DarcMatter has been a part of the FinTech scene for almost 5 years. During our tenure of building great fintech solutions for both asset managers raising capital and investors/LPs sourcing alternative investments, we have seen many fintech companies come and go, which has truly elevated the FinTech market as a whole, inspiring a new generation of entrepreneurs to innovate and create more enhanced fintech solutions. As a key player in this industry for this time, the DarcMatter research team has taken a deep dive into the evolution of the fintech industry through a few key segments. The general fintech landscape has evolved significantly over the last 5 years, creating new segments for investors that were not available previously. As the industry continues to mature, the expectation is that these segments will be more competitive and create additional segments as adoption continues. For FinTech, we have broken the landscape down into:
- Lending
- Digital Banking
- Insurance
- Payments
- Investments
Below we have noted a few leading companies in each segment that have made significant strides towards creating impact for financial services.
The one thing that all of these companies have in common is the discipline and desire to create more efficient tools and processes utilizing technology, as a means to drive the financial services industry as a whole, into a new era. Kudos to all of the fintech companies focused on making a real impact for the global financial services industry. Cheers to the disrupters and FinTech aficionados building the next suite of products driving change within traditional finance!
Lending
Established in 2012, Affirm is an alternative lender that provides consumers with another retail payment/purchase option versus credit cards by establishing key retailer partnerships. Affirm allows its customers to make online purchases immediately with credit, then pay it back in fixed installments with an additional interest fee. The monthly interest is expressed in dollars, which typically ranges from 0% to 30%; the maximum payback time frame is one year. Furthermore, there is no compounding interest or late fees. Affirm uses proprietary algorithms at the point of sale to evaluate a person’s creditworthiness before issuing the loan.
For customers who may not have the necessary funds to support their purchases at a given time or believe that incremental interest payments over time provides a better payment option than paying in full upfront, Affirm provides a tangible solution. Direct access to key partners provides easy discount offerings to these customers, and lower fees with favorable payment terms to incentivize users to choose Affirm over traditional credit methods. Available at 2,000+ merchants, including Warby Parker, Wayfair, and Expedia, its loan volume in 2018 reached $2 billion, verifying the need consumers have for this service. The company has raised a total of $1 billion in funding since launch and continues to focus on strategic expansion. For example, it has recently announced that its financing solutions would be made available in more than 4,000 Walmart Supercenters across the U.S., and will also extend to Walmart.com. Customers would have the choice to opt for a repayment term of three, six or 12-month installments on purchases ranging from $200 to $2,000.
Moreover, Affirm launched a new company, Resolve, in April which offers the same buy-now-pay-over-time solution for B2B commerce customers.
Kabbage was launched in February 2009 in order to assist small businesses with loan securitization for business development. Small businesses can be approved for a line of credit up to $250,000 in a short period of time thanks to machine learning algorithms that pull data from dozens of sources, creating more efficient risk qualification processes. Kabbage now lends about $10 million a day to growing businesses, with rates that range from 1.5% to 10%, depending on various business factors. In April 2019 the company said it has closed an asset-backed securitization of $700 million, which is the largest transaction of its kind for an online lending platform focused on small businesses. In January, Kabbage partnered with Chinese e-commerce giant Alibaba on a program called Pay Later. It allows U.S. small businesses on Alibaba.com to access up to $150,000 of financing for their orders.
Kabbage has carved out a niche customer base in the lending space as an alternative to traditional loan securement options by utilizing modern technology. Kabbage is a great example of how streamlining antiquated processes and eliminating downtime, for line of credit approvals in this case, has propelled fintech platforms to success. By applying new technology to a long-standing process, Kabbage has positioned itself as a practical alternative to financing options for small businesses.
Ant Financial, formerly known as Alipay, is the world’s largest and highly valued fintech company that provides mobile and online payments services. Founded in 2014, the company is an affiliate of China’s Alibaba Group and raised $14 billion in venture capital last year. For context, other fintech investments for the same time period in the EU and the US represent approximately $15.9 billion combined. The company supports both cross-selling services in addition to other financial services through key profitable verticals including insurance, credit, loans, credit scoring, payments, and wealth management tools, providing investors with various tools and further penetrating the market as a result.
Ant’s $150 billion valuation is a testament to the legitimacy of the growing fintech landscape. Beginning with its core platform business model, Ant Financial continues to change traditional financial processes with the integration of services across additional verticals.
Digital Banking
Launched in April 2014, Acorns is a personal money management app that quite literally invests spare change. The app targets millennials and uses a cash-back rewards program that rounds up purchases to the nearest dollar, then invests the difference into a computer-managed investment portfolio. Everything is automatic with no minimum and no trade fees to worry about, so the user can make automatic investments daily, weekly, and/or monthly depending on your preferences. To invest with “Acorns Later” you need only $5.
As of April 2019, Acorns had over 4.5 million accounts open. Moreover, Acorns has launched initiatives like its retirement savings platform Acorns Later, launched last April, which serves over 350,000 investors and manages more than $40 million. Acorns has further expanded its suite of services to “Acorns Found Money,” an application where participating partners invest directly in your “Acorns Core” account based on purchase activity with the partner. With over 200 partners, Acorns has secured partnerships with companies such as Airbnb, Barnes & Noble, Billshark, Expedia, Groupon, Macy’s, Nike, Sephora, and Walmart to name a few.
In this way, Acorns is educating a younger audience who may not be as investing-savvy by rounding up on each purchase by a few cents into a long-term portfolio, ultimately giving everybody access to a personal finance management application through easy-to-use technology.
One of the oldest fintech companies in the personal finance space, Credit Karma was established in March 2007. Credit Karma provides tools to help monitor credit score, an increasingly critical factor in an individual’s financial identity. The service offers free, ongoing access to a user’s existing credit scores and reports from TransUnion and Equifax, with personalized tips on how to improve them. Credit Karma suggests a suite of credit products based on current history, and which of them will come with high approval rates. It’s a win-win opportunity for both consumers, who can get a free credit score, and financial institutions that advertise their products on Credit Karma platform. Credit Karma has more than 85 million members in the US and Canada, and has over 1,000 employees across their 6 offices in the US and London. Their foray into the UK market was driven by the acquisition of Noddle, the U.K.-based free-for-life credit reporting and monitoring service, from TransUnion in 2018.
Credit Karma is another example of how fintech companies are utilizing their tech not only to provide an accessible, streamlined service to its end user, but also to suggest educational tips in order to further inform and increase transparency around a previously complex personal finance topic like credit.
Even, founded in 2015, is a financial service company that allows users to get paid on demand, budget instantly, and save automatically. It started with three employees in a co-working space. In three short years, the company secured its own office space, hired more than 50 employees, and raised more than $40MM in venture capital funding. The app allows the user to monitor his or her financial health by tracking spending versus expenses. It also enables employees to receive up to 50 percent of his or her net pay before payday, when used in arrangement with companies. Moreover, there are no fees for this upfront pay option, and the monthly subscription $8 can sometimes be subsidized by the employer. In addition, Even is adding one-on-one financial counseling to its platform, aiming to help customers break the cycle of living paycheck to paycheck.
Even was able to lock high-profile corporate partnerships with companies like retail giant Walmart and top-tier software provider, Kronos. As a result, more than 200,000 Walmart employees in the U.S. have used Even’s app to manage their finances or access their wages early.
The ability to display one’s spending and expenses in a comprehensive layout is a tool that underlines the value of fintech apps offered by companies like Even. Additionally, the option to receive pay in advance may be attractive to those who find themselves in the occasional financial crunch.
Insurance
Lemonade was established in April 2015 and offers homeowners and renters insurance policies in 23 US states. In 2018 Lemonade took in $57 million in premium revenue from 425,000 customers, 75% of them under age 35, with 90% of clients being first-time insurance purchasers. The startup expects to double revenue this year and expand to all 50 states and throughout Europe. The European expansion began with Germany where Lemonade presented a simplified and easy-to-understand version of its renters and homeowners insurance policies.
The main advantage of Lemonade’s proposition is that they make the process of securing insurance quicker by replacing brokers and traditional processes with bots and machine learning, at a lower cost compared to competitors. Moreover, unclaimed money goes to a non-profit organization that the client wants to support at the end of the year, helping to raise social consciousness among their clients.
Oscar was founded in 2012 and has expanded its individual and small business health insurance coverage options into 14 markets in 9 states, forming partnerships with key doctors and hospitals. It’s a private health insurance company, that offers individual health plans and a 24/7 doctor on-call service, including sending prescriptions to your pharmacy. No referrals are required and there is direct appointment scheduling with preferred provider partners. Moreover, Oscar Health also offers various incentives for being active (e.g. step tracking by a free wearable), cash incentives for getting a flu shot, two free primary care visits as well as offering free generic drugs. Oscar’s premium revenue rose 13% to $353.5 million in Q1 2019 compared to $312.5 million in the prior year. Oscar currently sells insurance to individuals via the Affordable Care Act and to small businesses. The company plans to enter into two additional markets, New York and Houston in 2020, offering private health-insurance plans to seniors, also known as Medicare Advantage plans.
Root Insurance was established in 2015 to provide mobile access to car insurance. In just three years, the company was able to expand its regional product offerings from 10 states in the US to over 22. This represents an increase of over 2600% vs. 2017 and over $100MM in direct written premiums.
Root only insures the safest 20% of drivers, which is a big part of how the company is able to offer low rates relative to its more established competitors like Geico and State Farm, who base their pricing not on driving ability but rather on some arbitrary combination of factors, such as the credit score.
Furthermore, in January 2019, the company announced plans for continued expansion throughout the US to advance the goal of Root being nationwide by 2020. Root also announced a partnership with Genpact in May, that will focus on optimizing the efficiency of claims processing, further improving the Root customer experience, and driving competitive growth.
Payments
Founded in 2009, Flywire initially launched with a focus on providing payment services for colleges and universities. It has since transformed to focus on full-fledged payment and receivables service for a variety of companies across the globe. Clients can use its full-service platform to tailor the payment experience for their customers and to control payer engagement and receivables management – from invoicing to payment reconciliation. Flywire also provides end-to-end customer support, including multilingual servicing via phone, email, and chat, as well as around-the-clock online payment tracking. The company has successfully raised over $143.2 million, is headquartered in Boston, with offices in Valencia, London, Manchester, Singapore, Sydney, Tokyo, Shanghai, Cluj and Chicago, and maintains a workforce comprised of 400 employees. Flywire and UnionPay International announced on May 8, 2019 that they are re-launching a promotional program that provides Chinese students and patients with discounted foreign exchange rates on cross-border tuition and healthcare payments. Also, Flywire has partnered with Student Loans Company (SLC) to provide additional repayment options for customers living overseas. As a result of its new efforts in Asia-Pacific region, Flywire achieved significant growth in payment volumes for APAC and EMEA, reflecting a 130% and a 65% increase, respectively.
In March 2019, the company confirmed over $10 billion in total payments volume for over 1,700 clients since its inception.
Adyen was set up in 2006 and its market capitalization has surged almost 50% this year to around $22 billion. The company’s core business is providing payment processing and distribution to service providers globally via more efficient fintech tools. Adyen requires only one system, one process integration, and one contract for a multinational enterprise to serve customers in 150+ countries and to accept 200+ methods of payment. These services have attracted top-tier companies such as Tiffany & Co., Uber, Netflix, Mango, Booking.com, and easyJet. Adyen’s revenue in the second half of 2018 was €192.5 million ($219 million).
In June 2018, Adyen went public on Euronext with an implied market capitalization of €7.1B based on the current capital structure and the private shares previously issued. As of November 2018, Adyen share price has more than doubled and has a market value of €16.7B. Adyen has also established a partnership with Cellulant, Pan-Africa’s leading financial technology company, bringing new payment capabilities across Africa, starting with Nigeria, Kenya, Tanzania, Ghana and Uganda.
Stripe was founded in 2010 and the company is now valued at $22.5 billion, with headquarters in San Francisco and 14 additional offices globally, managing over 1,700 employees. Stripe provides software that allows companies and individuals to quickly set up online billing and payment systems on their respective websites. The company says it now has “millions” of customers, including Google, Didi, Mindbody, Spotify and Uber. It is live in 130 markets for acceptance and 25 countries for originating the charges.
Stripe has acquired Touchtech Payments, a startup out of Ireland that works with banks to help it gear up for new regulations in Europe that will be rolled out later this year to improve security in online transactions. Alongside this, Stripe itself is updating its APIs, partly in line with these changes. This will include a new default payments API, a new checkout and upgraded billing.
Investments
Formerly known as SafeCorp Financial, Personal Capital was established in 2009. The company provides clients direct access to qualified financial advisors. It offers other services as well, such as a net worth tracker, retirement savings planner, budgeting tool, investment fee analyzer, and a myriad of useful investment management tools. These added-value services and access to dedicated financial advisors make this app attractive to investors, despite high minimum investment requirements. To date, Personal Capital has surpassed $8.5 billion in assets under management and two million registered users on its platform, which represents more than $650 billion in aggregate account value.
Wealthfront, established in 2011, manages close to $14 billion in customer assets. Wealthfront offers users holistic financial advice and automated investment management tools to assist in managing investment portfolios and advanced tax optimization strategies. The company also is able to tout one of the highest interest rates in the industry, recently increasing the rate from 2.29% to 2.51%, according to Bankrate.com. Wealthfront launched the Federal Deposit Insurance Corporation’s insured cash account in February and has since ushered in more than $1 billion in customer deposits. Wealthfront partners with multiple bank partners to insure deposits up to $1 million.
Wealthfront also plans to take on more bank-like functions this year, providing enhanced services for automatic bill pay, direct deposit, and debit or ATM cards.
Stash was founded on February 19, 2015, and has raised $189.3 million to date from investors including Union Square Ventures, Breyer Capital, Coatue Management, Entree Capital, Goodwater Capital and Valar Ventures. This fintech company created tools to make it easier for millennials to save and invest small amounts of money, allowing users to open an investment account with as little as $5. It has amassed 3 million active brokerage accounts and around $530 million in assets under management. The average age of a Stash user is 29 and the average income is less than $50,000 per year, which also aids in bringing about a new class of investors at a younger age. (https://techcrunch.com/2019/03/12/investing-app-stash-raises-65m-launches-banking-and-stock-back-rewards-with-green-dot/)
The company is introducing mobile-based banking accounts from Green Dot Bank, and, alongside it, a new rewards program called “Stock-Back.” When users spend money using their Stash accounts, they get “points” — which are either stocks in the companies where they are buying goods, or shares in ETFs approved by Stash. On top of that, Stash will be using the $65 million it raised recently to grow its business on the back of these two initiatives.
The company announced in January that it has unveiled a number of new features for its users, including round-ups – which lets customers invest spare change – and cash back for purchases made at certain retailers.
DarcMatter was founded on September 1, 2014 and is a global award winning fintech platform that provides transparent and direct access into alternative investments. DM’s platform connects GP’s actively raising capital with LPs globally, to seamlessly connect, access fund documentation, and invest in a curated set of Hedge Funds, Private Equity, and Venture Capital funds efficiently online. Investors and fund managers can benefit from entirely compliant and secure transaction methods and investor qualification processes created to enhance transparency, security, and trust to the alternative investment industry. Furthermore, the platform helps to exclude various unclear intermediaries by direct connections between fund managers and the investor community.
DarcMatter already has a global presence with usage from over 62 different countries and the team is working with 50+ funds (GPs), 3,000+ institutions and investors worldwide.
Since DarcMatter’s launch, the company has been recognized and awarded with numerous accolades globally, that include: “HFM Technology 2017: Best Fintech Solution for Hedge Funds,” “NextMoney Hong Kong: Best Growth Stage FinTech Startup,” and “TechCrunch Beijing: Top 15 Global Startup.” DM was also selected to compete in various startup competitions globally. One of the largest was DarcMatter being selected by South Korea’s Ministry of Science, ICT and Future Planning, as a finalist from over 2,000 applicants globally, to participate in “K-Startup Grand Challenge,” where DM was a Top 4 Finalist.
At the beginning of this year, the company confirmed partnership with Hana Financial Group (HFG), one of the largest financial services holding companies in South Korea. This announcement solidifies DarcMatter as a key partner in providing enhanced access to exclusive deal flow throughout alternative investments globally. Furthermore, DarcMatter is one of the few established fintech companies that are also actively exploring blockchain technology integrations, via the company’s blockchain division, Konstellation, that was launched at the beginning of this year. Konstellation’s mission is to remove opacity and inefficiencies from the global alternative investment industry through its blockchain solutions. It will be exclusively focused on key services centered around “Blockchain Consulting & Education,” “Blockchain Technology Development,” and the “Konstellation Network.” Konstellation’s core business operations revolve around the countries primarily leading blockchain development, which includes South Korea, Greater China, and Singapore.
Disclaimer: All information provided herein is for informational purposes only and should not be relied upon to make an investment decision and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. Readers are recommended to consult with a financial adviser, attorney, accountant, and any other professional that can help you understand and assess the risks associated with any investment opportunity. Private investments are highly illiquid and are not suitable for all investors.
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