In his role, Passarelli will focus on developing a robust compliance program for Melio and obtaining Money Transmitter Licenses (MTLs) in all states and territories where Melio operates, creating more payment opportunities for Melio customers.

“Understanding how compliance and regulation can provide customers with the highest quality of service is crucial for any financial institution,” says Passarelli. “I am excited to join Melio at a pivotal time of growth and service their customers by implementing the highest standards of protection.”

Passarelli has over 20 years of experience in compliance and has built and managed full-scale compliance programs for financial, cryptocurrency, and fintech companies.

He previously worked at Brex, where he served as Chief Compliance Officer, oversaw the company’s MTL framework, and managed all regulatory examinations and communication with regulatory bodies. Additionally, he has held the role of Chief Compliance Officer at multiple companies, including LGO, a leading Bitcoin spot exchange and OTC platform for institutions; Dealerweb Inc, a comprehensive and highly effective solution in the search for fixed income liquidity; and brokerage firm Kellogg Partners Institutional Services.

“We are excited to have Nicholas Passarelli join our team, bringing his wealth of expertise to Melio,” said Matan Bar, co-founder and CEO of Melio. “Nicholas’s strong values align with our corporate ethics that put compliance at the foundation of our company and with his guidance, we will be able to expand payment options for our customers.”

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“FS Vector’s team has worked with fintechs and banks in Treasury Prime’s network over the past few years and has played a vital role in ensuring they are ready for their BaaS journey,” said Kyle Costello, head of partnerships at Treasury Prime. “With sponsor banks more focused on compliance than ever, we’re thrilled to officially partner with FS Vector to bring valuable compliance training resources to our network and peace of mind for our customers that a reliable consulting firm is ready to step in when needed.”

As trusted advisors to banks, FS Vector helps build, launch, maintain and scale their Banking-as-a-Service (BaaS) platforms. As a partner to fintechs, the company provides hands-on assistance with services like obtaining bank partnerships, designing and building compliance programs, and licensing acquisition and maintenance.

“Successful BaaS relationships hinge on a shared understanding of and respect for the compliance obligations that a bank and their fintech program are subject to,” said FS Vector Principal Justin Muscolino. “Our Headmaster platform provides fintechs with the education that sets these relationships up for success in a cost-effective way. We believe that compliance and risk management training should be something that employees enjoy taking, and with the Headmaster, fintechs have a user-friendly platform that makes training relevant, accurate and role-specific.”

Headmaster provides comprehensive education, tracking, and regulatory updates for fintech companies. The platform also enables training development specific to a partners’ obligations and responsibilities, so if a requirement changes or a need arises to educate partners, it can push content out to all or a subset of partners’ employees.

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Founded in 2016, Celcoin provides financial infrastructure services and solutions for banks, fintechs, and enterprise companies. Focused in three key verticals – payments, banking, and lending – Celcoin’s offerings are designed to enable personalized embedded finance solutions for companies across any segment and stage of development. With over 400 customers in the financial industry and more than 5,000 non-financial companies, Celcoin combines market-leading technology, product innovation, and best-in-class security to support customers in building financial offerings that serve the needs of their end-consumers.

Brazilian financial technology is among the most advanced in the world. In recent years, the Central Bank of Brazil has introduced groundbreaking innovations, including the instant payment system Pix, which was launched in October 2020. Pix transaction volume skyrocketed from zero to 5 billion monthly transactions in just four years. In 2021, the Central Bank introduced Open Banking, and over 22 million customers have already consented to share their data between participating financial institutions. Celcoin has become the leading provider of Open Banking solutions for licensed institutions.

“Celcoin’s technology allows banks, fintechs and non-financial companies to introduce their own financial products and embed financial services directly into their ecosystems. We see this as the future of the financial sector, and we are excited to be part of this transformation,” says Celcoin CEO, Marcelo França. “With this funding, we plan to accelerate our investments in technology and innovation as well as evaluate both organic and M&A-driven growth opportunities.”

“Over the last several years, we’ve worked to identify technology companies that we believe are supporting economic development in Brazil through financial empowerment of the Brazilian consumer,” commented Alberto Reyes, an investor with Summit Partners. “We believe we have found such a company in Celcoin, and we are confident that our investment will continue to bolster this mission.”

This financing comes at a time of strong momentum for Celcoin, with the company recording US$63 million in annual recurring revenue in the first quarter of 2024 – a 140% increase compared to the same period last year. Celcoin processes over 200 million Pix transactions monthly, underscoring the robustness and reliability of their platform. In addition to the ongoing development of in-house products, Celcoin has successfully completed four strategic acquisitions since 2022: Galax Pay, specializing in billing and sub-acquiring solutions; Flow Finance, which provides credit infrastructure; Finansystech, a leading Open Finance startup; and most recently, Reg+, a regtech solution dedicated to supporting regulatory compliance.

“It is truly a privilege to partner with the impressive team at Celcoin during this phase of exciting innovation and expansion,” said John Coughlin, an Executive-in-Residence at Summit Partners who will join the Celcoin Board of Directors. “We have been impressed by the scalability of their platform and speed of new product innovation. We look forward to supporting Celcoin as the company continues to expand in Brazil and throughout Latin America.”

Christopher J. Dean, a Managing Director at Summit Partners, and angel investor Michael Esrubilsky join Coughlin on the company’s Board.

Innova Capital, which invested in Celcoin’s two most recent funding rounds, also participated in this financing. “Celcoin provides a technological infrastructure that allows its clients to take advantage of some of the greatest tailwinds in the payments landscape in Brazil, such as bancarization, emergence of instant payment methods, and Banking as a Service. We are excited to continue to support the Celcoin team, and work alongside Summit Partners and the other shareholders,” said Marcel Vitor Santos, Managing Director of Innova Capital and Celcoin Board Member.

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This alliance was signed by representatives from the European Digital Finance Association (EDFA), the FinTech Alliance Iberoamerica (FIA), the Africa FinTech Network (AFN), and the Digital ASEAN & Digital Philippines & IDEA. These organizations represent the foremost continental associations spanning Europe, Latin America, Africa, and Asia, marking a significant milestone in interregional cooperation. Their collaboration aims to promote the adoption of best practices in business, legislation, financial technology, and to foster innovation through enhanced cooperation.

“We are very pleased to join the Global FinTech Alliance, especially at a time when there is significant global interest in cutting-edge financial technology solutions, with a focus on maintaining cybersecurity in business processes, safeguarding customer information, and with our digital identity technology, we can offer security in transactions, prevent fraud, in order to build trust, which is our mission at Incode, especially in an increasingly digitized world.” explains Ricardo Amper, Founder and CEO of Incode Technologies.

Incode’s technology is powered by artificial intelligence, offering a fully automated, precise, and human-error-free solution to ensure accurate, reliable, and secure validation processes. Identity verification typically takes an average of five seconds per person. This advanced system incorporates over 30 validations, including passive liveness detection, which utilizes AI and machine learning to prevent unauthorized access and transactions, such as those involving bank accounts, from being compromised by photographs, videos, or synthetic identities created using AI.

“Incode is solidifying its global impact; following significant growth in the United States and Latin America, we have expanded our operations to countries in Latin America. Now, we are strengthening our presence in Europe through operations in such relevant markets as Spain and the United Kingdom,” remarked Diego Creel, Director of Incode in Europe. Globally, Incode collaborates with major banks and fintech companies such as Citi, HSBC, Nu Bank, and Chime, among others.

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Given the heightened regulatory scrutiny and rise of fraudulent incidents in the financial sector, transaction monitoring for banks and fintechs has become more critical than ever. Effectiv’s all-in-one fraud, risk, and compliance platform prevents fraud at every step of the journey, from onboarding new customers and businesses to ongoing and real-time transaction monitoring. The company’s transaction monitoring solution identifies and mitigates at-risk transactions by leveraging AI to analyze patterns to detect anomalous fraudulent behaviors, reducing risk of financial loss and reputational damage.

“We are dedicated to equipping our customers with the tools they need to thrive in an increasingly complex financial ecosystem,” says Mark Vermeersch, Chief Platform Officer of Treasury Prime. “With the speed at which money moves today, fraud detection needs to be just as fast. We’re thrilled to be partnering with Effectiv and enabling customers to combat fraud more holistically.”

“Over the past year, we’ve seen a rise in fraud with real-time payments. As banks get ready to adopt FedNow and AI fraudsters increasingly get more sophisticated, it’s critical that fintechs and banks invest in technology that can improve their security posture,” says Ravi Sandepudi, CEO and co-founder of Effectiv. “By partnering with Treasury Prime, we can provide more fintechs and banks with the tools they need to help manage risk at every step of the transaction.”

This partnership comes on the heels of Treasury Prime’s recent partnership announcement with Astra, further building out the firm’s industry-leading partner marketplace.

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Cybersecurity Risks

Fintech platforms heavily rely on digital infrastructure, making them vulnerable to cyber threats. Data breaches, identity theft, and hacking attacks pose significant risks to both financial institutions and consumers. To mitigate these risks, robust cybersecurity measures should be implemented, including multi-factor authentication, encryption techniques, regular system audits, and employee awareness programs.

According to a study conducted by the Ponemon Institute, the average cost of a data breach for financial service companies reached $5.85 million in 2020, highlighting the critical importance of cybersecurity in fintech risk management.

Regulatory and Compliance Risks

Fintech companies operate in a highly regulated environment, facing various compliance requirements. Failure to comply with regulations such as anti-money laundering (AML) and Know Your Customer (KYC) guidelines can lead to severe legal consequences, reputational damage, and loss of customer trust. Effective risk management involves a thorough understanding and adherence to relevant regulations, ongoing monitoring, and proactive compliance measures.

According to a report by Thomson Reuters, global financial institutions paid over $10 billion in fines for non-compliance with AML, KYC, and sanctions regulations in 2020, underlining the significance of regulatory risks in the fintech sector.

Operational Risks

Fintech relies on complex systems and interconnected networks, increasing the potential for operational risks. System failures, technical glitches, disruptions in service availability, or inadequate disaster recovery plans can lead to financial losses, customer dissatisfaction, and business interruptions. Effective risk management requires robust infrastructure, regular system testing, contingency plans, and disaster recovery protocols.

A report by the Financial Stability Board revealed that operational risks accounted for 32% of total risks faced by fintech firms in 2020, emphasizing the need for comprehensive risk management strategies.

Fraud and Financial Crime Risks

The digital nature of fintech platforms creates opportunities for fraudsters and financial criminals to exploit vulnerabilities. Scams, money laundering, insider threats, and fraudulent transactions pose significant risks to fintech companies. Implementing advanced fraud detection systems, conducting thorough due diligence on customers and partners, and employing transaction monitoring tools are vital risk management practices in mitigating these threats.

According to the Association of Certified Fraud Examiners, organizations globally lose an estimated 5% of their annual revenues to fraud, underscoring the importance of proactive risk management measures to combat financial crimes.

Principles of Effective Risk Management in Fintech

• Comprehensive Risk Assessment: Conduct regular and thorough risk assessments to identify, evaluate, and prioritize potential risks and vulnerabilities specific to the fintech organization.

• Robust Governance and Compliance Framework: Establish clear policies, procedures, and internal controls to ensure compliance with regulatory requirements and industry best practices.

• Strong Cybersecurity Measures: Implement advanced security protocols, encryption technologies, regular system audits, and continuous employee training to protect against cyber threats.

• Business Continuity and Disaster Recovery Planning: Develop and test comprehensive strategies to ensure uninterrupted service availability and timely recovery from potential disruptions.

• Proactive Fraud Prevention: Deploy fraud detection systems, conduct regular transaction monitoring, and foster a culture of vigilance among employees and customers.

• Ongoing Monitoring and Risk Mitigation: Regularly monitor internal processes, external environments, and emerging threats to identify and address new risks promptly.

• Collaboration and Partnerships: Engage in collaborative efforts with regulatory bodies, industry peers, and technology providers to stay informed about emerging risks and share best practices.

Conclusion

Fintech has reshaped the financial landscape, providing immense benefits to businesses and consumers. However, the digital nature of fintech operations brings inherent risks that must be effectively managed. By understanding and addressing risks related to cybersecurity, compliance, operations, and fraud, fintech companies can navigate the evolving landscape while safeguarding their reputation, customer trust, and long-term success. Embracing the principles of effective risk management is crucial for building resilience and maintaining a competitive edge in the dynamic fintech industry.

Fintech News – The Latest News in Financial Technology.

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Pierre Demarche, CEO and Co-Founder of Monnai

Trained as an engineer in Belgium, Pierre has held many executive roles in technology businesses, across the globe. In 2021, together with co-founder Ravish Patel, Pierre co-founded Monnai a global consumer insight infrastructure start-up that enables fintech organizations to navigate efficiently the four key pillars of onboarding, trust and fraud risk, credit underwriting, and collections, across emerging and developed markets.

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Over the last three years, Nex Cubed has established itself as a leader in early-stage innovation and acceleration, creating a global ecosystem of strategic investors, with 140 mentors, 50 advisors, 3 industry-specific Centers of Excellence, 20 corporate and government partners, and investments in over 70 startups.

In 2020, Nex Cubed is building on its success by scaling existing programming, including the launch of its FinTech Accelerator in New York City.

Nex Cubed’s FinTech Accelerator is a bespoke, semi-remote, sixteen-week program focused on pairing technically and operationally talented founders with fintech advisors and subject matter experts. These experts work with teams daily, preparing the startups for investment and enterprise readiness.

“With innovation in fintech addressing issues throughout the global economy, we are extremely proud to introduce this select group of founders pioneering transformative fintech solutions,” said Marlon Evans, CEO at Nex Cubed.

The FinTech Accelerator is part of Nex Cubed’s startup acceleration platform that also includes the Nex Cubed Frontier Tech Accelerator in San Francisco and the Nex Cubed Digital Health Accelerator in San Diego. Nex Cubed’s platform supports angel to seed stage startups and helps them to drive commercial adoption of their solutions and prepares founding teams for their next round of financing.

Nex Cubed has hired Mike Ma to serve as the Managing Director of the FinTech Accelerator. Mike has an extended track record of success in technology, advertising, marketing, and sales in organizations ranging from founding and advising startups to running product strategy and advertising campaigns for multi-billion dollar companies.

“We’re thrilled to have Mike join us at a time of exceptional growth and opportunity for Nex Cubed,” said Nex Cubed Co-Founder and Chief Growth Officer, Kelsey Morgan Pasqualichio. “Mike’s experience working with companies at all stages and his in-depth knowledge of the financial industry uniquely positions him to help us build on existing momentum and provide strong leadership as we accelerate the world’s most innovative fintech companies.”

Nex Cubed has assembled a distinguished 17-member Advisory Team that is embedded with the accelerator companies and works with founders on a daily basis. The team includes change agents who have served at organizations like JPMorgan, 3iGroup, Credit Suisse, Fortress, Route 66 Ventures, Nasdaq, Blockchain at UCLA, Tradeshift, Box, PriceWaterhouseCoopers, Bank of America, Visa, Wells Fargo, TangoTrade, GE Capital, New York Angels, SoFi, PayPal, UBS, Sway Ventures, Harvard Business School, and Goldman Sachs.

The seven companies selected for the Spring FinTech program are A.I. Capital Research, DeFiner, Destiny, Earn.re, InnoDT, Sixpence, and Vestalyze. The Spring program launched on March 2nd with a 2-day kickoff event held at the Franklin Templeton Investment offices in New York, and will culminate in June with a formal Showcase and Demo Night in New York.

A.I. Capital Research

A.I. Capital Research pioneers Deep Reinforcement Learning (RL)’s application in the world of finance and business. As AI achieves more and more unthinkable milestones such as beating humans in board games like Go (AlphaGo) and video games like Dota (OpenAI Five), the Deep RL algorithm behind these achievements becomes more and more known to the public. Instead of applying such cutting-edge technology to more games, our team specializes in Deep RL’s direct applications into real problems the industry is facing. We started by solving quantitative trading in the FX market and launching the first Deep RL managed hedge fund with A.I. Capital Management, and are now launching A.I. Capital Research to apply our expertise and ambition into solving more problems outside of trading, including business optimization, economics forecasting, and personal finance management to benefit financial institutions and the general public.

DeFiner

DeFiner is a non-custodian financial institution for digital asset investments, loans, savings, and payments without the middleman. DeFiner’s globally available, decentralized lending marketplace is designed to securely borrow and lend digital assets through smart-contracts on the blockchain. The company’s mission is to advance financial trust, growth, and simplicity. Users can access DeFiner anytime, anywhere in the world, within a fully transparent, secure, and open network.

Destiny

Destiny is a hybrid Personal Financial Management and customer retention platform aimed at helping financial institutions bridge the technology gap to the most crucial demographic in banking; their young and digital-first customers. Most financial institutions today do not provide services that meet the needs of debt-laden Millennials. By partnering with Destiny, their cutting edge debt management tool is delivered in an API to the institution’s mobile app and eliminates the customer’s debt as fast as possible. Simultaneously, Destiny’s Banker tool leverages the data gathered to help the institution increase customer retention, loyalty, and ultimately uncover unforeseen loan opportunities in a way that hasn’t existed in the market until now.

Earn.re

Earn RE, Inc. has developed a first to market blockchain-based platform facilitating SEC compliant funding of commercial real estate projects in the United States (currently a $9 trillion market). The platform will significantly enhance investor liquidity and reduce sponsor development costs by leveraging the power of the blockchain. Earn’s team is comprised of experienced real estate developers, securities attorneys, licensed securities professionals, and renowned blockchain developers.

InnoDT

We now live in a blockchain world filled with a never-ending growing number of transactions and crypto products. In the last 10 years, this market has grown from $1B to a $200B total cryptocurrency market, and the majority of this space is still filled with speculation and a lack of laws around the world. InnoDT’s customers recognize it as the solution that is visual, fast and reliable. InnoDT is a data platform designed for big data and machine learning by providing visibility and traceability into blockchain transactions for analytics and identity associations that identify good and bad activities across the market. The company is supported by Draper University and accelerated by UCLA Anderson Venture Accelerator.

Sixpence

Today, there are plenty of apps and platforms to facilitate quick one-time transactions between people. But what exists for people to gather funds together for shared goals over time? Think group savings meets crowdfunding, meets roundups (as popularized by Acorns), and you have Sixpence. Anyone can create a “Sixpence Jar” and then gather funds through one-time contributions or roundups, enabling people to steadily contribute to shared goals. PTO raising funds for a field trip or coach raising funds for a youth sports team? Create a jar and get parents rounding up. College roommates wanting to save together for a ski trip? Create a jar and contribute steadily together with your own daily purchases. Family who wants to save together for an annual vacation? There can be a jar for that too. This isn’t P2P fintech, it’s group fintech, and it’s the best way for us to achieve financial goals together.

Vestalyze

Vestalyze helps professional money managers and retail traders manage investment portfolios more effectively by providing a SaaS cloud-based platform that automatically tracks securities transactions, provides clarity into risk and performance metrics, offers real-time trade analytics, customizable reports, and extends messaging around user-established action triggers. Vestalyze helps clients increase income potential, save time to generate complex reporting, mitigate portfolio management risk, and provides a complete suite of investment analytics that can be tailored to each specific client and stored in the cloud for on-demand future reference.

Applications for the Fall 2020 FinTech Accelerator will open in June 2020. To learn more about the program and to apply, please visit the Nex Cubed FinTech website.

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Aashish Yadav, Content-Editor, FintecBuzz

Aashish is currently a Content writer at FintecBuzz. He is an enthusiastic and avid writer. His key region of interests include covering different aspects of technology and mixing them up with layman ideologies to pan out an interesting take. His main area of interests range from medical journals to marketing arena.

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In 2018, for example, fintech investments in the U.S. reached $11.9 billion, a new annual high, according to CB Insights.

But despite the favorable trend, fintech startups also face the same reality that all startups do – raising the capital to launch a business is no easy feat.

The good news for fintech entrepreneurs, though, is that we are well past the time when investors might have viewed fintech as a fad that would pass.

“I think that most investors have come to understand that fintech is here to stay,” says Kirill Bensonoff (www.kirillbensonoff.com), a serial entrepreneur and an expert in blockchain.

“Finance is getting more and more high tech each year.”

Still, coming up with sufficient capital to start any business – whether it’s from your own savings, a loan from a relative, or cash from an investor – can present a formidable problem.

“One lesson I’ve learned over the years is that successful entrepreneurs must be persistent,” Bensonoff says. “You will face challenges and one of those could be raising capital. Perseverance will get you through.”

Options for raising that capital include:

• Venture capital. Venture capitalists might be inclined to invest in your startup in exchange for an equity stake if they think there’s a chance they can score a big return. But they will need convincing. “The failure rate for new businesses is high, so it’s only natural for investors to be skeptical about whether you can pull it off,” Bensonoff says. “Any investment is a risk, and venture capitalists know that. But smart investors want it to be at least a calculated risk, not a roll of the dice.”
• Crowdfunding. If venture capital is not an option, crowdfunding could be the next best bet, Bensonoff says. Online crowdfunding platforms allow you to make your pitch in one spot where a myriad of different potential investors can see it. Examples of startups that used crowdfunding are Oculus and Skybell.
• Angel investors. An angel investor is an accredited investor who uses his or her own money to invest in a small business. Not just anyone can be an angel investor, though. They need to have a net worth of at least $1 million or a minimum annual income of $200,000. Bensonoff himself has served as an angel investor for some companies.
• Self-funding or “bootstrapping.” For those who want to bootstrap their fintech company, relying on their own money rather than the investments of others, there are options. Some people tap into savings or retirement accounts. Many keep their day jobs and make their startup a side business until it takes off. “Bootstrapping has always been an important approach to my life,” Bensonoff says. “I had to rely on my own money and hard work to succeed, and I had to remain frugal. When bootstrapping becomes a way of life, it opens up new opportunities.”

In Bensonoff’s view, raising capital to launch a fintech company isn’t any harder – or easier – than raising money for any other type of business.

“I think a good company in any sector gets funded,” he says. “So for entrepreneurs who want to plunge into the fintech sector, the key is to develop something that’s useful and satisfies an economic want.”

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