Information and Analytics about Embedded Finance, BaaS and Open Banking

The Transformation of the Insurance Sector by AI

The Transformation of the Insurance Sector by AI

At the inaugural hx Live conference, hyperexponential’s co-founder and CEO, Amrit Santhirasenan, discussed the transformative potential of artificial intelligence (AI) in the insurance sector. Santhirasenan, who has a background in software engineering and actuarial work, highlighted how hyperexponential is leveraging AI to enhance insurance operations and decision-making processes, as stated in Fintech Global News.  Santhirasenan emphasized that while the initial buzz around AI is waning, the real potential of AI in the insurance industry is becoming evident. He noted that insurance is critical to the global socioeconomic infrastructure, allowing clients to take risks ranging from homeownership to space exploration. Therefore, insurers must innovate to support societal advancement. One of hyperexponential’s primary missions is to improve pricing processes, enabling insurers to better assess and admit risk. Santhirasenan pointed out a growing gap between clients’ expectations and the value delivered by insurance coverage. Despite serving innovative companies, the insurance industry has been slow to adopt data-driven advancements, making effective risk management a significant challenge. The industry struggles to utilize internal and external data efficiently due to siloed systems and outdated solutions. Companies like Floodflash and Gaia are innovating with IoT sensor data and customer experience, but established players often miss these opportunities due to a lack of technological integration. Santhirasenan highlighted that the quality of decisions in insurance depends on the quality and quantity of data and the depth of understanding derived from it. hyperexponential’s AI framework for Pricing Decision Intelligence aims to improve pricing decisions by leveraging data, extracting insights, and enhancing decision-making. The insurance industry deals with managing outliers and protecting against unforeseen events, which makes reliance on historical data models difficult. Judgemental inputs become crucial, giving companies with the best judgments a competitive edge. The industry is diverse, requiring different techniques, technology, and underwriting workflows. hyperexponential’s hx Renew platform is designed to be versatile and integratable, accommodating this diversity by tailoring AI’s role to different needs. The insurance market’s complexity, with risks often shared among multiple carriers, poses challenges for using models effectively. Despite these challenges, hyperexponential remains optimistic about AI’s potential. They view AI as an enabler of productivity gains, automating non-value-added tasks and allowing underwriters and actuaries to focus on high-value work. Santhirasenan concluded that hyperexponential’s hx Renew platform offers innovative features for simplifying and accelerating data ingestion and decision-making processes. This platform marks the beginning of hyperexponential’s efforts to enable insurers to harness AI’s full potential and drive industry evolution.

Discovering Open Banking Benefits for Consumers and Companies With Prometeo

Discovering Open Banking Benefits for Consumers and Companies With Prometeo

Latin America’s fintech landscape has seen rapid growth, with over 1,000 active fintech companies focusing on financial inclusion, as highlighted in The Fintech Times. A notable player in this space is Prometeo, an open banking platform dedicated to enhancing financial inclusivity and access to financial data. We revisited Prometeo to understand the evolution of open banking in the region. Prometeo, co-founded by Ximena Aleman and Rodrigo Tumaián, aims to promote the adoption of APIs across Latin America, providing a single access point for the region’s financial systems. Aleman, co-CEO and co-founder, emphasizes the company’s role in fostering financial inclusion and improving risk management for lenders through open banking. Aleman explains, «Open banking has significantly impacted the credit market by enabling access to customers’ financial information, allowing lenders to offer personalized rates or payment plans.» She highlights Prometeo’s account-to-account payment solutions, which facilitate real-time transactions and improve credit risk management. Countries like Brazil, Chile, and Mexico have introduced regulatory frameworks to encourage open banking adoption. For instance, Brazil’s PIX payments platform, initiated by the Central Bank, has become a preferred payment method. Prometeo’s single API approach has been crucial in these developments, connecting hundreds of financial institutions. Aleman notes, «The user experience has greatly improved, with digital platforms simplifying financial management. Users can now secure loans, open savings accounts, and make real-time payments directly from their bank accounts.» In the past two years, Prometeo has expanded its network to include over 500 APIs across 283 financial institutions in 10 countries, driving a tenfold increase in sales. The company offers account-to-account payments through personalized links and QR codes and supports bank account validations in six countries, covering all banks in Mexico and Brazil. Prometeo’s expansion into Chile and Mexico has enhanced financial inclusion. Aleman highlights the company’s 100% SPEI bank coverage in Mexico and plans for further growth in Chile. Prometeo remains focused on overcoming barriers in Latin America’s financial ecosystem. «Our priority is to generate solutions addressing the challenges of an uneven financial landscape,» Aleman says. The company aims to expand its impact across Latin America and explore opportunities in the US market, leveraging its successes in Brazil and Mexico to further digitization and financial inclusion.

Galileo Introduces Wire Transfers for FinTechs

Galileo Introduces Wire Transfers for FinTechs

Galileo Financial Technologies, a So-Fi-owned company, has launched wire transfer capabilities for FinTechs. The announced new service provides FinTech companies with a fast and secure option for money movement, according to PYMNTS.  Galileo’s wire transfer API connects FinTechs working with Community Federal Savings Bank to Fedwire, which processed over 193 million wire transfers last year. “Galileo streamlines the process of both incoming and outgoing wire transfers, enabling faster, reliable movement of funds,” the company stated in a news release. This service is crucial for large transactions like home sales, tuition payments, and vendor payments. With this new capability, recipients can receive funds on the same day they are sent, with each transaction undergoing rigorous validation processes to ensure safety and integrity. “The demand for Fedwire transfers spans a broad range of use cases, from individual consumers managing personal financial needs to businesses handling large-scale, B2B financial operations,” the release added. In related news, PYMNTS highlighted the growing importance of instant payments for borrowers. According to their report, 44% of consumers who receive borrowing disbursements most frequently do so through instant methods. PYMNTS Intelligence found a notable increase in instant usage for borrowing in the past year, with nearly half of loan disbursements received instantly as of January. The report also noted that consumers highly value instant loan payouts, with nearly three-quarters willing to pay a fee for this service.

Revolutionizing Automotive Transactions: The Integration of In-Car Payments

Revolutionizing Automotive Transactions: The Integration of In-Car Payments

In the evolving world of automotive fintech, in-car payments are revolutionizing the way we interact with our vehicles, according to Itexus. This groundbreaking technology allows for seamless financial transactions from the comfort of the driver’s seat, enhancing convenience and transforming cars into mobile wallets. According to industry reports, the global market for in-car payments is expected to reach $12.50 billion by 2028, growing at a compound annual growth rate (CAGR) of over 20.9% from 2021 to 2028. This growth is driven by the increasing demand for connected vehicles and the adoption of advanced technologies like the Internet of Things (IoT) and artificial intelligence (AI). In-car payments integrate financial transactions into daily driving routines. Drivers can pay for fuel, parking, tolls, and even order food directly from their vehicle’s dashboard using digital payment platforms. This innovation is not limited to luxury cars but is expanding across the entire automotive industry. Potential Impact on the Automotive Industry: New Revenue Streams: Automakers can tap into new revenue streams by integrating e-commerce platforms into their vehicles, generating income through transaction fees and data monetization. Advancement in Connected Vehicle Technology: In-car payment systems are a crucial component of connected vehicle technology, facilitating financial transactions and paving the way for future innovations like personalized offers and predictive maintenance services. Data Insights and Analytics: These systems generate valuable data on consumer behavior and spending patterns, allowing automakers and third-party providers to optimize business strategies and deliver targeted marketing campaigns. Collaborations and Partnerships: In-car payments create opportunities for collaborations between automakers, payment service providers, financial institutions, and other businesses, driving technological advancements and enhancing the connected mobility ecosystem. Enhanced Customer Experience: By eliminating the need for physical payment methods, in-car payments streamline the driving experience, leading to higher customer satisfaction and brand loyalty. Leading automakers are actively incorporating in-car payment systems into their vehicles, with partnerships and mobile wallet integrations becoming increasingly common. Security remains a top priority, with advanced encryption, tokenization, and biometric authentication methods being implemented to protect sensitive financial information. The future of in-car payments looks promising, with potential integrations of voice recognition and other technologies on the horizon. As the demand for connected and frictionless experiences grows, in-car payments are set to play a pivotal role in shaping the future of mobility.

The ESG FinTech Sector: Is it Expanding Rapidly Enough?

The ESG FinTech Sector: Is it Expanding Rapidly Enough?

The environmental, social, and governance (ESG) FinTech sector is gaining attention, but is it growing rapidly enough? Market value isn’t the sole measure of the sector’s importance, but it provides insight into its prioritization, as highlighted in Fintech Global News. According to Opimas, the market for ESG data is projected to reach $2.1 billion in 2024, up from $1.9 billion in 2023. ESG data is essential for assessing a firm’s impact, investment insights, and supporting ESG reports. Lindsay Schreiber, Head of Data at IntellectAI, highlighted the sector’s growth: «The FinTech sector is thriving, with ESG FinTech emerging as a particularly promising niche. Post-COVID, the focus on ESG has surged, spurring a variety of players in the industry. Financial institutes, corporations, and consulting firms are backing ESG tech startups and developing their own applications and platforms.» Despite this, the sector’s progress is crucial for sustainability and equality in business. Although funding for most FinTech areas declined in 2023, ESG FinTech remained stable at $28.8 billion, according to KPMG’s Pulse of Fintech 2023 report. Schreiber noted the promising trends but questioned the pace of growth: «Growth projections are for the future, yet the need for solutions is immediate. Even rapid growth may seem insufficient given the enormity of the climate crisis.» ESG FinTech is projected to attract $123.7 billion in investment by 2026. Schreiber emphasized, «The time for action is now to mobilize funds and technology to address global sustainability challenges.» ESG FinTech provides powerful tools like carbon footprint tracking, centralized ESG data management systems, sustainable investment platforms, and green lending platforms. These services help companies support the evolving market and new customer expectations while staying compliant with regulations like the EU’s Corporate Sustainability Reporting Directive (CSRD). Financial institutions can play a critical role in combating climate change by integrating climate considerations into their investment decisions. Schreiber added, «A robust, climate-focused FinTech sector can serve as the financial engine propelling us toward a more sustainable future. The time for action is now, and financial institutions must ramp up their investment in ESG FinTech to meet the immense challenge of our changing climate.» As ESG issues continue to attract focus, the ESG FinTech sector is likely to grow. A KPMG report found that insufficient and inaccurate data was the most common challenge firms faced with their ESG processes. To overcome this, banks are adopting flexible target operating models for ESG data, collaborating with ESG FinTech data providers, and building internal data analysis capabilities. Schreiber pointed out the challenges: regulatory and policy cohesion, standardization of ESG data collection and reporting, and technological advancement. «Emerging technologies like AI and blockchain can create more sophisticated ESG FinTech solutions. Collaboration between FinTech startups, financial institutions, and environmental organizations can lead to more effective solutions and broader market reach.»

Consumers Can Save for Purchases Via Save Now, Buy Later Fintech

Consumers Can Save for Purchases Via Save Now, Buy Later Fintech

Compound, a new fintech startup, has officially launched in the Middle East, introducing a unique «save now, buy later» model aimed at helping consumers save for purchases with their favorite brands while earning rewards, as highlighted in The Fintech Times. Compound partners with various brands to offer a proactive savings approach. For example, customers can save for an upcoming vacation with their preferred airline and earn rewards from the brand at each savings milestone. This initiative comes as savings culture is gaining traction in the UAE, with nearly 90% of people setting financial goals for 2024, according to a National Bonds survey published by Gulf News. Similarly, Saudi Arabia has seen its highest savings rate in over a decade, as per 2023 data from the Saudi central bank. Brands are increasingly facing high customer acquisition costs and intense competition. Compound provides these brands an opportunity to engage with prospective buyers early and foster deeper relationships throughout the customer’s savings journey. Shashank Narayanan, the founder of Compound and a founding team member of Sarwa, the leading investment platform in the UAE, emphasized the dual benefits of this model: “It’s about time consumers are given an opportunity to earn better rewards by saving up for a purchase, and we’re able to offer this by helping brands build deeper relationships with prospective buyers,” said Narayanan. “Our goal is to enable financial wellness at every purchase – for consumers and brands alike.” Compound was incubated with HP Spring Studios, a venture studio in partnership with Salica Investments and Bahrain’s Al Waha Fund of Funds. Zainab Khamis, head of HP Spring Studios Bahrain, announced Compound as the first spinoff, highlighting its potential to drive positive change and promote healthy financial habits in the region. She also underscored Bahrain’s emerging role as a fintech innovation hub.

Banking-as-a-Service: Navigating the Upheaval

Banking-as-a-Service: Navigating the Upheaval

The Banking-as-a-Service (BaaS) model is currently experiencing significant challenges, as highlighted in PYMNTS’ monthly “What’s Next in Payments” series. Synapse has declared bankruptcy, and Evolve Bank and Trust has been issued a cease-and-desist order, requiring Federal Reserve approval for any new FinTech partnerships. Despite these setbacks, Lydia Inboden, Chief Revenue Officer of Ingo Payments, remains optimistic about the longevity of the BaaS industry. Inboden noted that the current turmoil does not signify a systemic collapse but rather a combination of factors shedding light on vulnerabilities within different business models. «These incidents highlight the vulnerabilities in different business models,» Inboden commented during the interview for the series. Regulatory bodies are now developing additional frameworks to better govern FinTechs and their partnerships with financial institutions. Inboden predicts a shakeout among some players in the industry, particularly those that have commoditized bank charters and disintermediated banks from FinTech programs. «That’s where we’re starting to see things break down,» she observed. In the early days of BaaS, there were only a handful of sponsor banks focused on money movement and card issuance. Today, there are over 30 sponsor banks, and 76% of banks view FinTech partnerships as a future growth area. This trend suggests a shift towards a direct business model, where FinTechs maintain direct relationships with financial institutions holding consumer funds. Direct relationships offer several advantages, including enhanced vetting of FinTechs through anti-money laundering and compliance programs. «The financial institution needs to be able to show proper oversight into all those downstream partners,» Inboden explained. These relationships also help ensure FinTechs have the capacity to manage fraud and marketing activities, and assess whether their bank partners have adequate liquidity and capital. The current climate may also impact open banking. Larger financial institutions might become hesitant to share data with riskier downstream FinTech partners. Early Warning, for example, does not allow FinTechs or neobanks to access their banking data through APIs. This could hinder money mobility, necessitating clearer and more transparent communication from digital-first brands. «As the tea leaves ‘fall,’ I think we’re going to have a better framework for operating [these partnerships] … The banks need a playbook,» Inboden concluded.

Digital Vehicle Wallets Revolutionize Connected Car Payments

Digital Vehicle Wallets Revolutionize Connected Car Payments

Innovation in the payments industry hinges on the ability to put oneself in the end users’ shoes. This principle has guided Sheeva.AI in its mission to transform in-car payments using geolocation technology and artificial intelligence (AI), as stated in Fintech News.  In a recent interview for the «AI Effect» series, Evgeny Klochikhin, founder and CEO of Sheeva.AI, discussed the company’s pioneering approach. «It’s a new market. We do not have transactions right now inside cars. None of us are familiar with what it would even mean,» Klochikhin explained. «Therefore, when we talk about launching a new category like in-vehicle payments, we have to make it as convenient as our existing payment methods.» Sheeva.AI’s technology enables drivers to pay for services such as fueling, electric vehicle charging, parking, and curbside pickup directly from their vehicles. By leveraging precise vehicle location data, the company can deliver a personalized and contextualized payment experience in real time. «Location is the best predictor of customer intent,» Klochikhin noted. The company’s product suite is being deployed globally, with over 2 million fuel pumps, parking spaces, electric vehicle chargers, and other service points mapped into its location-based platform. Recently, Sheeva.AI’s in-vehicle payment technology became available in Citroën vehicles in India, where digital payments are heavily emphasized. «We’re very bullish on the Indian market because the market itself is super focused on digital payments,» said Klochikhin. Through this collaboration, Indian drivers can now seamlessly pay for fuel without manual intervention or additional QR code scanning. This milestone reflects Sheeva.AI’s ambition to create a unified platform for multiple use cases, from parking to fueling. «We do not want a platform that has only one use case. We want all of it in one account for you, the driver,» Klochikhin emphasized. To achieve this, Sheeva.AI has developed a B2B API product, a white-labeled vehicle wallet that any automaker can integrate. This approach aims to provide a seamless and branded experience for drivers. «Making it a white label experience just creates a much better homogeneity of you driving your own vehicle and actually transacting within that car,» Klochikhin added. The adoption of in-car payment solutions is driven by the need for convenience and simplicity. Klochikhin likened the vehicle wallet to an Uber-like experience where payment and service are unified. «What we’re trying to put inside the vehicle wallet is creating this one account which combines both the payment means as well as the service itself. So, it becomes the single experience for you as a driver,» he explained. Looking ahead, Klochikhin envisions a future where in-car payments extend beyond traditional use cases. By leveraging emerging technologies such as voice recognition and AI-driven interfaces, Sheeva.AI aims to enhance the user experience and streamline in-car transactions. «Without those three components—automakers, service providers, and consumers—nothing will work,» he concluded. Sheeva.AI is poised to revolutionize the connected car experience, making in-vehicle payments a seamless and integral part of everyday driving.

The Influence of Global Regulatory Compliance on Financial Services

The Influence of Global Regulatory Compliance on Financial Services

As businesses expand internationally, the need for global regulatory compliance has never been more critical, as outlined in Fintech Global News. Companies face a complex web of diverse regulatory frameworks, necessitating a systematic approach to ensure adherence to applicable laws across multiple jurisdictions. This comprehensive guide delves into the significance of global regulatory compliance, its key components, and the challenges it presents. According to Corlytics, global regulatory compliance involves a strategic approach where organizations ensure adherence to a myriad of laws, regulations, and guidelines spanning multiple jurisdictions. This process includes understanding varied regulatory frameworks, tailoring specific compliance programs, managing non-compliance risks, and conducting regular audits. Effective compliance also requires internal coordination, robust relationships with regulatory bodies, and upholding high ethical standards and corporate governance. Such strategic compliance helps avoid legal penalties, reduce operational risks, and maintain a positive international reputation. In the financial services sector, global regulatory compliance is crucial. It ensures market stability and integrity, protects consumers, and promotes a fair and transparent business environment. Key aspects include: Regulatory risk mitigation Avoidance of legal penalties and fines Reputation management for customer trust and business relationships Operational efficiency through standardized processes Adherence to local regulations for market access For global financial services firms, important compliance areas include: Anti-Money Laundering (AML) Know Your Customer (KYC) Data Protection (e.g., GDPR, CCPA) Financial Reporting (e.g., IFRS, GAAP) Market Conduct Consumer Protection (e.g., Dodd-Frank Act, MiFID II) Basel III for banking sector oversight Sanctions Compliance (e.g., OFAC, EU, UN regulations) Cybersecurity (e.g., GLBA, PCI DSS) Organizations face numerous challenges managing global compliance, including diverse legal frameworks, evolving regulations, and cultural and language differences. Non-compliance can result in severe repercussions such as financial penalties, legal disputes, and reputational damage, disrupting business operations and long-term success. To ensure compliance, firms should continuously update their knowledge of relevant laws, enforce robust compliance policies, and provide regular employee training. Leveraging RegTech can assist in managing regulatory changes and enhancing compliance strategies. Global regulatory compliance goes beyond avoiding penalties; it fosters a culture of responsibility and trust, significantly benefiting companies by enhancing their reputation and ensuring long-term success.

Artificial Intelligence: The Key to Financial Inclusion

Artificial Intelligence: The Key to Financial Inclusion

Financial inclusion remains a pivotal issue, but mere access to financial products isn’t sufficient. True inclusion demands financial literacy, enabling individuals to make well-informed decisions, as stated in The Fintech Times. Helal Lootah, co-founder and co-CEO of Lune Technologies, a Dubai-based data analytics company, discusses the role of AI in achieving this, using the UAE as a case study. Financial inclusion, as Lootah explains, is often misunderstood as just providing basic access to financial products. True inclusion begins with financial literacy, empowering people to make informed choices and actively engage in the financial system. Financial literacy enhances decision-making in budgeting, spending, planning, and recognizing opportunities. Conversely, financial illiteracy leads to missed opportunities and costly mistakes due to poor planning and unsustainable spending habits. A 2022 survey by the US National Financial Educators Council revealed that financial illiteracy costs Americans over $1,800 annually, about 5% of household income. Despite advances by traditional advisors, digital banking, and fintechs, the future of financial inclusion and literacy lies in AI-powered financial technologies. These technologies uniquely model an individual’s capabilities against their goals, offering personalized insights. The complexity of the financial landscape challenges even the financially literate, with digital transactions often leading to impulsive spending due to their intangible nature. While digital payments make tracking spending harder, mobile banking and financial apps show a growing comfort with digital financial management. AI-powered solutions can transform data into personalized insights and recommendations, moving beyond traditional dashboards to include savings plans and investment advice. In the UAE, financial inclusion is a top priority under the National Agenda, seen as essential for socio-economic well-being and economic growth. With financial inclusion at 46% in 2020, the UAE leads the Gulf in this area, attracting $2.5 billion in fintech investments in 2022. The UAE’s National Strategy for Artificial Intelligence 2031 aims to harness AI across vital sectors, including finance. For AI solutions to reach their full potential, further integration with established financial institutions is necessary. These institutions possess vast data that AI can use to generate personalized insights. Collaboration among fintechs, legacy financial institutions, and regulatory bodies is crucial for advancing innovative finance and inclusion. Helal Lootah’s insights underscore that true financial inclusion requires a blend of access, literacy, and AI-powered personalization, driving the UAE’s leadership in fintech and financial inclusion.