Leaders from Flashpoint VC, Lytical Ventures, the Sony Innovation Fund, and Talis Capital assured audience members during an online discussion on Nov. 3 that investment in regulatory technology (RegTech) is not losing attractiveness to venture capital funds, despite crises around the world and worries of an economic downturn in the future. 

“It’s natural in a recession environment to reassess the risks companies take,” said Steve Berg, partner at Lytical Ventures. “We are experiencing a natural slowdown, but you can’t invest less in compliance. You don’t have a choice.”

"The RegTech space has witnessed a huge boost in new tech solutions since the previous crisis of 2008 and I believe that the current economic crisis will be no different. Compliance is eating the world and sooner every business will have to take care of it. This represents a tremendous opportunity for all the existing and new businesses operating in the space," - Donatella Callegaris, Managing Partner, Flashpoint Venture Debt, added.

As it stands now, the global regtech market is expected to reach $10.1 billion in size by the end of 2022, according to a recent Future Market Insights report, which is an increase compared to 2021. Compare that to the significant devaluation of some fintechs, especially neobanks and buy-now-pay-later firms. Klarna, for example, closed a recent funding haul at a $6.7 billion valuation, a share drop from the $46 billion it reached in June 2021.

Costantino Mariella, Senior Venture Capital investment manager at Sony Innovation Fund said, “B2B SaaS is currently suffering a drop in valuation. This is reflected in the target market as well. However, RegTech has been under the radar compared to the biggest sectors suffering less valuation increase. RegTech has suffered less hype and will suffer less drop in valuation accordingly."

“It’s been interesting to watch and speak to investors recently. We have never had so much demand in a round of investment than we have now. Because, in the macroeconomic slowdown, compliance is not optional,” said Evgeny Likhoded, CEO and founder of Clausematch.

Likhoded and the investors all agreed, after an unprecedented 10-year investment and capital-generating cycle, the push to consolidate some regtech companies is inevitable. Just this year, GRC software management solutions developer Ideagen agreed to a $1.3 billion offer from private equity firm Hg Pooled Management.

“On the one hand, there is this push to go for one company that can manage five products. There are so many solutions to make it easier, faster, and cheaper. So eventually there is undeniable consolidation coming,” said Vasile Foca, co-founder and managing partner at Talis Capital.

"And on the other hand, RegTech is not immune to the Amazon effect. For instance, onboarding Revolut takes three minutes. People are used to onboarding fast and are very well connected with smartphones. It means that compliance also needs to be fast to ensure this speed," he added.

The industry continues to see breakneck advances coming to the marketplace by a variety of companies, including Clausematch. Yan Shtefanets, VP of Product, remarked with thousands of complex regulations published every year, connecting data through AI has proved beneficial.

“AI could start helping us by transforming unstructured data into a more consumable format so we can easily identify relations and connections in compliance content,” said Shtefanets. “We can digitise compliance content and connect the dots with AI.”

Financial institutions in particular are adopting regtech, as they recognize regulations are not going to stop coming and their compliance departments can no longer sit in the back office.

“If you have a hope of surviving the avalanche, you have to do something. The regulators never sleep…the old ways of relying on the subject matter expertise of the few people who have worked for your organisation is not just going to cut it anymore. There is a real need to digitise that regulatory management role because it goes across many roles in your organisation,” said Melanie Wright, a North American compliance expert.

No matter what looms on the horizon, investment, development, and innovation in the regtech space continue, the panellists concluded.

“Regtech and compliance solutions are very, very sticky,” said Likhoded. “Our gross retention revenue is 99%. Net retention revenue is over 100%. Most of our contracts are three-year contracts. Yes, growth matters. Yes, revenue matters. The recurring revenue matters. But you can also show your contract value…your customers don’t leave the solution. So it’s a very resilient offer to the market. It’s a company that you are not going to see churn.”

A full recording of the conversation can be found here: https://youtu.be/q8ioXVCgTFU

Understand how to adapt credit risk modelling strategies in a new environment where macroeconomic pressures, regulatory demands and covid related data are posing an array of challenges to financial institutions

23 January - 25 January 2023 | New York City | NYC

Credit risk modelling continues to be a top priority for financial institutions in 2022. Despite the fact that they are now more comfortable with managing the regulatory environment, there are still enhancements and optimization to be made to regulatory models. In addition to this, there are new concerns in this space which are being prioritized. The current macro environment with changing interest rates and inflation is causing concern for credit risk modelling professionals as they need to account for the impact that this will have. It is vital that banks keep on top of the priorities in this space as they need to appropriately monitor the probability of default of different customers and remaining on top of the emerging macro developments needs to be a consideration to do this effectively. Additionally, there are still challenges around what to do with COVID data and the implementation of climate risk into credit risk models.

This GFMI conference will allow delegates to understand the best practices for overcoming the challenges of the volatile market, including how to adapt to macroeconomic factors, keep updated with the best techniques for measuring climate risk and incorporate machine learning technologies into modelling strategies. The conference will examine all of these problems in depth and also provide practical examples of the best practices to deal with COVID data, enhance regulatory modelling, CECL compliance and model validation. 

Why you should attend:

1. Enhance regulatory modelling and CECL implementation within credit risk

2. Determine how the process of model validation can be done more effectively and streamlined

3. Overcome the challenges that the volatile macro environment poses for credit risk

4. Assess the best approaches for managing COVID-related data within credit risk models

5. Evaluate the incorporation of climate risk data into credit models

6. Understand how machine learning and artificial intelligence can be utilized in credit risk

Keynote Presentations from Financial Organizations such as:

• MUFG

• Ally

• Federal Reserve Bank of New York

• Citi

• U.S Bank

• BNP Paribas

• Citizens

• KeyBank 

• Charles Schwab

• PNC

For further information and clarifications, contact Ayis Panayi at ayisp@marcusevanscy.com or visit the event's website here: https://bit.ly/3NM8UyL. 

Glow, the digital insurance agency for small businesses, announced that it has closed a $22.5 million round of series A financing led by Cota Capital. AV8 Ventures, Markd, Startup Venture Capital, Maiden Re, and others also participated in the round. The financing will fund innovation in Glow’s digital insurance platform, which automates the insurance process for small businesses. Glow uses data to ensure that a business is maintaining the correct coverage for all their insurance needs at a lower cost, not just when they purchase, but every year. Glow will also use the investment to expand into more states across the nation, serving small businesses across more vertical industries.

“Glow is changing the landscape for small business insurance,” said Ben Malka, partner at Cota Capital. “Small business insurance is a $100 billion market, and it’s underserved and underinsured. Glow’s approach has all the elements the industry needs to bring small businesses into the new era of digital insurance. It offers the platform small businesses are moving toward. It’s consolidated and convenient, and it helps the small business bottom line.”

Glow technology matches companies with carriers that best meet their needs, then offers policies that are a better fit at the exact time they need it, at lower costs, with less paperwork.

“Our goal is to take care of all small business insurance needs, because insurance provides the peace of mind to pursue your dreams,” said Samad Wahedi, CEO and founder of Glow. “If you’re a small bakery, you want to know that your employees and your assets are safe but your focus is baking. At the same time, insurance comes out of your margins. Overpaying can mean a lot of cupcakes. We use data and cutting-edge technology to make sure you’re always protected with the right coverage so you can focus on building your business.”

Traditional insurance has moved up-market, leaving small businesses behind. These agents often have a blunt-instrument approach to insurance, quoting policies that may not be the best fit for the company based on very few details about the business and its employees. This “one size fits all” approach can lead to overpaying. Glow uses technology to look more deeply at data like job codes that can more accurately reflect the risk of a business. This allows Glow to offer a policy that results in a more cost-effective option than local agents typically provide. In addition, traditional agents often “sell-and-forget,” locking customers into renewals and walking away without reexamining whether their business, number of employees, or employee roles have changed. The Glow platform ensures that a company’s coverage is always up to date, at the lowest possible cost now and a year from now.

Glow partners with a number of well-known insurance providers to offer all the commercial insurance lines a small business needs, starting with workers’ compensation and then offering extended coverage to existing customers with an automated and streamlined insurance experience.

In addition to cost advantages, Glow offers small businesses the convenience of a dedicated account manager who is a licensed insurance advisor that understands the company’s business. This concierge-like service is available by phone or online. Glow’s service process is fast and transparent. Glow also syncs directly with a company’s payroll, so businesses know exactly how much they owe every month.

“Insurance can be scary for a small business owner like me. I’m not an insurance expert,” said Lanay LaFerriere, owner of Whitecaps Pizza in Lake Tahoe. “With Glow I have an expert I can call anytime that I trust to break things down, and they always get me the best rate even if we have to switch carriers. Glow is a no-brainer for us.”

Amir Kabir, partner at AV8 Ventures, added, "Glow is building the next-generation digital insurance agency for SMBs in a large, growing market that is both fragmented and profitable. Their sophisticated approach to customer acquisition, data aggregation, underwriting, and servicing is transforming traditional offerings while creating unique value and customer centricity for SMBs.”

Glow began by offering workers comp to small businesses in California. Today, thousands of small businesses use Glow to get the best fit insurance coverage. Small and medium sized businesses can sign up with Glow today.

Emerging markets venture capital firm Quona Capital today announced the final close of its Fund III at $332 million, significantly exceeding its $250 million target. This is the third fund from Quona Capital since its inception, bringing the firm’s aggregate committed capital to over $745 million.

Quona focuses its investments on innovative technology companies that are expanding access to financial services for underserved consumers and businesses in Latin America, India, Southeast Asia, Africa and MENA.

Quona’s Fund III investors include an array of leading global asset managers, insurance companies, investment and commercial banks, university endowments, foundations, family offices and development finance institutions. The majority of Fund III investors returned from prior Quona funds, joined by more than 20 new relationships.

Quona Capital was established as an independent venture capital firm in 2015 by co-founding managing partners Monica Brand Engel, Jonathan Whittle, and Ganesh Rengaswamy. Today the firm’s global team—which includes investment professionals and other staff hailing from more than 10 countries and speaking 20 languages—brings a unique combination of deep experience as investors and operators in financial services and technology together with a passion for making investments for lasting impact.

“Since our earliest days, Quona has been dedicated to expanding the frontiers of financial inclusion—investing with conviction in markets and technology-enabled models improving access and quality of financial services for the masses,” said Monica Brand Engel, who leads Quona’s investments in Africa and MENA. “Our prior fund performance, robust pipeline of inclusive fintechs, and growing LP interest in our offerings are ringing endorsements of our view on the prospects of impact-oriented venture investing in emerging markets.”

“Financial services in emerging markets are being transformed by the power of technology, and Quona’s portfolio companies have been at the front lines of that transformation,” added Jonathan Whittle, who leads Quona’s investments in Latin America. “The pace of innovation in Latin America is accelerating due to a combination of regulatory reform, a maturing venture capital ecosystem, and a wave of founders who cut their teeth with the first generation of successful technology companies in the region.”

Ganesh Rengaswamy leads the firm’s investments in India and Southeast Asia. “With 35% of the global population and over 150 million small businesses, the Asia region hosts a very large proportion of the world’s marginalised consumers and small businesses,” he said. “The rapid digitisation of these markets—combined with the innovative solutions developed by the companies Quona is investing in—are bringing these consumers and small businesses into mainstream economic and financial systems. Quona is proud to be a catalyst in enabling these entrepreneurs and their teams.”

A history of impact measurement

From the onset, Quona has systematically measured the impact of the companies in which it invests, and it has played a substantial leadership role in the impact industry as a result. Before its formal launch in 2015, Quona collaborated with industry leaders to pioneer an impact framework built for financial inclusion measurement. From being an early adopter of the GIIN's Impact Reporting and Investment Standards (IRIS), to shaping the Impact Management Project's “5 Dimensions of Impact,” to becoming an early signatory to the Impact Principles, Quona has continued to play a critical role in the evolution of the impact investing industry, and has been recognized as part of the Impact Assets 50 for three years in a row.

Recent statistics from Quona’s latest Impact Report reveal that the firm’s portfolio companies:

• Served 8.8 million SMEs (with 80% previously underserved)
• Served 30.2 million retail customers (with 77% previously underserved)
• Touched 166 million lives (with 74% previously underserved)
• Generated $836 million in revenue
• Financed $2.4 billion in loans
• Enabled $12.3 billion in payment transactions
• Employed 23.2K people, 35% of which are women
• Raised $3.99 billion in cumulative capital 

Quona Capital funds have made more than 65 investments since the firm’s inception.

The Dubai Financial Services Authority’s (DFSA) Task Force on Sustainable Finance (TFSF) has today issued a publication on Climate and Environmental Risk Management.

Comprising members from international financial institutions based in the Dubai International Financial Centre (DIFC), the TFSF aims to drive forward discussions regarding sustainable finance in the DIFC with the goal of supporting the consistent application and adoption of global regulatory standards for sustainable finance in the DIFC.

The publication, which features insights from seven TFSF members: Bloomberg, DBS Bank, Franklin Templeton, HSBC Bank Middle East, Natixis Corporate and Investment Banking, Standard Chartered and S&P Global, contributes to the global debate on how best to address and mitigate the physical and transition risks stemming from climate change, as well as broader environmental risks in the UAE.

Ian Johnston, Chief Executive of the DFSA said: “This Climate and Environmental Risk Management publication forms an integral part of our work to foster an open dialogue on sustainability within the DIFC and the UAE. We are extremely grateful to the Task Force members who contributed to this publication for sharing their views on this important topic.”

Transferra has partnered with Sumsub to create an easy, safe and secure onboarding experience for their clients.

Sumsub is a global tech company on a mission to eliminate online fraud and help businesses meet compliance requirements. Transferra is a UK-registered payments company offering a variety of financial services for business owners, including individual UK IBANs and sort codes, a variety of EUR and GBP payment options, and a responsive online platform. The company offers modern and simple solutions for business owners who want to control their finances on the go.

"We are a UK-based, Fintech company for business owners, and we need a straightforward user verification process. We partnered with Sumsub as they are the only company providing a full KYB solution fully integrated with our company's AML/KYC policies. Sumsub also enables us to build complete onboarding of corporate entities, which includes questionnaires, company registry checks, and establishing corporate structure. Plus, we can perform AML checks on each individual in the process including all sanctions lists and adverse media. Thanks to Sumsub’s solution, we have up-to-date data about our clients and quick notifications about changes”, shares Alexey Reshko, Head of Products of Transferra.

"Transferra aims to make business payments secure and simple while considering every client’s individual requirements. We believe this is another step toward an inclusive financial future for people, where payment companies are trustworthy partners in business endeavours. We are glad that our identity verification and compliance solutions will contribute to reaching this goal," says Jacob Sever, Co-founder and Chief Compliance Officer of Sumsub.

London-based RegTech startup docStribute, formerly known as ALT/AVE, has today announced that it has signed a Framework Agreement with the UK Government’s Crown Commercial Service (CCS) to be listed as a G-Cloud 13 supplier. The Innovate UK-backed company will be able to offer their services to public sector bodies later this autumn.

According to the agreement, docStribute’s cloud-based solutions will be made available to tens of thousands of potential buyers in the UK within the G-Cloud 13 digital marketplace, listed in the lot 2 (Cloud Software) and lot 3 (Cloud Support) categories. Over 52,000 public sector and third sector organisations, such as local authorities, charities, housing associations and buyers, will be able to capitalise on docStribute’s service, which uses Distributed Ledger Technology to provide organisations with a secure and sustainable digital solution for distributing highly regulated documents.

Christopher Ansara, CEO & co-founder of docStribute, comments: “We are thrilled to have been selected as a service on the Digital Marketplace by the Crown Commercial Service. This will enable more public sector organisations to access docStribute’s services and it will be simple for non-profit organisations and public sector bodies to have access to the best product on the market. docStribute has always had productivity and sustainability at heart, and we hope to see our solution help not only reduce the use of paper but also help organisations become more sustainable, while increasing efficiency.”

When implemented, the flagship docStribute solution will result in a 95% reduction in paper usage, cut costs by as much as 70% and drastically reduce carbon emissions. The listing as a G-Cloud 13 supplier thus presents docStribute with a significant opportunity to enact large-scale change to aid the UK in its quest for net zero by 2050. Utilising the Hedera Distributed Network that docStribute is built on, the integrity of every document is assured. Even more positively, Hedera’s network is significantly more energy-efficient than alternative public networks.

docStribute recently signed a partnership with global technology behemoth Salesforce to make its Document Distribution and Digital Signature solutions available to its 150,000+ customers. Salesforce will immediately benefit from docStribute's DLT-powered solutions, which are more environmentally friendly, secure, and user-friendly than their peers.

The partnership is especially important as Salesforce looks to implement its ambitious and industry-leading net zero plan (www.salesforce.com/company/sustainability). docStribute directly helps Salesforce (and its customers) address three of its six sustainability priorities (emissions reduction, regulation and policy, and innovation). Forward thinking companies such as docStribute are critical to driving the innovation required to mitigate climate change.

G-Cloud 13, which officially launches on 9th November 2022 is the 13th iteration of the digital marketplace managed by the CCS.  As a popular method of procurement by public sector buyers and suppliers alike, it provides an easier way for companies to sell their cloud-based computing services, such as hosting, software and cloud support, including many off the shelf, pay-as-you-go cloud solutions to the UK central government departments and all other public sector bodies. For the buyer, procuring services through such a framework is more efficient than posting and managing multiple, individual contracts.

docStribute is a distributed ledger application that utilises a decentralised public network known as hashgraph, a secure, shared database that everyone can read from and write to, and a faster, more secure alternative to blockchain. Through docStribute, secure links can be sent in the body of emails that direct the recipient to a digital version of the document in their web browser, which can then be downloaded if requested. docStribute has been striving to help businesses in various sectors streamline working practices while ensuring that they are meeting regulation requirements. 

Considerable opportunities exist for banks to monetise their APIs for both internal and external-facing use cases, according to a report released today by Mobey Forum’s Open Banking Expert Group. Based on a year-long research study, the report leverages the expertise of open banking experts across leading Tier One banks and global institutions.

The research initiative behind the Expert Group’s report, entitled Monetisation of Open Banking APIs, set out to answer the questions ‘Can Open banking APIs be monetised?’ and ‘If yes, how best to do so?’. Based on its findings, the group determined that significant monetisation opportunities exist beyond those initially expected and, most notably, many of these opportunities are for ‘internally facing’ use cases, which present lower risk and higher return.

According to the report, the simplest business case for banks is through direct monetisation of so-called Premium APIs, which involves charging third parties for access and use of a bank’s APIs beyond the standard free offerings required by, for example, compliance to the EU’s PSD2 regulation. The research found that this type of direct, external-facing monetisation can enable banks to recover the cost of creating and publishing core compliance APIs, and that increasing the number of products available via APIs, together with offering enhanced performance levels, generates significant monetisation opportunities. Internally, use of APIs can facilitate the sharing of data across otherwise siloed departments within a bank that leads to efficiency gains. 

“The findings of the Open Banking Expert Group’s research could not come at a more important time,” comments Elina Mattila, Executive Director, Mobey Forum. “Economic pressures, dwindling profit margins and increasing compliance and regulatory requirements mean that banks are searching for new ways to increase revenue with value-added services. The monetisation of APIs can help banks unlock new efficiencies and generate new revenue streams. Yes, the monetisation use cases explored in the report are still in their infancy. Nonetheless, they still represent billions per year to the medium to large bank segment.”

Kristian T. Sørensen, Partner at Norfico and Co-Chair of the Open Banking Expert Group, adds: “The opportunities for monetisation - while hugely exciting - are still only the beginning. As banks expand their APIs to enable access to richer sets of data, their potential to monetise grows exponentially, in line with the growth in available data combinations. It’s important for banks to embrace this opportunity; it will expand both the utility and the value of the Open Banking ecosystem for all.” 

The report contends that open banking, currently limited to payment accounts in many jurisdictions, should be seen not only as the first step towards richer use cases, but also as a step toward the broader, overarching goal of Open Finance and Open Data.

To create the report, the Open Banking Expert Group conducted a series of workshops exploring the types of problems or market needs potentially large enough to consider solving via open banking. The group then mapped the types of data that could be used to solve these problems before exploring how these data assets can be brought together to create realistic monetisation opportunities.