Financial Wellness Apps Bank on Credential-Based​ Authentication

vopay financial wellness

There has never been a more exciting time in banking than now. Financial wellness apps and digital tools help users manage their finances, automate their savings, boost their credit, track their spending and investments, and create and follow budgets. Consumers and businesses have control over their finances right from their phones or desktops. The list of innovative fintech companies and the use cases for their financial wellness apps goes on and on. Just see our recent two-part series on 15 fintech companies to look out for in 2020 to see what we mean. 

However, in order to continue to allow users access and full functionality to these apps, fintech companies require data—and, more specifically, permission to access it. 

The Financial Data and Technology Association (FDATA) of North America released a January 2020 white paper on credential-based authentication that could affect billions. The data shows that 1.8 billion consumer accounts in the U.S. would lose functionality to financial apps they depend on. This could happen if screen scraping (which we’ll define shortly) were no longer allowed and only the largest financial institutions’ APIs were available to users. 

Today, we’ll unpack this statement and supporting statistics, looking at what credential-based authentication means for the future of banking. 

What is credential-based authentication?

All digital platforms—websites, applications, social networks, etc.—require some authentication that the owner is who they say they are. Some websites’ authentication credentials only require an email and a password from the owner. That is called password-based authentication. 

Others, especially those linked to financial accounts with sensitive data, require further identification and verification for protection and security. These require credential-based authentication, such as name, email, password, date of birth, and account details, such as a bank account number, or extra verification through another connected device. This is credential-based authentication. 

Another form of authentication that many fintechs are moving toward, including ourselves here at VoPay, is through tokenization. We recently wrote a post called Tokenization: The secret key to digital payment security

In the post, we explain that tokenization is a form of credential-based authentication that adds an extra layer of security to consumers’ sensitive information and is more user-friendly. Tokens are a kind of credential that is far superior to anything that passwords and email addresses could ever provide. They can only be created by the credential owner and the information provided is algorithmically scrambled to protect against hackers decoding the information. These tokens replace and retain the essential information, not unlike a secure lockbox. 

Impact of credential-based authentication on fintech apps

This superior level of identification, verification, and security is essential to protecting consumers’ sensitive information. But it is also essential for fintech applications to function and support the users effectively. Unfortunately, many innovative banking tools that consumers (could) use on a daily basis, are working with missing data or are screen-scraping to fill in the blanks. 

Screen scraping is the process of collecting screen display data from one application to another. Most often, this is done as a last resort and captures data from an older, legacy application to display it through a modern app or website. Having to screen scrape in order to provide a modern service to consumers makes a great case for open banking—or the collaborative sharing and use of financial data. But that’s another story, which you can read here

If screen scraping was prohibited, open banking never comes into effect, and consumers were to rely only on applications built by major banks, what would happen? How would fintech companies that provide financial wellness apps be impacted? The short answer is that without all of the user data—and access to it—they cannot function fully. 

According to the FDATA North America data, the impacted consumer and small business use cases in the U.S. would include:

  • +530 million loan accounts for retirement planning, financial wellness, and debt reduction
  • +310 million accounts to manage and pay account balances and provide overdraft protection
  • +330 million investment accounts
  • +210 million accounts to help move and save money 
  • Almost 200 million transactions accounts 
  • Almost 140 million accounts fighting fraud and providing identity verification and authentication
  • +100 million credit accounts 

In the end, credential-based authentication is essential for encouraging innovation and competition in the banking and technology sector. It gives consumers the power to control who has access to their financial information and the choice of what they want to do with it. It gives them the freedom, tools, and support to manage and improve their financial wellness like never before.

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FintechOnline Payments

Canada’s in Love With Cashless Payments

Cashless Payments

This post is based on the comprehensive findings published by Payments Canada in its annual 2019 Canadian Payment Methods and Trends report

Canada exchanges almost $210 billion worth of payments and financial transactions on average every business day. More of these transactions take place electronically each year as Canadian payment systems and business processes go digital. According to Payments Canada’s 2019 Canadian Payment Methods and Trends report for 2018, the payment market grew to 21.1 billion transactions worth more than $9.9 trillion. 

Here is a look at the most significant findings and statistics for both Point-of-Sale (POS) and remote transactions in Canada in 2018.

Canada’s cashless payments: Point-of-Sale (POS) stats

Point-of-sale (POS) transactions take place either physically or virtually via online and e-commerce vendors and payees, brick and mortar merchants, or mobile and in-apps. This space is undergoing massive growth, evolving largely because of electronic payments and to support mobile e-commerce. 

Fast facts on Canada’s POS transaction growth in 2018 

The big picture of POS in Canada

  1. The total volume of POS transactions in 2018 was 15.7 billion.
  2. The total value of POS transactions in 2018 was over $856 billion.
  3. The average POS transaction value was $54 in 2018.
  4. In the last five years, POS volume has increased by 5% and value by almost 25%.

Types of POS payments: Debit is king in Canada

  1. Debit cards are now the most widely used payment method at 6 billion transactions, overtaking cash transaction volume for the first time in 2017. 
  2. Contactless debit made up 60% of the total volume of contactless transactions and 35% of the value. The average debit transaction was $42.
  3. Credit cards are the second-most-used POS payment method in volume and had more transactional value than all other POS methods combined in 2018.
  4. Despite 4.5 billion POS cash transactions—it continues to decline every year, down 40% from 2013.

Mobile wallets and contactless transactions

  1. Mobile device and contactless card payments totalled 4.1 billion transactions (a 30% increase since 2017) and $129.9 billion value in 2018.
  2. More than one-third of Canadians used a tablet, phone or device to make a purchase in 2018.
  3. Canadians who use credit contactless payments tend to be younger, have higher earnings and live in British Columbia and Ontario.

E-commerce POS and credit cards

  1. Approximately 20% of all of Canada’s shopping has migrated to e-commerce.
  2. Credit card usage is faster growing than debit because of rewards points and the perceived ease-of-use and security for e-commerce.
  3. Canadian online merchants and businesses lack diverse payment options for e-commerce.

Canadian businesses love remote payments (and EFTs)

Remote transactions and payments are all those that don’t require a POS device or application. This often means that payors rely on a third party such as a bank or financial technology partner to route payments through Electronic Funds Transfers (EFT), cheques, and other payments. A few examples include bill payments, direct deposits, pre-authorized payments, and P2P and B2B transactions. 

Fast facts about remote payments in Canada

  1. There were a total of more than 4.5 billion remote transactions in 2018.
  2. Remote transactions totalled approximately $9 trillion in value in 2018.
  3. These transactions make up 91% of the total Canadian transaction value, but only 25% of the total volume.
  4. The average remote transaction value was $1,993.

Electronic Funds Transfer (EFT) transactions: Number one for businesses

  1. EFT transactions are the leading payment method for businesses both in value and volume—and overtook cheques for the first time in 2018.
  2. EFT growth lessened from its growth spurt in 2017 but accounts for 49% of remote payment value.
  3. Electronic payments totalled 73% of the total payments volume and 59% of value in 2018.
  4. The average EFT transaction size was $1,718 in 2018. 
  5. EFT and cheques dominate remote payments in Canada totalling $8.8 trillion in combined value, but credit cards and online transfers are growing quickly.

In the end, Canadian businesses are continuing to move all systems, including payments, to digital. While they are not letting go of paper cheques and cash as quickly as consumers are, they are increasingly adopting electronic payments. Business owners and consumers will always seek more efficient, faster, and easier ways to make payments. 

Learn more about VoPay and how we’re digitizing payments in Canada.

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FintechOnline Payments

Paper to Plastic to Digital Payments: Evolution of Credit Cards And Checks

Payments Innovation

Before plastic cards, credit cards were made of paper and contained a customer’s important banking information. This may sound archaic, inefficient, and insecure, depending on your age and whether you’re one of the millions of people who still use paper checks (or cheques). 

For one reason or another, the evolution of checks to safer, more convenient plastic checking or debit account cards never eradicated the original paper version. Canada, for example, processes nearly a billion checks every year, even though it still takes days to process (and they’re fraught with fraud). Likewise, unlike the rapid credit card evolution to mobile wallets and instant online payments, the evolution of checking accounts to instant online payments has had slower adoption. 

Let’s consider the history and evolution of both credit cards and checks—and predict the (present) future of online bank payments. 

Motivated innovation: The credit card evolution

In 1970, IBM launched a pilot project with American Express and American Airlines. They developed the first-ever magnetic stripe—that would become integral for the evolution of credit cards, bank cards, ticketing systems, passports, and the like around the globe. The back of every bank card could now automatically store personal financial data. This discovery was not only revolutionary, but it was also essential

IBM was building computer systems and needed a way to increase adoption. Airlines needed to streamline the ticketing and boarding process. Banks wanted their customers to be able to automatically withdraw and deposit money from remote locations.  

The biggest innovation motivator, however, for evolving credit cards was the uptick in fraud in the 1960s. A mechanical imprint and signature to verify someone’s identity may seem questionable today, but consider how far we’ve come. Back then, a merchant had to make a carbon copy of a customer’s credit card, handwrite the cost and tax, physically deposit the slip at the bank, and wait for bank tellers to manually check the signature and account for funds and against known fraud accounts. Only then could they approve or reject the payment. 

The several-day lag time between purchase and account verification opened customers, merchants, and banks up to all kinds of security, NSF, and fraud risks. Unfortunately for paper checks, this archaic security risk is still a present concern. For processing credit cards, the archaic carbon paper machines that manually “charged” credit cards quickly became a thing of the past. 

In the midst of this credit card revolution, in 1977, there were 8.2 million credit cards in circulation. Of course, we know that credit card evolution and innovation didn’t stop there. The 1990s saw the emergence of EMV chip smart card technology and its simple and automatic tap and instant approval system. By 2008, mobile wallets launched to improve Apple sales. Online shopping using credit cards and mobile wallets have taken off. By the end of 2017, the average American held 3.1 credit cards—and the outstanding debt they can hold.

Checks to debit cards to digital payments 

Interestingly, both credit cards and debit cards benefitted from and evolved with innovations like the rise of plastic, magnetic stripes, and EMV chips. Yet the former tends to send its users into crippling debt. In the third quarter of 2019, credit card loans reached $1.08 trillion in the U.S. The rise in credit card use over the decades has seen with it a rise in outstanding consumer debt. 

What if innovation and further adoption in the checking sector could put an end to that? The hassle of having to go to a bank to deposit a check, for example, and wait for days for it to be processed should be a thing of the past. Just like the carbon paper slips for credit cards. 

The same goes for processing and verifying digital payments for checking accounts. Since checking accounts have undergone digital transformation, the banking industry has seen a rise in more secure and efficient technologies thanks to financial technology companies and banks working together. For example, ACH (Automated Clearing House) payments in the U.S. or EFT (electronic funds transfer) in Canada transfers money online between accounts. Examples are direct deposits and online bill payments. These transfers between checking accounts online are becoming faster, more secure, and easier than ever. 

The future of checking accounts and digital payments 

At VoPay, our Intelligent EFT / ACH (iQ11) technology processes and verifies digital payments instantly—without the security risk of sharing credit card information online or mailing a paper check. In fact, with our intelligent EFT and ACH solution and secure partnerships, no financial information is ever shared. The entire system is tokenized (stay tuned for an upcoming blog post on what that means for your safety and security). In short, personal financial data is replaced with an algorithmically generated number. 

This is the future of online banking, payments, and shopping. Customers can work their way out of credit card debt by instead using their debit cards online, anywhere, instantly, and securely.

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FintechOnline PaymentsOpen Banking

The Future of Digital Banking: Top 5 Trends for 2020

Invisible Banking

With the dawn of our new decade comes innovations, connectivity, speed, ease, and security in banking like never before. It is a thrilling time to be in digital banking. Payments can be made in an instant by merely saying the words aloud, tapping our phones or even driving. The future of digital banking is now and it’s invisible, open, and highly connected. 

Here are the top five trends in digital banking for 2020 and beyond. Perhaps most interestingly, yet unsurprisingly, is how connected they are. One cannot thrive or exist without another. 

The future of digital banking: Top 5 trends for 2020

1. Invisible banking and payments

Invisible banking is just as it sounds: banking behind the scenes that takes place automatically or with a simple tap or even drive by. It’s banking that we don’t have to think about, explains Penny Crosman’s in the American Banker article, The Rise of the Invisible Bank

Invisible banking happens behind the scenes when, for example, we tap our mobile phones to pay for transportation, coffee, or gas. It takes place with voice banking when we tell Alexa or Siri to pay a bill or transfer money. Invisible banking connects to our mobiles, wearables, laptops, POS applications, cars, and other Internet of Things (IoT) products. 

Invisible banking—and invisible payments, for that matter—happen everywhere, all around us, and at any time. Every device can accept and transfer payments, pay bills, save money, or invest it. We can now pay when, how, and wherever we want.

VoPay is a great example of invisible payments at work. Users connect their bank account and can make digital payments instantly and easily from then on without a second thought. In 2020 and beyond, invisible payments like this will be the new norm.

2. Mobile payments

Analysts predicted that mobile payments would hit the $500 billion mark by 2020. That represents a yearly growth rate of approximately 80% in five years. That is major growth, but not unsurprising. Mobile innovations have changed the way humans live, work, connect, and now bank and make purchases.

In our two-part blog series, 15 Fintech Companies To Watch In 2020, we discussed only some of the hundreds of innovative financial technology companies on the rise. Revolut, for example, is a tech company that is now one of the world’s fastest-growing bank account providers. Fintech companies are leading the shift toward mobile banking—and millions of mobile users are signing up for their applications.    

3. Open banking

In order for invisible banking, invisible and mobile payments, and innovation in the digital banking sector to continue to boom, we need open banking. We wrote a post on open banking, which dives into much more detail, but essentially it means “open bank data.” It is the sharing of customers’ financial data between banks and innovators, such as VoPay and other fintech companies. Collaboration for a greater purpose, if you will.

4. Financial wellness 

The digital transformation of banking and payments will be powered by both banks and fintech companies. Working together. Financial data ownership and control has been a challenge for years. Banks own the data that fintechs require to innovate. Yet, we’re seeing more countries begin to consider open banking regulations and more banks and fintechs are entering into equally advantageous partnerships.  

The challenge with invisible banking is that because it happens without much thought (not unlike breathing, according to ING’s CIO, Benoit Legrand), users will have to take extra care to keep track of their money and spending. Kristen Berman, a scientist and lab co-founder at Duke University said that ‘overarching trends in money have had mixed results for financial wellness.’ Essentially, financial apps have made it too easy to spend money. 

There are, of course, mobile applications to counter this issue. In our 15 Fintech Companies To Watch In 2020 post, for example, we discussed many financial wellness applications that aim to help us to budget, save, invest, improve our credit, spend less, and learn more about financial literacy in general. 

For example, Alan McIntyre of Accenture explained in the American Banker article that “the U.S. banking industry still has tens of billions of dollars of insufficient-funds fees and we’re getting to a point where technology should save customers from that.” However, fintech companies like VoPay aim to put an end to this: digital payments can be secure and easy for consumers, without the non-sufficient fund fees and risk for merchants.

5. Security, service, and AI

Regardless of how, where, and when consumers and merchants choose to bank, they will always demand superior security and service. When it comes to digital banking, security is of the utmost importance. 

It is essential for fintech companies and banks to continue to innovate security solutions and be transparent about data use. As open banking regulations come into play, consumers will own and control their personal financial data. Giving up this data control does not loosen the implied and expected security that consumers need from their banks, third-party fintechs, merchants, and other service providers. The coming years will see new developments in payment security and authentication, especially via AI and Machine Learning. 

When it comes to customer service and user experience, there is, however, a fine balance between AI and human support. Customer support can be automated and digitized to a point. After that, humans are increasingly wanting human support and connection to help troubleshoot or problem solve. McIntyre explained that Accenture’s research found that the majority of people want the reassurance of talking to a human being. 

Learn more about VoPay and the future of digital payments. 

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15 Fintech Companies to Watch in 2020: Part II

fintech companies to watch two

Happy 2020 readers! This is the second post in a two-part blog series titled 15 fintech companies to watch in 2020. Read part one with the first 7 fintech companies to look out for and meet us back here shortly

Here are the last, but certainly not least, 8 of 15 fintech companies to watch out for in 2020—and the ones that we believe are paving the way for an entirely new financial industry in the years to come.

15 fintech companies to watch in 2020: Part II 

8. Hydrogen

Image result for hydrogen fintech logo

American global fintech company Hydrogen is an acceleration platform from which businesses can deploy fintech apps and solutions. Hydrogen provides its B2B customers with a powerful toolkit in order to build innovative digital financial applications at a fraction of the time and cost. For example, VoPay and Hydrogen have partnered to offer end-to-end open banking payments in 2020 and beyond. Hydrogen is part of a leading group of firms that are helping make fintech 2.0 more open, accessible, and innovative through APIs (Application Programming Interface). 


Image result for koho fintech logo

One review of KOHO Financial called it a “marriage of a bank and budgeting app,” which is a helpful way to put it. This Toronto fintech company is a mobile-banking service that has helped more than 120,000 Canadians track their spending. In May 2019, the company raised $42-million in growth capital. Similar to a chequing account, users put money into their KOHO accounts and spend as if it were a credit card (but without the monthly fees). The app tracks their spending, savings, and helps them budget toward goals in real-time. 

10. Envestnet | Yodlee

Image result for yodlee fintech logo

The American software company, Envestnet | Yodlee, is a leading data aggregation and data analytics platform for digital financial services. Envestnet | Yodlee as over 25 million users worldwide and over 1,200 financial institutions and fintech partners (including 15 of the top 20 U.S. banks). It supports and powers many financial technology companies and banks, allowing users to access their personal financial accounts from any device, anywhere and transform modern banking. 

11. Borrowell

Image result for borrowell

In 2019, Borrowell closed a $20 million Series B funding as it reached over one million users. This Canadian fintech company gives its users a free credit report and credit score—no strings attached. Borrowell helps Canadians track their credit score and make better, more informed decisions about their credit (and financial situation). 

“Consumers want to know where they stand with their finances,” Andrew Graham, co-founder and CEO of Borrowell told BetaKit. “We help them do that, with our free tools, product recommendations and credit scores and reports.”

12. Flinks

Image result for flinks

Flinks is a Montreal-based data software company that connects to over 250 million financial accounts and provide financial insight and credit risk intelligence. In other words, it provides the necessary link and data between mobile financial apps, financial institutions and consumers who want to modernize their banking. For example, in October 2019, Flinks and VoPay announced an official partnership in order to provide a secure consumer-focused open banking payment solution via VoPay. 

13. Kabbage

Image result for kabbage fintech

Kabbage Inc. was named on the Forbes Fintech 50 2019 and recently valued at $1.2 billion. This Atlanta-based fintech company saw an opportunity back in 2008 to improve the efficiency and profitability of small business lending. Where banks have a high standard to meet for small business loans, Kabbage’s automated lending platform pulls data from many data sources. This allows Kabbage to automatically evaluate the health of the business, asses the risk, and provide a line of credit where applicable.

14. MX

Related image

MX has been called one of the fastest-growing fintech companies—and one to watch out for in 2020. MX provides financial services data, such as data aggregation, enhancement, and analytics, and experience, such as mobile banking and verification. In June 2019, the company announced a $100 million Series B round of financing, bringing the total equity financing to $175 million. According to Battery Ventures’ (the Series B investor) Michael Brown, “MX is powering some of the top financial institutions in the world and is simply one of the most promising fintech companies we’ve ever seen.” 

15. VoPay

Image result for vopay logo

Last, but most certainly not least on the 15 fintechs to watch in 2020, is VoPay. This Canadian-headquartered fintech company is a leader in digital payment technology innovation. VoPay empowers businesses to provide exceptional financial services and create a customer-focused open banking payment solution. The company made several strategic moves in 2019, including by announcing its partnership with Hydrogen and with Flinks in order to offer seamless banking experiences for users across North America.  

Stay tuned for more growth from us in 2020 and beyond. Learn more about VoPay and our payment solutions

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15 Fintech Companies to Watch in 2020: Part I

fintech companies to watch

This is the first post in a two-part blog series titled 15 fintech companies to watch in 2020

Fintech, as many of you know, is short for financial technology. According to a Forbes post that we recently summarized called Fintech: The Fourth Platform, the term fintech has thus far meant taking a well-known financial product and making it more digitally accessible by building software around it. 

However, as Matthew Harris explained in his two-part articles, fintech is set to go far beyond just improving existing products and services in finance. He believes that fintech will join the likes of the internet, cloud, and mobile to innovate and found entirely new products and services. This will change everything from the way we bank to the ways in which we value and view money. This major shift to fintech as ‘the fourth platform’ in the tech stack could create $3.6 trillion of value. 

Here are the first seven of 15 fintech companies to watch out for in 2020—and the ones that we believe are paving the way for an entirely new financial industry in the future. 

15 fintech companies to watch in 2020 

1. Revolut 

Revolut integrates smart money app Yolt

London-based tech unicorn Revolut launched in July 2015 and is now one of the world’s fastest-growing bank account providers. Revolut is a digital banking alternative for instant payment notifications and fee-free international money transfers and spending. It has more than 8 million customers worldwide (albeit mostly in Europe) and has processed over 350 million international transactions totalling more than £40 billion. The financial app and debit card operator is a privately held company with over $331.63 million in funding

The end of 2019 saw the beginning of Revolut’s U.S. rollout with Mastercard as a partner. Revolut is also set to come to Canada in 2020 and continue providing international fee-free debit cards to European customers with Mastercard. 

2. Plaid

Image result for plaid fintech logo

U.S.-based fintech company Plaid was founded in 2013 and recently valued at $2.65 billion. The company builds infrastructure to power a number of third-party applications (including VoPay) and allows users to interact with their bank accounts online. In other words, it is a simple way for consumers to connect their bank accounts to mobile apps. The fintech company has analyzed over 10 billion transactions to date. It has integrated with 15,000 banks in the U.S. and Canada and has begun its European roll-out

3. Mylo

Image result for MyLo fintech logo

This Montreal-based fintech company is one to watch in 2020. Mylo launched in July 2017 and has already been downloaded by over 500,000 Canadians and raised $14 million in funding. This app helps Canadians automate their savings and investments. For example, as a Globe & Mail article explained, Mylo rounds purchases up to the nearest dollar and invests the difference weekly in a conservative exchange-traded fund (ETF) portfolio. In November 2019, the company raised $10 million from National Bank and Desjardins Capital.

4. PayBright

Image result for paybright fintech logo

PayBright was named Canada’s fintech company of the year in 2019—and is slated as one to watch for 2020. This Toronto-based company provides a consumer payments platform focused on real-time point-of-sale (POS) installment plans. PayBright has partnered with over 5,000 merchants around the globe to allow shoppers to pay off purchases in four easy installments. The company has approved over $1.25 billion in purchasing power for consumers in Canada and beyond. 

5. Plooto

Image result for plooto fintech

Plooto is a Toronto-based startup that is helping put the city among the fastest-growing tech markets in the world. It is a payment management platform that allows Canadian and U.S. businesses to send and collect payments and manage invoices internationally. The Digital Finance Institute named Plooto (as well as Mylo, PayBright, Flinks and Borrowell included in today’s post) as some of Canada’s top 50 fintech companies of 2019

6. Lexop

Image result for lexop fintech logo

Lexop is a fast-growing Montreal-based fintech company that removes friction in collections. The company helps its B2B customers automate collections recovery efforts as well as retain customers and provide a convenient payment experience. Launched in 2016, Lexop has since participated in 500 Startups and FounderFuel, won many awards, was nominated as “most promising startup” by NACO (National Angel Capital Organization) and has announced several partnerships, including with Centris.

7. Chime

Image result for chime fintech company logo

San Francisco-based fintech company, Chime, is now considered the leader in the U.S. challenger banking segment. It is part of a new kind of mobile and digital-only banks and is one of the fastest-growing bank accounts in the U.S. Chime members receive a Chime debit card, spending and savings accounts, and an app that keeps their financials in check. It was valued in December 2019 at $5.8 billion, after raising $500 million in funding, the largest investment in a digital bank since NuBank raised $400 million. 

Stay tuned until next week for Part II of 15 fintechs to watch in 2020

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Summarizing The $3.6 Trillion Fintech Opportunity

Fintech Platform

Forbes contributor and investor at Bain Capital Ventures, Matthew Harris recently wrote a two-part Forbes article called Fintech: The Fourth Platform. In the articles, he discusses the future of financial technology (or fintech) companies and how a major shift to fintech as ‘the fourth platform’ will create $3.6 trillion of value. That is five times the revenue multiple that the internet, cloud, and mobile platforms produced altogether upon startup at just under $3 trillion. 

In other words, Harris sees fintech as a huge opportunity. 

Here’s why we’re listening: Harris bet on fintech two decades ago, back when Venture Capital investment in financial services was non-existent. Today, these financial technology companies represent 14% of venture business. In 2018 alone, fintech startups raised nearly $40 billion. Bain Capital Ventures has invested over $700 million in fintech companies over the past seven years—and they’re turning their attention to companies that use fintech embedded in their business models and tech stacks, rather than as a primary business model

Let’s unpack and summarize the opportunity that Harris presented in Fintech: The Fourth Platform.

Fintech and our current technology stack

Harris first defines fintech as “taking a well-known financial product” and “building software to make it digitally accessible as well as easier and more elegant to buy and use.” However, as with earlier disruptors (and our current technology stack) the internet, cloud, and mobile, fintech has the potential to develop beyond its original use-cases and become embedded in everyday business and life. 

He describes fintech’s potential in relation to a trend: “the internet comes along and people rebuild old stuff on it. Then they build brand new stuff with connectivity as a key ingredient.” The internet first developed online versions of businesses and then transitioned to create new functionality and connectivity. The cloud began by hosting accessible software and transitioning to create SaaS products, new applications, and cloud intelligence. The third member of the tech stack, mobile, transitioned from small desktop versions of websites to create entirely new mobile-centric apps like social media, video, maps, and photos. 

Harris argues that fintech is up next. 

Embedding financial services into business models and technology

Harris explains that financial functionality is quickly becoming a native component of both the technology stack (internet, cloud, mobile) and as a business model. For example, financial functions such as payments and lending have embedded themselves into the tech stacks of many businesses today. 

Take Uber, for example. The entire payment transaction takes place within Uber’s software application, making it a smooth and user-friendly experience. As Harris puts it, “having these financial functions integrated with software enables new functionality, leveraging the persistent connection to move beyond transactions to relationships.” 

Having embedded financial services inside a business opens a world of opportunity for making data-driven, smart decisions that will benefit the end-user and the business. It also reduces the risk of payment issues and could lead to increased opportunities to sell, market, and grow.

The benefits of integrating digital payments 

Harris uses Shopify as a great example of a successful ($36 billion) software company that gets most of its revenue from payments. Shopify basically provides highly functioning, integrated shopping cart software to small businesses and e-commerce startups. 

But the trend takes place beyond technology companies. Eight percent of payment card volume in the U.S., Harris states, has moved to an integrated payment, where payments are managed through third-party software companies, such as our own. That number is growing quickly. 

Analysts predict that 40% of the payments industry will move to an embedded model. Harris explains that most financial innovation begins with the evolution of payments. In other words, the fourth platform shift to fintech is still in its infancy but has much potential. 

As a fintech company that digitizes direct payments, VoPay is a proud contributor to advancing fintech to be a fourth layer of the technology stack and of business models cross-industry. Our payment software connects digital enterprises to banking systems to streamline payments and boost experience into the future. 

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