By Nicholas Larsen, International Banker
With banks seeking to leverage the flexibility and agility of financial-technology firms (fintechs) and fintechs hoping to utilise the scale and experience of traditional financial services, several exciting partnerships have been formed between the two sectors in 2021. Indeed, the COVID-19 pandemic has made such partnerships even more vital in many cases, as people seek new and innovative solutions from the world of banking and finance to deal with the ongoing crisis.
The end of June saw JPMorgan Chase make its third fintech acquisition of the year—and arguably its most interesting, given the recent surge in global interest for sustainable and ESG (environmental, social and governance) investing. The US banking giant’s asset and wealth management unit agreed to buy San Francisco-based start-up OpenInvest, a platform that allows customers to customise their investment portfolios based on ESG metrics. The company was founded by Joshua Levin and former Bridgewater Associates employees Conor Murray and Phillip Wei and is backed by leading sector investors such as Andreessen Horowitz, Y Combinator and QED Investors.
The acquisition is intended to help JPMorgan’s financial advisors customize clients’ ESG investments—a huge growth sector that has drawn record inflows and pushed global assets under management to almost $2 trillion by the end of the first half of this year. According to Levin, the partnership with JPMorgan “combines leading ESG technologies with America’s largest bank and the ability to reach nearly half of all American households”.
“Clients are increasingly focused on understanding the environmental, social, and governance impact of their portfolios and using that information to make investment decisions that better align with their goals,” Mary Callahan Erdoes, chief executive officer of JPMorgan’s asset and wealth management division, stated. Clients can use OpenInvest to create highly personalised, dynamic portfolios that can be closely aligned with their values. The company pulls data from more than 35 sources to feed to the decision engines embedded in its tools. “Through technology, it’s now possible, for example, to give people granular control over how their values are implemented,” Conor Murray told CNBC. “It’s not just whether or not you care about gender equality, but whether you want to tilt more towards maternity leave or gender pay gap or board compensation, any of the things that matter to the client.”
Among the most unique partnerships was the one formed in April between Goldman Sachs and New York-based Esusu Financial Inc., a fintech start-up founded in 2016 that enables renters to improve their creditworthiness by reporting their rent payments to credit bureaus. Given the devastating impact the COVID-19 pandemic has had on housing tenants, Esusu has been particularly active in digitising credit-building efforts and creating a national rent-relief fund to support renters through this difficult time.
Esusu’s Series A funding round raised $10 million, and it has received backing from a diverse range of investors, such as Motley Fool Ventures, Global Good Fund, Next Play Ventures, Zeal Capital Partners and even tennis star Serena Williams through her venture-capital firm, Serena Ventures. “I started Serena Ventures to invest in diverse founders and early-stage companies that outperform and generate impact while at the same time empowering others and creating opportunities. Esusu is definitely one of those companies,” Williams told CNBC. “Esusu is really focused on credit building and creating pathways to financial inclusion not only for working families but for individuals as well.”
Esusu’s collaboration with Goldman Sachs stems from a 2019 pilot rent-reporting program funded by the US bank, which was implemented by Esusu and the Credit Builders Alliance (CBA) to confirm that rent reporting could be beneficial to renters’ credit scores. The partnership will enable renters in select Goldman Sachs properties nationwide to potentially benefit from rent reporting.
“Credit is the building block of financial stability, opportunity, and resiliency in this country. Esusu and Goldman Sachs are working together to help renters access the same credit-building benefits that homeowners have utilized for generations,” according to Esusu’s co-founders, Abbey Wemimo and Samir Goel. “This partnership, our first with a major financial institution, is ground-breaking for us because we can scale across the Goldman Sachs real estate investment portfolio and its extensive housing footprint while advocating for our shared commitment to removing systemic housing inequalities that negatively impact the financial well-being of under-resourced communities.”
Speaking about the partnership, Goldman Sachs acknowledged its role as being one of helping to advance sustainable economic growth and financial opportunity, and, as such, it is committed to improving the financial health of the tenants of those properties already receiving investment from the bank. “Offering rent reporting through our partnership with Esusu is a win all around—for investors, for landlords, and for our tenants and their families,” said Margaret Anadu, global head of sustainability and impact for Goldman Sachs Asset Management. “Given the significant impact of rent reporting on financial health, we are working with Esusu to expand rent reporting throughout our Goldman Sachs Asset Management multifamily housing portfolio in the US over time.”
The pandemic is also demanding increasingly flexible solutions within the healthcare sector, which means that Bank of America’s (BoA’s) announcement in April that it was acquiring the German healthcare-payment fintech company Axia Technologies to advance its payment solutions for healthcare clients was certainly welcome news.
AxiaMed was founded in 2015 with the goal of helping healthcare providers offer an omnichannel, end-to-end gateway and terminal software solution for payments to their patients. Axia provides healthcare providers with tools to expand patients’ payment options and streamline administrative workflows. “AxiaMed is excited to join Bank of America,” said Randal Clark, Axia’s president, chief executive officer and founder. “AxiaMed strives to ensure that our industry-leading payments platform can be leveraged by our partners and their clients, many of whom currently use numerous products and services of Bank of America, to provide a seamless and secure end-to-end patient payment experience.”
BoA, meanwhile, has been working on proprietary merchant-services solutions to assist clients across all business lines. The acquisition of Axia is expected to deepen and expand the bank’s payment offerings for healthcare clients, in particular. “We are adding a talented team that brings great domain expertise and technology, and we’re excited to have them join Bank of America,” Mark Monaco, head of enterprise payments at Bank of America, said of the Axia partnership. “We have a shared vision of providing clients with the best technology to meet their payment needs. Working together, we can leverage our joint expertise and capabilities to deliver a comprehensive range of payment and settlement solutions to our healthcare clients and their patients.”
Several of the most significant bank-fintech partnerships this year have emerged in Africa. For instance, one of South Africa’s leading financial institutions, Nedbank, teamed up with Mastercard and fintech firm Ukheshe Technologies in April to launch Money Message, a payment platform that allows small and micro businesses to receive secure in-chat payments from their customers via the popular WhatsApp messaging service. The solution also enables merchants to use WhatsApp to send an invoice requesting payment from any customer, who, in turn, can quickly settle a payment directly from the platform.
The business owner sends a request-to-pay message to the customer, and for first-time users, a notification is sent via SMS (short message service), prompting them to register for the service. The customer enters his or her name and card details to make the payment securely. Customers can make secure, cardless payments via their cellphone numbers or QR (quick response) codes.
“The need for a diverse range of contactless payment methods is more important today than we could have possibly imagined, as we seek to rebuild the economy by giving businesses the ability to transact in a safe and secure way,” according to Chipo Mushwana, Nedbank’s executive for emerging payments. “In order to support entrepreneurship and sustainable business growth across all markets, we need to deliver low-cost, accessible and flexible solutions that leverage widely accessible technologies. Money Message looks to overcome a variety of cost, security and technical barriers by enabling micro merchants and their customers to transact with each other easily on an existing platform, which is WhatsApp.”
Nedbank also notes that Money Message is accessible to anyone with a valid South African identity document and South African bank account. Merchants will first need to register for the service before initiating a payment request, however, although the process should take only a few minutes.