Fintech

Fintech Innovation Lab Startup Graduates Catch on to AI Boom

Published

9 months ago

10 July, 2024

Fintech Innovation Lab Startup Graduates Catch on to AI Boom

The novelty of artificial intelligence as a game-changer may have cooled, but it continues to be a sought-after element among startups graduating this year from Fintech Innovation Lab New York.

The recent demo day involved nine companies that developed ideas that included Defender of reality cybersecurity resources to detect AI-generated content used by malicious actors to commit fraud and Qumis with its AI-assistance platform for insurance policy analysis.

You can find a list of companies that perform demonstrations Here.

While not all startups in this year’s class focused on AI, the technology’s greater impact was to be expected, as demonstrated by the 2023 class of the laboratory diving into this space and the general attention that artificial intelligence receives nowadays.

In a separate interview after the demo day, Maria Gotsch, co-chair of the FinTech Innovation Lab, said conversations with institutional partners in the fall help shape how each candidate class takes shape. “It’s no surprise that in almost every conversation we had with the 40 financial institution partners, AI came up as something they were interested in,” Gotsch said. “So when we went to market, we set out to target those types of companies because it was a high priority for everyone.” Those priorities include looking at potential AI tools that could help financial institutions meet regulatory demands, she said, such as spotting deepfakes and building resources to protect against emerging risks.

Gotsch is also president and CEO of the Partnership Fund for the City of New York, one of the co-founding organizations, along with Accenture, of the New York lab.

“What we heard from financial institutions was definitely also a theme of wanting to learn from the startups that are out there at the forefront of these different perspectives,” said Steven Murphy, senior managing director, Financial Services Industry Solutions Lead at Accenture. Murphy is also the lab’s executive sponsor.

Accenture is no stranger to artificial intelligence, having created a series of deep investments in this space in recent years, keeping an eye on the potential that foresees.

Murphy said about 90 percent of the companies in this year’s class of finalists for the lab were either direct AI players or using AI as part of their solution, which fits well with the needs of incumbents in the financial industry. “While there was an element of financial institutions learning what was going on and just exploring, understanding the technologies better and how they could fit into the regulated environment, we saw an interesting event as we were wrapping up this year’s class,” Murphy said. “One of the companies was actually acquired by a financial institution.”

Acquired by NuBank for undisclosed terms, Hyperplanewhich did not demo, developed a platform that uses specialized LLMs to enable financial institutions to deliver personalized experiences to consumers. “There was definitely interest in bringing that capability and talent in-house,” Murphy said.

The financial industry can tend to be reticent to adopt new technologies or methodologies, especially given the regulatory scrutiny that many financial institutions may face. While AI may open up new frontiers that do not have deeply entrenched security barriers, it seems that financial institutions cannot ignore the possibilities that the technology could offer, especially as AI is rapidly increasing in usage and adoption compared to other emerging technologies.

“It’s a boom versus a gradual ramp,” Gotsch said. “I guess the two technologies, for the 14 years or so that we’ve been in business, I would contrast them with digital currency and cloud, and they’ve both had interesting journeys.”

Digital currency, he said, started with cryptocurrency, which went through phases where financial institutions felt they couldn’t touch it, but then had to learn about it. Then financial institutions wanted to know what would be a compelling use case for them. As for the cloud, Gotsch said financial institutions have also taken a phased approach, first with a few early adopters, followed by a mix of adoption over a decade-long effort.

“In the early days of the lab,” he said, “the common question for these early-stage companies was … ‘Where are you building your solution?’ And the answer was, ‘On the Amazon cloud, of course.’” That may not work well, however, for institutions that require on-prem solutions. Gotsch said much of the financial industry has been looking at a dual strategy that includes private cloud within a third-party provider while some continue to operate data rooms.

The lightning-fast spread of AI, however, seems to have prompted the financial world to pay attention and become interested in how they could leverage these tools. “It’s generative AI and getting it into the hands of the average person that has accelerated dramatically, which is why I call it kind of a boom factor,” Gotsch said. “It wasn’t a gradual increase in interest. It was, ‘Yeah, we’re doing stuff with AI,’ to, ‘We’re doing stuff with AI! We want to learn about AI.’”

For Accenture’s perspective, Murphy agreed with the AI boom’s description. “We see it as a pervasive technology that will provide value and leverage across the value chain of all of our industries,” he said. “One of the things that we’ve started to see some good examples of in this year’s class and I think, and I hope we’ll see in the next year and beyond is that now, beyond companies that are looking to help financial institutions execute on base camp use cases well… We see there’s a lot of opportunity and a lot of impact and value to be had.” That could include customer service and sales, marketing and content creation, or even roles like co-pilots for regulatory compliance or underwriters, he said.

Source

Fintech

US Agencies Request Information on Bank-Fintech Dealings

Published

9 months ago

30 July, 2024

FinCrypt Staff

Federal banking regulators have issued a statement reminding banks of the potential risks associated with third-party arrangements to provide bank deposit products and services.

The agencies support responsible innovation and banks that engage in these arrangements in a safe and fair manner and in compliance with applicable law. While these arrangements may offer benefits, supervisory experience has identified a number of safety and soundness, compliance, and consumer concerns with the management of these arrangements. The statement details potential risks and provides examples of effective risk management practices for these arrangements. Additionally, the statement reminds banks of existing legal requirements, guidance, and related resources and provides insights that the agencies have gained through their oversight. The statement does not establish new supervisory expectations.

Separately, the agencies requested additional information on a broad range of arrangements between banks and fintechs, including for deposit, payment, and lending products and services. The agencies are seeking input on the nature and implications of arrangements between banks and fintechs and effective risk management practices.

The agencies are considering whether to take additional steps to ensure that banks effectively manage the risks associated with these different types of arrangements.

SUBSCRIBE TO THE NEWSLETTER

And get exclusive articles on the stock markets

Source

Fintech

What changes in financial regulation have impacted the development of financial technology?

Published

9 months ago

30 July, 2024

FinCrypt Staff

Exploring the complex landscape of global financial regulation, we gather insights from leading fintech leaders, including CEOs and finance experts. From the game-changing impact of PSD2 to the significant role of GDPR in data security, explore the four key regulatory changes that have reshaped fintech development, answering the question: “What changes in financial regulation have impacted fintech development?”

PSD2 revolutionizes access to financial technology
GDPR Improves Fintech Data Privacy
Regulatory Sandboxes Drive Fintech Innovation
GDPR Impacts Fintech Data Security

PSD2 revolutionizes access to financial technology

When it comes to regulatory impact on fintech development, nothing comes close to PSD2. This EU regulation has created a new level playing field for market players of all sizes, from fintech startups to established banks. It has had a ripple effect on other markets around the world, inspiring similar regulatory frameworks and driving global innovation in fintech.

The Payment Services Directive (PSD2), the EU law in force since 2018, has revolutionized the fintech industry by requiring banks to provide third-party payment providers (TPPs) with access to payment services and customer account information via open APIs. This has democratized access to financial data, fostering the development of personalized financial instruments and seamless payment solutions. Advanced security measures such as Strong Customer Authentication (SCA) have increased consumer trust, pushing both fintech companies and traditional banks to innovate and collaborate more effectively, resulting in a dynamic and consumer-friendly financial ecosystem.

The impact of PSD2 has extended beyond the EU, inspiring similar regulations around the world. Countries such as the UK, Australia and Canada have launched their own open banking initiatives, spurred by the benefits seen in the EU. PSD2 has highlighted the benefits of open banking, also prompting US financial institutions and fintech companies to explore similar initiatives voluntarily.

This has led to a global wave of fintech innovation, with financial institutions and fintech companies offering more integrated, personalized and secure services. The EU’s leadership in open banking through PSD2 has set a global standard, promoting regulatory harmonization and fostering an interconnected and innovative global financial ecosystem.

Looking ahead, the EU’s PSD3 proposals and Financial Data Access (FIDA) regulations promise to further advance open banking. PSD3 aims to refine and build on PSD2, with a focus on improving transaction security, fraud prevention, and integration between banks and TPPs. FIDA will expand data sharing beyond payment accounts to include areas such as insurance and investments, paving the way for more comprehensive financial products and services.

These developments are set to further enhance connectivity, efficiency and innovation in financial services, cementing open banking as a key component of the global financial infrastructure.

Sebastian Malczyk

General Manager, Technology and Product Consultant Fintech, Insurtech, Miquido

GDPR Improves Fintech Data Privacy

Privacy and data protection have been taken to another level by the General Data Protection Regulation (GDPR), forcing fintech companies to tighten their data management. In compliance with the GDPR, organizations must ensure that personal data is processed fairly, transparently, and securely.

This has led to increased innovation in fintech towards technologies such as encryption and anonymization for data protection. GDPR was described as a top priority in the data protection strategies of 92% of US-based companies surveyed by PwC.

Arid Islam

Financial Expert, Sterlinx Global

Regulatory Sandboxes Drive Fintech Innovation

Since the UK’s Financial Conduct Authority (FCA) pioneered sandbox regulatory frameworks in 2016 to enable fintech startups to explore new products and services, similar frameworks have been introduced in other countries.

This has reduced the “crippling effect on innovation” caused by a “one size fits all” regulatory approach, which would also require machines to be built to complete regulatory compliance before any testing. Successful applications within sandboxes give regulators the confidence to move forward and address gaps in laws, regulations, or supervisory approaches. This has led to widespread adoption of new technologies and business models and helped channel private sector dynamism, while keeping consumers protected and imposing appropriate regulatory requirements.

George Blandford

Co-founder, UK Linkology

GDPR Impacts Fintech Data Security

A big change in financial regulations that has had a real impact on fintech is the 2018 EU General Data Protection Regulation (GDPR). I have seen how GDPR has pushed us to focus more on user privacy and data security.

GDPR means we have to handle personal data much more carefully. At Leverage, we have had to step up our game to meet these new rules. We have improved our data encryption and started doing regular security audits. It was a little tricky at first, but it has made our systems much more secure.

For example, we’ve added features that give users more control over their data, like simple consent tools and clear privacy notices. These changes have helped us comply with GDPR and made our customers feel more confident in how we handle their information.

I believe that GDPR has made fintech companies, including us at Leverage, more transparent and secure. It has helped build trust with our users, showing them that we take data protection seriously.

Dr. Rhett Stubbendeck

CEO & Co-Founder, Leverage Planning

Source

Fintech

M2P Fintech About to Raise $80M

Published

9 months ago

30 July, 2024

FinCrypt Staff

Application Programming Interface (API) Infrastructure Platform M2P Financial Technology has reached the final round to raise $80 million, at a valuation of $900 million.

Specifically, M2P Fintech, formerly known as Yap, is closing a new funding round involving new and existing investors, according to entrackr.com. The India-based company, which last raised funding two and a half years ago, previously secured $56 million in a round led by Insight Partners, earning a post-money valuation of $650 million.

A source indicated that M2P Fintech is ready to raise $80 million in this new funding round, led by a new investor. Existing backers, including Insight Partners, are also expected to participate. The new funding is expected to go toward enhancing the company’s technology infrastructure and driving growth in domestic and international markets.

What does M2P Fintech do?

M2P Fintech’s API platform enables businesses to provide branded financial services through partnerships with fintech companies while maintaining regulatory compliance. In addition to its operations in India, the company is active in Nepal, UAE, Australia, New Zealand, Philippines, Bahrain, Egypt, and many other countries.

Another source revealed that M2P Fintech’s valuation in this funding round is expected to be between USD 880 million and USD 900 million (post-money). The company has reportedly received a term sheet and the deal is expected to be publicly announced soon. The Tiger Global-backed company has acquired six companies to date, including Goals101, Syntizen, and BSG ITSOFT, to enhance its service offerings.

According to TheKredible, Beenext is the company’s largest shareholder with over 13% ownership, while the co-founders collectively own 34% of the company. Although M2P Fintech has yet to release its FY24 financials, it has reported a significant increase in operating revenue. However, this growth has also been accompanied by a substantial increase in losses.

Source

Fintech

Scottish financial technology firm Aveni secures £11m to expand AI offering

Published

9 months ago

30 July, 2024

FinCrypt Staff

Aveni, Investment Management, AI, NLP, UK

By Gloria Methri

Today

To come
Aveni Assistance
Aveni Detection

Artificial intelligence Financial Technology Aveni has announced one of the largest Series A investments in a Scottish company this year, amounting to £11 million. The investment is led by Puma Private Equity with participation from Par Equity, Lloyds Banking Group and Nationwide.

Aveni combines AI expertise with extensive financial services experience to create large language models (LLMs) and AI products designed specifically for the financial services industry. It is trusted by some of the UK’s leading financial services firms. It has seen significant business growth over the past two years through its conformity and productivity solutions, Aveni Detect and Aveni Assist.

This investment will enable Aveni to build on the success of its existing products, further consolidate its presence in the sector and introduce advanced technologies through FinLLM, a large-scale language model specifically for financial services.

FinLLM is being developed in partnership with new investors Lloyds Banking Group and Nationwide. It is a large, industry-aligned language model that aims to set the standard for transparent, responsible and ethical adoption of generative AI in UK financial services.

Following the investment, the team developing the FinLLM will be based at the Edinburgh Futures Institute, in a state-of-the-art facility.

Joseph Twigg, CEO of Aveniexplained, “The financial services industry doesn’t need AI models that can quote Shakespeare; it needs AI models that deliver transparency, trust, and most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, and reviewed by financial services experts for specific financial services use cases. Generative AI is the most significant technological evolution of our generation, and we are in the early stages of adoption. This represents a significant opportunity for Aveni and our partners. The goal with FinLLM is to set a new standard for the controlled, responsible, and ethical adoption of generative AI, outperforming all other generic models in our select financial services use cases.”