Tag: complyadvantage

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UK’s ThirdFort nabs $20M for tools to help with ID verification, and detect money laundering and payment fraud

Money laundering has been a hot topic of late in the UK, which is facing pressure to not just make tighter rules to track down the origins of money that’s spent on large assets in the country like prime real estate — the capital city has been dubbed by some as the “London laundromat” — but also, in light of sanctions on Russia in recent weeks, actually to enforce those rules.

Today, a London startup called Thirdfort, which has built a platform to help professional services firms run more thorough due diligence, and to flag when something is suspicious, is announcing a funding round of £15 million (about $20 million), money that it will be using to continue expanding its services, specifically to build payment infrastructure directly into its platform.

The raise, a Series A, was led by Breega, with B2B fintech-focused Element Ventures also investing, along with the founders of ComplyAdvantage, Tessian, Fenergo, R3, Funding Circle and Fidel.

CEO Olly Thornton-Berry said that he and Jack Bidgood first came upon the idea for Thirdfort after a friend of theirs lost £25,000 while buying a flat in London due to phishing attack: fraudsters had picked up some data about the deal, and created a domain similar to that of the legal firm the friend was using for the purchase, and with that wrote an email impersonating the friend’s lawyer, asking for the sum to be transferred via link. It was only weeks later that the friend was legitimately asked for the same sum that they all started to suspect foul play. The friend never recovered that money.

The incident, Thornton-Berry said, highlighted how little information both professional services companies require of a customer before entering into a business dealing, and how little protection the client has against more sophisticated fraud attempts.

This led to Thirdfort, which provides a big-data toolkit of multiple resources such as data from LexisNexis, ComplyAdvantage, Companies House and more that can be corralled (and picked by the client) to provide different data points about individuals and their sources of money. Thirdfort has built tools first to address the needs of companies in the legal and property markets.

The product today comes in two parts. First, there is the “risk engine” built for its business clients, which can be used both for KYC (know your customer) checks as well as to help companies comply with anti-money laundering regulations. There are around the 700 businesses already using the platform, including law firms DAC Beachcroft, Penningtons Manches Cooper and Mishcon de Reya; and property businesses Knight Frank, Strutt & Parker and Winkworth.

Second, there is an app built for consumer customers of those businesses that has been built on open banking infrastructure to connect up those businesses with the customer’s bank, by way of the banks’ own banking apps, for payments to be made in a secure way. This has now been downloaded some 500,000 times.

Similar to Alloy in the U.S. (which is a potential competitor, if either expands into the other’s market), the pitch here with Thirdfort is that the work that would have had to go into running similar identification and origin-of-funds research would have mostly been drawn-out, largely manual and expensive to run, if it was run at all. Times are now changing, and companies are now being required to do more of this work.

“Now, what’s required is a lot more,” Thornton-Berry said. “They need to run an in-depth level of due diligence, seeing bank statements what is moving in and out, asking clients specific questions, diligence checks on gifted money if the sum is specified as a gift. It’s a whole new kind of workflow that’s come into existence with AML going up.”

And while Thirdfort today focuses primarily on fraud detection — it’s managed to halt around one dozen dodgy transactions for its customers, Thornton-Barry said — it’s also built for AML diligence and compliance regulations and will likely come into its own when these are run more widely, especially around any large transactions involving international money.

“For both consumers and professional services, the risk of fraud and the need for compliance represents a massive burden,” Maxence Drummond, Principal at Breega, said in a statement. “Consumers need to get verified for every transaction, and regulated professionals spend too much of their valuable time on client verification and compliance.

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Vauban, an AngelList-like platform for VCs and angels to run and raise funds, closes $6.3m

It’s always been a slight puzzle why AngelList never really properly took off in Europe, especially when, a few years ago, there was such a dearth of funding options for poorly served European startups. But the reasons are fairly simple when you look at them. For starters, the US tech industry boomed in the last ten years. Why bother spreading your resources, when your home market is taking off, right? Secondly, the sheer complexity of building such a platform across Europe’s myriad regulatory borders would tend to dissuade even the boldest of actors. So this is why the market for such a fund-raising platform has been more or less wide open for such a long time. Until now.

Vauban is a new startup based out of London which provides venture capital fund managers with tools to raise a fund and invest capital. It’s now closed a Post-Seed / Pre-Series A funding round of £4.7m or $6.3m.

Vauban says it will now deepen its tech and regulatory infrastructure, and launch a new office in Luxembourg to strengthen its European / EU offering, alongside its headquarters in London. Thus it will be able to span the entire European ecosystem.

The investment round was co-led by Pentech and Outward, in addition to 7percent Ventures and MJ Hudson. A roster of angel investors have also participated including CEO of Nested Matt Robinson;  the founder of Grabayo, Will Neale; the founder and CEO of ComplyAdvantage, Charles Delingpole; Partner at Augmentum Fintech Perry Blacher; and Al Giles, from legal services provider Axiom.

Vauban allows VCs and angel investors to raise funds, create angel syndicates, and manage fundraising and investment activities. The platform claims it enables users to set-up and deploy Funds and SPVs, from multiple global investment jurisdictions, at “a fraction of the usual time and cost”, covering structuring, legal documents, investor onboarding, banking, and reporting.

Vauban says it is onboarding “at least one new client every day” and current VC users include Anthemis, Passion Capital and Octopus Ventures. In total, it says over 5,000 LPs are using its platform.

Founder and Co-CEO Rémy Astié said: “Our goal is to reduce the friction between those who have the capital, and those who need it to solve humanity’s biggest problems. So, we decided to start by rebuilding the infrastructure on digital rails, because it’s mission-critical in order to provide a great UX to everyone in the industry: GPs, LPs and Founders.”

Vauban has appeared at a time when there is huge investment activity in European tech. Some €41.8bn was raised across Europe in the first half of 2021, up from €32.6bn in 2020.

With VC firms now managing several funds and now often using Special Purpose Vehicles (SPVs) to participate in specific deals, make secondary investments, or set up ‘sidecar’ funds alongside EIS vehicles or their main institutional funds, the whole process is becoming more complex, hence the increasing ‘platformization’ of the space. Doing all this on spreadsheets or, similarly simple tools, will no longer cut it.

Furthermore, European angel investors are more and more professionalizing and syndicating deals to boost dealmaking and dealflow, hence why a dedicated platform is likely to be welcome.

Ulric Musset, Founder and Co-CEO says, “One of the biggest catalysts for new startup creation was the launch of Amazon Web Services in the early 2000s. We believe Vauban will have the same impact that AWS has had on the startup ecosystem.”

Andi Kazeroonian, Investor at Outward VC, commented: “Despite the meteoric growth in alternative investments in recent years, the infrastructure the industry relies on has failed to evolve. Simply creating and administering an investment vehicle remains synonymous with lengthy, cumbersome and expensive processes fragmented across multiple service providers. Vauban’s integrated platform has turned this on its head with a relentless focus on product and user experience, which has unsurprisingly led to exceptional organic growth and its emergence as the standout category leader in Europe.”

Craig Anderson, Partner at Pentech added: “We like to invest in category-leading companies with big ambitions for growth. We believe Vauban is building a modern infrastructure for the alternate asset market which enables users to set up, deploy and manage their funds and SPVs in just a few hours.”

Founder and Co-CEO Rémy Astié told me over a call: “We are different to AngelList in that we are very international and global by design. The idea is to create a global platform, which means that you can raise from LPS anywhere in the world, to invest in a company that’s anywhere in the world. And yeah, we think that’s our core strength, that we build everything with international LPs in mind, so you can raise in multiple currencies.”

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Stitch gets a $2M seed extension, hires Benjamin Dada to lead Nigerian expansion

Two months into 2021, South African fintech Stitch came out of stealth and raised $4 million in seed funding, allowing it to begin to make inroads into Nigeria some months ago.

Today, Stich formally announced the expansion into Nigeria and a seed extension of $2 million to go with it; the total seed investment now stands at $6 million.

Investors in the round include existing backers Raba, Firstminute Capital, CRE, Village Global, 500 Fintech, Future Africa, and Norrsken. New investors, mainly executives at global fintechs, participated as well. They include Tom Blomfield, co-founder of Monzo and GoCardless; Matt Robinson, co-founder of GoCardless; Emilie Choi, president and COO of Coinbase; and Charlie Delingpole, founder of ComplyAdvantage.

In February, Stitch launched the typical Plaid playbook used globally by fintech infrastructure players: a data product to help developers and fintechs connect their applications to users’ financial accounts. These businesses can then access their identities, accounts, transaction history and balances with users’ consent.

Because Stitch had just launched from stealth, it felt too early for the company to divulge how many financial accounts it had connected. Nine months in, the company still isn’t enthused about sharing those numbers, though it has been testing a payments product and has made significant progress there.

African fintechs most times rely on card payments, and despite the infrastructure provided by the likes of Yoco, Flutterwave and Paystack, there are still issues around chargeback fees and fraud costs.

In South Africa, Stitch decided to address these issues and help businesses process payments better by soft launching its pay-by-bank feature. 

“Once you make the user experience even more frictionless for pay-by-bank, and as tokenizable as card, the choice to use this method over others [particularly for fintechs] is fairly straightforward,” Kiaan Pillay, the co-founder and CEO of Stitch, told TechCrunch.

Pillay says that within six months of its soft launch in South Africa, the company has seen more than 50% month-on-month growth in customer and payments volume across all solutions.

Stitch emerges from stealth with $4M for its API fintech play in Africa

In Nigeria, Stitch has also been testing its payments product instead of its primary data product. According to the CEO, the company had a more compelling use case of the payments product in Nigeria after speaking to over 40 fintechs.

Here’s why: Nigeria has an efficient instant bank settlement system and the option to pay via bank in various fintech applications is relatively standard. The problem, however, is that when customers try to pay via their mobile or internet banking app, they must eventually use their mobile bank application to complete the transaction.

With Stitch, however, users do not need to go through that hassle and can initiate once-off, recurring and user-not-present bank transfers, the company said.

“The opportunity is ripe,” said Pillay, who co-founded Stitch with Natalie Cuthbert and Priyen Pillay. “I think more and more API fintechs are recognizing that paying via credit card interchange comes with a high fee when converting customers onto their platforms. Just this month alone, we’ve seen our inbound requests increase five- to tenfold here in South Africa, and customers are integrating us in Nigeria even as we were previously still in soft launch.”

Now fully live in South Africa and Nigeria, Stitch says it is on track to facilitate $10 million in monthly payments by the end of the year. Some of its clients include Chipper Cash, Paystack, Franc, Sanlam, Yoco and Flexclub.

When open banking startups came into the African fintech scene last year, it seemed there was a race to become Africa’s Plaid. But now, each player has settled in their respective markets — Pngme in Kenya and Nigeria; Mono in Nigeria and Ghana; Okra in Nigeria, with beta in South Africa and Kenya; and Stitch in South Africa and Nigeria.

It is clear how important Nigeria is as a market for these startups. So how does Stitch plan to acquire customers in a market where other competitors offer the same payments product?

“For a start, we are offering Nigerian businesses who intend to use Stitch free access to the product until the end of 2021,” Benjamin Dada, the country manager of Stitch Nigeria, told TechCrunch.

Dada will spearhead Stitch’s operations in Nigeria. Before joining the company, he was the founder and editor-at-large at Nigerian tech publication Benjamindada.com. The country manager’s fintech experience comes from working at partnerships for Eyowo, a Nigerian digital bank and a brief stint at Tiger Global-backed FairMoney.

While Dada believes the market is big enough to accommodate multiple players, he says the team will try to edge others by developing “inclusive and sustainable” pricing for its customers.

“They will not only be achieving cost savings by accepting account payments, but they can now earn a little more for each payment they accept via Stitch,” he added.

How the company intends to do that is murky for now. What is clear, though, is that the company plans to launch its data solution by the end of November. The seed extension will be integral to that and to seeing more hires join Dada and his team in Lagos, Nigeria.

Blomfield said in a statement that he backed Stitch because he sees the company playing a crucial role in building the infrastructure to enable exponential growth for digital finance companies in Africa.

“I see a lot of potential in African markets, where the wave of digital finance innovation is really beginning to gain momentum, and the Stitch team is getting in at precisely the right time. The team is one of the best I’ve seen globally, and I’m excited to see them continue to grow in Nigeria and beyond.”

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Vyne raises $15.5M seed round to grow its merchant-focused open banking solutions

Open banking — a new approach to payments and other financial services that disrupts traditional card-based infrastructure by linking directly into banks — is having a moment. On the heels of open banking startup TrueLayer hitting a $1 billion valuation in its latest round after seeing strong traction for its services, today another open banking startup, Vyne, is officially opening for business, and announcing seed funding of $15.5 million to help it grow.

The funding is coming from Hearst, Entrée Capital, Triplepoint, Seedcamp, Venrex, Founder Collective and Partech, with Alex Chesterman (founder of Rightmove and CEO of Cazoo), Charlie Dellingpole (CEO and founder of ComplyAdvantage) and Will Neale (founder of Grabyo) also participating. CEO Karl MacGregor said in an interview that the round was “massively oversubscribed.”

London-based Vyne has been quietly building its platform — which targets merchants to help them build open-banking-based payment services — for the past 18 months, honing the tools based on feedback from early customers that it’s picked up ahead of today’s wider launch. The sizable seed round from strong investors is due to a few factors. Firstly, because of its early traction — the company says that it’s already processing millions of pounds in transactions in the UK each month, and is growing currently at a rate of 95% each month — in what (secondly) many believe is poised to be a big market in coming years. And thirdly, because of the pedigree of its four founders:

MacGregor’s long financial services resume included years as an executive at Barclays (at Barclaycard), online betting company Ladbrokes (where he oversaw not just payments but also fraud), and Worldpay. COO Damien Cahill spent years at Worldpay, as well as Amazon. CTO Adam Rowland was also a Worldpay alum, among other financial services roles elsewhere. And business development head Nick Daniel spent years in financial services at Logica (now part of CGI) and VocaLink (which was acquired for nearly $1 billion by Mastercard a few years ago).

With a lot of that experience covering payment systems based on cards and card networks, it was the perfect knowledge bank for understanding why open banking was such an important innovation, and why it had an opportunity to disrupt a lot of what’s in place today.

“Our key takeaway over those years [of experience] was that payment cards are not a great fit for e-commerce,” MacGregor said. “They were designed 40 years ago, and are costly and inefficient.”

He noted that the annual cost of dealing with fraud is now at €25 billion (there is a comparable number in this report), and that’s before considering other issues related the friction of using cards for payments, such as shopping cart abandonment (users give up instead of pulling out cards and punching numbers in), mistyped details, and more.

Because of that, MacGregor said many in the industry, including Vyne’s co-founders, “saw open banking as a huge opportunity” to transform the rails around how people get paid. “That is a global scale opportunity, and this is what motivates us,” he added.

MacGregor claims that implementing an open-banking-based system can save a merchant up to 65% in costs because of the added speed and efficiency (and no longer needing to pay fees to card networks).

TrueLayer’s value in the market, as one of the early movers in this space, has been in how it worked with a wide range of major and smaller banks to help build the infrastructure and services to integrate their banking services into a wider network where they could be used for direct payments and providing other kinds of financial data about their customers. It then used that critical mass to build out the connectors to those who wanted to use those integrations to do stuff: build payment flows, authenticate users and more.

As a later entrant, Vyne’s value has been in using some of that groundwork to then focus more on the merchant end of that ecosystem, and to make their open-banking-based services work more seamlessly for their customers. For example, if a customer selects an open banking option for payment in an app, the customer is then redirected to the banking app used for banking to authenticate the transaction and the connection without needing to enter any details. “The UX has been significantly improved,” MacGregor said.

Targeting primarily digitally native consumers as the most likely early adopters, Vyne also lets merchants build QR codes and pay-by-link to complete transactions.

The fact that we’re still talking about early adopters, however, speaks to the bigger challenges that exist, not just for Vyne but all startups focused on open banking. Open banking is at its most mature state in the UK, but even here it’s relatively young: regulations only came into effect at the start of January 2018. Europe has followed on, and although there are companies like Plaid in the U.S. that have made some interesting headway in building services that bypass payment rails, regulation has been slow to follow. Some have even speculated it may never arrive.

The UK’s catchily-named Open Banking Implementation Entity (OBIE for short), a trade body for those building in this area, is predictably upbeat about growth. However, if the numbers speak for themselves, there is clear opportunity. The OBIE said in a recent report that some 300 fintechs are now in the open banking ecosystem, and more than 2.5 million consumers in the UK are using services enabled by open banking (these include payments, getting lines of credit, authenticating services, and more). And, API call volumes reached 6 billion in 2020, up from just 66.8 million in 2018. Adoption is coming, if perhaps slowly and not as internationally as what open banking is trying to replace.

“Our view is that this is the hockey stick of growth that all VCs like,” Megumi Ikeda, the MD for Hearst Investments, said in an interview. “The second factor is the habits of consumers. They have shifted to a cashless economy [but] merchants are still operating on old banking rails… Open banking helps the merchants catch up.”

Perhaps just as importantly, by giving customers a more direct grip on how and where their financial data is used, by dis-intermediating the card companies (and credit ratings, and many others involved) in the process, open banking is part of a bigger evolution in how personal data and information are being used. As systems catch up with what we use them for, that can only be a good thing.

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ComplyAdvantage nabs $50M for an AI platform and database to detect and stop financial crime

The growth of digital banking has opened up a wealth of opportunities for making the world of finance more accessible and transparent to a greater number of people. But the darker underbelly is that it has also created more avenues for illicit activity to flourish, with some $2 trillion laundered annually but only 1-3% of that sum “caught”.

To help combat that, a London-based startup called ComplyAdvantage, which has built an AI platform and wider database of some 10 million entities to help identify and track those involved in financial crime, is today announcing a growth round of funding of $50 million expand its reach and operations.

Specifically, the plan will be to use the funding for hiring, to invest in the tools it uses to detect entities and map the relationships between them, and to bring on more clients.

“We’ve been focused on more granular analysis and being able to scale to hundreds of millions of searches across our database,” said Charles Delingpole, founder and CEO, said in an interview. “The next phase is more around the network of contacts and more enhanced diligence.” The company today has some 250 staff, mainly in the UK and Romania.

The Series C is being led by Ontario Teachers’ Pension Plan Board (Ontario Teachers’), a huge pension plan out of Canada (US $155 billion) that is known as a prolific growth-stage tech investor.  Previous backers Balderton and Index are also in the round. The company has raised $88 million to date, and while it’s not disclosing its valuation, for some context, it was last valued at around $141 million its last round a year ago, per PitchBook data.

Today, ComplyAdvantage has over 500 customers, primarily financial institutions using it to meet regulatory compliance requirements as well as to reduce their own exposure and risk, providing some automated services to complement (and potentially replace) some of the manual checks that they make to prove you are who you say you are.

It also has a growing business with other groups that are tracking fraud for their own ends, such as insurance companies trying to stem fraudulent claims and government entities. It also has a number of partners that access its database and use that as part of their own solutions (Quantexa, which announced a big funding round of its own last week, is one of those licensing partners).

“A lot of companies in the wider identity space are powered by our data, even if they don’t disclose it,” Delingpole said.

The company had its start originally focusing on the process of helping banks meet regulatory compliance around fraud detection by ingesting and analysing documents provided by customers ahead of opening accounts, initiating larger transactions with new entities and so on. That has taken on a more targeted purpose in recent years as ComplyAdvantage’s database has grown deeper.

Today the core of the business is based around a central database of known money launderers, human traffickers, terrorists, drug lords, and others who exploit financial rails to run illegal operations and make a profit from them.

It’s formed, Delingpole said, by way of “automatically ingesting tens of thousands of datapoints, from websites, national warning lists, linked real-time databases of companies, and various other applications on top of that.” That central database is still growing and Delingpole believes that it’s not unrealistic for it to run to a much higher number in order to get the most accurate picture possible.

“Although we have 10 million today, we want to cover every company and person one day. We think the right number is 8 billion” — that is, the world’s population. “With that larger database we can solve other kinds of crimes too.”

The startup already has a straight channel through to government agencies, reporting connections and discoveries on behalf of their clients directly to them. And to be clear, although there are now strong data protection measures in place in Europe, when people are linked to illegal activity, that puts them on a list that supersedes that. When someone is suspected and is tipped to authorities, that information is kept private.

While all institutions will continue to have teams of people dedicated to risk analysis and investigations into activity, the idea here is to supercharge that work with more data that helps those investigators tackle the greater scale of data in the world today.

“Detecting financial crime in billions of transactions that take place around the globe has become nearly impossible without the application of data science and machine learning. It is this approach that has made ComplyAdvantage into a leader in the category, and the go-to partner for organizations who seek to automate what are still very often manual or inadequate processes,” said Jan Hammer, a partner at Index Ventures, in a statement.

The longer-term opportunity is to build out ComplyAdvantage’s customer base by leveraging information that the company is already surfacing that might be relevant to other verticals.

Insurance is a key example, Delingpole said. “We already see a mention of a person having defaulted on a loan then making an insurance claim,” he said. “We see credit, fraud and ownership data together.”

This, of course, puts the company into close competition not just with others building credit databases but those building strong AI platforms to leverage data to gain deeper insights into seemingly disparate digital actions and to build better pictures of activity on behalf of their clients. That includes not just partners like Quantexa but others like Palantir.

The strength here, said Delingpole, is the sheer size of ComplyAdvantage’s database and its very specific focus on financial crime and how that sits for companies that need to police that, both for their own business health and for regulatory reasons. It’s that focus that has attracted investment.

“ComplyAdvantage offers mission-critical technology solutions for combating financial crime and keeping pace with an ever-evolving regulatory landscape,” said Olivia Steedman, Senior Managing Director, TIP, at Ontario Teachers’. “The company is well positioned to continue its rapid growth as its powerful technology platform transforms the compliance and risk management process for its clients.”

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Embedded finance, or why fintech mega VC rounds have become so common

Another day, another monster fintech venture round.

This morning, it was personalized banking app MoneyLion, which raised $100 million at a near unicorn valuation. Last week, it was N26, which raised another $170 million on top of its $300 million round earlier this year. Brex raised another $100 million last month on top of its $125 million Series C from late last year. Meanwhile, companies like payments platform Stripe, savings and investment platform Raisin, traveler lender Uplift, mortgage backers Blend and Better, and savings depositor Acorns have also raised massive new rounds this year.

That’s all on top of 2018’s record-breaking year for fintech, which saw $52.5 billion of investment flow into the space according to KPMG’s estimate.

What’s with all the money flowing into the fintech world? And what does all this investment portend not only for the industry and other potential entrants, but also for customers of financial services? The answer is that this new wave of fintech startups has figured out embedded finance, and that it is changing the entire economics of disruptive financial services.

First, this isn’t (really) about blockchain

Let’s get one thing out of the way right away, for whenever the topic of financial services and digital disruption come together, some blatherer always yells blockchain from the proverbial back row (often with a bit of foaming at the mouth I might add).