Hi 5! The five fintech stories we’re following this week

top fintech stories

Let’s get digital

Everyone’s still trying to figure out this digital thing. Some financial institutions are doing better at it than others. USAA’s customer-centric charter leads digital innovation, not the other way around. “Since the military community moves more often than the average consumer, USAA found a way to move with them.”

One entity that doesn’t quite get it is, well, the Fed. The organization launched a Facebook page recently. That’s when things started to go a bit off the rails. The Fed is using its social media presence to give a kinder, gentler view of its inner workings but the user comments are just flat out hysterical. It appears the public isn’t quite ready for this level of access.

The Australian Stock Exchange was shut down by a technical failure that stopped trading for a few hours. ING suffered a similar fate when a loud boom was followed by an outage at one of the bank’s data centers in Bucharest.

When they do decide to put rubber to pavement, banks and asset managers may do so using an advanced form of surveillance technology.

I don’t think P2P means what you think it means

There’s been a lot of excitement about Lemonade, the new well-capitalized insurance startup that launched this week. Much of that interest stemmed from the company’s marketing of its new peer to peer model of insurance. Looking at the app, Lemonade must mean something else when it says it’s P2P. Regardless, the app still looks pretty sweet.

Also, as more devices track our every move, some insurance companies are using this data to craft more personalized insurance policies around our behavior. In some instances, insurers are using this data to help modify policyholder behavior to nudge better outcomes (for both the guy who pays the premiums and the insurer itself).

Not sure how this fits in? Mike Galarza understands what fintech success means. The immigrant founder of Entryless was inspired by a talk Peter Thiel delivered at Stanford to do something he was passionate about. And he did.

Domo arigato, Mister Roboto

Roboadvisors have, by default almost, become the poster boys for consumer fintech. As they’ve grown and acquired more assets, they’ve also changed their focus. Lex Sokolin, who founded one of the first robos, joins us on the Tradestreaming Podcast this week to discuss what he calls, the four stages of roboadvice. It’s an interesting discussion and perspective, given the fact that Sokolin, who’s director of fintech research for Autonomous, believes we’re currently in the third wave.

According to a new McKinsey study, digital finance could add more than $3 trillion to emerging market GDP. Sure, the consulting firm is just talking up its book, but when you look at what’s happening, incumbent financial institutions are paying attention. 25 percent of them are actively considering acquiring fintech firms.

Speaking of robos, robo tax manager, Avalara raised close to $100 million.

Is bitcoin really money or not?

There’s still a lot of dickering going on about Bitcoin. The U.S. legal system, for example, is still trying to figure out if the cryptocurrency is money. After a local Miami judge ruled that Bitcoin wasn’t money, a U.S. judge just ruled that it actually is money.

Lots of banks are getting into the P2P game. But, honestly, it’s an interesting phenomenon that more banks haven’t gotten into the digital gifting game, which is weird because Christmas expenditure on gifts alone is $830 billion in the U.S.. As we explore the changing role of banks, we’ll probably see some financial institutions experiment more with this type of thing.

API-ification of banking

We’ve been exploring the theme of increasing use of APIs in banking. Here’s a good place to start answering the question, what is a bank API? What’s starting to happen is that banks are making their banking rails available, either publicly and or privately, to third parties to build stuff on. While the financial industry is behind other industries, it’s slowly legging into APIs. Regulation will help encourage the sharing of data, too.

Lemonade Insurance: I do not think P2P means what you think it means

On September 21st, 2016, P2P renters and home insurance firm Lemonade launched with a great deal of fanfare. There are a number of factors contributing to the positive buzz the app’s launch has generated: its simple, sleek design, the fact that they were able to roll it out after just one year – a rarity in the insurance industry – and of course, it’s finer fintech attributes. According to the Lemonade website, it takes just 90 seconds to get insured, and 3 minutes to get claims paid, all with the help of Jim and Maya, the app’s helpful AI chatbots. Not to worry; policy holders who want to speak to a human at any point in the process can actually reach the real Jim and Maya at Lemonade’s office.

However, one of the fintech concepts blatantly missing from Lemonade is P2P, which seems to be a big part of its marketing strategy. The company bills itself as the world’s first P2P insurance company. The P2P model of lending, in which online platforms match borrowers directly with investors, is fairly straightforward. Yet that model is nowhere to be found in Lemonade.

Instead, it turns out that Lemonade, like its German insurtech cousin, Friendsurance, is using the term very differently than online lenders do. With Lemonade, P2P means that the company pools the premiums of its policyholders to pay out claims…like any other type of traditional insurance.

The Lemonade twist is how the company connects policyholders to one another. While insurtech companies like Friendsurance or the UK’s Bought by Many pool people according to the type of insurance they’re taking out, Lemonade groups people by having them choose a charity when they purchase a policy. Unlike other insurance companies, which retain any unclaimed premium money, Lemonade intends to donate said money at the end of the year to the pool’s charity of choice. The company hopes that connecting people to one another through social action will deter them from submitting fraudulent claims.

The fact is that P2P insurance like Lemonade’s isn’t as P2P as marketplace lending is, nor is Lemonade the first insurtech to pool people around a common thread: Friendsurance’s shareconomy has been around since 2010.

Still, Lemonade is a unique offering in the state of NY, and its clean design, the low premium cut it takes – 20 percent as opposed to the industry’s average 35 percent – and its social component are sure to appeal to the Big Apple’s digitally savvy.

Lemonade, insurance, and banking mashups

P2P Lending's Developing Debt Market


Lemonade, the hiring-like-crazy, raising-money-like-crazy, getting-PR-like-crazy insurance startup just added another big name to its roster. In addition to the minions of execs the company recruited out of AIG, the p2p insurer just hired behavioral economist, Dan Ariely. The Duke professor is probably best know for his wacky, creative experiments that populated the pages of the books he’s written about our irrational financial behavior.

Ariely’s role at Lemonade is technically titled “Chief Behavioral Officer”. So, ostensibly, his role will be to help develop the user aspects of the insurance platform to ensure it provides enough billion dollar triggers to get users addicted to the platform and turning to it for repeated dopamine hits.

“If you tried to create a system to bring out the worst in humans, it would look a lot like the insurance of today,” Ariely said in a statement. “We’ve spent recent years deepening our understanding of honesty and trust, and our conclusion is that insurance is crying out for a makeover.”

While the hype machine is working overtime, we don’t have a lot of details yet what p2p insurance (or at least, Lemonade’s flavor of it) really looks like. We aren’t without clues, though. We do know that there is some type of reinsurance scheme (Buffett’s Berkshire Hathaway has its hands in it) and the firm has said that it won’t make money by denying claims. So, if in fact, the firm is collapsing the 3-tier insurance stack, it will have to allay fears that the company won’t be around to payout when a claim is made. The big funding round, the name-brand reinsurers, the executive migration — all may be necessary parts of the Lemonade gameplan.


A couple of years ago, Simple (then called Bank Simple) was billed to be the future of banking. Simple was a really nice user interface that sat on top of the banking stack but never quite impacted the industry the way some had hoped.

Number26, a Peter Thiel-backed next generation German bank, is another attempt at creating the bank of the future. Instead of building a vertically-integrated bank, some banks like Number26 are taking the mashup approach: integrating with various services and product providers to provide more comprehensive service. Number26 is integrating Transferwise, a p2p currency exchange, so that clients of the bank can exchange currencies easily within their accounts.

Marc Andreessen, founder of Netscape and considered by some as smart VC money, once boasted that he’d fund anyone who wanted to start a full digital bank. That spurred a pretty vigorous conversation about whether a truly disruptive bank needed to be built completely from the ground up or a virtual bank could be produced by doing away with branches and just creating digital hooks into banking infrastructure.

Because of the costs and complexities in building a full banking technology stack from the ground up, many banking startups, like Number26, are taking the approach of integrating their money apps into other non-financial apps (like Qapital recently did by integrating on IFTTT). This can essentially take a banking app with limited functionality as a standalone and back it into being a much more robust offering.

Number26’s co-founder and CEO Valentin Stalf says its ambition is to create a single app that integrates the services of multiple fintech startups, providing an aggregated showcase for the best emerging alternatives to traditional banking services on a single screen.

The Startups: Who’s shaking things up (Week ending December 13th, 2015)

fintech startups shaking things up

[alert type=yellow ]Every week, Tradestreaming highlights startups in the news, making things happen. The following is just part of this week’s news roundup. You can get these updates delivered direct to your inbox by signing up for the Tradestreaming weekly newsletter.[/alert]

TipRanks’ Uri Gruenbaum on the need for accountability and transparency in stock market analysis (Tradestreaming)
Analysts and pundits get their feet held to the fire with TipRanks.

Funding Circle is 3rd biggest SMB lender in UK behind RBS and Lloyds (CityAM)
Illustrating the power of crowdfunding, the third biggest lender to UK small businesses isn’t a bank or building society but peer-to-peer lending platform.

Noah Waisberg of Kira Systems on the role of automated contract analysis in fintech (Tradestreaming)
Imagine a future world where much of the contractual work around financings happens algorithmically – that’s what Kira is working on.

From Flipping Burgers To A $2.25B Fintech Startup (TechCrunch)
Klarna co-founder and CEO Sebastian Siemiatkowski took the stage at Disrupt London to discuss his payment startup and the wider financial tech ecosystem.
Startups raising/Investors investing

Funding Circle’s Sam Hodges on scaling growth by navigating globally (Tradestreaming)

Sam Hodges joins the Tradestreaming podcast to talk about going global, the challenges his firm faced expanding cross borders, and how he’s ramping growth for next year.

Sequoia Invests $13 Million In Seed Round For Lemonade, a P2P Insurance Platform (TechCrunch)
In one of the largest seed investments in the firm’s history, Sequoia Capital is committing to a $13 million round for Lemonade.

New Marketplace Lender Backed Secures $1.5M in Seed Funding From iAngels, Cyhawk Ventures (Crowdfund Insider)
Backed, a new marketplace lending platform that seeks to lower borrowing costs for young adults by mitigating traditional co-signing risks, raises a round.

Income& Secures $2.9 Million; Announces Peer-to-Peer Marketplace PRIMO (Crowdfund Insider)
Income&, based in San Francisco, runs PRIMO, a fixed income marketplace backed by mortgages.

Stealthy London Startup Curve Raises $2M From Notable Fintech Backers (TechCrunch)
Stealthy London-based fintech startup Curve has closed a $2 million seed round from a rather notable list of early backers.

Real estate lender Groundfloor takes in $5M Series A (PE Hub)
Groundfloor scores a nice round to build out its real estate lending platform that’s open to the general public.

Trizic Raises $2 Million to Help Advisors Compete with Algorithms (Finovate)
The San Francisco-based company’s Accelerator is a cloud-based advisory platform that caters to both advisors and their clients.

American Express joins $8 million Clip funding round (Finextra)
Clip, the Mexican equivalent of Square, has raised $8 million in a funding round led by Alta venture with new investors American Express and Sierra Venture.

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