Fintech Startups: Can They Help Your Business

Financial technology companies, or Fintech startups, seem to be making money hand over fist. According to PitchBook, since 2015 “U.S.-based fintech startups have pulled in roughly $19 billion across more than 1,400 deals with VC participation,”1 with some of the bigger names including Coinbase (an online platform for buying and selling digital currency) and Credit Karma (which offers “the info you need to take control of your credit”).  

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Fintech Startups: Can They Help Your Business?

Aug 13, 2018

Fintech Startups: Can They Help Your Business

Financial technology companies, or Fintech startups, seem to be making money hand over fist. According to PitchBook, since 2015 “U.S.-based fintech startups have pulled in roughly $19 billion across more than 1,400 deals with VC participation,”1 with some of the bigger names including Coinbase (an online platform for buying and selling digital currency) and Credit Karma (which offers “the info you need to take control of your credit”).

But fintech startups —defined by Wharton FinTech as “an economic industry composed of companies that use technology to make financial systems more efficient”2 — do face specific challenges.

First and foremost, since they deal with money, people are inclined to be skeptical. Fintech startups often need to work extra hard to gain the trust of consumers. This is especially true in light of all the recent publicity about data breaches and consumer privacy, not to mention the diverse array of security concerns that surround buying, selling, transferring and storing cryptocurrencies like Bitcoin and Ethereum.

Witness the myriad challenges that have been reported by some users of the aforementioned Coinbase, who panicked when the exchange mistakenly drained the non-cryptocurrency bank accounts of customers, an error it blamed on a “code change by the card networks.”3 

Never mind the users who have reported having their Coinbase accounts drained of cryptocurrency, typically after having their email account hacked.4

Other concerns that have been highlighted by Entrepreneur magazine, include the fact that many fintech companies and their customers face an uncertain regulatory playing field, one which is likely to evolve over time. “Since most regulations tend to cover post fintech, companies being operational and servicing customers have to change their business model and mechanisms to get their businesses to comply with new regulations,” and do so without hampering service to customers, notes Bharat Ravuri, founder of MintZip, in Entrepreneur. “In certain cases, the new regulations make it unfeasible for some companies to offer their services — thus creating chaos and larger trust issues for customers to embrace these digital platforms.”

The good news for fintech startups, though, is that millennials — who have grown up with smartphones — are generally comfortable using their phones to make payments and execute financial transactions. According to equities.com, “nearly 33 percent of Millennials believe they won’t need a bank within the next five years.”5

With that in mind, following are seven prominent fintech companies (listed in alphabetical order) whose products and services you may find useful — or useful to know about. And, if you’re interested in learning more about the top companies in this fast-growing sector, check out the Forbes FinTech 50 of 2018.

  1. AvidExchange helps companies automate their accounts payables process using Procure-to-Pay (P2P) automation, which “streamlines the entire process from procurement all the way through payment for enhanced reporting, optimal spending, and better budgeting for your entire organization.”6

  2. Giftly allows senders to give gift cards by email, text, or U.S. mail; gift recipients can receive their gift card via mail, or have the funds deposited into their bank account or PayPal™ account.

  3. Kabbage provides funding directly to small businesses through an automated lending platform. Users apply for a line of credit by providing their business information and revenue data online or through Kabbage’s mobile app.

  4. Nok Nok Labs develops authentication technology for consumer-facing mobile and IoT applications. More specifically, the company describes itself as “a pioneer in driving the adoption of password-less modern authentication that includes biometric, token or wearable-based authentication of devices and users on mobile, PC and IoT platforms to deliver strong, multi-factor authentication.”7 

  5. Oscar, which bills itself as the “first technology-driven health insurer,” sells individual health insurance plans via a digital interface, filling a need among freelancers and those who work in the gig economy, as well as others who may not be able to get health insurance the traditional way (through their employer).

  6. RobinHood describes itself as “a stock brokerage that allows customers to buy and sell U.S. listed stocks and ETFs with $0 commission.”8 It earns revenue by collecting interest on the cash and securities in user accounts, while also offering premium margin accounts with extended trading hours for a monthly fee.

  7. TrueAccord has developed a fully automated debt recovery system for businesses, one with a decision-making engine that uses machine learning, which is also being used to fight fraud in the payments space. According to the company, “hundreds of thousands have dealt with their debts with convenient payment plans,” part of the startup’s ongoing effort to “turn collections into a recovery and reconciliation process.”9 

Last but not least, if you're interested in learning more about fintech in a conference setting, you may want to consider attending FinCon18, which will be held from September 26-29, 2018, in Orlando, Florida.

1. The 11 most valuable VC-backed fintech companies in the US, PitchBook,
https://pitchbook.com/news/articles/the-11-most-valuable-vc-backed-fintech-companies-in-the-us

2. Wharton Fintech, What is FinTech? https://www.whartonfintech.org/blog-archive/2016/2/16/what-is-fintech

3. Have a Coinbase account? You need to check your bank statement right now, Mashable, https://mashable.com/2018/02/15/coinbase-drains-bank-accounts/#yIy_v526lqqd

4. Hacking Coincase: The Great Bitcoin Bank Robber, Fortune, http://fortune.com/2017/08/22/bitcoin-coinbase-hack/

5. Millennials lead the change in the latest fintech trends, Equities.com, https://www.equities.com/news/millennials-lead-the-change-in-the-latest-fintech-trends

6. P2P Automation with AvidXchange, https://www.avidxchange.com/

7. About Nok Nok, https://www.noknok.com/company/nok-nok-labs/

8. About Robinhood, https://support.robinhood.com/hc/en-us/articles/202844869-About-Robinhood

9. TrueAccord, Our Story, https://www.trueaccord.com/about/story

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