JJ Hornblass, Royal Media CEO

Hi, everyone. I’m JJ Hornblass and welcome to FinTech Unfiltered the podcast from Bank Innovation, the leading digital news service on banking and FinTech. This is our weekly wrap on what’s happening in banking innovation for the week of July 13 2020. Before we begin, I want to thank our sponsors, Infogroup LQD Finance and Mambu for their support, so thank you to them. I am joined by Bianca Chan and Rick Morgan from the bank innovation team. And we’re happy to have Johan Envall who is the Vice President at COVR Security as our special guest this week. Hi, Johan. Greetings from our house. How are things in Sweden?

Johan Envall, vice president of sales and business development

Things are good. We’re in the summer. Going it. I’m fine. Thank you.

JJ Hornblass

Good. Good. Thank you for being here. It is Friday, July. 17 2020 a key story this week that we wrote about was on the gravitation amongst some financial institutions to what might be called alternative core providers. There was some data that came out of Bankjoy, which is one of those core providers that showed that they’ve secured some new clients. And 17 new files is not a big number, but what do core alternative cloud providers need to do to seize more market share from the major bank technology companies? Rick, do you want to start with that?

Rick Morgan, news editor at Bank Innovation

Yeah, I can start. So I mean, the thing that we noticed in this story was that the credit unions that they’ve been very drawn to the fact that they can be like a personal customer with this with Bankjoy. So they know that they’re going to get that one on one attention. They’re going to be, you know, a real valued customer, not just another customer if they were to go with one of the big providers out there. So that was what really was setting Bankjoy apart, at least for this story. And it’s a trend that you’re seeing, not just with credit unions and Bankjoy. I mean, you’re noticing a lot more startup core providers, Neocova is a company that we’ve covered quite a bit. I know I wrote a story A while back earlier this year about a really tiny core provider called Smiley Technologies that has like eight companies or eight banks that use it. So yeah, this idea of going with a smaller player to get that one on one individualized attention is sort of a growing trend. I know Bianca anyway, that’s my thoughts as well based on on your understanding.

Bianca Chan, news editor at Bank Innovation

Yeah, well, we saw some data come out of FI navigator. And William Mills, which is a PR firm this week that showed the market place, especially among credit unions, for core providers is pretty scattered much more so than in the banking, banking side of the industry. So you see, for instance, Fiserv, which is the biggest provider on both ends, only has a handle on 30% versus 40%. For banks, so I think there’s more opportunity among credit unions, they’re not, they’re looking for other alternatives. And that’s kind of opened the door for more players to gain some traction.

JJ Hornblass  

So Johan, you’re maybe first tell us a little bit about COVR. And then the question I wanted to ask you is just from a from a COVR standpoint, how you view kind of the traditional core providers versus alternative core providers and whether that has any implications for you as a fin tech startup, based out of Sweden. Yes.

Johan Envall

First of all COVR security is a Swedish startup in the cybersecurity space. We provide digital identification technology for any service provider really. But our main focus is obviously financial service providers who have the need for existing end users to authenticate them online as well as authorization of payments and other business activities. Equally quintiles provide digital onboarding of new customers, instead of having to go to a bank branch, you could potentially instead onboard and identify yourself, your smartphone in that channel. So we have a background as heavy our founder, we’re creating the Swedish National Standard of digital identification. And we have developed that technology further and now expanding it to other regions in Europe, Southeast Asia, Middle East, as well as the North America’s now. So that’s very briefly our background and what we do In regards to core providers, well, you know, we’re looking at us, we will definitely look at ourselves as the next generation of providing identification technology. And, you know, competing with the incumbents, if you will. And yeah, it’s challenging as, as banks have many, many times had technology providers for a long, long time, replacing such partnerships and integrations is quite an investment on their end. So you have to be very crisp in your message to convince the banks that you know it’s worth the journey to switch.

JJ Hornblass

Do you have a you know, do you look at the kind of gravitation to some of these new alternative technologies like it Security as well as a high threshold for adoption standards and so on. Is there a messaging that you try to pursue that allows you to kind of get through this kind of incumbent hurdle challenge? when you’re when you’re talking to potential partners and users?

Johan Envall

Yeah, I think we have a conversation. It’s obviously about security and, and the guts of the cryptography and etc. But looking at security from a user experience perspective, I mean, security’s To be honest, maybe a boring topic and it’s, you know, something just have to do and it’s people expect it to to kill or sabotage the user experience. It’s a trade off. High Security means for us so equal that you can trade off security To improve UX, but we show how actually user experience can be improved by equally improving security. So again, looking at how to authenticate yourself to log in or to authorize payments in an easy and seamless and frictionless manner is a topic of cybersecurity equal to user experience. So they go hand in hand and that discussion is more. It’s nicer and more fun to have to talk about how the UX is getting better while you’re improving the security piece.

JJ Hornblass 

This week, Bianca and Rick both wrote road I think varying stories that sort of touched on POS lending. Why is there so much attention around POS lending? Now first of all, maybe kind of fill us in on what happened this week, between MoneyLion, ChargeAfter and Afterpay? But it seems like This was the there was a confluence of news coming out of POS lending.

Rick Morgan 

Yeah, I mean, people want that basket size up, but they want that decreased cart abandonment. And then I know Afterpay this is where I wrote about, wrote about other stuff as well. But Afterpay they came to the US a couple years ago. And they’ve just been growing like gangbusters. They had 1.5 million customers, I believe last summer. And this May they announced they were to 5 million customers in the US. The US is now I think their biggest customer base. They’re an Australian company. So used to be Australia, New Zealand was their biggest customer base. They’re also in the UK as a company called Clearpay. So yeah, the fact that their US market is now it’s really, really grown, grown to be the biggest customer base they have. It’s pretty interesting. And to that end, they launched in-store capabilities. They had been a completely online capability. completely online solution up until this point in the US So, but now they’re going into the brick and mortar.

Bianca Chan  

Yeah. And MoneyLion for its part is a challenger bank. They’re looking to get into point of sale financing. So the company which is now a challenger bank with checking accounts and lending products it recently revamped its online account offering, they’re calling it RoarMoney. And it’s backed by Mastercard, which is essentially a phase two of its free checking account that used to be backed by Visa. So since MoneyLion, handles its own lending processes, it has something like 40 state licenses. It’ll essentially allow customers to choose between the cash in their debit accounts, or to use money lending, money lines, lending products for installment loans at checkout, and they’re also looking to integrate AI into the process. Since MoneyLion, has a big focus on Personal Finance management. So the AI will essentially say, hey, you’ve got X amount of dollars in your checking account, it’s a good time to pay off this installment loan that you got four months ago. And that is essentially supposed to help build up credit scores for customers. So it’s a pretty interesting opportunity. I think especially I mean, it’s interesting that Afterpay is moving to brick and mortar because my guess would be POS finance is just taking off because of this ecommerce boom everyone’s at home. Everyone’s buying groceries online, buy other things online as well. So it kind of makes sense from like a market perspective that people are wanting more well, friendly payment options.

JJ Hornblass 

Yeah, I mean, it’s like there’s so much credit card transactions. There’s the volume is so huge that even if a small percentage of that goes towards POS point of sale, lending The numbers are really potentially staggering.

Rick Morgan  

I mean, Visa got into it with ChargeAfter. They’re looking into installment loans as well. So even the big card players are kind of trying to move into that space. 

JJ Hornblass  

Yeah. So looking ahead next week. What do you, Rick, what do you have coming up?

Rick Morgan 

Well, we have a few things on the docket, kind of going to look at some reports that talk about how big tech is affecting finance. And then also, you know, it is earnings season, so we will be keeping an eye on what some of the big banks, the big tech players have to say,

JJ Hornblass  

Good. Good. And Johan, what’s coming up for cover in the next few months? What are you guys working on?

Johan Envall

Ah, we have some mature projects that is finally kicking off both in Middle East and Southeast Asia and myself. I’m driving one National ID project in Central Europe. So it’s all over the globe, I would say. 

JJ Hornblass  

Very good and it’s a COVR so people can find COVR Security covrsecurity.com and it’s COVR. Correct. Make sure to leave out the but thank you so much for being here, Johan and Bianca and Rick. As always, we want to hear from you. Please rate FinTech Unfiltered wherever you listen to your podcast. And please be sure to visit us on finainews.com we’ll see you next time here on FinTech Unfiltered and Until then, keep it unfiltered.