November 2017

Tracking innovation in financial services

FinTrack

Introducing FinTrack, GlobalData’s financial innovations tracker. Every month, FinTrack will showcase the latest innovations from financial providers around the world. Each innovation is assessed and rated on key criteria, providing you with valuable insight. FinTrack will help you to: • Keep up-to-date with the latest innovations from your competitors. • Develop cutting-edge product and channel strategies. • Identify the latest trends in the delivery of financial services.

FinTrack: the inside track on the latest financial innovations.

November 2017

About This Product

Consumer Payments Fomo Pay & Razorpay first on board with Visa QR LBX to launch cryptocurrency exchange debit card

General Insurance Dacadoo scores health on mind, body, and lifestyle So-Sure offers a new take on P2P gadget insurance ZEGO attempts to exploit a niche in the commercial insurance industry

Retail Banking Financial Health Check uses AI and big data to provide tailored financial insights Finn.ai is a financial analyst and customer service operator in one OrbitID’s identity proofing and fraud prevention

Wealth Management Coutts starts using voice recognition to identify clients NatWest rolls out robo-advice platform Wells Fargo enters robo-advice market with Intuitive Investor

November 2017

Table of Contents

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Consumer Payments

FOMO Pay & Razorpay first on board with Visa QR

Singapore’s Fomo Pay and Razorpay in India are two Asia-based fintech payment providers, and the first to be approved as partners for Visa’s new QR solution in the region. It will allow consumers using payment solutions from the two companies to make QR-based payments wherever Visa QR payments are accepted. The move provides a model for new payment start-ups wanting to compete with more established providers and gain immediate scale.

Is it original? QR payment solutions have been around for a few years now. Particularly in Asia Pacific, there are several established providers using the QR system, including Alipay and Singapore’s new national QR code system. Visa’s partnership-based model is a new approach to QR code-based payments, but is not fundamentally a new concept in payments. Is it long-lasting? With the way QR has developed in Asia Pacific, it has become the mainstream format for mobile payments in the region. Visa’s foray into this market only confirms its long-term potential; though it is starting small with these partnerships, as an international brand it has the resources to develop its platform into a major regional player, especially if it can continue to attract local partners.

Is it operationally game-changing for the provider? With very low overhead costs on all sides for QR code-based payments (as compared to other technologies such as NFC), the use of QR has grown very fast in Asia Pacific. With Visa taking the QR solution seriously, its partnership with FOMO Pay and Razorpay will introduce a new revenue stream for Visa by tapping into the rapidly growing QR code-based mobile payments market in Asia Pacific.

Will it significantly improve the user experience? For both consumers and merchants, a QR code-based payment tool offers a marked improvement over cards and cash in terms of convenience. For merchants, QR codes offer a cheap way to accept electronic payments, which will be highly attractive to small enterprises. For customers of FOMO Pay and Razorpay (and future Visa partners) this service offers a fast, convenient electronic payment experience that does not require access to a card. Is it market-changing? The collaboration between Visa and these two mobile payment providers is a first in Asia Pacific, and will provide increased momentum for wider adoption of Visa’s QR-based payment solution, as well as QR codes in general. This also marks the beginning of a regional shift in the technology that the card schemes are relying on at the POS – from NFC to QR codes – a shift that may give these providers much greater growth potential in these markets.

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November 2017

4/5

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London Block Exchange (LBX) has announced plans to launch a sterling-to-cryptocurrency exchange debit card called ‘Dragoncard’ that will allow people to convert bitcoin and other cryptocurrencies to sterling and spend it in the UK. The card will be linked to an app that will allow purchases of cryptocurrencies. Customers will be charged a 0.5% transaction fee each time they use the card to make purchases in sterling, and £20 to purchase the card.

Is it original? The Visa debit card named ‘Dragoncard’ will be available to the UK market, allowing customers to purchase cryptocurrencies via app and spend them in-store via card transactions. This is not something new, as CoinsBank already offers a similar proposition. Is it long-lasting? LBX allows retail and institutional investors to buy and sell cryptocurrencies through a dedicated app and then make everyday purchases with the debit card. Therefore, the app and the card are not limited just to currency investments as the card can be used to make everyday purchases as it is cobranded with Visa. Is it operationally game-changing for the provider? The launch of the debit card comes with a dedicated app for investors, allowing them to trade and invest on its platform. Being cobranded with Visa, it will allow retailers to accept cryptocurrencies and will provide a built-in revenue stream in the form of transaction fees. This launch therefore provides new revenue streams for LBX. Will it significantly improve the user experience? The app will benefit consumers who are interested in cryptocurrencies, as the features are robust and designed for users who wish to safely and easily understand and invest in digital currencies. Being cobranded with Visa, it will be easily accepted by retailers, although the card holder will be charged a fee for its use at the point of sale. Is it market-changing? The new debit card uses cryptocurrency as a new payment method, and there is currently interest in this market. However, this is still a niche area and the impact will be very slow; changing consumer behavior and gaining trust is a long-term game, particularly given that cryptocurrencies are not widely understood among the majority of consumers.

LBX to launch cryptocurrency exchange debit card

November 2017

4/5

General Insurance

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Dacadoo monitors an individual’s health and wellbeing to provide an overall Health Score from 0–1,000, which is continually updated in real-time via an app or wearable device. The score is based on body, mind, and lifestyle. It has games and challenges, links to social media, and offers personalized feedback. It is available in a white-label solution that insurers can use to better engage with their customers and achieve personalized and dynamic risk underwriting.

Is it original? Using wearables to personalize life insurance risk underwriting or reward customers for good behavior is not in itself unique – Vitality is already well known for doing so. However, Dacadoo differs in how it measures individuals; it is original in that it seeks to help insurers measure whether an individual’s health is improving over time. The Health Score is also more comprehensive than simply monitoring the number of steps taken in a day. Is it long-lasting? It is expected that the life insurance and protection markets will move towards personalized underwriting and try to engage more often with customers about their health. It is thought therefore that this concept has a long-term future in the market. However, there will always be individuals who may not want to disclose their data or medical histories to gain cover, and who therefore will not find this proposition attractive. Is it operationally game-changing for the provider? Being able to offer a personalized policy will inevitably change a provider’s proposition. The proposition could change Dacadoo’s underwriting strategy operationally by basing risk on new data points through wearable devices. Will it significantly improve the user experience? At present customers only tend to interact with protection insurers at the point of claim. Using wearables and monitoring their health through their insurer will therefore increase customer engagement with their providers and their policies. Is it market-changing? There are already providers taking a similar approach of using wearables to personalize individual risk, and so it is not expected to drastically change the market. However, providers offering personalized policies will be seen to be more innovate, impacting market competition.

November 2017

Dacadoo scores health on mind, body, and lifestyle

4/5

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So-Sure is a ‘social’ mobile phone insurer that mixes traditional insurance with a peer-to-peer (P2P) element. It incentivizes customers to recommend friends and offers up to 80% cashback if the individual customer does not make a claim.

Is it original? Yes. Forms of P2P insurance are becoming increasingly common, especially for gadgets. However, this is not traditional P2P insurance. Every time a customer recommends someone, both they and their friend receive £10 in their individual reward pots. This can continue until the pot reaches 80% of the total annual premium. If no claim is made at the end of the year, the customer will recuperate all the money from their personal reward pot. Is it long-lasting? Yes. Mobile phone insurance, especially through network providers, can be expensive, so a way of reducing costs while maintaining the same service and potentially receiving cashback should prove popular. Furthermore, So-Sure has high-profile partners, as its policies are underwritten by Munich Re and Salva, meaning it is well supported. Is it operationally game-changing for the provider? No. If it becomes mainstream it may lead to mobile insurers having to offer more incentives to compete for customers, but the basic policies – covering theft, loss, accidental damage, and out of warranty breakdown – are not game changing. Will it significantly improve the user experience? Yes. Alongside the cash incentives and potential for money back, it offers next-day repair or replacement and claims to be up to 40% cheaper than traditional insurers, even before the incentives kick in. Is it market-changing? No. It is not going to disrupt the way insurance works in a major way, though it is a smart means of getting customers to encourage friends and family to join up.

November 2017

So-Sure offers a new take on P2P gadget insurance

3/5

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Zego is a London-based start-up that recently received £6m in Series A funding, with the aim of expanding its current offering of insurance products for on-demand drivers and growing internationally. Zego currently offers customers the ability to purchase flexible commercial vehicle policies – providing cover only during the hours they work. This type of policy makes Zego one of just a few providers that have been able to tap into the gig economy.

Is it original? The proposition of commercial insurance that mirrors the hours of those working within the gig economy is not currently widely available among the largest insurers. In order to purchase an hourly commercial insurance policy, customers simply need to use Zego’s app. With increasing reliance on mobile devices among consumers and businesses, this purchasing method is likely to be well received. Is it long-lasting? With the main target of Zego’s products being individuals who work within the gig economy, their longevity is largely dependent on the continued growth in the gig economy. The recent round of funding will allow Zego to expand its operations and products, allowing it to become well established in the market. Is it operationally game-changing for the provider? Broadly, the movement of the industry towards a more flexible “switch-on-switch-off” handling of risk is an operational game-changer worthy of note. However, Zego is not the first to arrive at this concept, with a number of personal lines products exploring this already. Will it significantly improve the user experience? Giving customers the ability to purchase insurance that is flexible will revolutionize the customer experience – particularly for a gig economy sector lacking suitable insurance solutions. Is it market-changing? Although the use of an app as a method to purchase insurance is not market-changing, the product that is offered could be considered to be. Currently there are few providers offering insurance that is specifically tailored to the gig economy and allows the policy holder to determine when they are covered.

November 2017

ZEGO attempts to exploit a niche in the commercial insurance industry

4/5

Retail Banking

Financial Health Check from Envestnet Yodlee is an AI-powered financial coach that uses insight from its extensive datasets to offer targeted financial recommendations. Users’ finances are assessed across their spending, savings, borrowings, and planning, and each category is further sub-divided e.g. spending is measured across spend-income ratio and timelines of bill payments. Red/yellow/green color coding is used to indicate the health of each metric. Actionable insights give users options for making improvements.

Is it original? Other personal financial management tools, provided by both banks and third parties, exist. However, Financial Health Check leverages a far bigger dataset than those available to competing products. Envestnet Yodlee’s database comprises 70 billion transactions, gathered from 23 million users, totaling $20tn in spending, income, and investment data. Is it long-lasting? The increasing complexity of consumers’ finances means that there is growing demand for services that provide them with a holistic view of their monetary situation. AI, which powers Financial Health check, will become a dominant technology in this sector. Is it operationally game-changing for the provider? Envestnet Yodlee’s access to such a large dataset allows its AI algorithms to work at a high rate of efficiency, and peer group insights can be provided at a highly granular level. These factors give it a significant competitive advantage that will be effective in persuading banks to partner with it. Will it significantly improve the user experience? Financial Health Check offers a simple breakdown of users’ finances that clearly highlights areas of concern. It provides prescriptive suggestions for improving money management, based on detailed peer group comparisons. Insight is so detailed that users are informed of the savings to be made by, for example, switching to cheaper TV or streaming subscriptions. Is it market-changing? Financial Health Check’s main strength lies in the size of the datasets it uses to make its comparisons and recommendations, rather than in offering something completely new. As such, it is an evolutionary development in personal financial management. Nevertheless, it demonstrates how access to data in the open banking era can be used.

November 2017

Financial Health Check uses AI and big data to provide tailored financial insights

TOTAL SCORE 4/5

Finn.ai is a white-label virtual banking assistant that provides customers with instant support and analytical insight of their personal finances. Finn.ai is also able to operate on third-party messaging platforms such as Facebook Messenger, Amazon Alexa, and a host of web chat platforms. Its ability to handle messaging and voice queries means it can also augment a bank’s call center capacity, thus reducing operational costs for providers as well as boosting loyalty and advocacy among customers.

Is it original? No. A wave of banks are either developing their own, bringing to market, or have already launched virtual banking assistants. Is it long-lasting? Consumers’ finances are becoming increasingly complex, while at the same time they are becoming increasingly time poor. In addition millenials have become accustomed to managing their lives on digital devices, so there is an expectation that products and services follow suit. Early launches of virtual assistants have received mixed reviews. However, the speed at which they can be improved and the appetite among the mostly tech-savvy millennial demographic mean that virtual assistants will only gain in prominence. Is it operationally game-changing for the provider? Quite possibly. Initially providers using finn.ai will experience a drop in call volume as some customers’ queries will be addressed by its virtual assistant. Over the longer term, as finn. ai handles more queries it is conceivable that call center operators could be reduced significantly. Will it significantly improve the user experience? Finn.ai works on third-party messaging platforms such as Facebook Messenger and Amazon’s Alexa, enabling customers to access its virtual banking assistant on platforms they already use. In addition, its ability to produce fast insights into a customer’s personal finances is a step-change from the slower and less insightful visual PFM tools that have hitherto dominated the market. Is it market-changing? Finn.ai will increase retention, particularly among millennials. In fact, it is possible that millennials will become reliant on finn.ai for their day-to-day, but also medium-term, financial needs. Aside from cost savings at call centers, finn.ai will give providers much deeper insight into what their customers want. That said, finn.ai is not original enough to significantly change the market.

November 2017

Finn.ai is a financial analyst and customer service operator in one

TOTAL SCORE 3/5

Is it original? Although online and mobile image capture of ID documents has been around for years, OrbitID’s image capture and OCR extraction, which is done in under 0.4 seconds with 98% accuracy, makes it unique . This translates into improving the efficiency of Know Your Customer and anti-money laundering processes. Is it long-lasting? There is a concerted push across the industry towards adopting multimodal identity proofing and fraud detection practices for added security. With regulators forcing banks to strengthen their anti-fraud measures, there will be increased demand for products that can help address these challenges cost-effectively. Is it operationally game-changing for the provider? This tool will improve operational efficiency for providers. It will not just shorten processing times but will also reduce the need for manual intervention. This service will significantly improve the ease and speed of the onboarding process, and boost conversion rates. Will it significantly improve the user experience? The ability to fulfil all ID checks through online or mobile is of clear benefit to consumers. It will make banking much more secure, while at the same time reducing friction in the onboarding process. Is it market-changing? OrbitID is an enhancement, and onboarding represents a relatively small part of the provider-customer relationship. Furthermore, the range of new onboarding solutions entering the market means that each will only have a small impact on its own.

November 2017

OrbitID’s identity proofing and fraud prevention makes onboarding process more efficient

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OrbitID from OCR labs is an ID verification system that offers document and facial authentication via online and mobile image capture. OrbitID provides smart data capturing and analysis with precise recognition. It enables enterprises to stop fraud, reduce friction during the onboarding process, and help manage KYC/AML obligations. Other features include facial recognition and geographic security feature analysis. Orbit engine combines these features and is deployable on the web, iOS, and Android. It supports over 300 countries with a database of 300+ passports and 250+ other ID documents.

4/5

Wealth Management

In November 2017 Coutts announced it is rolling out voice recognition technology to identify clients contacting the bank via a call center. Traditional identification methods, which include security questions, will remain in place, however, if a client cannot be verified by voice for some reason. The service will also be available for clients of Adam & Co, the other private banking brand within RBS Group.

Is it original? Other banks already use voice recognition systems to identify their clients. In the UK, these include Barclays (which first tested the service with private banking clients before rolling it out to all customers) and HSBC. Is it long-lasting? Once implemented, voice recognition will remain an integral part of the client identification process. Voice-controlled systems and applications are becoming increasingly popular outside the financial services industry (see Amazon’s Alexa for example), hence with time clients are likely to become increasingly familiar and comfortable with the service. Is it operationally game-changing for the provider? No. The introduction of the new technology will not change the way Coutts operates, it is just another means of identifying clients. Given that other wealth managers are already offering this type of service, Coutts is merely catching up with the competition. Will it significantly improve the user experience? With voice recognition in place, the process of identifying clients using Coutts’ call center will be quicker and easier. The use of biometrics will also improve security compared to traditional identification methods (like logins, or security questions), which can be relatively easily compromised. Is it market-changing? No. While the use of voice and biometrics in general is likely to become more common in the wealth management industry, it will not have much impact on what services are provided.

November 2017

TOTAL SCORE 2/5

Coutts starts using voice recognition to identify clients

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Is it original? NatWest is the first UK bank to offer robo-advice, but the platform doesn’t offer anything significantly different from what is available from competitors such as Nutmeg or Wealth Horizon. Is it long-lasting? Yes. Client demand for services delivered via digital channels is on the rise, making online platforms a necessary part of any investment management proposition. Is it operationally game-changing for the provider? NatWest’s parent company, RBS, continues to report losses as it has not yet shaken off the effects of the 2008 financial crisis. As reported in 2016, the bank was hoping to cut up to 550 advisor jobs thanks to the introduction of robo-advice not only in investments, but also in insurance and lending. Indeed, rolling out NatWest Invest will allow the competitor to provide advice in a more efficient way. Being the first big brand to launch robo-advice will also prove to be an advantage in acquiring investors who are willing to explore automated investments, but who don’t trust platforms without an established reputation and track record. Will it significantly improve the user experience? NatWest Invest is a significant improvement compared to the brokerage platform offered by the bank previously. NatWest Invest offers advice, but the option to invest in a selected fund portfolio without guidance remains available. As discussed above, the platform will also appeal to new customers willing to engage with a known brand. NatWest Invest offers pricing comparable to competitors, and the 1% cashback bonus on investments of up to £25,000 is an attractive perk. Is it market-changing? NatWest’s entry into the robo-advice market will be followed by other big brands, with HSBC planning its launch for 2018. This will cause a stir in the UK industry. In the US, established providers such as Charles Schwab and Vanguard were able to attract many more customers than challengers were able to. The UK will not be much different, and existing robo-advisors will have to respond to the increased competition.

Launched in November 2017, NatWest Invest is the first robo-advice service in the UK operated by an established brand. The platform offers regulated financial advice for those willing to invest £500 (or £50 per month), or an unadvised execution-only service with a minimum investment of £50. Client assets are allocated into one of five predesigned fund portfolios. Total charges are below 1% per annum, and a stocks and shares ISA account is available.

November 2017

NatWest rolls out robo-advice platform

4/5

Wells Fargo Intuitive Investor is a robo-advice offering that allows users to invest in one of nine strategies of different risk levels. Rolled out in November 2017, the platform requires a minimum investment of $10,000 and charges an annual advisory fee of 0.5% (0.4% for clients enrolled into the Portfolio by Wells Fargo offering). In additional to the digital service, clients have 24/7 access to human financial advisors via phone. The technology for Intuitive Investor was delivered by SigFig, a provider of white-label robo-advice solutions.

Is it original? The US is the robo-advice home market, with a number of platforms operating for years – by both incumbent wealth managers (e.g. Schwab Intelligent Portfolios) and challengers (e.g. Betterment). Is it long-lasting? As per our 2017 Global Wealth Managers Survey, in the US automated investment platforms will experience more growth in demand than any other form of wealth management service, including execution-only as well as more involved advisory services. Yet, the inclusion of a human element is essential for the long-term success of such offerings, and Intuitive Investor responds to these trends with advisor support available via phone 24/7. Is it operationally game-changing for the provider? Intuitive Investor is Wells Fargo’s attempt to offer investments to younger and less affluent individuals than those traditionally served by the company’s Wealth and Investment Management division. Wells Fargo currently engages with this demographic in its banking business, and encouraging them to use the investment offering is a good cross-selling opportunity. Will it significantly improve the user experience? Intuitive Investor is integrated with Wells Fargo’s banking services, being a user-friendly expansion of its existing suite of products for the bank’s customers. However, the established Wells Fargo brand is also likely to appeal to a new client base. Setting up investments and navigation through the platform is straightforward, following principles explored by other robo-advice services. However, it remains to be seen whether the relatively high minimum account threshold and fees (Schwab Intelligent Portfolios charge no advisory fee and requires just a $5,000 investment) will hinder the platform’s growth. Is it market-changing? Wells Fargo is yet another competitor entering the already well-established US robo-advice market, and is not offering anything that can disrupt the market.

November 2017

TOTAL SCORE 3/5

Wells Fargo enters robo-advice market with Intuitive Investor

Definition of parameters Is it original? Is the innovation significantly different to other products or services already on the market? Is it long-lasting? How much longevity will the innovation have? Is the innovation more than a novelty that will only be of transient appeal to consumers? Is it sustainable for providers in the long run, with respect to the cost and complexity of provision? Is it operationally game-changing for the provider? How much impact will the innovation have on providers with respect to cost, speed, and efficiency of provision? Will it reduce barriers to entry or open up new revenue streams? Will it significantly improve the user experience? How much impact will the innovation have on consumers with respect to speed, ease of use, and cost or price? Will it enhance or add value to their experience, or will it lead to improved outcomes for consumers? Is it market-changing? How much overall impact will this innovation have across all market participants, both providers and end users?

November 2017

Appendix

Sources Coutts (2017) Seamless Security Through Voice Recognition Dacadoo (2017) dacadoo Overview Findever (2016) OCR Labs

Finextra (2017) UK cryptocurrency exchange startup launches debit card for spending bitcoin Finovate (2017) FinovateFall 2017 – Envestnet Yodlee Market Insider (2017) Visa Ready QR Programme Launches with FOMO Pay and Razorpay as First Asia Pacific Partners NatWest (2017) NatWest Invest OrbitID (2017) Company website So-Sure (2017) Company website Tech Crunch (2017) Zego picks up £6M Series A led by Balderton for its gig economy worker insurance Wells Fargo (2017) More than robo: Wells Fargo offers its take on digital investing Zego (2017) Company website

Ask the analyst For further information, the Financial Services team can be contacted at clientservices.fs@globaldata.com.

November 2017

Appendix