to pay for merchant services any time. The merchant is able to track any income payments, using a robust invoicing, billing, payment, reconciliation, and reporting infrastructure.
Cellulant provides access to a variety of payments channels. These include point of sale terminals (POS), ATMs, Cards, Agent network, USSD, SMS, and checkout APIs for ecommerce.
Digital banking
Cellulant allows banks and other financial institutions to reach customers. The fintech offers services such as balance inquiries, bank-to-mobile-wallet transfers, and funds transfers through mobile phones.
It also provides to the financial institutions agent management and service modules. This provides access to previously unbanked communities at much lower costs.
Remittances
The Cellulant wallet enable the dispatch of funds to multiple recipients from a single point of interaction. From there, the user can track, audit, or modify disbursement activities.
The remittance function also has activation services. Businesses and marketers can use these to send customised messages to large target groups.
Neighbourhood agency banking
The company said it’s building a network of neighbourhood agents in underserved communities.
“These will become de facto banking service points in the communities. They will allow people to send and receive money digitally, using just their mobile phone number and without leaving their neighbourhood,” Cellulant said.
It said the agencies will be equipped with payments instruments, such as cards and mPOS devices, making bill payments, funds transfers and peer-to-peer transfers that would make life easier.
Cellulant and other fintechs in Sub-Saharan Africa are on the cusp of a major economic and societal transformation. As millions of unbanked citizens get integrated into the formal final system, huge benefits ensue for the communities and the businesses that cater to them.
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Quantexa (United Kingdom; founded: 2016)
Quantexa is a big data analytics company that drives actionable intelligence in the fight against financial crime and provides customer insight.
The fintech enable companies and institutions to make better decisions from their data. Quantexa’s technology uses real-time entity resolution with network analytics and AI to knit together vast and disparate data sets.
The startup is run by a team of experts in advanced analytics and data-focused solutions. Quantexa operates globally, with offices in the UK, Brussels, New York, Boston, and Sydney.
The company has been busy developing its technology, building partnerships, and growing.
Rounds of financing
In August 2018, it raised $20m in a Series B financing to finance more international expansion. The round was led by Dawn Capital, a European tech venture fund. Return backers were HSBC and Albion Capital. As part of its growth strategies, Quantexa also used part of the funds to develop its technology.
Norman Fiore, general partner at Dawn Capital, said Quantexa “provides valuable insights for clients across a myriad of industries from money laundering to credit risk, through to human trafficking and customer acquisition.”
Strategic partnerships
Professional services firm Accenture has partnered with and made a minority investment in Accenture. As part of the agreement, Accenture will build new capabilities combining its technology and risk expertise with Quantexa network analytics platform.
Adam Markson, managing director of Accenture Finance and Risk Services, commented: “This alliance further enhances our financial crime analytics utility, which will help prevent the movement of illicit funds that enables real-world issues, including human trafficking and drug crime.”
Under the agreement, Accenture financial crime analytics utility, a data analytics-as-a-service platform, will help train and refine Quantexa’s dynamic network analytics models.
Standard Chartered Bank also sought to boost its financial crime detection systems by partnering with Quantexa.
The agreement would allow Quantexa to support Standard Chartered’s anti-money laundering (AML), anti-fraud, and counterterrorist financing (CTF) through the use of dynamic entity resolution, network analytics, and contextual data.
Quantexa’s revolutionary technology is based on the latest development in big data software. According to the company, “it’s a sustainable and scalable technology that evolves with the market”.
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BlockFi (USA, Founded: 2017)
BlockFi is a New York-based non-bank lender that gives USD loans to cryptocurrency holders. The fintech provides not only loans, secured by cryptocurrency assets, but also interest-bearing accounts.
In other words, BlockFi enables clients to make their cryptocurrencies work for them. Clients can earn interests on their digital assets. By using them as collateral, they can also borrow funds for investment and other uses.
The cryptocurrencies used as collateral are held at BlockFi. BlockFi’s services are used by both individuals and businesses.
How to earn interest on Crypto
BlockFi’s interest-account clients can deposit their Bitcoin (BTC), Ethereum (ETH), or Gemini Dollar (GUSD) and earn up to 6% annually. Payable monthly, the interest compounds, increasing annual yield up to 6.2%.
This means that a client who deposits 1 BTC on January 31st will have an updated balance of 1.005 BTC at the end of February. The process repeats month after month, until the client decides to withdraw their funds. If the interest rate and deposited crypto’s price remain unchanged, the client’s holding will increase to 1.062 BTC (or +62%) over 12 months.
If the client adds additional crypto to your BlockFi interest account, your interest will compound on the new balance.
One interest account option is the Interest Payment Flex. It allows clients, if they so wish, to have their compound interest paid out in a different asset than the one they deposited. With Flex, clients can hold BTC, ETH, or GUSD in their account and get their interest paid out in the currency of their choosing.
This allows clients to easily diversify their assets without having to buy new crypto.
How does BlockFi make money?
BlockFi generates interest on assets held in interest accounts by lending them to trusted institutional and corporate borrowers.
To ensure loan performance, BlockFi typically lends crypto on over-collateralised terms (similar to the structure of the crypto-backed loans the fintech gives out). In addition, BlockFi’s automated risk management system monitors positions around the clock.
Client funds are structured to be at the top capital structure, senior to BlockFi equity and BlockFi employee capital. This means that the fintech would take a loss before any client would.
However, BlockFi warns: “BlockFi implements very thoughtful risk management practices and technology to mitigate the risk, but you should not view the BlockFi interest account as a savings account or brokerage account with FDIC or SIPC insurance.”
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Wallets.africa (formerly Wallets.ng; Nigeria; founded: 2016)
Wallets.africa is a digital wallets and payments platform that allows people to conduct a variety of financial transactions.
A smart banking alternative, the Lagos, Nigeria-based fintech makes transactions fast, convenient, and accessible to businesses and consumers across Africa.
It provides a service paired with a prepaid debit card. It also enables users to track their transactions, classifying them into various categories.
The digital payments app enables people to send and receive money, using their mobile phone number. It also enables permits to use virtual dollar cards to conduct international transactions.
Wallets.nigeria announced in June 2019 that it had changed its name to Wallets.africa to reflect the growing scope of its business. “Wallets.africa is a borderless digital bank that helps Africans transact seamlessly across the continent using any currency of their choice,” the company said.
With the advent of mobile wallets in Africa, people are now able to send and receive money from their loved ones, by simply using their mobile phones. For the large number of African expatriates living and working overseas, it brings a much-needed convenience into a process that’s otherwise costly and complicated.
Across the continent, people are now using mobile wallets to pay for bills, utilities, and shop for items ranging from groceries to clothes to electronics.
Some businesses have even started paying salaries via mobile wallets.
Interestingly, Africa is said to be the birthplace of the mobile wallet phenomenon. Mobile wallets were originally designed to allow microfinance repayments to be made by phone. The intent was to reduce the cost of handling cash, and make payment easier for microfinance debtors.
Mobile wallets have since evolved and are becoming increasingly indispensable to many individuals and businesses throughout Sub-Saharan Africa.
Wallets.africa has tapped into a phenomenon with breathtaking potentials. The Nigerian payments startup has secured international partners such as Interswitch, Flutterware, Microsoft, and system Specs.
The fintech’s focus has been to increase efficiency and lower costs.
“The major gap in the market was poor service delivery by banks. Often prioritising profit over meeting actual needs of customers,” said Wallets.africa founder John Oke. “Wallet seeks to empower everyday customers and small and medium-scale businesses by providing access to loans, escrow services and seamless subscription payments.”
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Kyber Network (Singapore; founded: 2017)
Kyber is a decentralised, peer-to-peer crypto-asset exchange based on the Ethereum blockchain. It is an innovative system that allows the exchange and conversion of digital assets.
The startup describes itself as an “Ethereum-based protocol that allows the instant exchange and conversion of digital asset (e.g., crypto token) and cryptocurrencies (e.g., Ethereum, Bitcoin, ZCash) with high liquidity”.
The system provides rich payment APIs and a new contract wallet that allows anyone to seamlessly receive payments from any token. Users can also mitigate the risks of price fluctuations in the cryptocurrency world with their derivative trading.
Kyber’s on-chain liquidity allows decentralised token swaps to be integrated into any application, enabling value exchange to be performed seamlessly between all parties in the ecosystem.
The Kyber Network’s promised of liquidity and bookless makes it an easy sell.
In short, Kyber is much like the Ox Project but instead performs all of its actions on the blockchain.
Kyber compared to the Ox Project
The major differentiating factor between Kyber Network and Ox is that the Kyber Network records exchanges on-chain, while leaving the order book off-chain. Ox, on the other hand, keeps both the order book and exchange off-chain.
Other than that, both exchanges operate very similarly. They are also separate from centralised exchanges like Coinbase and Binance.
Kyber Network roles
The following functions helps to understand the universe of the Kyber Network.
Users send and receive tokens to and from the network. They can be individuals, merchants, or smart-contract accounts.
Reserve Entities bring liquidity to the platform. They can be internal or hosted by a registered third party. They are classified as public or private, depending on whether or not the public contributes to their reserves.
Reserve Contributors provide funds to the Reserve Entities. They are only associated with public Reserve Entities and share the profits from the reserve.
The Reserve Manager maintains the reserve, calculates exchange rates, and enters them into the network.
The Kyber Network Operator adds and removes Reserve Entities. He also controls which tokens are listed. Initially the Kyber team will play this role, but eventually, it will switch to a proper decentralised governance.
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Tpaga (Colombia; founded: 2015)
Tpaga is an online wallet for the unbanked. It allows customers in Latin America to store money via cash kiosk and then use it to pay for utility bills, mobile phone top ups, groceries, and even petrol station merchants.
Tpaga is currently available in Colombia and Mexico. The startup has become the first mobile wallet in Latin America to allow users to pay for grocery without having a bank account. It now allows unbanked businesses to start receiving payments without a POS system.
In Latin America, more than 50% of the population do not have either credit card or bank account. On the other hand, nearly everyone has a mobile phone.
Partnerships
Tpaga has been growing, and building its partnerships in the region.
In Colombia, it has teamed up with a taxi company to enable passengers to make electronic payments via e-wallets. According to one study, less than 5% of an estimated 800,000 taxi drivers in the country accept credit cards or electronic payments. The main reason: lack of payment terminals or bank accounts.
On Tpaga’s app, money can be instantly wired to a cabby’s e-wallet. Money on the platform can also be used to pay for other things like public services.
Tpaga’s partnership with Buda, a local cryptocurrency exchange, possibly turned out to be a life saver for the latter.
Buda.com’s users were unpleasantly surprised to realise they had limited access to transactions on the platform. As it turned out, Buda’s bank account had been closed, so crypto-trade was no longer possible.
Apparently, local banks took it upon themselves to close accounts linked to cryptocurrencies. The motive behind this move was an old government notice that warned of the risks of crypt-trade. The notice, however, did not order banks to act as they did.
Thanks to its alliance with Tpaga, Buda was still able to allow crypto-trading on its platform, while negotiations with Colombia’s Financial Superintendence continued.
Tpaga has undergone at least seven rounds of financing. Notable investors include Y Combinator, Toro Ventures, Hack VC, Greyhound Capital, and Green Visor Capital.
