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Video: Top fintech stories this week – 26 February 2021

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Atom Bank plans £40m shareholder fundraise in prep for future IPO

February 26, 2021 at 12:00PM

Atom Bank has announced a planned £40 million fundraising from its existing shareholders, as the UK direct bank gears up for an initial public offering (IPO).

Atom planned a similar £150m raise last year

The Durham-based bank expects its small and medium-sized enterprise (SME) lending business to have grown to more than £700 million by March 2021.

It saw numbers boosted by the UK government’s Coronavirus Business Interruption Loan Scheme (CBILS).

It also says it has seen “strong and profitable growth” in its mortgage operations.

CEO Mark Mullen says the funding is needed to drive growth, and hinted that the bank may go back to shareholders in future.

Atom originally planned a £150 million shareholder round in August 2020, reported at the time as preparation for the a 2022 IPO.

The bank has raised £429 million to date from eight funding rounds. Its largest investment arrived as £150 million from Spanish banking group BBVA, which retains a 40% stake in Atom.

BBVA even planned a takeover of the UK challenger. Rumours swirled in January 2019 that the Spanish giant had its eyes on Atom, but they never materialised.

Founded in 2014, Atom Bank opened for business in 2016. It claims to be the first challenger bank in the UK market.

It has a collection of technology platforms, including FIS’s Profile core banking system, Wolters Kluwer’s OneSumX for regulatory reporting, and Phoebus Software for secured business lending.

The bank’s total lending grew by 76% in 2019 to £2.4 billion, supported by growth in deposits from £1.4 billion to £1.8 billion.

In late 2019, the bank picked Google Cloud to underpin its application and product development. The bank had been using a third-party data centre since 2015.

Related: Starling set to raise £200m led by US investor Fidelity at $1.5bn valuation

via FinTech Futures – https://bit.ly/3uz9Mwq

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Former international footballer Rio Ferdinand invests in Sokin

February 26, 2021 at 11:30AM

Former England footballer Rio Ferdinand has become a shareholder of UK-based payments fintech Sokin.

Sokin CEO, Vroon Modgill, says his team is excited to work with Ferdinand

Ferdinand is branching into technology investment alongside his current role as a sports pundit on BT Sports.

Sokin, his first target, provides fixed-fee, subscription-based payment services for currency exchange.

The fintech is planning to offer customers unlimited international money transfers and payments with no mark-up on transactions from June 2021.

It says its peer-to-peer (P2P) mobile app makes the transaction process easy from the onboarding of customers to instant payments.

Ferdinand says he has seen “first hand” the “power that digital services have brought to broadcasting and social media”.

He adds: “I’m interested in applying the same innovation to financial services. Those working overseas and sending money back to family members and communities have really felt the pandemic.

“They usually opt to use well-known brands to send what spare money they have home, but the process is often time-consuming and expensive.”

FinTech Futures spoke to Sokin CEO Vroon Modgill in 2019. He notes that the firm is capable of serving 150 countries in 30 currencies.

He says Sokin’s £9.99 a month UK plan for limitless transactions would “turn remittances on [its] head”.

On Ferdinand’s investment, Modgill says his team is “thrilled” to work with the former footballer.

“In 2021, there’s absolutely no reason why customers should accept additional – or hidden – commissions, unexplained costs or repeat charges,” he adds.

“We don’t pay for every track we download or each film we stream, yet when we’re sending money or making a payment, we accept unspecified and variable costs.

“This has to change and so we’re changing it, putting transparency at the heart of our service.”

Related: Sokin picks Jumio to power customer authentication

via FinTech Futures – https://bit.ly/3qY0yI2

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ICYMI funding round-up: Zolve, Symple Loans, Butn, FunGuard & more

February 26, 2021 at 11:00AM

With the fast-paced nature of the fintech world sometimes it’s easy for announcements to slip by. Here at FinTech Futures we’ve put together a “In Case You Missed It” (ICYMI) list of our funding picks this week.


Zolve has raised $15 million for the creation of a banking platform for those emigrating from India to the US.

The seed funding round was led by Accel Partners and Lightspeed Venture Partners.

Founded by Raghunandan G, creator of ride hailing firm TaxiForSure, the start-up works with banks in the US to provide financial products to new arrivals.

Raghunandan tells TechCrunch his firm underwrites the risks, enabling banks to provide support to Zolve customers.

“Consumers can open an account with us and access all banking services as if they are banking with their national bank,” he says.


Symple Loans co-founders, Bob Belan (CEO) and Paul Byrne (COO)

Melbourne-based firm Symple Loans has raised AUD 15 million ($11.8m) in a Series D round, taking its total funding to date up to AUD 130 million.

Symple will use the funds to “further accelerate its profitable growth strategy” and for targeted investments in “new digital capabilities”.

The firm completed an AUD 11 million Series C capital raise in January 2020, and recently announced a partnership with Australian Financial Group.

“Symple, along with our Australian fintech peers, has a role to play in supporting the country’s recovery,” says CEO Bob Belan.

“We remain focused on building on our momentum to date and doubling-down on our vision to redefine how personal lending ought to work.”


Tarabut Gateway, a UAE-based open banking firm, has raised $13 million in seed funding – the largest of its kind in the region.

The round was led by Target Global, and featured participation from Entrée Capital, Zamil Investment Group, and Global Ventures.

The announcement follows Tarabut Gateway’s recent expansion into the UAE in October 2020. The fintech will use its new funding for further geographic growth and the development of its current product offerings.

“The open banking industry is a catalyst for transforming the way banks and fintechs in the region interact with one another,” says CEO Abdulla Almoayed.

“Tarabut Gateway provides the infrastructure which enables enhanced collaborations between financial institutions and an increasingly agile and flourishing regional fintech sector.”


Butn co-founder Rael Ross

Fintech funding start-up Butn has landed AUD 12.5 million ($9.8m) ahead of an expected float on the Australian Securities Exchange.

Butn deploys a technology platform that offers a handful of lending options to customers, including buy now, pay later options.

Canaccord Genuity led the round, and will also act as lead manager for its initial public offering (IPO).

“We developed an agnostic technology that overlays any third-party platform or cloud-based solution,” co-founder Rael Ross tells the Australian Financial Review.

“Butn is literally that, a button that people can click to sort out funding.”

Butn claims to have facilitated $166.6 million in lending for 2020, up from $105 million in 2019.


Investment technology platform FundGuard has raised $12 million to develop its AI-powered asset servicing software.

The financing is being led by Team8 and existing investors Blumberg Capital and LionBird Ventures. It brings the total amount of capital raised by FundGuard to $16 million.

FundGuard says its AI-powered platform replaces the “decades-old solutions in the marketplace” that are “no longer able to address growing industry demand”.

The investment will spur product development to support FundGuard’s partnerships with “several of the world’s largest fund administrators and asset managers”.


A GoodBox cashless donation points

GoodBox, which enables digital charity payments, has raised £9 million in funding to boost its footprint across the UK.

The firm provides a contactless series of devices to enable people to donate without using cash. Founded in 2016, it has partnered with 1,500 non-profits.

It says the new cash will help it create “a number of exciting, industry-first product launches” lined up for the year ahead.

“Despite the obvious challenges of 2020, we have continued to onboard new charities on the GoodBox platform throughout the year,” says CEO David White.

“The closure of this round will solidify our position as a partner in fundraising to the global non-profit sector, enabling us to offer a wider range of solutions that will help non-profits engage more donors.”


Gen Z-targeting neobank Zelf has raised $2 million in pre-seed funding.

The round was led by Austrian venture capital fund 3VC, with backing from Seed Х, Hard Yaka, Yair Goldfinger, and the co-founder of ICQ and UK angel investor, Chris Adelsbach.

Zelf offers its users a digital card and IBAN account “within 30 seconds”, which they can use to send payments through social media applications.

The neobank also utilises an “AI-powered” voice control system to allow users to request money, and check account balances.

Based in Latvia, the neobank plans to use its new injection of cash to expand into Spain, Germany, and Poland.

Related: ICYMI funding round-up: FlexxPay, Raqamyah, and JustUs

via FinTech Futures – https://bit.ly/37PqnCp

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FCA boosts data strategy with new executive hires

February 26, 2021 at 10:30AM

The UK’s Financial Conduct Authority (FCA) has made a handful of new hires among its executive team to drive its data transformation project.

Stephanie Cohen (chief operating officer (COO)), Jessica Rusu (chief data, information and intelligence officer), Sarah Pritchard (executive director for markets), and Emily Sheppard (executive director for authorisations) have joined the regulator.

The FCA’s new hires. Clockwise from top left: Emily Sheppard, Jessica Rusu, Sarah Pritchard, and Stephanie Cohen

The hires are part of a transformation programme the FCA kicked off in December. It brought together two supervision divisions with the FCA’s policy and competition functions.

The four new appointments arrived after a “rigorous and wide-ranging recruitment processes.”

Nikhil Rathi, chief executive of the FCA, says the four bring “a deep understanding of the consumers we seek to protect, the markets we oversee, and all have track records for operational excellence.”

Rathi adds that their experience is “vital” as the FCA builds itself as a “data-led regulator”.

Cohen, Rusu, Pritchard, and Sheppard all join the FCA’s leadership team, meaning that more than half of the FCA’s executive committee are women.

Cohen and Rusu

Cohen, as the new COO, is responsible for the FCA’s operations and business performance, systems and infrastructure, and finances.

She arrives with two decades of experience, including 14 years at BlackRock where she held the position of global COO.

“I am truly delighted to be joining the FCA at this pivotal moment,” she says. “Now more than ever, the FCA has a vital role to play in protecting the interests of consumers, and I can’t wait to get started.”

Rusu steps into a newly created role at the FCA. She leads the transformation of the FCA’s use of data in overseeing the more than 60,000 firms it regulates.

Rusu will also lead the watchdog’s relationship with Big Tech companies, fintechs, and the data science community.

She joins from Chetwood Financial, where she currently works as chief data officer. Rusu has also worked at eBay Europe, Ford Motor Company, and GE Capital.

“I am excited to join the FCA at this time of great transformation to leverage technology and data science to deliver innovation and excellence in regulation,” says Rusu.

Cohen and Rusu will join the FCA June 2021. The regulator says both will “deliver operational excellence and build the FCA’s data and intelligence analytics capabilities”.

Pritchard and Sheppard

Pritchard takes over the delivery of the FCA’s statutory market integrity objective in the newly combined supervision division.

She joins from the National Economic Crime Centre, where she is a director. Before joining the NECC, Pritchard worked in risk and compliance at HSBC. She also trained as a commercial litigator with Decherts LLP.

Pritchard joins in June 2021 to work alongside Sheldon Mills, consumer and competition director.

She says she looks forward to ensuring that the FCA “protects and enhances the integrity of the UK and global financial system.”

Sheppard joins the FCA in March, and will oversee authorisations, which the regulator describes as “the gateway” for firms and individuals aiming to work in the industry.

Sheppard was most recently director of customer services and change at Aegon UK. Prior to that she spent time as EMEA COO for Bank of New York Mellon. During her time at BNY Mellon, she chaired AFME’s technology and operations group.

She says: “I am excited to be joining the FCA at such a crucial time for financial services in the UK. I look forward to helping ensure both UK markets and consumers are protected.”

Related: More than 90% of UK’s financial firms still rely on legacy tech, says FCA

via FinTech Futures – https://bit.ly/3aYk69L

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Kalifa report says UK’s fintech crown at risk from waiting competitors

February 26, 2021 at 09:55AM

Ron Kalifa’s wide-ranging report into the UK fintech industry released this week, warning other countries are waiting in the wings to snatch its “crown”.

The UK’s fintech sector, generating £11 billion ($15.6 billion) a year for the country’s economy, now holds a 10% share in the global fintech market.

But whilst Kalifa’s report celebrates UK fintech, it also highlights the fact the sector has hit an inflection point of opportunity and risk. To mitigate the risks posed to UK fintechs, particularly post-Brexit, the report lists a number of recommendations. “[They] must be done now,” says Kalifa. “Others are waiting for our crown to slip.”

UK, London

The UK’s fintech sector continues its growth

A reliance on foreign talent

One relates to attracting international talent. As revealed earlier this week, Kalifa has proposed a “tech visa” with the backing of UK prime minister Boris Johnson, and lobby group Tech Nation.

These would give priority access to workers in the tech industry to live and work in the UK. According to Kalifa’s report, foreign talent represents around 42% of UK fintech employees.

Homegrown fintechs such as Transferwise, Monzo, Checkout.com, Revolut, and Onfido collectively hold a valuation upwards of north of £19 billion ($27 billion). Their contributions to the UK economy are huge, but they rely on an easy flow of workers onto the island.

“The proposed introduction of a new visa stream will no doubt serve to attract qualified talent and boost the international appeal of the sector,” says Ammar Akhtar, Yobota’s CEO.

Another way the report wants to boost the UK’s fintech status internationally is to create a “Fintech Credential Portfolio” (FCP). It says this would “mitigate barriers to entry” and “in turn further ease collaboration between fintechs and larger firms in the market”.

Oliver Prill, Tide’s CEO, thinks the FCPs have “the scope to ease market entry significantly”.

Getting local

Adam Holden, NorthRow’s CEO, thinks “regional funding”, as opposed to just London-focused investments, will help to attract the right talent to the UK’s fintech sector.

One of the report’s recommendations highlights the need for better “national connectivity”. It suggests establishing ten fintech clusters across the UK, each writing their three-year strategy for growth.

They would be located in London, the Pennines (which would cover Manchester and Leeds), Scotland, Birmingham,  Bristol & Bath, Newcastle & Durham, Cambridge, Reading & West of London, Wales and Northern Ireland.

Each cluster would be categorised as either a “super hub”, “established”, “emerging”, or “other”.

In Manchester, the fintech scene has historically put less emphasis on connectivity alone. Instead, putting more weight on the end goal of growing its own fintech unicorn.

Scaling to IPO stage

Kalifa highlights the much-criticised issue of scaling fintechs in the UK. The report wants to boost the lagging number of London initial public offerings (IPOs), especially compared to countries like the US.

There were just 30 IPOs in London last year. Two thirds of these took place in the last quarter of 2020.

One proposal is to the implement a “scalebox” which would support fintech scaleups as opposed to the Financial Conduct Authority’s (FCA) regulatory sandbox, which incubates start-ups.

The scalebox would allow established firms to test new products designed to grow their customer bases. Just like the regulatory sandbox, it would offer firms an easier pathway into large customer contracts – be them with banks, or other enterprise-level customers.

Alongside the proposed scalebox, Kalifa says government should get more involved and form a “Digital Economy Taskforce” (DET) which could write a policy roadmap for fintech development.

KPMG analysis

The former Worldpay chairman also recommends a £1 billion Fintech Growth Fund, in an effort to tackle what it calls “a £2 billion fintech growth capital funding gap”.

But as Charles Delingpole, ComplyAdvantage’s CEO, points out: “The government needs to be mindful that there is already a huge number of commercial growth and venture capital funds in the UK.”

These suggestions, the report hopes, will make the UK a better location to grow fintechs into listed companies. But this year is looking better, according to technology sector specialist at the London Stock Exchange (LSE), Neil Shah.

“The 2021 pipeline for tech IPOs in London is very strong. With more tech floats expected in the first half than in the whole of 2020,” Shah told CNBC at the beginning of February.

Dual class changes, no Spacs

In this vein, the report also calls for a “free float reduction, dual class shares and relaxation of pre-emption rights”. All these regulatory changes would likely attract more companies to go public in the UK, as opposed to the US.

As Kalifa’s review points out, out of the 3,787 IPOs at the world’s major stock exchanges between 2015 and 2020, the US
alone accounted for 39% (via the NASDAQ and the NYSE), while the UK trailed with 4.5%.

But some are sceptical of dual class structures, and think there are more important changes need to the LSE.

“In reality the practice is few and far between,” says Delingpole.

“Probably far more relevant is the take-over code rules on change of control, which makes special-purpose acquisition companies (Spacs) difficult to list in the UK.”

Last year saw a huge flurry of Spac-fuelled IPOs. In the US alone, 244 took place, raising more than $78 billion between them – according to Refinitiv data.

Whist the report doesn’t mention Spacs, it does call out the Competition and Market Authority (CMA), suggesting the regulator is at presence a hindrance for fintech.

“There is a case for more flexibility in the assessment of mergers and investments for nascent and fast-growing markets such as fintech,” it reads.

As of December last year, the CMA had prohibited more mergers via a “phase 2” than it had cleared, with a further six transactions abandoned by parties, according to Ashurst data. Phase 2 sees the regulator launch an in-depth assessment into a merger.

More difficult post-Brexit

Ian Connatty, managing director at British Patient Capital, puts this slow London IPO timeline down to a lack of “both access to talent and easy access to global markets”.

UK fintech Currencycloud’s CEO and self-proclaimed Silicon Valley veteran, Mike Laven, says from his experience “fintechs need assurance of these things from the start”. He adds: “Unfortunately, the fallout of Brexit and the pandemic have recently made this more difficult.”

EU flag

“It’s shocking the elephant in the room with Brexit is never acknowledged”

One of the ways Railsbank’s Verdon thinks the UK can overcome this is by drawing parallels with Scandinavia. “Where companies know how to grow globally because the local market is so small”. This, in addition to a fintech-friendly tax environment, is why Verdon sees “cause for optimism”.

The UK is striving to cultivate an equivalent financial environment with the rest of Europe. This is an approach it hopes will maintain the country’s financial stability in the long-term, beyond 2022 grace periods.

But the Bank of England’s governor, Andrew Bailey, said on Wednesday that the EU’s initial efforts to help the UK achieve equivalence to the rest of Europe have become a “sideshow”.

The governor accused the European Commission of being more concerned with pulling billion-euro derivatives clearing business out of London.

These actions, confirmed in EU documents seen by Reuters, directly contradict the sort of “equivalence” supposedly set to underpin the UK’s post-Brexit memorandum of understanding with Brussels.

Nigel Verdon, Railsbank’s CEO and a Kalifa report participant, points out that “equivalence” aside, the UK fintech sector has already spent “millions to set up mirrored infrastructure in Europe”. ­­The Kalifa report recognises this too.

“It’s shocking the elephant in the room with Brexit is never acknowledged,” says Verdon. “The market dropped from 720 million people to 60 million overnight”.

Read next: Manchester’s fintech scene needs a homegrown unicorn, says report

via FinTech Futures – https://bit.ly/3syTTob

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US credit builder Petal closes $125m debt facility

February 26, 2021 at 09:30AM

Credit fintech Petal has announced the closure of a new committed debt facility totalling more than $125 million.

The firm says more than 100,000 people use its Petal 1 card

This new facility includes $100 million from Silicon Valley Bank (SVB), and $26.6 million from Trinity Capital.

It is Petal’s first asset-backed facility with SVB and Trinity Capital. The firm says it complements its existing $300 million facility with global investment bank Jefferies.

“We are excited to expand our relationships with both SVB and Trinity through a truly innovative capital solution,” says Nate Huebscher, Petal’s vice-president of capital markets.

“The closing of the transaction, structured during the height of COVID, represents a critical milestone for Petal in our efforts to expand credit access.”

Founded in 2016, Petal has now closed more than $440 million in debt and raised more than $100 million in equity financing.

It claims to be “a new kind of credit card company” built to “help people financially succeed”.

Credit building with two cards

The fintech provides two different cards to help users build their credit scores, both backed by Visa.

Petal 1, introduced in October 2020, targets consumers who already have a credit history.

Petal 2, designed for those with no credit history, offers “a no-fee credit card with cash back” alongside manageable limits.

The firm says more than 100,000 people have been approved for the Petal 1 and Petal 2 cards. It estimates 70% of these had poor or no credit history at the time of application.

Petal claims those who have joined with no previous history accrue an average credit score of 678 after two months.

Its services are underpinned by Federal Deposit Insurance Corporation (FDIC) member WebBank, which backed the launch of the Petal 2 card in 2018.

“Petal has achieved incredible growth in just a few years since their launch,” says Kyle Brown, chief investment officer (CIO) at Trinity Capital.

“We’re thrilled to partner with the teams at Petal and SVB to provide this warehouse financing facility as the company continues to scale rapidly.”

Related: Fintech funding round-up: SeedFi, Libeo, Ember and Finch Capital

via FinTech Futures – https://bit.ly/3sAvazT

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Lloyds spends big on tech projects as profits slump 72%

February 26, 2021 at 09:00AM

Lloyds Banking Group has spent a total of £4 billion on technology investments under its three-year digital transformation programme, which was earmarked with a £3 billion budget – a significant increase on the bank’s prior plan.

Called “GSR3”, the project ended in December 2020 following a year which saw Lloyd’s profits dive from £4.39 billion to £1.2 billion, a 72% drop.

Lloyds sign

Lloyds’ fintech partners include Thought Machine and Form3

The bank has steadily increased its technology spend since 2018. In 2018, it represented 16% of operating costs, or £1.3 billion. In 2019, technology spend accounted for 19% of operating costs, or £1.5 billion.

Lloyd’s hasn’t explicitly stated the percentage of technology spend in its overall operating costs for 2020. From its results presentation it seems the bank spent around £1.2 billion.

This would be a reduction compared to the first two years of GSR3, but adds up exactly to the bank’s overall profit in 2020.

GSR3

GSR3 was set up under Lloyds’ CEO António Horta-Osório, who is set to step down later this year.

A successor to the group’s prior transformation scheme GRS2, it included a 40% increased spend in digital technologies. GSR3 featured four key pillars, which Horta-Osório outlined at its launch in late 2017.

These were digitisation, driving greater customer relationships, boosting group-wide lending figures, and focusing on “skills for the future”.

Fintechs signed to Lloyds’ partner list since include London-based Thought Machine and Form3, as well as Sweden’s Minna Technologies.

Alongside investing in fintech, Lloyds also slashed its employee count last year. In November, the bank cut 1,040 back office support staff, bringing its total job cut count in 2020 to 1,900.

Lloyd’s digitally active customers increased by one million in 2020, or 6.1%, while mobile app users sat at a smaller 12.5 million. They racked up average customer logons of 26 per month, up 12% compared to 2019.

The bank says it has now digitised 78% of the group’s cost base. In 2021 it says it aims to double mobile app releases year-on-year.

Not as bad as feared

Analysts anticipated an even smaller profit. But the bank decided to put aside £4.2 billion – less than expected – to cover bad loans post-coronavirus.

This allowed the bank, which boasts 17.4 million digitally active customers, to pay a larger dividend of 0.57 pence a share.

Alongside Lloyds, fellow UK firm Metro Bank announced its financial results on Wednesday. Instead of making a decreased profit, Metro Bank saw losses widen considerably, from £11.7m in 2019 to £271.8 million in 2020 – partially due to more conservative loan provisions.

But despite a 72% dip in profits, Lloyds still stressed its status as “the UK’s largest digital bank”. Having spent a cumulative £4 billion on technology since 2018.

Read next: Form3 appoints ACI Worldwide’s Jessica Letterman as new customer chief

via FinTech Futures – https://bit.ly/3aTC1hA

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Pension builder Vantik signs card partnership with Mastercard

February 26, 2021 at 08:30AM

Berlin-based fintech, Vantik, has announced a partnership with Mastercard and Banking-as-a-Service (BaaS) platform Vodeno.

Vantik App Germant

Vantik was founded in April 2017

The deal sees the creation of a free debit Mastercard with “long-term savings” options.

Users of the new “Vantikcard” receive 1% cashback on every purchase, automatically invested into a sustainable pension fund.

The debit Mastercard provides traditional bank card services through direct charging from a personal bank account. It can also connect to a preferred account on Google Pay and Apple Pay.

Vantik argues that saving for retirement is “integrated into everyday life”. It avoids “the bureaucracy and complexity” of other pension schemes. Vantik plans to launch its new card in April.

The fintech says financial security in retirement is “one of the biggest issues for society”.

It cites research from German analysis firm AWA that 26.4 million Germans believe their own efforts to save for retirement are not enough.

Eurostat numbers claim the number of people threatened by old age poverty in Germany has risen to 3.1 million above 65 years old.

Founded in 2017, Vantik has raised €2.3 million across two funding rounds. Among its investors are STS Ventures and Atlantic Labs.

“Despite being aware of the urgent need to boost retirement savings, people still do not act”, says Til Klein, founder of Vantik.

“Statutory programmes are far too complex, too bureaucratic and too inflexible to meet the needs of today’s society.

“With Vantikcard starting a pension becomes a no-brainer. We show that saving for retirement works without a manual.”

Mastercard’s president in Germany and Switzerland, Peter Bakenecker, says “starting to save for retirement should be as easy and smooth as a payment process.”

Related: Mastercard nabs UK market share with NatWest debit deal

via FinTech Futures – https://bit.ly/3dPyOBM

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US Federal Reserve’s payment system down for more than three hours

February 26, 2021 at 08:00AM

The US Federal Reserve suffered a major outage this week which saw its payments systems suffer a shutdown.

For more than three hours, systems remained disrupted, after which, the regulator got the majority of them back up and running. Its systems process more than $3 trillion each day.

As of 2:58pm, the Federal Reserve’s website still reported an “alert” status for several of its service areas. The central bank put the outage down to an “operational error”.

Photo by RDSmith4 / CC BY

Both Fedwire and FedDACH went down

Major US banks rely on the Federal Reserve’s real-time payment settlement system, called “Fedwire”, which took even longer than three hours to get back up and fully running.

In December, Fedwire Funds handled more than 835,000 transactions a day on average. Its daily average dollar volume was $3.4 trillion.

FedACH, which also went down temporarily, processes smaller transactions such as pay checks and tax refunds.

Another reason for CBDCs?

This week, hearings in Washington saw Federal Reserve chair Jerome Powell asked what the central bank was working on in regard to digital currencies.

A central bank digital currency (CBDC) would utilise smart contract technology using blockchain technology, meaning the money being sent to citizens could be automated.

It would also mean banks and citizens could rely on an alternative system to the one which went down on Wednesday.

Congressman Patrick McHenry said this week that a CBDC would be “vital to American competitiveness”.

This year, according to Powell, the Federal Reserve will focus on extensive research and public outreach. Despite calling it a “high priority project”.

He stressed: “We have a responsibility to do this right. We don’t have to be the first.”

So close, yet so far

Back in March 2020, House Democrats considered whether to use digital dollars and digital wallets to expedite the delivery of direct emergency funds to unbanked consumers.

They drafted a bill which, if enacted, would have created a ‘digital dollar’.

The government would then have been able to leverage the same peer-to-peer (P2P) technology underpinning digital currencies to initiate payment clearance faster. Democrats dropped the bill before it could pass into legislation.

However, the mere consideration of such technology on a mass scale showed a huge leap in thinking by Powell. The central bank chair has traditionally opposed the creation of a CBDC.

Read next: Trump’s COVID-19 stimulus plan needs to swap checks for digital dollars

via FinTech Futures – https://bit.ly/2MvKQ86