Fintech

Troop rallies retail investors to get out the proxy vote • ZebethMedia

By zebethcontrolPosted on November 2, 2022Posted in ESG, Fintech, shareholder activism, StartupsNo Comments

Retail investors entered the stock market in droves over the past couple of years. Much ink has already been spilled analyzing competition between fintech companies such as Robinhood and Public.com to capture these new customers. But there’s another implication of this trend that’s less obvious: these new investors also have the power to introduce and vote on shareholder proposals that can shape the trajectories of publicly-traded companies. It’s a classic David-and-Goliath battle, though, as retail investors typically don’t stand a chance in organizing around their interests when they are going up against the behemoth fund managers that tend to hold the majority of shares in large, public companies through indexes. Troop, a New York-based startup, is optimistic that the balance of power can shift. Troop cofounders Seb Jarquin, Felix Tabary, Zen Yui Image Credits: Troop The company just announced it raised a $4.3 million seed round co-led by Northzone and BlockTower Capital for what it calls a “collective bargaining platform for everyday investors.” The raise brings its total funding to $6.1 million to date ahead of its private beta launch slated for later this month, co-founder and CEO Felix Tabary told ZebethMedia in an interview. Tabary started his career as a salesperson at Bloomberg, where he covered activist hedge fund clients. That experience opened his eyes to how shareholder advocacy can enact change at large companies, he said. The first time he thought to bring those tactics to retail investors through a new tech platform occurred years later in 2021 after small activist firm Engine No. 1 mobilized some of ExxonMobil’s largest shareholders to fill two of the company’s board seats with directors who were more conscious of climate risks. “Despite only owning a tiny bit of that company, they were able to kind of wrangle together a really interesting coalition to kind of push the company in the direction of sustainability for environmental and economic reasons,” Tabary said. “Motivated by seeing what was possible on the institutional level, and inspired by what happened in the Gamestop story, we figured, what can we do to combine these?” The ExxonMobil campaign was a watershed moment for socially-conscious activist investors. This year, the number of ESG (environmental, social and governance) proposals filed by shareholders at S&P 500 and Russell 3000 companies has surged. It’s quite uncommon today for retail investors to actually vote on proposals, though. Tabary and his co-founders, Seb Jarquin and Zen Yui, along with their 15 employees, are betting that building a stronger community of investors can lead to a more robust flow of information and therefore encourage a higher level of retail investor engagement. Troop’s platform seeks to take advantage of this trend by providing a home for retail investors to interact with one another where they can remain anonymous, but their shares are still verified on the platform, Tabary explained. Once users connect their brokerage accounts to the Troop app and become verified, they can connect with an “influential community of verified shareholders” to vote collectively on polls and campaigns that could eventually translate into formal shareholder proposals. “If you look at the landscape today, there really aren’t that many practical ways to align your finances, your personal wealth, your portfolio, your 401k, you name it, with, strictly speaking, your values, in a productive, impactful, measurable way. [Shareholder voting], I think, is a really concrete lever to try and hold companies to the best and highest possible standards,” Tabary said. While the tech is still in the early stages, Tabary said Troop’s plan is to monetize through B2B revenue by selling its platform to professional activist investors. “Professional activist investors are doing more and more activism, but they’re taking smaller and smaller stakes in the companies that they’re targeting, which means they need to build broader support from a larger number of people,” he said. There are some prominent firms such as ISS and Glass Lewis that provide proxy voting advisory services to institutions but haven’t historically focused on retail investors, Tabary explained. Publicly-traded fintech Broadridge, he added, is another player that does have a consumer-facing platform to aggregate proxy votes but in Tabary’s view, the company is constrained by highly specific rules that limit its ability to incentivize shareholders to actually vote. As a young upstart, Troop may have more latitude to experiment with different strategies to get retail investors on board. Ultimately, retail investors could end up making a decisive difference in important proxy votes, according to Tabary, which is why Troop is so focused on bringing them into the conversation. “The bulk of shareholder activism happens six to nine months ahead of the annual shareholder meeting, and it starts with small, incremental coalition-building. What we’re trying to do is very consciously build out the retail portion of that coalition that typically tends to only be involved at the very end to make up the 5-6% difference in vote swings,” Tabary said.

Upstart lays off 7% staff amid weakening demand for loans • ZebethMedia

By zebethcontrolPosted on November 1, 2022Posted in Fintech, Layoffs, UpstartNo Comments

Lending giant Upstart has laid off about 140 employees — or 7% of its total workforce — who help process loan applications, sources told ZebethMedia. The cloud-based AI lending platform notified its affected employees about the layoff on Tuesday. Upstart had about 2,000 employees, according to the company, which confirmed the layoffs. “Given the challenging economy, we are making this difficult decision for the long-term health of the company. We do not expect any further layoffs, and continue to hire for roles that are strategic to our business,” Upstart spokesperson Mike Nelson said in a statement. Upstart said in its latest 8-K filing with the U.S. Securities and Exchange Commission that the decision was due to ongoing economic challenges and the “reduction in the volume of loans” on its platform. However, the company would not confirm the exact drop in its loan volumes. In its last quarterly results in August, the California-based company reported a 72% annual increase in loan volumes on its platform from 456,610 in the first half of 2021 to a total of 786,675 in the same period a year later. The earnings for the third quarter are due on November 8. Upstart is facing difficulties owing to weakening demand for loans in the U.S. due to significant hikes in interest rates by the U.S. Federal Reserve to cope with the global rise in inflation. The company’s share price dropped by 84% this year. Upstart was trading at $22.88 in afternoon trading on Tuesday. The market cap of Upstart rose to nearly $32 billion at one point after its public debut in November 2020. Since, the company’s total stock value dipped to less than $2 billion earlier on Tuesday. Unfavorable economic conditions have not only impacted the lending industry but also many technology companies around the globe. Telehealth unicorn Cerebral, online real estate marketplace Zillow, and SurveyMonkey parent Momentive Global have all laid off employees in recent weeks. Companies including Netflix, Spotify and Tencent also made similar decisions. Indian startups such as Byju’s and Ola have also sacked their employees amid the dip in funding and investments.

Retirable secures $6M to plan retirement for those without millions in savings • ZebethMedia

By zebethcontrolPosted on November 1, 2022Posted in Fintech, retirement planning, Startups, VentureNo Comments

Retirement plans are usually made by people who feel they can actually quit their jobs at a certain age and have enough money to maintain their lifestyle. But what about those who don’t? Several fintech startups are tackling this problem, including Retirable, which believes that retirement planning should be just as easy to get even if you won’t ever have millions of dollars set aside. The New York-based startup describes itself as a “first-of-its-kind holistic” approach to retirement planning. Building off of a 2019 study by TransAmerica Center that found only one in five workers has a written retirement strategy, the company provides similar offerings to other retirement planning companies: a dedicated advisor and products and services for investing, planning and spending. But that’s where co-founder and CEO Tyler End says the similarities end: not only is it focused on lower net-worth individuals, but it also went all in on retirement “decumulation.” It does this by allocating an individual’s assets into three buckets: cash, stability and growth. The client can see what their income is in real time and how much is safe to spend each month. It also applies this same logic to investments and is working on a debit card that gives cash back into savings. The company offers a free consultation to Americans aged 50 years and older and prices its service at 0.75% on the first $500,000 of managed assets, and nothing after that. End said that translates into roughly 63 cents for every $1,000 managed, which is lower than comparable advisory services. Retirable’s asset allocation dashboard. Image Credits: Retirable “Big players might offer call centers to have somebody help you with your account, but we’re the only ones giving you a dedicated advisor that you can trust that will work with you on your plan that is fiduciary, meaning no commissions,” End told ZebethMedia. “You see a lot of people start with a mission similar to ours of helping everyone, but when people are incentivized to sell, they generally drift in the direction of higher net worth.” End founded the company in 2019 with Ian Yamey and Brian Ramirez, and together with their 15 employees, Retirable built proprietary technology that has designed more than 50,000 retirement plans. A month ago, the company launched its investment management and paycheck products and has started matching its customers with planners. Retirable also grew its revenue by over 25% month over month. Today, the company announced $6 million in additional venture-backed seed funding to give the company $10.7 million in total investment to date. The round was led by Primary and included Vestigo Ventures, Diagram, Portage and Primetime. End said the new funding will be used to accelerate the development of the debit card, continue to grow the advisor team and add new distribution channels, for example, working with Medicare agents, tax planners and estate planners. “One of the interesting things about this demographic is that some people spend way too much way too early,” he added. “When you’re really active in retirement, spending fluctuates as you age. What this debit card does is give both the consumer and the advisor insight into spending amounts and where the money is being spent. Then from that, we can offer discounts on top of savings. It’s a first-of-its-kind of product.”

Cinven snaps up tax preparation software provider TaxAct for $720M • ZebethMedia

By zebethcontrolPosted on November 1, 2022Posted in Apps, Cinven, Drake Software, Fintech, TaxACTNo Comments

London-based private equity firm Cinven has acquired online tax preparation software provider TaxAct in a deal worth around $720 million. TaxAct offers a range of online tax tools and products, targeting individuals, small businesses, and professional tax preparers. The company’s history can be dated back nearly 25 years, when it was founded out of Cedar Rapids, Iowa, initially as 2nd Story Software. In the intervening years, it expanded to the cloud and was eventually acquired for $287.5 million by Blucora (then known as InfoSpace) in 2012 before officially changing its name to TaxAct the following year. Cinven, for its part, has been on something of a buying spree of late with some five acquisitions to its name in the past year alone. However, Cinven has also become embroiled in controversy after the U.K.’s competition watchdog issued it with several multimillion dollar fines over price-gouging practices involving drugs sold to the NHS. Separately, Cinven also invested an undisclosed amount in another tax preparation software company called Drake Software back in 2021, with Cinven now planning to push both Drake and TaxAct together into a new holding company that will serve as a single entity spanning professionals and consumers. The transaction is expected to close by the end of this year, with both Drake and TaxAct continuing to operate under their own brands and their current CEOs remaining at the helms.

Cover Genius lands $70M infusion to grow its embedded insurance business • ZebethMedia

By zebethcontrolPosted on November 1, 2022Posted in Commerce, Dawn Capital, Fintech, insurtech, King River Capital, startupNo Comments

In 2014, Angus McDonald, the former head of publisher partnerships at Yahoo (full disclosure: ZebethMedia’s parent company), teamed up with ex-Googler Chris Bayley to found Cover Genius, an insurtech platform that prices and handles claims for virtually any line of insurance or warranty. After expanding the business to all 50 U.S. states and more than 60 countries, Cover Genius is gearing up for its next phase of growth, McDonald says, fueled by significant fresh capital. Cover Genius today announced that it raised $70 million in a Series D round led by Dawn Capital with participation from Atlas Merchant Capital, GSquared and King River Capital. Bringing the 420-person company’s total raised to $165 million, McDonald tells ZebethMedia that the proceeds will be put toward “assisting business growth” and further expanding Cover Genius’ insurance distribution services. “We’ve co-created a wide range of protection solutions for partners across many verticals including several of the world’s largest airlines and travel companies, retailers and logistics players, mobility, auto and gig economy companies, banks, fintechs and proptechs and business-to-business software and event ticketing companies,” McDonald said in an email interview. “Having been bootstrapped in our early days, only raising $1 million from inception in 2014 to our Series B in 2018, we’ve been blessed to have significant partners to ensure a healthy and sustainable cash flow, while also carrying frugality in our DNA.” McDonald and Bayley were motivated to launch Cover Genius after encountering insurance challenges with their previous joint venture, an international online travel agency. They found that traditional insurers were difficult to work with because every country the co-founders wanted to target required a separate insurance agreement with separate country leads. In creating Cover Genius, McDonald and Bayley worked to gain licensing and approvals for embedded insurance in most major countries around the world. Unlike typical insurance plans, embedded insurance like Cover Genius’ is bundled with the purchase of a product or service, offered in real time or at the point of sale. Ridesharing app Ola uses Cover Genius to offer insurance to both drivers and riders. Betterplace, an India-based human resources management software provider, taps Cover Genius’ technology to provide healthcare to contract workers. As for buy now, pay later provider Zip, Cover Genius built an AI-powered tool that classifies insurable items (e.g. a power drill) to recommend warranties to e-commerce customers. Among the products Cover Genius offers is Shake Shield, earthquake insurance backed by Swiss Re. Image Credits: Cover Genius “We strongly believed in the embedded insurance model, which is the ability to protect customers at the point of sale or sign-up, and that there would be a major value shift away from direct-to-consumer and traditional insurers toward digital platforms partnering with insurtechs,” McDonald continued. “Customers gain access to tailored protection at the right time, removing the inconvenient need to take a second step to purchase protection. Partners achieve bottom-line growth and stickier customers and insurers benefit from a data-rich distribution channel.” There’s no doubt that embedded insurance is the hot new thing in insurtech. Startups in the space, many founded within the past five years, raised close to $800 million in VC funding in 2021. And a recent report from Simon Torrance, an embedded finance and app strategies advisor, estimates that embedded insurance in property and casualty alone could account for over $700 billion in gross written premiums by 2030, or 25% of the total market worldwide. New York-based Cover Genius has competition in insurance vendors like Extend and Bolttech. But it also has a robust client base, covering 10.5 million customers across merchant partners such as Intuit, Kayak, Booking Holdings, Priceline, Turkish Airlines, SeatGeek, Amazon, eBay and Wayfair. While Cover Genius was initially impacted by the pandemic — the company primarily offered travel insurance in 2020, when the industry took a hit — McDonald notes that it’s been able to branch into a range of new market segments over the past two years. The branching out came through a combination of product launches and acquisitions. In July, Cover Genius made a strategic investment in India-based insurtech Ensuredit and bought Booking Protect, a ticket refund protection startup that brought SeatGeek onto the Cover Genius Platform. And in June, Cover Genius launched a “price-optimized” warranty offering for small- and medium-sized ecommerce businesses. One hurdle on the path to expansion that Cover Genius will have to overcome is the general sentiment around insurance — which isn’t positive. A 2019 survey by the Geneva Association, a global association of insurance companies, found that more than half of people (53%) have had a bad insurance experience. In a separate report from IBM, less than half of customers said that they trust the insurance industry. McDonald says that Cover Genius’ products speak for themselves. “By delivering peace of mind and a high-quality customer experience, boosted by product relevance and seamlessness from the time of sale to claims, our partners get to enter new territory with their customers,” he said. “In the past, they’ve either had experience working with traditional insurers, who negatively impact the customer experience and invariably cause churn and backlash against their own brand, or they’ve tried to engage with traditional insurers and have given up because all the ‘heavy lift’ otherwise sits with them.”

Rapyd Ventures backs Indian fintech-as-a-service startup Decentro • ZebethMedia

By zebethcontrolPosted on November 1, 2022Posted in Fintech, india, rapyd, Startups, Y CombinatorNo Comments

India’s Decentro, the Y Combinator-backed startup that helps companies enter the fintech market by deploying its APIs, has raised $4.7 million in a Series A round. The Bengaluru-based startup offers banking and payments APIs that allow development of fintech products such as banking, payment cards, neobanking and collections and payout services in a short period of time. Decentro has partnered with scores of industry players including Axis Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, Visa, RuPay, Quickwork, Equifax, Aadhaar and National Securities Depository Limited (NSDL) to offer solutions for prepaid payment instruments, no-code workflows, conversational banking via WhatsApp and enable document verification and KYC process. “Whenever a fintech startup or a company wants to launch a new product in the market, it takes them a minimum of a few months to launch. And it purely has to do with the bank processes, the way the bank runs the process, as well as the tech of the bank. It’s not so great. That’s essentially the problem we are solving,” said Rohit Taneja, co-founder and CEO, Decentro, in an interview with ZebethMedia. Taneja, who has previously co-founded social payments platform Mypoolin, which was acquired by Cupertino-based financial services company Wibmo, and spent eight years in the fintech market, co-founded Decentro with Pratik Daukhane in 2020 — after personally facing all the problems he wants to address. He considers Cashfree and PineLabs-owned Setu among the key competitors for the startup but believes that it’s differentiating with “solution-driven enterprise customer base” and “superior” product experience. The startup has already amassed over 250 customers in commerce and fintech sectors. Some of these include Freo, Mobile Premier League, FamPay, CreditWise, Uni Cards and BharatX. Decentro, which has a headcount of over 40 people, offers products to let companies create virtual, business and escrow accounts, enable payments and provide lending. The available products comply with all the latest regulations in the country, the startup said. The Series A round of Decentro is led by Rapyd Ventures, the venture arm of the UK fintech-as-a-service giant, along with participation from Leonis VC and Uncorrelated Ventures. Indian angel investors including CRED founder Kunal Shah, Groww co-founder and CEO Lalit Keshre, Gupshup co-founder and CEO Beerud Sheth and former CBO of BharatPe Pratekk Agarwaal also participated in the funding round. Taneja told ZebethMedia that the startup aims to utilize the fresh funding to go deeper into its partnership with banks and enter categories including large enterprises. It also plans to acquire licenses and launch in Singapore to expand beyond India eventually. “Building their innovation layer in India first gives Decentro a great base to build scalable innovations that can be expanded as other emerging markets modernize their own infrastructure. We’re excited to support Decentro as they scale and expand,” said Joel Yarbrough, MD of Rapyd Ventures and Rapyd’s VP of Asia Pacific, in a prepared statement. Before the latest funding round, Decentro had raised a total of $1.7 million in seed and angel rounds. The seed round, which closed in October 2020, included investments from Y Combinator and FundersClub. Since then, the startup claims its valuation has increased by 3.3X and revenues have grown by more than 35X. Taneja, however, did not reveal any specifics about the valuation. Dcentro’s API transactional volumes have also been growing by 50 to 70% every quarter since early 2021, with an average of 70 million annualized API transactions recorded over the last 12 months, it said. The startup is also profitable, the co-founder said.

Contract lifecycle management vendor Icertis secures $150M in debt to stave off rivals • ZebethMedia

By zebethcontrolPosted on October 31, 2022Posted in contract lifecycle management, Enterprise, Fintech, Icertis, silicon valley bank, StartupsNo Comments

It’s Halloween. And, if you’re contract management software company Icertis, it’s payday. After raising $115 million in 2019, Icertis today secured $150 million — $75 million in convertible debt and a $75 million revolving credit facility — in a combined tranche from Silicon Valley Bank that brings the company’s total capital raised to $520 million. By going the debt route, Icertis avoids having to answer the tricky question of valuation in an especially challenging economic environment. (Icertis was valued at $2.8 billion as of March 2021 and reportedly as high as $5 billion earlier this year, but valuations in tech are on a steep downswing.) Convertible debt allows Icertis to pay its loan obligation with equity or stocks, while the credit facility lets it borrow and repay on an ongoing basis. CEO Samir Bodas was rather vague about the plans for the new cash, but told ZebethMedia in an interview that it would involve “accelerating the application of transformational technologies like artificial intelligence, natural language processing, machine learning and blockchain to deliver material, unique and consequential value to customers.” That’s all rather ambitious (and, truth be told, a little buzzwordy), but Bodas asserted that Icertis is well-positioned to fend off rival startups in the cutthroat contract management space. “Industry analysts like Gartner and Forrester refer to our category as contract lifecycle management (CLM), but Icertis differentiates from traditional CLM vendors,” Bodas said. “We not only deliver efficiencies in contract creation and negotiation, but we use AI and natural language processing to structure contract information into on-demand data and connect that data to operational systems … to automate processes, maximize contract value and ensure compliance.” Founded in 2009 by Bodas (a veteran of Microsoft and Aztecsoft) and Monish Darda (previously an executive at BladeLogic), Icertis provides cloud-hosted tools for managing procurement, sales and corporate contracts — including tools that can read and analyze contracts to deliver risk management reports and automatic obligation tracking. The platform systemizes contracts and the associated documentation, extracting data like contact information and clauses to figure out contractual commitments and monitor them to ensure compliance. Ingested contracts can be used to model commercial relationships in Icertis, letting users identify contracts missing clauses necessary to complying with regulations like GDPR. Bodas claims the AI systems powering this and other features of the Icertis platform are among the most capable of their kind, able to process over 7,000 different types of contracts across 11 verticals. Icertis’ contract management software, which runs in the cloud. Image Credits: Icertis “We are forging and leading a new category of technology — contract intelligence — which uses AI to automate processes and deliver insights with structured, connected contract data to digitally memorialize the purpose of every commercial relationship and ensure the intent of those agreements is fully realized,” Bodas said. That’s a bold statement. But it’s true Bellevue, Washington-based Icertis is already one of the larger and more successful contract management software vendors to emerge in recent years. Bodas says that the company exited 2021 with an annual recurring revenue north of $100 million and recently surpassed $200 million in recurring revenue. He declined to disclose the size of Icertis’ customer base, but he noted that current clients include Microsoft, Boeing, Google, Johnson & Johnson, Sanofi, Mercedes-Benz and Qantas and unnamed public sector agencies. This year, Icertis announced a partnership with SAP to make Icertis the CLM solution of choice for SAP customers. (Alongside SoftBank, SAP holds a minority stake in Icertis.) Bodas says it’ll create a contract management “ecosystem” for SAP clients through integrations with SAP solutions like Ariba, Fieldglass, S/4HANA and SuccessFactors. “In this economic downturn, we believe contracts, which govern every dollar in and out of the enterprise, will emerge as the go-to asset because they are an untapped source of invaluable business value to reduce costs, manage risk, ensure compliance and drive revenue,” Bodas said. “We are bullish that contract intelligence will emerge from this downturn as the fifth system of record in the enterprise, and that Icertis is positioned to lead it for the long term.” Investors see promise in contract management legal technology for procurement, sales, finance, legal and HR like Icertis’ — perhaps because of the enormous addressable market. The contract management lifecycle market is expected to grow from $1.5 billion in 2019 to $2.9 billion by 2024, according to Markets and Markets. The early adoption metrics certainly have been promising, with one recent Bloomberg Law survey showing that more than half of in-house lawyers were using contract management programs in 2020. Bodas says that Icertis’ platform alone has handled more than 10 million contracts worth over $1 trillion in more than 40 languages and over 90 countries. “Contracts are an invaluable source of original data — documenting and governing the entitlements and obligations between a company and its suppliers, customers and employees. In other words, contracts provide a single source of truth for commercial relationships,” Bodas said. He gave an example: “Recently, customers have been turning to Icertis to help them navigate inflation as best they can. Do their contracts have clauses that enable them to adjust prices in the event of inflation, how often can they raise prices, and by how much? We deliver these insights instantly, so every entitlement within a company’s contracts can be realized for maximum value.” Among Icertis’ competitors are ContractPodAI and SirionLabs, which raised $55 million in July and $85 million in May, respectively, for their automation-fueled contract management software. Another formidable rival is LinkSquares, which landed $100 million in April to grow its platform that combines legal analysis with contract lifecycle capabilities. For what it’s worth, Icertis dwarfs them in size, with more than 2,000 employees spread across its offices in New Jersey, Chicago and elsewhere.

Hong Kong to explore legalizing retail crypto trades in reversal of previous proposal • ZebethMedia

By zebethcontrolPosted on October 31, 2022Posted in Crypto, Dubai, Fintech, hong kong, SingaporeNo Comments

Hong Kong has proposed allowing retail investors to trade in cryptocurrencies and crypto exchange-traded funds and plans to conduct pilots in NFT issuance and CBDC as it looks to regain its status as a global financial hub. The city had earlier proposed limiting crypto trade to professional investors, a move that saw many crypto entrepreneurs shift base to Dubai and Singapore. Hong Kong will review property rights for tokenized assets and explore legalizing smart contracts “to provide a solid legal foundation for their development,” it said. It is also planning to put in place “appropriate regulations” on aspects such as “governance, stabilization and redemption mechanism” of stablecoin. The proposal comes at a time when China has ramped up its efforts to crackdown on crypto transactions and Singapore is exploring a series of stringent guidelines surrounding virtual digital assets. “We want to make our policy stance clear to the global market, to demonstrate our determination to explore fintech with the global virtual asset community,” said Hong Kong Financial Secretary Paul Chan. In the initial stage, Hong Kong expects the underlying assets to be “confined to bitcoin futures and ether futures on the Chicago Mercantile Exchange,” he added. Hong Kong also detailing the approach it wishes to undertake in a policy statement. It said the Securities and Futures Commission will conduct a public consultation on how retail investors may be given a “suitable degree” to access to virtual asset under the new licensing regime. “We recognise VA [virtual asset] is here to stay, given how it has attracted attention of global investors and is increasingly viewed as a conduit for financial innovations, not to mention the future opportunities that will be opened up as VA moves into the areas of Web 3.0 and the Metaverse,” the Financial Services and the Treasury Bureau said in a statement. “The Government, in conjunction with the financial regulators, are working towards providing a facilitating environment for promoting sustainable and responsible development of the VA sector in Hong Kong.” Sam Bankman-Fried, the chief executive of crypto exchange FTX and a high-profile backer in the industry, called Hong Kong’s steps today “really promising,” but added that if only the region had taken this stand last year, referring to aggressive exodus that Hong Kong’s previous proposal caused. “I deeply appreciate when policymakers engage constructively and optimistically with the people who matter the most for an industry’s direction: the customers,” he said in a tweet. In its statement Monday, Hong Kong said it will pilot projects to test the technological benefits of virtual assets and their applications in the financial markets. These pilot projects include issuance of NFTs, tokenization of green bonds, and “possible launch of retail Central Bank Digital Currency, the eHKD.” Hong Kong, Singapore and Dubai have attracted crypto entrepreneurs, investors and tech employees from around the globe in the past half decade with their friendly views on cryptocurrency. But in recent quarters, they have wrestled with just how open do they want to remain. Last week, Singapore proposed new guidelines that may soon require retail investors to take a test and not use credit card payments and other forms of borrowing for trading cryptocurrencies. The Monetary Authority of Singapore said in a set of consultation papers that it’s worried that many retail customers may “not have sufficient knowledge of the risks of trading” digital payment tokens, which may lead them “to take on higher risks than they would otherwise have been willing, or are able, to bear.”

Money Fellows, an Egyptian fintech digitizing money circles, raises $31M funding • ZebethMedia

By zebethcontrolPosted on October 31, 2022Posted in Egypt, Fintech, Money FellowsNo Comments

Egyptian fintech Money Fellows has raised $31 million in what it describes as the first close of its Series B investment. The round, which the startup expects to top up in the coming months, was led by CommerzVentures, Middle East Venture Partners (MEVP) and Arzan Venture Capital. Other participating investors include Partech, Sawari Ventures, Invenfin, National Investment Company (NIC), 4DX Ventures and P1Ventures. Money Fellows has raised $37 million in total funding since its inception. Money Fellows’ premise is the digitization of money circles or what’s commonly known as the Rotating Savings and Credit Association (ROSCAs), a system where a group of people agree to contribute money for a specific period, thereby saving and borrowing together. ROSCAs, which Money Fellows CEO Ahmed Wadi says is a $700 billion opportunity globally, are quite popular in over 90 emerging and developing markets with several names: Esusu or ajo in Nigeria, Kameti or chit fund in India and Gameya in Egypt. But it wasn’t in either of these countries that Wadi first tested Money Fellows, it was in Germany, where he lived at the time. There, Wadi found it difficult to access financial services because he lacked a credit history. He thought by replicating the gameya system in the European nation, he could provide an alternative financing system for people like him. However, adoption wasn’t significant there nor in the U.K. which was his next stop. “Germany didn’t have this culture and at some point, it felt like it made sense to go to the U.K. where they have Asians, Africans, and Arab communities that traditionally use this model,” said Wadi. “But we found out people didn’t need it because they had an advanced financial system.” On the other hand, Egypt has a functioning ROSCA system, and Wadi, being from the country, chose it as his third try in 2017. He launched the platform a year later. Here’s how ROSCAs work. Let’s say 10 people come together and agree to pay $1,000 monthly for ten months. At the end of each month, a member gets $10,000 and it keeps rotating until everyone receives their payout. This system works best with a tight-knit of friends or family because it can be risky when strangers are involved. However, this limits offline ROSCAs in that participants may find it difficult to access more capital. But with Money Fellows, people have a broader pool of participants — each passing through a credit assessment process — around Egypt so that they can form and join ROSCA groups through its app. Similar players globally include Pakistani fintech Oraan and U.K.-based StepLadder. Money Fellows classifies its users as borrowers, savers, or planners depending on where their position is in a ROSCA cycle and when they receive a payout. It charges a one-time service fee of about 6% to users who choose its early spots; the percentage decreases down the line and turns to incentivized interest paid to users at the end of the cycle. “People looking to borrow can find slots on our platform. People are looking to save too. So if you are a slot number one, you’re a pure borrower, so we charge a fee. If you’re a slot number two, we charge you slightly less. It decreases the more you’re willing to wait until the end of that ROSCA, where we incentivize the users with one of the most attractive saving incentives in the country.” Any fintech business that involves lending in one form or another has to deal with defaults. Money Fellows doesn’t have it differently. Its conscious design also factors in such cases and has made provisioning and reserve requirements to ensure that customers keep getting paid even when other participants miss their targets. According to the chief executive, Money Fellows sets aside reserves for every new ROSCA launched and, complying with a provisioning schedule, covers any defaults from those funds. “The good thing with ROSCAs versus consumer finance is that not everyone has equal credit exposure. So if your slot number five, for instance, when you get $10,000, you only need to repay $5000 because you historically paid $500 in the past five months,” he said. “That’s why we’re more conservative. We don’t limit people to only amounts. We also restrict them to specific slots because we know which slots carry more or less risk. That’s another beauty and how we control defaults using Rosco as the financial Engine versus the typical consumer and microfinance model.” Image Credits: Money Fellows The fintech also includes a B2B play where it partners with various merchants in Egypt to sell their products within the app so its customers can get discounts. The fintech generates a commission from markup on these products in addition to charging fees in its ROSCAs. It plans to offer more financial services such as buy now pay later, pension, and cards, where the four-year-old fintech plan to make interchange fees. Money Fellows has over 4.5. million registered users on its platform; however, only 7% are monthly active users. The average payout ticket per user is around 23,000 EGPU ($1,100). The company, which regards itself as “one of the favorite financial apps for Egyptians,” claims to have experienced an 8x year-over-year growth. Wadi said Money Fellows’ plan with the funding is to accelerate growth by diversifying its portfolio of services and expanding its product offerings across the B2C & B2B segments, as well as its geographical expansion across Africa and Asia. “To be honest, this model has yet to be cracked globally. It took so much time to develop our product and technology to ensure ROSCAs were fully completed while onboarding the right mix of borrowers, savers and planners, the CEO stated. “This was our key focus over the past couple of years, so now it’s the time to grow, and so a big chunk of what we’re raising is to aggressively grow or scale a lot faster than what we have done and then hopefully try to replicate this in other markets.” Hangwi

Xiaomi winds down financial services business in India • ZebethMedia

By zebethcontrolPosted on October 28, 2022Posted in Apps, Fintech, mi pay, Xiaomi, Xiaomi IndiaNo Comments

Xiaomi has quietly discontinued its financial services in India, less than three years after launching payment and lending apps in the key global market, two sources familiar with the matter told ZebethMedia, retreating from what analysts say is a $1 trillion opportunity. The Chinese giant recently pulled the Mi Pay and Mi Credit apps in the country from the local Play Store and its own app store. Mi Pay, which allowed users to make transactions on the nation’s UPI payments network, is also no longer listed among the recognized UPI apps by NPCI, an industry body that oversees UPI. Xiaomi and NPCI did not respond to a request for comment. The abrupt wind down of the financial services business is a setback for Xiaomi India, which commands the smartphone market in the country and has aggressively expanded its offerings to increase profits as the company’s hardware business operates on razor-thin margins. Xiaomi launched Mi Pay in India in March 2019. The app had amassed over 20 million registered users in the country that year itself, company executives said at the time. Later in the year, the company launched Mi Credit, an app that lent customers between $70 to $1,400 at low interest rates. It accessed users’ texts and call logs to look for transactions information and some other details to determine their credit-worthiness and approved loans to them through partners in a matter of minutes. In August last year, Xiaomi India’s then head Manu Jain told media outlets that the company was aiming to become one of the largest players in India’s fintech space through Mi Credit and Mi Pay apps. The company considered India as the biggest market for Mi Credit after China, he said. Scores of giants including Facebook and Google have entered India’s digital loan market, offering small businesses loans via partners. Digital lending is expected to be worth $1 trillion by 2025, according to estimates from the Boston Consulting Group. Jain, who has transitioned to a different role within the firm since, said last year that the company was looking to bring several more financial services including gold loans, credit line cards and insurance to the South Asian market. It’s unclear why Xiaomi discontinued the financial services offerings in the country, but the move comes at a time when India’s central bank has proposed stringent rules surrounding lending in India, mandating what all data they can access on a customer’s phone and broader disclosures about the terms of their credit agreement. Xiaomi has also been at the center of intense scrutiny from the Indian government agencies. The Indian Enforcement Directorate earlier this year seized bank accounts of Xiaomi India after finding that the company had remitted $725 million to three foreign-based entities “in the guise of royalty” payments. Executives of Xiaomi, which has refuted the charges and has legally challenged the ruling, faced threats of “physical violence” during their investigation with the ED, Reuters reported earlier.