PFM, AI and more: Startups compete for Barclays funding

October 21, 2018 9:30 PM

Welcome to the Next Big Thing.

That, at any rate, was the idea when I visited the Barclays Accelerator powered by Techstars last week, which featured a range of entrepreneurs competing for funding. Through the Accelerator, Barclays and its partner, Techstars, funds program participants up to $120,000 per company and take an equity stake in its common stock. The firms also provide 13 weeks of advice, office space and introductions to useful contacts.

Learn more about In|Vest West: Dec. 6-7

This year’s class was more international than in years past: applications came in from 68 countries. The startups seemed to cluster around two themes: easier, cheaper and better personal finance apps and artificial intelligence to help banks solve problems and become more efficient.

Here’s a look at eight of the firms vying for further funding this year:

Negotiating bank fees for consumers: Harvest

Harvest’s software finds erroneous or excessive bank fees and automatically negotiates them down for customers.

“We're solving this problem that's a quiet consumer epidemic in the U.S.,” said Nami Baral, CEO (pictured). “Fees are a tremendous source of revenue for banks, but at the same time, they're a massive pain point for consumers, especially after the financial crisis as banks have come to rely on these kinds of fees as a profitable revenue source. These fees tend to hurt the people who already are hurting from many other aspects of financial lack of liquidity.”

Harvest was built for the 80% of Americans living paycheck to paycheck, Baral said.

“This product democratizes financial wellness for them,” she said. “The first thing we're tackling is fees that have been charged either frivolously, intentionally or unintentionally, because banks are large bureaucratic institutions that have machines that don't properly talk to each other.”

The software watches every transaction (it pulls the information from data aggregators) and identifies the bank fees that are negotiable based on the customer’s relationship with the bank, the bank’s competitive landscape, consumer protection regulations, and a close look at the bank’s own terms and conditions, “something the consumer doesn't do ever.”

It then automates a negotiation between the consumer and the bank through secure messaging.

Harvest is currently working with four banks: Chase, American Express, Citi, and Fifth Third, though its purpose is to be eventually be able to deal with any bank.

"We are built for the consumer, but how we get banks to work with us is by being this independent third party, making sure customer attrition is low and that they're complying with regulatory policies,” Baral said.

Asked if banks always like what Harvest does, Baral said, “I think we're small enough that the banks don't care.” The company provides useful data to institutions, she said.

“We don't exist in universe in which we're antagonistic to banks,” Baral said. “The best way to make a company sustainable as well as continue to provide value to consumers is by trying to find some sort of value for the banks themselves. Traditional banks are facing a lot more scrutiny and a lot more competition, especially from challenger banks that are providing all kinds of more consumer friendly solutions. Banks themselves know they either need to find a way to work with changing consumer sentiment or get disrupted.”

The target demographic is people who live paycheck to paycheck, the 30 million Americans who pay more than $1,000 in banks fees a year; some pay thousands of dollars a month.

“It's crazy how desperate this entire group is,” Baral said.

Financial wellness app for Gen Z: Pluto

Pluto has built a financial wellness app just for Generation Z — those born after 1995.

“We're focusing on college students,” said Tim Yu, CEO. “We believe those are the most formative years in people's lives, when they form habits. The goal is to make personal finance approachable and to understand how Gen Z uses finances and how that’s different from millennials.”

Millennials have racked up debt, he observed.

“Gen Z are a lot more proactive about their finances and they want to avoid making the same mistakes that millennials made,” Yu said. “So they're starting to care about finance at a much earlier age.”

The Pluto Money app focuses on the short-term savings goals college students have.

“We don't try to push for retirement, mortgage savings, all the things that aren't relevant to this generation right now,” Yu said.

The app links to bank and card accounts through the aggregator Plaid. It shows users how well they’re meeting their goals and presents “challenges” to meet them, like “spend less on Uber this week” or “spend less on eating out.”

“We don't use the word ‘budget’ anywhere in our app,” Yu said. “We focus on a specific habit that you want to break and how does that tie to your goal.”

As users get older, Pluto will become a “contextual and goal-driven bank,” said Susie Kim, CXO. “When they graduate from college, start earning a salary, have a family, they’re going to go from very short-term goals like saving for music festivals, to saving for a mortgage and then eventually to saving for a mortgage or your kids’ college funds.”

Pluto has had an app in the App Store since October and has more than 12,000 users. The company has raised money from Queen City Fintech.

Getting couples on the same financial page: honeyfi

honeyfi’s app helps couples talk about money.

“A growing trend among younger couples is that people are getting married later and coming into relationships with assets, debt, financial habits, and financial relationships,” said Joe Stanish, COO. “It's very different from previous generations that got married young and were combining zero plus zero. We're taking advantage of that trend to help them understand how they can think about financial goals, and work together as a team, and balance the individuality and autonomy.”

honeyfi uses Plaid to aggregate accounts. Couples choose which accounts they want to share. Each person can keep certain accounts private and others shared in the app, though honeyfi has a unified transaction feed.

Users can add emoticons and comments to transactions. (I suggested adding Edvard Munch’s The Scream; Stanish said someone else had suggested a “WTF” option.)

The app helps customers have tough conversations about finances, Stanish said. “There's a neutral third party helping you understand how you're doing.”

One customer found the app because he was going to a marriage counselor who identified finances as a point of conflict and told the couple to write down everything they're spending money on and then talk about it.

"They said they were millennials and they weren’t going to do that, but they would get an app," Stanish recalled. "Three months later, the couple reported that honeyfi helped save their marriage.”

Personalized insurance: Waffle

Waffle is building an insurance company with an app that would let consumers get all the different kinds of insurance they need — car, home, life — in an integrated bundle at a cheaper rate than they could obtain if they bought them separately.

The Waffle team has built a risk model that looks at each person holistically, not just as a driver, say, or a homeowner.

“We look at you as an individual and we collect a series of data points that lets us understand you better and price you better,” said Quentin Coolen, CEO. “We've built, proven and tested the model at MIT with live data. If you take this holistic approach you can better predict the likelihood of someone claiming by 5% to 8%.”

Waffle also has a predictive engine that will do things like tell a user to protect their home because a hurricane is coming, then lower their premium.

According to Coolen, insurance is being personalized, "the real question is who will trigger it,” he said.

Sending money home using a distributed ledger: SendFriend

The SendFriend app is designed to let expatriates send money back home to their friends and family.

The company will soon let people who live in New Jersey transfer money to the Philippines through its app. (It’s going through the process of getting a money transmitter license in each state.)

The average fees charged by companies like Western Union is 7%, according to David Anderson, chief revenue officer. SendFriend’s fees will vary from 2.5% to 3%, he said.

CEO David Lighton used to work at the World Bank, where he saw how hard it was to get money to countries in emergencies. He originally founded SendFriend at MIT.

Xoom, Remitly, WorldRemit and others offer versions on this theme. SendFriend is the only one based on a distributed ledger, however. Specifically, it uses Ripple’s xRapid system and distributed ledger technology.

“That allows us on the back end to be more efficient with our capital,” Anderson said. “These are real time settlements so we don't have to do pre-funding, we don't have to park money in the receiving corridor and then manage the foreign exchange risk. We can just do it one by one as the transactions go through.”

AI for trade finance: Vector.ai

Vector.ai wants to eliminate the trade finance gap that occurs when trade finance gets bogged down with too much paperwork.

“Because it costs so much and it's so expensive, a lot of deserving companies don't get access to credit,” said James Coombes, CEO. “So our underlying philosophy is that we could digitize trade finance and help banks deliver credit.”

Banks receive paper documents couriered to them and they use those paper documents to inform their lending in trade finance, he said.

Vector.ai’s system automatically scans and reads all the documents and turns them into computer-readable text that can be analyzed in a way that’s useful to banks and can help them make lending decisions.

The company has raised seed money from venture capital firm Dynamo.

Discrete, anonymous headhunting via AI: Fintros

Fintros has built a system that discretely allows companies to reach out to people who may not be aggressively looking for a job, but who would be open to a better situation if it came along.

“About 15% of people are actively applying for new jobs, the rest are not,” said Jonathan Garbe, CEO (pictured). “The vast majority of those people are interested in specific opportunities, but for a number of reasons, they're not actively looking. They might be interested in working in the same role they’re in but for someone willing to pay them for more money. They might be interested in a change of city or career, but might feel there's no rush.”

Such people won’t come to a bank’s website and complete a half hour application, because they're not actively looking for a job.

Fintros captures all the needed information quickly, Garbe said. It asks questions about a person's dream jobs, minimum compensation to switch roles and historical work information. It uses AI to match people to job openings, such that for each position a company will receive a list of only six to eight people.

Because passive candidates might worry their boss might find out what they’re doing, Fintros keeps the applications anonymous. Recruiters only see an anonymous resume and application. Even previous employment is masked — Barclays would become "global investment bank," for instance — so that people couldn’t connect the dots and realize their identity.

Fintros reaches out to people through industry associations, universities, LinkedIn and such.

“It’s career optionality for people so they don't feel stuck in their roles and can act on their career curiosity,” Garbe said.

AI that reads and understands documents: Applica.ai

Applica.ai has developed AI for understanding large volumes of documents such as legal papers.

The software can extract meaning, not just keywords, according to Piotr Surma, CEO (pictured).

The company is running several proofs of concept with U.S. banks. One is related to bankruptcy filings.

“It seems there are hundreds of thousands of pages nobody reads,” Surma said. “This is very good for us because we manage huge volumes of text easily.”

Applica.ai is preparing for a POC with another U.S. bank for contract review.

"Two or three times a year" large banks "need to review customer contracts,” Surma said. “This is very manual work, they need to go through hundreds of thousands of contracts, looking for signed provisions. This takes weeks and requires a team of lawyers. We can do the same thing within hours with one person.”

The company has received a $5 million grant from the European Union.