Lemonade, insurance, and banking mashups

P2P Lending's Developing Debt Market

Insurance.

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.

Banks.

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 6th, 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]

ApplePie Capital’s Denise Thomas on enabling investors to lend money to the right franchises, franchise owners (Tradestreaming)
Online lending marketplaces are changing the way capital is deployed and ApplePie has an interesting approach: small business loans to franchisees.

Cookies Wants To Become The Venmo Of Europe (TechCrunch)
Cookies is all about paying your friends without any fees. And now it intends to massively expand in Europe.

Trulioo’s Stephen Ufford: “Missing element to provide financial services for the 2.5 billion unbanked lies in a digital footprint” (Tradestreaming)
User identification is a seemingly simple problem, yet it stands in the way of truly opening up fintech applications. Until now, doing it well has remained elusive. Trulioo is trying to change that.

Number26 Launches Its Bank Of The Future In 6 New Countries (TechCrunch)
If you don’t like your current bank, Number26 may appeal to you. The German startup has been trying to reinvent the average banking experience in Germany and is now expanding throughout Europe.

Wealthsimple acquires online brokerage pioneer ShareOwner (Newswire)
Largest Canadian roboadvisor ($400M), Wealthsimple acquires online brokerage, ShareOwner.

SoFi’s Mike Cagney on valuation (Business Insider)
SoFi CEO Mike Cagney thinks the company could be a $30 billion business. Will he be right?

Startups raising/Investors investing

Australian Fintech Tyro Payments Raises $72M Led By Tiger Global (TechCrunch)
Australian financial tech company Tyro Payments plans to challenge the country’s leading retail banks after scoring AUD $100 million (about $72 million).

Bee Raises $4.6 Million to Deliver Banking Services (WSJ)
Banking startup Bee (which provides bank accounts, debit cards and financial services aimed at people who live in low- and middle-income neighborhoods) secures investment capital.

Clearpool secures $8 million investment (Finextra)
The electronic trading software development and agency execution business announced it has received an $8 million investment from growth equity firm, Edison Partners.

SMB Lending Technology Provider Mirador Secures $7M (Let’s Talk Payments)
Lending as a service getting more traction…and more money. Companies like Mirador help banks compete in online lending.

Q2 Acquires Social Money in $10 Million Deal (Finovate)
Formerly known as Smarty Pig, Social Money helps financial services companies better engage their customers by offering them savings solutions such as GoalSaver, a customized, bank-audited goal-saving system.

Startup Tracker’s Jeremiah Smith on how Twitter is a great distribution medium for his complement to CrunchBase (Tradestreaming)
Startup Tracker is changing the way investors and competitors research startups.

Prosper’s BillGuard Unlocks Premium Features for All Users (Finovate)
On the heels of being acquired by Prosper, the expense-management and fraud-tracking application made some of its most popular premium features available for free.

Green Dot to Enter Lending Space with Loan Marketplace (Bank Innovation)
Prepaid player Green Dot is stepping into the lending game with a marketplace for loans. The move will happen in 2016, CEO Steve Streit announced this week.

Photo credit: V31S70 / VisualHunt.com / CC BY