ACI UPF Framework - An Overview

 The UP Framework is at the core of ACI’s Universal Payments strategy to enable end-to-end enterprise payments. It is a set of technologies and frameworks that orchestrate all aspects of payments processing for any payment type, any channel, any currency and any network. Combined with ACI’s leading solutions, it delivers an innovative architecture that bridges existing systems and future needs.

               ACI’s UP Framework enables customers to adopt an enterprise payments strategy, moving beyond monolithic applications to loosely coupled, service-oriented solutions. Both flexible and functionally rich, the UP Framework enables institutions to evolve their payments processing from legacy platforms to a new, componentized architecture that is capable of managing payments of all types and from all channels in a consistent, efficient and profitable manner. 

How does it work?

                The UP Framework extracts core payments functionality from applications and exposes the business logic as well-defined, standards-based service interfaces. These service interfaces unlock the intrinsic value of the business logic and allow it to be more easily shared across ACI’s products and existing payment solutions. Approaching payments in this manner radically reduces process duplication, which reduces the need for duplicate infrastructure and ultimately leads to lower overall costs, better reuse and greater processing efficiency. Well-defined service interfaces also enable more streamlined interaction between ACI solutions and existing customer assets, preserving IT investments and shortening the delivery cycles for implementation and new product innovation.

             ACI’s Universal Payments Platform paves the way to true enterprise payments. Common business logic inherent in ACI’s payment solutions, along with shared data models based on ACI’s Payment Information Model (PIM), are incorporated into the UP Framework. The result is an enterprise platform that allows financial institutions to view payments corporate-wide and implement a service-oriented architecture that optimizes business processes regardless of payment type, currency, entry channel or settlement mechanism.

            ACI UPF provides a flexible and functionally rich framework based on a componentized architecture that is capable of providing a robust, consistent and efficient payment platform.

This Architecture, depicted above, is composed of 4 main areas that are described in subsequent sections.

            ·       Platform – the payments processing and business operations servers

            ·      Tools – applications for extending and testing the platform

            ·      Horizontal Frameworks – underlying technology components used within the platform

            ·      Cartridges – application modules developed for use within the platform

The UPF technology provides a common platform through which payments services can be orchestrated. These services can be from ACI’s existing solutions, or any financial institutions provided services that are needed across the full workflow of any payment. 

The platform provides a common layer for integration, eliminating inefficient point-to-point interfaces, the solution provides endpoints that needs to be defined only once, but can be re-used many times for different services allowing for agility to respond quickly to new business initiatives and importantly new customer demands. Each endpoint protects other core systems from changes, and makes adoption of new services, products and technical requirements simple. 

The UP Framework provides a central repository of payments data, and can interact with customer channels to provide real-time, personalized data. 

The UP Framework forms the core of the applications and it is being widely adopted in every ACI solution offerings such as transaction banking, consumer solutions and other ACI solutions.

Benefits

·      Provides a holistic view of the customer’s payments activity, regardless of how they decide to interact.

·      Enables new customer channels to be supported through configuration which enables rapid deployment as new devices come to market.

·      Provides a common service across devices, allowing customers to start a transaction on one channel, and complete it on another.

·      Enables new ‘products’ to be configured rapidly, either by the use of new orchestrated services, or by the definition of existing services specific to the customer needs (e.g. special FX tiers).

·      Drives specific customer outcomes via attributes within the payment flow by accessing other enhanced services that can be exposed through the UPF.

·      Provides a tool for the management of different payment input formats that the customer might want to provide to you; enabling the customer to interact with you under their own needs not driven by the restrictions.

·      Provides interface to CRM and loyalty applications to support enhanced authorization based on customer class or status.

ACI UPF Product integrated into Azure DevOps

 

Cryptography – Examples

 1.WhatsApp Encryption:

End-to-end encryption in WhatsApp is a notable example of cryptographic encryption these days. This functionality is available in WhatsApp via the asymmetry model or through public-key techniques. Only the intended recipient is aware of the real message. After installing WhatsApp, public keys are registered with the server, and messages are sent.

2. Digital signatures:

Digital signatures are another real-time application of cryptography. When two clients need to sign paperwork for a commercial transaction. However, if two clients never meet, they may not believe each other. Then, encryption in digital signatures guarantees improved authenticity and security.

3. Email Encryption/Decryption:

Email encryption protects the content of emails from anyone outside of the email discussion who wants to access a participant’s information. An email is no longer readable by a human when it is encrypted. Your emails can only be unlocked and encrypted with your private email key.

4. Authentication of SIM cards:

The SIM must be authenticated before it may be used to access the network. The operator generates a random number and sends it to the mobile device. This random number, together with the secret key Ki, is fed into the A3 algorithm (it is this Ki that recently has been compromised). The result of this computation is returned to the operator, who compares it to the result of the calculation he performed himself.

5. Disk Encryption:

Disk encryption software encrypts your whole hard disc, eliminating the need to worry about leaving any traces of unencrypted data on your disc. PGP may be used to encrypt data as well. In this example, PGP encrypts the file with IDEA using the user’s private key and a password given by the user. To unlock the file, the same password and key are needed.

Types of Cryptography

1. Secret Key Cryptography (Symmetric Cryptography)

2. Public Key Cryptography (Asymmetric Cryptography)

3. Hash Functions

1. Secret Key Cryptography (Symmetric Cryptography):

Secret Key Cryptography, also known as symmetric cryptography, encrypts data with a single key. Because symmetric cryptography uses the same key for both encryption and decryption, it is the simplest kind of cryptography.

The cryptographic method encrypts the data using the key in a cypher, and when the data has to be retrieved again, a person entrusted with the secret key can decode the data. Secret Key Cryptography may be used on both in-transit and at-rest data, although it is most often employed on at-rest data since revealing the secret to the message’s receiver might lead to compromise.

Secret-key or symmetric-key encryption algorithms generate a predetermined number of bits known as a block cypher with a secret key that the creator/sender uses to encrypt data and the receiver uses to decrypt it.

It is written as P = D(K,E( P) )

Where,

K = Encryption and decryption key

P = Plain text

D = Decryption

E§ = Encryption of plain text

Some of the examples of Secret Key Cryptography are as follows:

• AES
• DES
• Caesar Cipher

2. Public Key Cryptography (Asymmetric Cryptography):

The Public Key to encrypt data, cryptography, also known as asymmetric cryptography, employs the use of two keys. The first key is used for encryption, while the second key is utilized to decode the communication.

One key is kept secret and is known as the “private key,” while the other is released openly and may be used by anybody, therefore the “public key.” The keys’ mathematical relationship is such that the private key cannot be deduced from the public key, while the public key can be deduced from the private key. The private key should not be disseminated and should be kept only by the owner. Any other entity can be granted the public key.

Public-key or asymmetric-key encryption algorithms encrypt information with a public key associated with the creator/sender and decode that information with a private key known only to the originator (unless it is exposed or they want to share it).

It is written as P = D(Kd,E(Ke,P)).

Where,

Ke = Encryption key

Kd = Decryption Key

D = Decryption

E(Ke,P) = Plain text encryption using an encryption key

P = Plain text

Some of the examples of Private Key Cryptography are as follows:

• ECC
• Diffie-Hellman
• DSS

3. Hash Functions:

Hash functions are one-way, irreversible functions that secure data at the expense of not being able to recover the original message. Hashing is a method of converting a given string into a set length string. A decent hashing algorithm will provide distinct outputs for each input. The only method to crack a hash is to test every conceivable input until you obtain the same hash. A hash can be used to hash data (for example, passwords) and in certificates.

Some of the most well-known hashing algorithms are as follows:

• MD5
• SHA-1
• SHA-2 family which includes SHA-224, SHA-256, SHA-384, and SHA-512
• SHA-3
• Blake 2
• Blake 3
• Whirlpool

Card Tokenization

In India, RBI announced new rules for Tokenization, which is going to effective from Jan 1st 2022. Lot of my colleagues, friends are asking whats the impact to end users. Just wanted to write few things about Tokenization and that impact.

What is card tokenisation?

When you shop online or even book tickets on travel portals, you tend to save your credit card details in those websites. So, you just don’t need to remember your card details each time you shop. Just enter the CVV and you check out in a matter of seconds.

But that was risky. If your online site or travel portal gets hacked, your card details could be leaked. Besides, you may have also saved your card details on some website years ago and forgotten all about that. “There is a high chance some of the merchants will not know how to store secure card information,”

Enter tokenisation. This is a process of converting your card details into a unique token that is specific to your card and only to one merchant at a time. This code masks the true details of your card, without which no one can misuse your card. This token can be saved on the online portal’s server.

The new tokenization rule that comes into effect from January 1 2022, prohibits all online shopping portals from saving your card numbers, CVV, expiry date etc. on their servers. So, you either make a token before you buy an item and save that token on the particular website (for future use) or enter your card details every time you buy stuff off the internet.

“In the past, there have been instances of data leaks from merchant websites; digital transactions are also growing significantly, requiring added safety. So, this is a precautionary step mandated by the regulator to enhance card data security,” 

How does this card tokenisation work?

At check-out time on an online shopping portal, enter your card details and opt for tokenisation. Your merchant forwards it to the respective bank or the card networks (VISA, Rupay, Mastercard, etc). A token is generated and sent back to your merchant, which then saves it for you. Now, the next time you come back to shop, just select this saved token at check-out time. You will see the same masked card details and last four digits of your card number. You will need to enter your CVV and complete the transaction. Tokenisation is not mandatory, but it makes it easier to shop repeatedly.

“As a customer, you don’t need to remember the token. The end-customer experience is not changing while making the payment,” 

Is the tokenization service free?

Yes, tokenisation of card is absolutely free, and can be availed by anyone. Currently, tokenisation is applicable only to domestic cards. International cards are not covered by this guideline. You can request for tokenisation on any number of cards to perform a transaction. “If a merchant has not integrated with the card network and bank issuing the cards by December 31, you will have to enter the card details every time, as you cannot store your card details in the token format,” 

Does a card have different tokens for different merchants?

One token is limited to just one card and one merchant (online portal). For instance, if you have, say, an ICICI Bank credit card tokenised on Amazon, then, this same card will have a different token on Flipkart. However, as a customer you don’t need to know or remember the token linked with the card. You can tokenise multiple cards with the same merchant, or tokenise the same card with multiple merchants.

What is the best way to manage my tokens?

If you have multiple cards and like to shop online frequently, there’s a better way to manage your tokens. Say, you want to remove some tokens you had got long ago from a specific website. Mathur of Razorpay says that an issuer bank will now provide a dedicated portal (on its own bank’s website) to manage tokenised cards. In simple words, your dashboard would now show you a list of your cards and where (merchants) you have tokenized them. Delete the tokenised cards of websites you do not use frequently.

What will happen to the token once the card gets replaced or renewed or reissued or upgraded?

You need to visit the merchant page and create a fresh token. That is because your new card (credit or debit) comes with a new number and CVV. 

BaaS - How Banking as a Service works

 

Digital Payments - In Future

Digital payments must be 

• Faceless, 
• Cashless and 
• via completely electronic means of end to end transaction 

without compromising availability, provenance and traceability, repudiation and of course information security. 

Since last decade digital payments have garnered a lot of interest and adoption from the users and positively influenced the digital agenda for enterprises and governments.

According to Gartner,

• 5 countries will launch digital initiatives to remove cash from circulation by 2023 fully replacing cash by digital means
• Global cash in circulation will reduce after decades of year-on-year increases by 2024
• Consumers using mobile proximity payment methods will be almost 2 billion, up from 2019’s figure of less than 1 billion, by 2024

Future Technologies of Digital Payments

Use of Biometric - Using unique fingerprints and facial recognition, digital payments can be enabled via authenticating the users and authorizing the transactions, offering accurate, secure, instant and hassle-free way, rather than remembering various PINs and passwords from multiple entities and keeping track all the time. Most of the digital payment players leverage device based authentications and tokenize the transactions without need of user interventions. Most of the payment wallets running on the mobile devices have successfully paved way of this method and good amount of research and development is happening in this area.

Use of Voice/Speech Analytics and AI/ML based algorithms - They have been around for few years now and are driving the way we control our home appliances, even interact while driving, etc. As these technologies will become more efficient and accurate the digital payments would be the ones to leverage them in real life. This will help create more secure and simple way to trade and transact within the digital payment domain.

Near Field / Contactless - Using proximity of device via EVM & RFIDs, POS machines via NFC - there are many ways embedded workflows can be built to provide easy and secure way to transact. There are major credit card players already issuing the contactless that will work with ATMs and POS terminals and even interact with the mobile devices by and between the stakeholders involved in the workflow.

DLT's – Digital Ledgers / Blockchains’ foray with digital currency is well known and many regulators are finding ways to strike a balance between autonomous currencies and digital payments, which is significantly decentralized, anti-fraud and business continuity driven DLT’s will surpass our expectations and establish the technological governance to fool proof the digital transactions in years to come.

AI/ML and Data Science – It will substantially improve the insights on the volume and velocity of digital transactions which is a common barrier for fraud detection, risk management and regulatory mandates etc. Use of AI/ML coupled with established data science practices will pave way for governments and banks for traceability, customer acquisition and retention, royalty management, credit scores, marketing etc., expanding the canvas of intelligence of digital payment transactions.

The first wave of the digital payments started a few years ago. Users can no longer be constrained by banking hours, type of devices, physical cards etc., to transact by and between entities. 

AI - In Banking

 

Revenue Streams for Financial Sectors/Banks

 Its NOT that easy to define revenue model for Financial Sectors and Banks. There are 5 Main streams for Financial sectors. Its also applicable to Banks

1. Interchange
2. Interest
3. Payments
4. Financing
5. Software

Interchange is the portion of spend that the card issuer gets after cardholders use the cards to spend.

Interest paid on balances is perhaps the most obvious revenue stream in banking: simply park funds in a bank and let it pay you at the end of the month.

Just like banks, Financial Companies also, can get revenues from payment fees. Building a banking experience means offering payments in the form of ACH, wire, checks and bill pay.

Financing means giving your customers funds today and expecting them to pay them back in the future, potentially with an added fee or interest. 

Software revenues are the last (and often most overlooked) type of revenue associated with financial features. As the features become an important pillar in your software, you may choose to offer them at an extra cost.

Rise of Alternative Payments

 

Data -> Information -> KNOWLEDGE -> Wisdom

 

BNPL - Overview

 

How Does the Cash Back Debit Card Process Work?

The idea behind debit card cash back transactions is as simple as making change for any payment over the exact amount. At checkout, the customer can enter an amount of cash they would like to receive back. That amount is added to their purchase total, and the merchant gives the overage back as cash from the register. Cash back can only be given on debit card transactions, not credit cards (although Discover offers an exception to this rule).

Merchants can decide how much cash they are willing to offer back, but there are maximum upper limits, set by the card networks, which vary from region to region.

On the back end of the transaction process, cash back requires some special handling. What this means for merchants is that their payment terminals must have cash back functionality. They must be able to track the transaction and cash back amounts separately so they can be identified in authorization and clearing messages, and they must be able to handle Issuer Responses related to the cash back service.

Another rule is that merchants cannot process cash-back-only transactions; the total transaction amount must be higher than the cash back amount.

Though its widely used in America. Its NOT that much used in europe countries. For example, Its NOT allowed in netherlands

From Electronic to Digital Money

 

Biometrics Cards - 3

 BIOMETRIC PAYMENTS MYTHS & REALITIES:

1) Myth: Card stores the picture of the fingerprint.
Reality: The encrypted image stored in a series of digital 1’s & 0’s and not an actual picture. So the original image can’t be reverse-engineered.

2) Myth: The biometric data shared with every merchant.
Reality: The biometric data stored on the chip and so never leaves the card

3) Myth: The battery embedded in the card needs charging periodically.
Reality: So an electromagnetic field generated by the payment terminal provides the power needed by the card.

4) Myth: If dirt or sweat clings to the biometric emv card and the transaction will fail.
Reality: If biometric verification fails after multiple attempts due to some unknown reason. And the card will switch to PIN verification to authorize the transaction.

5) Myth: If the card’s stolen/lost, all the money stolen through contactless transactions.
Reality: A PIN entered from time to time to verify whether the cardholder is genuine.

6) Myth: Payment can be accidentally triggered for someone else if walking close to the contactless payment terminal
Reality: There is no chance of ending up paying for someone else’s transaction. Because contactless biometric emv card work
only and when they are a few centimeters away from the payment terminals

Biomertics Cards - 2

 End-to-end encryption 

An EMV card contains a microchip that stores and protects the user’s information. Communication between the user and merchant takes place during transactions only, making it nearly impossible for hackers to steal data such as bank details and personal cardholder information. POS readers authenticate the data offline to ensure the card is not counterfeit; then the user inputs a PIN number so cardholder verification can take place. Using cryptography, a unique code is generated to ensure personal details of the cardholder are never exposed. 

Up until recently, this level of security was 99.7% effective, and any attempts at stealing cardholder information were nearly impossible. In the US, counterfeit fraud dropped 76% in just over three years after the adoption of EMV technology.

Tokenization 

But as contactless payments have become more popular, extra layers of security have had to be introduced to prevent attempts at stealing cardholder data. Tokenization was introduced for card-not-present (CNP) transactions as a way of further disguising cardholder and transaction data. 

Most EMV card fraud occurs when the primary account number (PAN) details have been intentionally attacked and exposed. Tokenization adds an extra layer of security by replacing the PAN number with an encrypted code. This way, cardholder details are never transmitted. And even if token details are stolen, each code is unique and cannot be replicated or used again.

Biometric card security 

Biometric capabilities on EMV cards bring security features to a new level. Then the transaction can be authorized. Fingerprint reference data is stored directly on the card and can therefore never be stolen, hacked, or replicated.  

Benefits :-

1) Keeping merchants happy 

For merchants, the main benefit of biometric cards is ensuring no fraud liability can be placed on them, as these cards go above and beyond typical EMV standards. Also, there’s no need to buy new hardware, as POS readers in use today are compatible. Payment limits can be increased or done away with entirely with biometric cards; even if a card is stolen, no one else can use it

2) Increasing consumer satisfaction 

From a customer’s point of view, the extra layer of security is key. Anyone who has been the victim of card fraud, which had a global cost of $22.8 billion in 2016, will have no problem signing up for a new card. Although a small cost may be introduced to cover the manufacturing of these new cards, a one-off fee in return for years-long protection of your bank and personal details is an easy choice. 

What may put consumers off is having to visit their bank initially to register their fingerprint. This gets converted into an encrypted digital template to be stored on the card. Most providers at this stage don’t offer an alternative, so uptake may be slow initially. 

What’s holding EMV providers back from employing this technology? 

Production costs will be incurred, whether they’re passed on to consumers or swallowed by card providers. Instead of the $1 or $2 it takes to create a typical contactless EMV card, biometric cards can reach up to $20. Also, the typical placement of the CVV/CVC number on the back of EMV cards may need to be moved to allow space for the biometric scanner. 

Biometrics Cards

More than 7 Billion  EMV cards, both contact and contactless, in use today, and they're the preferred choice of payment for the majority of consumers.

Contactless payments – where no PIN number or signature is required to complete the sale – have grown in popularity due to their convenience especially in the COVID Times. Most of the banks/FIs increased the limit in contact less transactions. For example, In Netherlands, limit for Contactless Transactions got increased to 100 Euros.

Thanks to Apple Pay and Google Pay, mobile payments are increasingly common. But a lot of consumers are still wary of the security of these transactions and how easily credit cards and mobile phones can be stolen – along with the possibility that cardholder information could be intercepted during transactions.

Contactless payments are at the forefront of this trend, but security issues have slowed the adoption of 

• Contactless cards
• Contactless payments via mobiles 
• Wearable devices

Biometric card payments diminish consumers' fears of transaction security, whether online or in person, and are about to come out of beta testing. Adding biometric identification to EMV cards alleviates concerns about fraudulent activity while offering greater potential for profit by merchants and banks alike.

Security one step further by enhancing the card with a fingerprint-sized biometric sensor. Instead of entering a PIN number when the card is placed on a point of sale (POS) reader – or even having to write your signature on a receipt – all you have to do is place your finger on the sensor and the transaction will be verified and completed in a fraction of a second.  

What are the differences between EMV and biometric cards? 

The main difference between these cards is the level of security offered to consumers. 

• EMV cards use end-to-end encryption to hide user details and protect data from being stolen. 
• Contactless cards use tokenization for further encryption,
• while biometric cards go one step further and include a fingerprint scanner to confirm the identity of users.

Simplified AI Landscape

 

How The Traditional Bank Is Being Disrupted - From CBINSIGHTS

Traditional banking system is being disrupted across a wide variety of core revenue streams. For example: Bank of America is being disrupted by Fintechs.

Below, we take a look at how tech companies are unbundling Bank of America’s front office, from consumer deposits and payments to equity research and business credit cards. 

1. Consumer Payments
2. Investment Bankings
3. Consumer Deposits and Savings
4. SMB Lending
5. Business Creditcards
6. Wealth Investments
7. Consumer Lending
8. Business Banking

CONSUMER PAYMENTS

Startups here are using consumer payments products like money transfers and peer-to-peer payments to chip away at banks’ payments market share. 

International money transfers and remittances are expensive to complete, and they make up a massive market: Remittances are worth an estimated $743B, according to CB Insights’ Industry Analyst Consensus. 

• Remitly and TransferWise are digital platforms that facilitate international money transfers. TransferWise is valued at $5B, as of July 2020.

Products enabling peer-to-peer (P2P) payments are also targeting the traditional bank’s hold on payments systems. 

• Venmo, owned by PayPal, and Cash App, owned by Square, offer P2P payments as their primary offerings. However, both brands have expanded to additional products, such as Venmo’s credit card and Cash App’s stock investing offering. 

INVESTMENT BANKING

Investment banking services are more difficult to unbundle, given significant regulatory restrictions for the industry. However, some startups are enabling the digitization of traditional banks or are providing auxiliary services directly to banking clients like institutional investors. 

Though equity research services used to be offered for free to clients as part of a bundle with trading services, regulations like the EU’s MiFID II now require that banks must charge for research directly. This has provided an opportunity for other research providers to gain market share among banking clients.  

• Sentieo and Koyfin aim to help with investment decisions by providing data and equity coverage for a variety of assets, from stocks to currencies to fixed income.

Companies in the asset management arena are assisting with or replacing traditional asset management divisions by providing software and services for businesses, institutional investors, and more.  

• Companies like Fount and Liqid are digital asset managers with robo-advising capabilities. Liqid has raised a total of $44M in disclosed equity funding. 
• Addepar is a platform that helps financial advisors leverage data and customizable reports to communicate portfolio performance. Valued at $594M, Addepar most recently raised a $117M Series E round in November 2020.
• Ethic is a digital asset manager that helps institutions create custom sustainable investment portfolios.

Sales and trading operations within banks can be lucrative. Now, alternative brokerage platforms and software that provide access to stock market information and stock brokerage are gaining traction, potentially eating into bank revenues.

• For example, Trumid is an online trading platform providing corporate bond market professionals with direct access to liquidity. Trumid raised a $200M Series E round in July 2020 at a $1B valuation.

CONSUMER DEPOSITS & SAVINGS

Consumer deposits and savings are the bread and butter of any traditional bank, and Bank of America is no exception. The company is the second-largest lender in the US based on assets, and it made $3.3B in net income on deposits in the first 3 quarters of 2020. This makes the sector an attractive target for fintech companies. 

• There is no shortage of startups aiming to grab deposit market share from traditional banks. Companies like Chime, Monzo, N26, Revolut, Varo Money, Current, and Dave all offer digital banking services to consumers. 
• Other companies focus on savings accounts. Goldman Sachs’ Marcus offers savings accounts and personal loans — a departure for the investment bank, which did not have a consumer arm until recently.

SMB LENDING 

Companies in this category target small- and medium-sized businesses (SMBs) for business loans and working capital financing.   

• Capital Float is an India-based startup providing business loans through a lending platform. The company has raised $126M in equity funding from investors including Ribbit Capital and Amazon, which is also trying to break into the SMB lending space.  
• C2FO, Bluevine, and Fundbox provide working capital financing for small businesses, allowing them to buy inventory, expand operations, and cover expenses. 

BUSINESS CREDIT CARDS

Similar to the constraints on small businesses and startups looking for banking products, unproven companies have difficulty accessing credit. Startups here are targeting this demographic by leveraging alternative data for risk analysis. 

• Brex and Divvy provide corporate credit cards for tech companies and other early-stage businesses. Similarly, Ramp Financial provides a corporate credit card and an expense management platform.

WEALTH & INVESTMENTS

Banks are losing their edge in investing and wealth management as consumers flock to trade brokerages, personal finance management tools, and robo-advisors. Fintechs are catering to millennials and Gen Z consumers through digital, self-directed investment platforms that forgo the traditional financial advisor. 

Companies allowing individuals to trade stocks or alternative asset classes have long operated outside of traditional banks. Startups here are growing in popularity, especially as the Covid-19 pandemic has led to a significant increase in day-trading.  

• Companies like Robinhood create opportunities to buy and sell stocks and other assets without charging commissions on trades like traditional banks. In fact, the popularity of the app has forced more traditional trading businesses to remove commissions for their customers. 
• The rise of cryptocurrencies and digital assets, which currently operate outside of the traditional banking system, has led to the popularity of crypto trading apps like eToro and Coinbase. 

Personal finance apps work with banks as well as other financial institutions to provide a holistic view of an individual’s finances. 

• Personal finance managers like Mint, Personal Capital, and Qapital link to a user’s bank accounts, investment accounts, loans, and other financial products to track spending, assist with budgets and goals, and provide investment allocation and savings advice. Mint, owned by Intuit, claims over 20M users. 

Robo-advisors use technology to allocate investments for individuals, rather than depending on the user to choose their own stocks or on a wealth manager to allocate stocks on the user’s behalf.  

• Investment managers like Betterment, Wealthfront, and Wealthsimple automatically allocate investments based on a user’s goals and risk profile.  
• Similarly, Ellevest is an investment advisor that is targeted toward women, creating investment strategies that reportedly factor in pay gaps or potential career breaks in order to build wealth.

Unlike traditional brokerages, which require that investments are made in whole shares, micro-investing apps offer fractional share investments — some for as little as $1 investments into a stock. These enable new demographics to invest. 

• Stash offers subscription plans for users to invest in fractional shares of stock and earn stock-based rewards on spending through the Stash debit card. Similarly, Acorns allows users to round up their purchases to the nearest dollar amount and invests the spare change.

CONSUMER LENDING

• Companies in this category provide credit and loans to consumers. 

  Traditional banks require certain credit scores to qualify consumers for credit lines or credit cards. By assessing credit risk through alternative measures, startups may have an opportunity to gain consumers typically overlooked by traditional banks. 

  • Companies like Mission Lane and Petal provide credit cards for younger consumers or those without a substantial credit history by analyzing existing spending patterns and banking history. Petal raised a $55M Series C in September 2020. 
  • San Francisco-based Aven provides users with a credit card that pulls from an individual’s home equity line. 

  Some consumer fintech companies are using personal loans to help consolidate credit card debt, finance large purchases, and provide cash advances.

  • Fintech companies SoFi and MoneyLion provide individuals with personal loans. SoFi offers larger personal loans and loan refinancing to over 1M members, while MoneyLion provides cash advances of up to $250 in near real time.

  Although mortgage rates are hitting all-time lows, mortgages remain a money-maker for traditional banks. Bank of America saw over $35B in residential mortgage loan production in the first 3 quarters of 2020.

  • Companies like Landbay and Better offer digital mortgage platforms to help purchase or refinance homes. Better has reportedly funded $25B in loans since 2016.  
  • Blend provides software to financial institutions to help streamline their digital mortgage lending businesses. The company has raised a total of $385M in equity funding since 2012, including a Series F in August 2020 that valued the company at $1.7B.

  BUSINESS BANKING

  Companies using new methods to evaluate the health of small businesses and unproven startups are gaining traction among a typically underbanked segment.  

  • Mercury, Novo, and Rho Business Banking specifically target startups and entrepreneurs, which may be unable to take advantage of traditional banking due to lack of assets and credit history. 
  • UK-based Tide and Starling Bank are digital banks that each serve over 200,000 businesses.