What Citi sees in Even Financial

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Citi Ventures this week led a $25 million funding round for Even Financial, with participation from LendingClub and MassMutual Ventures.

American Express Ventures, Canaan Partners, F-Prime Capital, GreatPoint Ventures and Goldman Sachs also participated in the round — they have invested in Even before. The fintech has raised a total of $50 million.

This is strong support from the financial services community for a company that embodies a version of open banking that many U.S. banks are considering but few are doing.

Even Financial connects financial institutions and other consumer-facing businesses through a combination of application programming interfaces and a product recommendation engine. Goldman Sachs, American Express and SoFi are among the financial companies already using the technology. Nonbank partners in Even’s network include TransUnion, The Penny Hoarder, Credit Sesame, Money Under 30 and Empower.

Here is one way this could work: When consumers are submitting information to online tax preparers and learn that they owe the government money, a pop-up window fueled by Even could display loan offers from several online lenders.

Luis Valdich, managing director of venture investing at Citi Ventures, describes Even Financial as the host of a marketplace that is not apparent to the users.

“When you think about a marketplace, you typically think about a central location where you have buyers and sellers that are matching each other, like in an old-fashioned stock exchange,” he said. “As an API-based marketplace, Even sits in the background and everything happens seamlessly.”

Because of the APIs Even Financial provides, customer data can be sent directly from one provider to another if the consumer chooses that option. In some cases, an account can be automatically opened.

Valdich, who will join Even Financial’s board of directors, has been following the fintech ever since it raised its seed round in 2015.

“The idea and the promise behind it sounded very compelling, and we’ve been watching it grow,” Valdich said.

Citi Ventures considered joining Even Financial’s Series A round last year but decided to wait because the company was focused solely on personal loans.

“At the time, we wanted to see a bit more demonstration of the model and evidence of applicability to other products as well as wanting to see continued revenue acceleration and growth,” Valdich said.

The intervening year brought growth and support for high-yield deposit accounts. This gave Valdich’s team the motivation to lead this week’s round.

“The financial services ecosystem has become more fractured, and banks are going more and more for distributed banking,” said Phillip Rosen, Even Financial's CEO. “That is, they're offering their services inside other experiences via partnerships.”

For instance, he said, as people are using the services of a provider of wealth management, financial planning, or home improvement, they are likely to need other types of financial services.

“They have a real need for efficient ways to scale partnerships such that they're able to digitally connect to the consumer at that moment, in a scalable, regulated and brand-safe fashion,” Rosen said.

Rosen described Even Financial as a Visa-like network that connects banks to merchants.

It would be difficult for a bank to link to every retailer on its own, he asserted, but Even can create many-to-many linkages.

Even Financial has the decision engine, connectivity, quote generation and account-onboarding technology needed for smooth integration, Rosen said.

Using machine learning, it finds the strongest fit for a consumer based on available data, including anonymous records of 40 million Americans who have conducted transactions on Even’s network. According to Rosen, this gives the company an understanding of people’s needs.

“If you see a consumer who has $20,000 in a checking account that’s earning no interest, it's pretty straightforward to suggest they get 2.5% APR on a savings account,” he said.

The software might also recognize that the consumer is building credit or saving for a house and make recommendations accordingly.

“Distributed banking is a very real thing,” Rosen said. “There are many fintech challengers, and banks can't necessarily rely on the consumer coming into the branch and staying in the footprint.”

For its next steps, Even Financial is thinking about including credit cards and student loans in its virtual marketplace.

“Our goal over the next year is to ensure that all of the principal financial service products that a consumer needs to achieve their goals are available to be connected with across our API infrastructure,” Rosen said. “So it's about launching every single financial service product and making sure that we have the systems to do that intelligent recommendation. We're fairly far down that path, but we have more work to do there.”

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