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FINTECH BRIEFING: Mondo's lightning funding round — Fintech is growing up in Israel — EU-wide retail finance products

Welcome to The Fintech Briefing, a morning email providing the latest news, data, and insight into disruptive fintech in Europe and around the world, produced by BI Intelligence.

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MONDO RAISES £1 MILLION IN LESS THAN TWO MINUTES. Mondo, a mobile-only challenger bank, recently raised £1 million ($1.4 million) from individual investors via crowdfunding platform Crowdcube in what is being called the fastest equity raise ever.

  • 1,861 people invested an average of £542 ($763) each. Investors were limited to £1,000 ($1,408) per person.
  • 6,000+ people registered to take part in the raise
  • The £1 million ($1.4 million) adds to the £5 million ($7 million) Mondo raised from Passion Capital earlier this year.

Mondo currently has 1,500 cards in circulation as part of its beta trial and 30,000 people remain on a waiting list to use the service. It lags behind the three other major challenger retail banks in the UK — Atom, Starling, and Tandem — in terms of total funding, but it's the only challenger bank with a live product in the hands of consumers. All challenger banks seek to offer consumer-focused products, but Mondo is taking it a step further by giving customers an opportunity to become shareholders. That could lead to increased loyalty and engagement. Mondo's success in gaining funding shows that the need for innovation in financial services is so great that it's actively being driven by consumers. 

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Funding for UK challenger banks March 2016
BI Intelligence

ISRAEL'S GROWING FINTECH SCENE. The opening of fintech accelerator The Floor is just one of many indicators that Israel's fintech industry is starting to grow up. Here is a list of the latest fintech news coming out of the country:  

  • Fintech accelerator launches. The Floor is backed by VC fund Pando Group and will provide members with access to a network of 25 expert mentors including four major banks. Fintech accelerators provide much needed support and office space to startups looking to get off the ground, and are key to developing a thriving fintech ecosystem
  • VC fintech funding comes to Israel. Saban Ventures announced in February that it would launch a $100 million fund to invest in early stage Israeli firms. They are "actively" looking at fintech according to Barak Pridor, the manager of the new fund. Israeli fintech firms attracted £26 million ($36 million) in VC funding last year. As a point of context, UK fintech firms received £635 million ($901 million) in VC funding in 2015, according to Innovate Finance. 
  • Crowdfunding platform gets £7 million ($10 million) from Singapore bank. Israeli firm OurCrowd received funding this week from Singapore's United Overseas Bank to help develop the crowdfunding market in Asia. OurCrowd will offer its Israeli customers the opportunity to invest in Asian companies, while building its profile in the region. Despite there being a developed fintech scene in Asia, investors in the region worried by the economy in China are starting to look further afield.

EU EXPLORES CROSS BORDER FINANCIAL PRODUCTS. Last December the EU issued a Green Paper calling for input on how to improve cross-border retail financial services across Europe. The aim was to explore how to improve choice, competition, and transparency for consumers, and how firms could scale across the region. This week the EU held a public hearing in order to discuss the issues presented in the paper and potential solutions, with interested parties.

  • Consumers want to buy financial products from other countries. 90% of responses received by the EU were from individuals, providing a clear consensus that consumers want to be able to buy products across borders. It may be due to the fact that consumers are already accustomed to being able to shop online for the best deal on products and services, even if that means cross-border consumption. 
  • Regulation needs to keep up with technology. To meet consumer expectations, financial services providers will need the support of regulators. Particularly in developing an environment where companies can scale across borders and operate efficiently, while simultaneously protecting consumers.  
  • The consultation is open until March 18. Contributions from individuals and firms are welcome. 
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POWA TECHNOLOGIES FINDS BUYERS. The London-based payment technology company, which collapsed two weeks ago, has found buyers for two of its businesses.

  • London-based marketing agency Greenlight Digital is taking PowaWeb, Powa's e-commerce engine.
  • Leading a consortium of investors, Ben White, a director at the company, is acquiring PowaTag. The PowaTag app allows users to take pictures of products in advertisements using their smartphone at which point they are redirected to purchase those products through the app. 

Powa was once valued at £1.8 billion ($2.7 billion) and raised at least £160 million ($225 million) in debt and equity since 2013. But last month the company struggled to pay employees and contracts on time, and subsequently it was revealed that it had only £177,000 ($250,000) in the bank and debts of £11.6 million ($16.4 million). The company's biggest investor, US-based Wellington Management, called in its loans in February and has contracted Deloitte to navigate the best way forward. 

Collapse adds to uncertainty in the fintech marketInvestors have been cautious about fintech this year, and Powa's demise isn't helping things. However, there were signs that Powa was not operating as a typical startup long before its collapse. For example, it was based in luxury skyscraper Heron Tower at a cost of as much as £2.5 million ($3.5 million) a year. That suggests that company's performance alone isn't the best indicator of the state of fintech.

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Around the world....

Google goes hands free. Google is testing an app which enables users to pay using only their voice. Participants with the test app tell the cashier at select stores, "I'll pay with Google" and are verified via in-store cameras. The aim is to make paying as easy and quick as possible. However, if the product makes it to full launch, consumer adoption is likely to be slow. Consumers are already accustomed to paying with plastic cards and doing so isn't a significant hassle for most consumers. 

Dwolla gets fined for data-security practices. Digital payment company Dwolla settled with the US Consumer Financial Protection Bureau (CFPB) for £71, 000 ($100, 000) and an agreement to improve its practices this week. Dwolla has not had any data breaches, but the CFPB alleged that Dwolla "failed to employ reasonable and appropriate measures to protect data obtained from customers from unauthorized access". Following several high profile data breaches in the country, enforcement agencies in the US are scrutinizing the practices of companies that collect and manage consumer data. 

Fintech Israel Regulation
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