Recently, Let’s Talk Payments team had a conversation with Christine S. Loredo, VP, Programs & Partnerships at Yodlee Interactive, a division of Yodlee that builds APIs to help customers bring innovative FinApps to market more quickly using the richest consumer transactional data in the world. In what turned out to be a very enlightening discussion, Christine answered a few questions about Global investments in FinTech, platforms and success factors for FinTech and the Yodlee Interactive incubator program.
Excerpts from the interview:
LTP Team: How has the payments and FinTech industry evolved over the last few years?
C: I would say that there were 3 categories of changes:
- Explosion of APIs
- Proliferation of mobile phone and Smart Phones in particular
- Investments: Global investments in FinTech amounted to $3 billion in 2013, which is more than three times what it was in 2008. Our industry is tightly regulated; however, the innovators and builders are still getting funded in a big way. Many of these funded companies are on Yodlee Interactive’s platform. Xero, Credit Karma, OnDeck and Kabbage, all companies that we power, have raised a combined total of $362 million in capital in just the last year - an amount equivalent to 1/8 of all global FinTech investments in 2013. Growth will also depend on coming up with new ways to manage money and taking advantage of the two things that I mentioned before.
LTP Team: Over the last 3 years, which was the biggest game changing event according to you? Will you give it away to mobile penetration or the APIs?
C: I have to give it to the mobile phones, the ability to be anywhere and be connected to your client or be able to transfer money. It has a lot to do with the mobile phone and with the APIs that are available. There’s a proliferation of mobile apps that compounds the opportunities available for the entire Digital Well.
LTP Team: What do you think are the current success factors for the FinTech and payment startups?
C: For payments, it’s got to be mobile phones and it’s got to be excellent UI. You have to have trust, so the person using it has to trust that the entity is secure safe and highly reliant; You have to roll these different pieces together, you can do this by bringing in new features that bring the ability to make the payment quickly. It also has to be ubiquitous; whether I use my iphone, ipad or my husband’s windows phone, it needs to be ubiquitous and has to operate across OS. Startups need to consider mobile phones, excellent UI, security and safety, quick and ubiquitous applications as key success factors
LTP Team: With the UI aspect you mentioned, can you elaborate that with any examples or cases?
C: Take the case of PayPal: It offers the best safe, secure and simple UI. Another example is BillGuard, which enables users to get rid of grey, fraudulent charges. The magic is integration: You need to integrate quickly and you’ve got to have your core team including product managers, designers and developers. You also need to be open to feedback.
LTP Team: So from what I am getting, it needs to be secure and safe but UI provides the magic ingredient for it to succeed?
C: Yes, trust and security are important. However, lots of banks have very secure apps and haven’t done so well partly because of UI and the lack of attention to millennials’ needs. There’s actually a big debate whether it’s UI or security, but we think about it from the perspective of the growing millennial audience. The younger users gravitate towards UI.
LTP Team: How can Yodlee with its platform help FinTech startups?
C: We can help in a lot of ways: we have a platform that is used by 9 of the top 15 banks in the US and many other countries. Right now we have 2 API’s: one is Aggregation API and the other is an Instant Account Verification API. Some APIs are typically used very heavily by startups like the Instant Account Verification API which is more relevant in the payments space. This API is used to enable developers to reduce fraud and risk but also reduce friction. This enables them to get paid quickly because they actually verify the account and the developer can then charge the account making it more seamlesst and less fragile. The other API is an Aggregation API that enables developers to get access to randomized and securitized bank data through the ability to aggregate accounts, whether it’s an investment account, a bank account, a credit card account, a rewards account, insurance account, or some other account.
LTP Team: Can you give us some examples of firms that have utilized your platforms and APIs for building apps ?
- Personal Financial Management: Personal Capital
- Wealth Management: FeeX
- Small Business: Xero, Concur
- Mobile Wallet: - BillGuard
- Risk and Fraud: - Credit Karma
- Small Business Lending: Kabbag
LTP Team: How much time and effort is actually saved using your APIS?
C: We have been working with banks for 15 years to reach the 12,500 data points that we have and the breadth and depth of those relationships; this is one area that is very hard to compete in. Our Instant Account Verification API helps to reduce fraud, make sure that the account holder is correct and that the money is there. Development time isn’t an issue; it is more about savings on the actually cost.
LTP Team: What do you think about Apple Pay and how do you think it will impact the industry?
C: It’s about time, it will help us move away from the cash currency and more into the data currency. Apple Pay has a million credit cards on file and has trust combined with an excellent UI and I believe they are going to add more abilities to pay than just credit cards. I think it’s awesome, I couldn’t be happier that they finally announced it.
LTP Team: Please tell us about your YI incubation program
C: We have a YI incubation program in which Yodlee takes 0% equity and there is no charge to selected companies upon acceptance to the program. Our goal is to provide unhindered progress toward the launch of a successful FinDat solution. It is a lifecycle program where we add value to our ecosystem in 3 places, Incubation, Acceleration and Cultivation. The reason for it is that we have built an ecosystem of influencers, banks, partners ad investors and they want those companies in early phase to get started, so that’s incubation. We have our incubator where we are putting money in and using the networks to help them get along; and then acceleration, we say let’s get the usage up and we do various activities to drive that and finally in the cultivation phase, we ask the successful companies to help other also rise, because for us driving the ecosystems forwards and making sure everyone rises is beneficial to us, our ecosystem and our partners.
LTP Team: Can you tell us a bit more about the program?
C: Our incubator program offers $20,000 to each company and provides them with a mentor and a series of boot camps, a dedicated support for technical issues and an access to our APIs for free; in acceleration we take them in and we do PR and a lot of marketing, we also connect them with distributors and help them find funding. Here is a great story on it.
LTP Team: Can you tell us what kind of firms you are looking for?
C: We are looking for firms that are solving a problem for a consumer or small business audience, a company that needs to use our APIs in order to add a significant feature to its offering or to run their actual offering. Also, we are looking for companies which are pre series A as well as companies that will have a viable product or will be close to having a viable product launch in April to May 2015 timeframe. The segments that would be most interesting are: personal financial management, small business and mobile wallets. Besides those, we are open to any segment as long as we feel that a major need of the market is being fulfilled.