By Paul Schaus

The explosion of fintech startups in the last decade has transformed predictions that they would be disruptors to now, partners in banking — a critical element to the next evolution in financial services in the 2020s.

As many of these fintechs mature, banks will need to approach these newfound relationships more strategically, and with a modernized integration plan.

Digit, a fintech startup that offers automatic saving and credit card paydown, has hired Vishwas Prabhakara to be its first chief operating officer.

Vishwas will lead daily operations and help scale the business as Digit’s user base and product offerings grow. The company does not share how many users it has.

Prabhakara was most recently vice president and general manager of Yelp Reservations. Before that he worked at ESPN, Digg and Fanvibe.

Community banks are feeling extreme pressure to keep pace with cutting-edge customer experiences offered by tech giants and sophisticated digital products being launched by big banks. But a new app rushed through development could be laden with security pitfalls.

With no in-house app development team, smaller banks “are at the mercy of their provider,” said Al Pascual, senior vice president of research and head of fraud and security at Javelin Strategy & Research. “Every year, our researchers somewhere find a ton of banking apps with something broken.”

The issue is that every bank has to meet specific security needs, but the demand to get an app to market puts pressure on outsourced app developers, and therein a gap can form. Developers may add code or features that, while enhancing the user experience, fail to pass security muster.

Zelle, the bank-owned person-to-person payment network that competes with Venmo, continued to grow in the second quarter.

According to Early Warning, the company that operates Zelle, 100 million transactions passed over the network between April 1 and June 30, an increase of 17% over the first quarter. About $28 billion in payments were made, an increase of 11% over the previous quarter. Consumers conducted an average of six transactions each during the three months. The average transaction amount was $281.

Venmo, Zelle's top competitor for person-to-person payments, handled $14 billion in the second quarter, according to its parent company, PayPal. PayPal also got Uber and UberEATS to add Venmo buttons to their apps.

Big banks are in a race to have the most-used application programming interfaces, and Wells Fargo says it's off to a fast start.

Its APIs were called 1.5 billion times last year, according to Imran Haider, head of open APIs for Wells Fargo.

Big banks are in a race to have the most-used application programming interfaces, and Wells Fargo says it's off to a fast start.

Its APIs were called 1.5 billion times last year, according to Imran Haider, head of open APIs for Wells Fargo.

Banks planning technology improvements should heed a warning about fintech vendors: Their industry is in a state of churn.

There were 70 mergers and acquisitions among fintechs in the U.S., Canada and South America in the first quarter, and those deals were worth a combined $3.4 billion, according to a fintech investment report issued by KPMG on Tuesday.

The number of deals fell to 60 in the second quarter, but the total value rose to $5.8 billion. M&A activity in this field is expected to remain “very healthy [in] 2018 on the whole,” the report said.

Mike Novogratz is past the point of no return.

Two days from now, his cryptocurrency-focused merchant bank, Galaxy Digital LP, will start trading on Toronto’s TSX Venture Exchange. It should be a triumphant moment for the former Goldman Sachs Group partner and a milestone for the industry, yet Novogratz is having second thoughts.

He reflects on the "frustrating" demands of Canadian regulators that dragged out Galaxy’s listing for months and trapped his investors as bitcoin collapsed and crypto fever cooled.

“If I knew what I know now, knew the crypto markets were going to swoon as much, and it was going to take so long, I might have stayed private for another year or so and then gone public," Novogratz said in a TV interview with BNN Bloomberg in Toronto. “But I don’t think it’s a mistake."

While Novogratz said he has no regrets and remains bullish as ever on blockchain’s potential to revolutionize finance, his eight-month odyssey is a cautionary...

Are credit default swaps harmful to consumers and society at large?

The Vatican reignited a debate on the topic recently when it issued a document chastising the financial services industry for what it said was immoral behavior, specifically calling out credit default swaps, subprime mortgages and algorithmic models used to assess risk and determine prices as unethical products.

Regarding credit default swaps, it said "the spread of such a kind of contract without proper limits has encouraged the growth of a finance of chance, and of gambling on the failure of others, which is unacceptable from the ethical point of view."

A clash between a small bank and its insurance company after a cyberattack may have a lot of banks double-checking the fine print of their coverage.

The $1.3 billion-asset National Bankshares in Blacksburg, Va., has been hit by two separate cyberattacks, in May 2016 and January 2017. Hackers tricked employees into opening emails that gave them access to bank debit card account numbers, which they used to steal $2.4 million by making unauthorized withdrawals at hundreds of ATMs nationwide.

The bank’s claim seeking full reimbursement of its customers’ money was rejected, so National Bankshares took its carrier to court.

“It’s really becoming a huge issue for banks across many of their channels,” said Thomas Cronkright, president and CEO of the fintech firm CertifID, which provides digital security services. “And in direct channels in particular, when they are providing loans for collateral-based lending, the challenge is they are funding to a third party. So how do you trust that the wiring information has been received from the third party is accurate?”

Cronkright said over the past 18 months this has become a particular issue in real estate transactions; in fact Cronkright — who owns a title company — was a victim of such fraud and lost $180,000, which spurred him to create CertifID.

Here's a typical example of how this type of fraud can occur: A title officer responds to a phishing lure that looks legitimate, and then unknowingly gives up credentials to an online portal. The fraudster can then monitor accounts, sometime for up to 180 days, “to get the lay of the land, a...

When John Gibbons clicked on a website for a startup generator in the Midwest last summer, he wondered at first whether it was a scam.

Yet he wasn't asked for his Social Security or credit card number. Its pitch to help those selected create fintechs in the city of his alma mater, Notre Dame, was compelling. And the visa allowing him to live in Bangalore, India, was running out. So Gibbons applied for INVANTI’s inaugural six-month program in South Bend, Ind., for aspiring entrepreneurs.

He was accepted, beginning a journey shared by other entrepreneurs hoping to improve grass-roots banking in Des Moines, Iowa, Kansas City, Mo., and small cities and towns around the region. Some, like Gibbons, are drawn to existing community programs. Others are staying put or boomeranging back to fill jobs that established fintech companies, like Dwolla, are supplying. Some will visit the Midwest because banks, like nbkc bank, are beckoning them there with fintech...

IBM and the market infrastructure provider CLS on Monday are launching an app store of sorts for financial applications that can run on a blockchain.

It is called LedgerConnect, and it is already being used by Citigroup, Barclays and seven other banks that are not yet ready to go public. The banks helped design LedgerConnect, and they choose and help validate the applications that run on it.

This is not for any type of blockchain apps. It is only for applications that can run on the Hyperledger Fabric distributed ledger.