Category: Innovation

Current State of Fintech Trends in Europe

Being a global leader in the development of both financial institutions and financial markets, it is only natural that Europe is the birthplace of fintechs. European fintech companies are valued 2x more than any tech sector in Europe. Leading the rest of the world in electricity and internet coverage, the region specifically offers favorable conditions to boost fintechs. In addition, further technology infrastructure will bring 5G network coverage to 75% of region’s population by 2025.  Europe simply offers a business environment conducive to innovation and technology development, with several European countries (e.g., Switzerland, Netherlands and the Nordic countries) leading the 2020 Global Innovation Index.  

Europe makes up 17% of the global cumulative valuation of fintechs (around $2.26 trillion) which is also its largest venture capital investment category receiving 20% of all venture capital in Europe: a higher percentage than in Asia & the US. 

Advanced economies in Europe accounted for the largest share of non-cash payment transactions while card payments remained dominant in cashless transactions resulting in digital payments. Neobanks are seeing a sharp increase, making fintech the hottest startup sector in Europe.

The COVID Effect
The onset of COVID-19 caused unprecedented economic damage across the globe constituting significant challenges for traditional banks and their brick and mortar operations. Financial institutions were forced to quickly digitize operations in the banking sector.  Some organizations struggled to adapt, but many adopted these advancements in innovation to provide flexibility to customers during this crisis.

Fintechs created a competitive landscape by showcasing several long-term advantages to organizations and consumers with their origination in the digital world, offering more cost-efficient structures and better organizational agility. Customers rapidly became accustomed to having access to quick, easy, low-cost financial transactions and not relying on local branches for in-person transactions. 

Differentiating for Growth

While fintech companies have thrived, they do face unique challenges without brick and mortar locations to reach consumers. To acquire new customers and retain existing relationships fintech companies are expected to intently differentiate and offer unique products and features. One example is Curve, a banking platform that consolidates multiple cards and accounts into one smart card and app.

Aite Group published a research paper on fintechs which noted that Curve’s biggest challenge was educating the market while simplifying the fragmented world of finance for customers. To meet customer needs, Curve offered different product tiers, including its popular Curve Metal, a premium 18-gram brushed metal, fully contactless card available in a choice of three colors. 

Curve Metal was first launched in the UK in January 2019 and Europe in May 2020. The use of digitized options and metal cards successfully showcased the fintech company’s commitment to growth in the region and industry. Curve is now live in 31 markets across Europe, has won numerous industry awards for its groundbreaking innovations, and has grown to 300 team members across two continents.

Global Expansion and Adoption
The global fintech market is expected to grow at an annual rate of 22.17% from 2020-2025 resulting in a $305 billion valuation by 2025. European fintechs specifically have experienced tremendous growth from a 35 % adoption rate in France to as high as 82 % in Russia; higher than the average global adoption rate. This increase is partially due to online banking becoming one of the most popular payment methods in Europe. Consumers are increasingly incorporating fintechs into their everyday financial lives such as managing funds, trading stocks and crypto, paying for food, or managing insurance. In addition to the current COVID-19 pandemic, the aging population in Europe is ushering in a new opportunity for fintechs to incorporate easy-to-use services into their digital platforms. More fintechs are also responding to social and wellbeing needs of European citizens. For example, Longevity Card which uses AI-powered integration to analyze fitness activity, nutrition and other areas, provides health tips and rewards for leading a healthy lifestyle. Financial education for kids such as UK based fintech Gohenry enables the management of allowances for kids in exchange for simple activities like making their bed.

The Next Wave of Fintech

With the continued advancement of fintech, there is an exceptional amount of growth within niche markets in Europe. Leveraging new and emerging technologies to fuel innovation in the industry are the crowdfunding, peer-to-peer lending, as well as automated loans, robo-advisors and automated investment management (e.g., artificial intelligence and cyber defenses).  To meet customer needs, many fintechs are turning to the integration of cryptocurrencies, advanced card features, designs and materials including metal or a targeted focus on health, wellness and sustainability.  

Prime examples of the growing European fintech market and increasing community interest in digital banking alternatives include:

Revolut is continuously including more variety of new services including peer-to-peer payments, currency exchanges, trading stock, crypto and even commodities.  

N26 – The digitally native, German based bank is one of the earlier challenger banks who launched their first metal card in 2017.

• Bunq is an independent bank promoting sustainability with metal cards and trees planted for customers.

• Boursorama – pioneer and leader in the online brokerage, financial information on the Internet and now online banking based in France.

To learn more about the global fintech industry, best practices and common fintech challenges, please download the full Aite Group report commissioned by CompoSecure LLC: “Metal Cards: A Competitive Edge for Fintech Issuers.”

Fintechs e Oportunidades do Cartão Metálico na América Latina

View blog in English here.

As Fintechs espalharam-se globalmente durante a última década, criando raízes nos principais mercados financeiros como o Reino Unido ou os EUA. O mercado latino-americano de fintech ainda se encontrava atrasado em relação a esta tendência mundial; no entanto, é inegável que está hoje em franca expansão. Segundo a CB-Insights Research publicada em fevereiro de 2020, o investimento em fintechs na América Latina cresceu consideravelmente entre 2018 e 2019, e agora a região é o mercado mais quente de fintech. O Brasil lidera sem dúvida a região com o maior número de empresas fintech, seguido pelo México e a Colômbia. Os principais sub-sectores da fintech são pagamentos, bancos digitais (Neo-bancos), empréstimos e financiamento.

O principal impulsionador do notável crescimento na América Latina é a enorme mudança tecnológica: primeiro, pelo aumento da penetração da Internet, que ultrapassou 66% em 2019, em relação à média mundial de 53% de acordo com o Banco Mundial; segundo, pela penetração dos assinantes móveis que, de acordo com a GSMA Latino-Americana, representa quase 67% da população total da América Latina. Quase 80% utilizam os seus dispositivos móveis para aceder à Internet, com previsões estimadas em atingir 87% até 2025. Esta evolução tecnológica ajuda a aceder à enorme população não bancária e sub-bancária, para além das pequenas e médias empresas, cujos produtos e serviços digitais podem ser oferecidos.

Ao mesmo tempo, autoridades e reguladores em muitos destes países latino-americanos promulgaram regulamentos favoráveis à fintech com menores barreiras à entrada no mercado, identificando a fintech e os serviços financeiros digitais como uma forma de proporcionar um acesso financeiro alargado.

Finalmente, de acordo com a Finnovista, uma organização que impulsiona fintechs e startups na América Latina, os investidores internacionais mudaram-se para a região na qualidade de um espaço de investimento atractivo com um pico visto em 2018. Hoje, apesar da COVID-19 e da incerteza política em torno das administrações no Brasil e no México, a indústria fintech latino-americana é muito dinâmica. De acordo com a Latam Fintech Hub, angariou US$ 525M (US$ 249,3M em acções e US$ 275,7M em dívida) em 74 negócios no primeiro semestre de 2020, demonstrando que o investimento continuou apesar das turbulências.

Causar uma impressão com produtos inovadores

À medida que a pandemia continua e o impacto económico pós-COVID-19 continua a ser uma incógnita, muitas empresas fintech na América Latina podem estar sob pressão. No entanto, podem surgir grandes oportunidades para elas, enquanto a necessidade de serviços digitais aumenta repentinamente. As Fintechs poderão aproveitar esta situação única para alavancar os recursos, desafiar e diferenciar-se através de mais inovação e criatividade.

Enquanto o número de fintechs na América Latina está em expansão, as empresas de pesquisa de mercado sustentam que aqueles que causarem impressão quando iniciarem um novo negócio encontrarão o seu caminho através desta tempestade pandémica. Aqueles que serão capazes de atrair novos consumidores e de se ligarem ao seu público criando experiências únicas, se tornarão mais fortes através da adversidade. É aqui que a influência do cartão metálico pode entrar em jogo e fazer a diferença.

Neste contexto, um estudo recente do Aite Group sobre cartões de pagamento de metal da próxima geração mostra como nos EUA e na Europa os cartões de metal têm representado um meio chave para as instituições financeiras, fintechs e bancos digitais comunicarem com os seus clientes digitais, proporcionando uma experiência humana através de produtos premium.

Por exemplo, o México é um mercado favorável a observar em termos da adopção bem sucedida de produtos premium. A idade média no México é de 28 anos, tendo 41% da população entre os 25 e os 54 anos, o que representa uma base proveitosa de consumidores jovens e com conhecimentos tecnológicos. Estes jovens consumidores são atraídos não só pelos serviços digitais dos neo-bancos, mas também pelos seus benefícios globais que visam diferenciar-se, incluindo produtos específicos, tais como o formato legal dos cartões metálicos.

Cartões metálicos para impulsionar o crescimento da fintech

Os cartões de pagamento metálicos não são, de forma alguma, um conceito novo. Eles estão presentes no mercado há quase 20 anos. No entanto, a sua emissão foi originalmente direccionada para os segmentos de nível 1 e limitada aos segmentos de valor ultra-alto (UHNW).

Hoje em dia, o consumidor alvo dos cartões metálicos mudou. Isto é impulsionado por requisitos de segmentação e diferenciação, direccionados para a premiação da base de consumidores afluentes. Estão incluídos neste segmento millenials, um segmento altamente desejável para as fintechs. A Fintechs na Europa e no Reino Unido, entre outros, parecem ter contribuído para impulsionar a emissão de cartões metálicos, como um factor de forma única, integrando as mais recentes tecnologias EMV e contactless para inovar e competir com as ofertas convencionais dos bancos tradicionais.

Os cartões metálicos são atractivos para fintechs por diversas razões. O cartão metálico não só dá o “look and feel” que um cliente procura num produto, como também cria uma ligação emocional elevada onde o cliente tem a sensação de fazer parte de uma comunidade cool premium. O efeito de premiumization associado a benefícios específicos ligados à marca é a chave para uma experiência única do cliente. Os cartões metálicos são uma diferenciação que combina serviços digitais com um produto físico atractivo. Os cartões metálicos ajudam a criar um estatuto de topo de gama. Eles elevam o posicionamento da marca fintechs e a percepção que o cliente tem dela. De acordo com uma análise proprietária da CompoSecure, impulsionam volumes de transacção e gastos mais elevados, aumentam a retenção de clientes e, num círculo virtual, podem ajudar a contribuir para a aquisição de novos clientes. 

Romper o status quo

A América Latina está a seguir o exemplo das fintechs europeias, onde os casos de negócios apontam para a adopção de cartões metálicos como um motor de crescimento de negócios de êxito. As fintechs latino-americanas poderiam definir a sua própria oferta de inovação de produtos, de acordo com as suas especificidades de mercado regionais e locais e ecossistemas. O relatório do Aite Group conclui que os cartões metálicos poderiam ser um factor-chave para quebrar o status quo, especialmente numa região onde o segmento populacional de millenials é elevado, e onde a diferenciação e o “factor cool” são importantes.

Para mais informações sobre as melhores práticas de desafios comuns no âmbito da fintech e uma visão geral da emissão de cartões metálicos, convidamo-lo a descarregar o relatório completo do Aite Group encomendado pela CompoSecure LLC “A Competitive Edge for Fintech Issuers”.

Growth of Fintechs in North America

Financial technology companies (fintechs) stepped up innovation during COVID. This new breed of challengers to financial services is emerging to disrupt the payments industry. From non-banks and neobanks to tech companies and cryptocurrency platforms, these new fintechs are competing with traditional financial institutions. What began in Europe has seen a surge in other parts of the globe as well. The demand was propelled by COVID as stay-at-home orders globally fueled these upstarts, spawning more efficient payment platforms and allowing a full range of banking services. As a result, a number of fintechs have broadened their reach  and can be seen investing heavily to enter the North American market, especially the U.S.

Overcoming Challenges

North America is commonly the leader in most financial developments; however, fintechs have had a harder time cutting through the noise in this highly competitive market. The strong grasp many big financial institutions have dominates this more mature market. A whitepaper recently commissioned by the Aite Group pointed out the inherent challenges fintechs must overcome to be successful, including:

• Building trust
• Competing customer attention
• Developing the right brand and product positioning
• Overcoming regulatory hurdles
• Selling products without a branch network

The Battleground 

The closure of physical bank branches across the U.S. creates an opportunity for fintechs. By pushing consumers out of their comfort zone toward banking through their mobile phones, they are reevaluating the value and need for a physical financial location. Digital banks are growing quickly in the U.S. due to the pandemic, which is concerning to traditional financial institutions. One way this battle is playing out is through acquisitions. Despite a few failed attempts, many larger financial institutions, such as Bank of America, are investing heavily in digital for the future. Others, like JP Morgan’s venture in the U.K., are starting their own digital banks in select regions.  Fintechs also are partnering with financial institutions to share banking licenses and build collaborations.

Fintechs had to get creative in how they compete against more established financial institutions and stand out in the crowded marketplace. They are creating user experiences that are better and easier with mobile apps and online customer service. Fintechs are developing directed incentives that lure customers, including robust rewards programs, no-fee programs and premium cards that use metal materials and advanced designs. Bigger brands typically only offer metal cards to their elite customers, while fintechs expand the experience to all customers, including pre-paid cards in sophisticated metal material to differentiate themselves. 

Experiencing the Metal Card Difference

People  still like the feel and use of a card, even as they adapt to online and mobile banking. The increased use of metal payment cards to attract customers is not a surprising tactic. In fact, Aite Group’s whitepaper also breaks down the ROI of offering a metal card to customers. The benefits of metal cards far outweigh the cost associated with them. This has been one of the keys to the success of fintechs as they continue to expand their reach throughout North America. It is proven that metal cards increase account acquisition, card activation, transaction revenue, cardholder retention and additional fee income. Cards, in general, are the billboard for any brand and in many cases, the only physical connection a customer has with the bank. 

There are many examples of fintechs leveraging the issuance of a metal payment card to build their brand, grow customers quickly and disrupt the financial market. Greenwood, Blockfi, and X1 are all examples of fintech banks launching with waitlists and marketing a metal card to draw publicity. Koho and Chime have offered upgrades to metal cards when you refer friends. According to the whitepaper, half of consumers worldwide would leave their existing bank for another if it offers a metal payment card as part of their rewards and loyality benefits. As the competition for brand loyalty heats up, one of the most effective weapons that financial institutions have in their arsenal is the metal card.  

For more information on best practices of common fintech challenges and an overview of metal card issuance, please download the full report of Aite Group commissioned by CompoSecure L.L.C. “A Competitive Edge for Fintech Issuers.”

Fintech and Metal Card Opportunities in Latin America

View blog in Portuguese here.

Fintechs have spread globally over the past decade, taking root in major financial markets like the UK or the US. The Latin American fintech market was still behind compared to this worldwide trend; however, it is undeniably booming today. According to CB-Insights Research published in February 2020, the investment in fintechs in Latin America grew considerably from 2018 to 2019, and now the region is the hottest fintech marketplace. Brazil is without a doubt leading the region with the largest number of fintech companies, followed by Mexico and Colombia. The main sub-sectors in fintech are payments, digital banks (Neo-banks), loans and funding.

The main driver for the remarkable boom in Latin America is the massive technology shift: first, by increased internet penetration, which surpassed 66% in 2019, over the world average of 53% according to the World Bank; second, by the penetration of mobile subscribers which, according to GSMA Latin-American, accounts for nearly 67% of the total Latin American population. Nearly 80% use their mobile devices for the internet, with forecasts estimated to reach 87% by 2025. This technological evolution helps access the massive unbanked and underbanked populations, in addition to the small- to medium-sized businesses, which digital products and services can be offered.

At the same time, authorities and regulators in many of these Latin-American countries have enacted fintech-friendly regulations with lower market entry barriers, identifying fintech and digital financial services as a way to provide widespread financial access.

Finally, according to Finnovista, an organization that propels fintechs and startups in Latin-America, international investors have moved into the region as an attractive investment space with a peak seen in 2018. Today, despite COVID-19 and political uncertainty around administrations in Brazil and Mexico, the Latin-American fintech industry is very dynamic. According to Latam Fintech Hub, it raised US$ 525M (US $ 249.3M in equity and US $ 275.7M in debt) in 74 deals in the first half of 2020, showing that investment has continued despite turbulences. 

Make an impression with innovative products

As the pandemic continues and the post-COVID-19 economic impact remains to be seen, many fintech companies in Latin America may be under stress. However, great opportunities for them may arise while the need for digital services suddenly increases. Fintechs could seize this unique situation to leverage assets, challenge and differentiate themselves through more innovation and creativity. 

While the number of fintechs in Latin America is expanding, market research companies sustain that those who will make an impression when starting a new business will find their way through this pandemic storm. Those who will be able to attract new consumers and connect to their audience by creating unique experiences will grow stronger through the adversity. This is where metal card influence can come into play and make a difference. 

In this context, a recent Aite Group research paper on next-generation metal payment cards shows how in the US and Europe metal cards have represented a key medium for financial institutions, fintechs and digital banks to communicate with their digital customers, delivering a human experience through premium products.

For example, Mexico is a favorable market to watch in terms of the successful adoption of premium products. The average age in Mexico is 28, with 41% of the population being 25 to 54 years old, which represents a fruitful base of young, tech-savvy consumers. These young consumers are attracted not only by neo-banks’ digital services, but also by their overall benefits that aim at differentiating themselves, including specific products such as the cool form factor of metal cards.

Metal cards to drive fintech growth

Metal payment cards are by no means a new concept. They have been present in the marketplace for nearly 20 years. However, their issuance was originally targeted towards tier-one and limited to ultra-high-net-worth (UHNW) segments.

Today, the target consumer for metal cards has changed. This is driven by requirements for segmentation and differentiation, targeting the premiumization of the mass affluent consumer base. Included in this are millennials, a highly desirable segment for fintechs. Fintechs in Europe and the UK, among others, seem to have helped boost the issuance of metal variant card bodies, as a uniqueness form factor, integrating latest EMV and contactless technologies to innovate and compete against traditional incumbent banks offerings.

Metal cards are attractive for fintechs for many reasons. Not only does the metal card the “look and feel” that a customer is looking for in a product, but it also creates an elevated emotional connection where the customer has the feeling of being part of  a cool premium community. The premiumization effect associated with specific brand-connected benefits is key to a unique customer experience. Metal cards are a differentiation that combine digital services with an attractive physical product. Metal cards help create a top-of-wallet status. They elevate the fintechs brand positioning and the customer’s perception of it. According to a CompoSecure proprietary analysis, they drive higher transaction and spending volumes, increase customer retention and, in a virtual circle, can help contribute to new customer acquisition. 

Disrupt the status quo

Latin America is following the example of European fintechs, where business cases point to metal card adoption as a successful business growth driver. Latin American fintechs could define their own product innovation offering, in accordance with their regional and local market specificities and ecosystems. The Aite Group report concludes that metal cards could be a key driver to disrupt the status quo, especially in a region where the population segment of millennials is high, and where differentiation and “cool factor” are important.

For more information on best practices of common fintech challenges and an overview of metal card issuance, we invite you to down-load the full report of Aite Group commissioned by CompoSecure LLC “A Competitive Edge for Fintech Issuers”

The Inter-connectivity of Business

We are all finding new ways to adapt and work together to be successful in the COVID-19 world. There has always been an interdependence we share with our clients, employees, vendors, and the local community. The relationships with these entities have been tested and forever changed by the challenge we are facing together. Whether it be the favorite lunch place now struggling to find its footing, a distributor that went dark leaving supply chain confusion, or seeing the tired face of a neighbor who works in healthcare, we are all being faced with a new reality.

For the first ten years at CompoSecure, we were a very small business and we know the challenges that come as a company strives to maintain its core values and also grow. We had to be scrappy, innovate and adapt to meet new opportunities that would help guide us through challenges and into the future. We are now seeing these qualities to transform and rise to the occasion in our local small businesses today.  Farmers in the area are incorporating technology to distribute their products. Local restaurants are being creative with merchandise and delivery methods, pivoting to a model they had never foreseen entering. Other businesses are re-tooling to produce much needed personal protection equipment (PPE) and ventilators.

At CompoSecure, we have always actively supported the small business community and non-profit organizations around us. Now, more than ever, we see the importance of hiring New Jersey-based vendors, from cleaning services to food delivery, to help these businesses withstand the current crisis. Philanthropy is in the CompoSecure DNA, and we are deepening our relationships with local organizations that provide critical services for residents, such as The Arc of Somerset, Elijah’s Promise, Roots & Wings, and The Center For Great Expectations.

Businesses of all sizes need to remember that their most important asset is their people. CompoSecure has looked to its employees with admiration as they have independently stepped up and created initiatives to help the community. One of the most recent examples of this was an employee who started a crowdfunding initiative to raise money to support first responders called “Feed the Healer.” Including a CompoSecure contribution, he raised more than $5,000 and fed 800+ healthcare workers and law enforcement officers. His efforts helped our heroes on the frontline, as well as supported a local caterer who has been struggling since the quarantine shutdown.

Not only do we support our employees’ causes, but we also do everything in our power to show them our appreciation by investing in their safety. We do this by providing personal protective equipment and putting aggressive safety and cleaning protocols in place.  We consistently provide transparent communication with our employees on a regular basis. But we can’t just “talk shop.” We have to account for our employees’ health and wellness. We keep our team strong by reinforcing the human ties and connection, including weekly Zoom lunches, 1:1 check-ins and an “open inbox” policy. These interpersonal relationships are what helps us care for one another, work together, and strengthen our own community.

The COVID-19 pandemic has triggered a lot of fear, but we have also seen that it has brought out the best in people. CompoSecure is grateful for the strong collaboration with our employees, partners and community, who have all risen to meet the challenges that we are facing today.

This global pandemic has our global company looking inward to our employees and to those in our community who need help.  It has me personally reflecting on the interdependence we have on each other as a business, but also on an individual level.  It’s important to recognize that we need to look outside of ourselves to collectively guide us through this challenging time.  We will get through it, separately but ultimately together.

To learn more about our involvement in the community, check out our social media channels for more details.  #CompoCares

Innovation is in our DNA

An inventor and entrepreneur envisioned and helped build CompoSecure.

John Herslow saw an opportunity to enhance the growing ID market, creating one of the first long-life composite prelaminates, which were ultimately deployed in drivers licenses across the US. Under John’s technical leadership, the company grew into largescale production of IDs and ID components using these novel materials and constructions.

From this materials science expertise, CompoSecure evolved to become a market leader in the manufacture of non-traditional, premium payment cards. The company is credited with many firsts in the industry. CompoSecure created one of the first metal cards, the first EMV chip in a metal credit card, and the first dual-interface (contactless) metal card, an engineering feat. John Herslow’s inventive and entrepreneurial spirit was passed down to his daughter who today serves as executive chairman of the company, Michele Logan, who inspires every employee with CompoSecure to “do the impossible.”

As the new Chief Innovation Officer, I too am fascinated by the future, and products poised to disrupt the marketplace. Here are a few of the technological innovations we expect to see as more electronic functionalities are integrated into payment cards:

IOT – Everything is smart now. Products will only become more connected, enhancing the personalized experience between the product and the user. This experience requires a unique and secure identity. Cards have an advantage in this space as consumers are comfortable with cards as payment and identity form factors. The interoperability of cards with a varity of devices from cars to smartphone based payment devices provides a common touchpoint for consumers. This familiarity and ease of use poises cards, including those supplemented with electronics, to be the ideal credential long into the future.

Biometrics – Providing biological markers as an identifier is a hot topic right now as data security and breaches raise the stakes on template exposure, such as a person’s iris, fingerprint or face. The convenience and security makes biometrics an appealing choice that is already winning out over privacy concerns. Fingerprint sensors are already deployed on smartphones, computers and are being piloted in smartcards. Biometric smartcards are expected to particularly take hold in Europe where the PSD2 mandate requires more stringent payment authentication standards.

Electronic Cards – With the surge in card not present (CNP) purchases being driven by the ever-growing number of e-commerce transactions, new technologies are stepping in to address fraud. Several banks are starting to use a dynamic CVV card, which is a perfect example of this type of solution. Dynamic CVV converts the 3-digit code from a static number printed on the back of the card to one on a tiny e-ink screen that is periodically refreshed. A purchaser must physically possess the card in order to have all of the necessary information to make an online purchase, thwarting online fraudsters. Other technology options for financial institutions to consider include cards with power sources capable of feeding functions such as Bluetooth or interactive screens.

There is no single solution when it comes to payment technology. For example, an excellent solution for Europe may not be optimal for the United States. Our CompoSecure R&D team is continually working on innovation through trying to invent and evaluate a variety of technologies to support the future needs of our clients across the globe. We are in a search “to do the impossible.”