Fintech
Jifiti is shaping integrated finance
Jifiti is quietly shaping the future of integrated finance by working strategically with banks to provide customized solutions. This will help them get their share of a pie that is expected to grow by 148% by 2028.
Co-founder and CEO Jaacov Martin said Jifiti was founded more than a decade ago, initially to provide technology to retailers. Back then, customers stopped when integration has been discussed. This pushed Martin and the team to provide the same functionality with minimal integration. They achieved this by building solutions on top of existing guardrails.
The company has found success working with large corporations and building trust over time. Soon, customers turned to Jifiti to help deliver quality at the point where consumer, finance and retail meet: integrated finance.
“Creating a real-time connection between three different parties proved to be very challenging for all three players, and our infrastructure was able to address much of this,” Martin said.
Jifiti works behind the scenes to build the pipes that allow retailers, institutions and other service providers to offer financing to their customers. This allows everyone to focus on their specialty: dealers sell, Fiserv finances, and Jifiti connects the system.
Factors influencing the growth of embedded finance
Martin said some key factors have changed the picture of integrated finance over the past three years. Between 2017 and 2021, several businesses have flourished by touting the banks’ lack of need. They introduced better, more accessible technology, and by focusing on online, they made their mark.
This made sense when interest rates were near zero and raising capital was relatively easy. As the situation changed and interest rates rose, investors looked more closely at companies that needed to raise both operations and to fund balance sheets.
“When you’re operating in an environment where interest rates are zero and you’re only measuring yourself in terms of growth and profitability, that’s fantastic,” Martin said. “They have grown to these (extreme) ratings.
“If they couldn’t show profitability when their cost of capital was near zero, how could they show profitability overnight when they’re paying 6x for the same dollar? That perfect storm of the regulator coming in, the markets completely changing and the economy changing created a situation where there was huge demand, but all of a sudden the supply was reduced overnight . And that was our chance to shine.”
It is better to work with banks than against them
Many companies then promised to get rid of the banks. Jifiti did the opposite. They worked with them because they were stable, regulated and experienced. Compare that to some newcomers who implement questionable practices like encouraging excessive spending and cultivating defaults.
Banks were competitive, more efficient and had a low cost of capital. They needed technology to make their loans more accessible and Jifiti could make it happen.
Martin cautioned that patience is needed when working with tier one banks. Trust develops slowly. Each client has unique strengths that must be taken into consideration in the design.
Along the way, Martin saw an opportunity in B2B. They would also benefit from integrated finance opportunities, but they needed a system designed for their specific needs.
Be careful about the integrated financial partnerships you pursue
Banks and institutions also need to be aware of what they are giving up when they let fintechs into their system, Martin advised. At first, many thought that by partnering with name providers they would simply offer convenience to their customers, not realizing that that connection allowed outside companies to directly market to their customers.
“I take my hat off to them,” Martin said. “They’ve done an incredible job, and if you think about it strategically, it’s absolutely brilliant. It’s a fairly simple and straightforward product: pay in threes and fours. And in return, what they get is not only access to customers, but also onboarding of the brand’s customers, which the brand may have cultivated over the last 100 years.”
Jifiti acquired its first large banking client by cold calling. Martin said they could help them reduce deployment without compromising their scalability. So, Jifiti focused on offering infrastructure outside the United States. It took some work to adapt to different environments, but it’s paying off. Jifiti is present in 12 countries with expansion plans.
Grow through the right partnerships
Growth also comes through partnerships. Over the past year, Jifiti has announced mergers with Ingenico, FIS and Finastra. By integrating with Ingenico’s PPaaS service, Jifiti allows merchants to easily offer bank financing at any point of sale. The collaboration with FIS offers an integrated end-to-end solution for banks and financial institutions to provide commercial services such as B2B BNPL. The Finastra agreement allows participants in the Finastra BaaS ecosystem to embed financial offers at any commercial POS via a single platform.
“They also realized that our platform gave validity to their components,” Martin explained. “You can’t operate with an insurance component if you don’t have the rest of the origination or if you don’t have the rest of the disbursement. Those are two main areas where we provide technology and a whole other level of orchestration.
The challenges of integration
Back-end partner integration is a complex process involving many elements. Martin said this needs to be balanced with simplifying the process as much as possible within highly regulated environments. Ideally, Jifiti is included early in the process when the partner responds to an RFP. It is a long process that requires patience, patient advice with an eye on the long term.
Martin said financial institutions need to match transactions with the right financial products. Each product has underwriting requirements, and each lender looks at distinct credit ranges. If you do it wrong, you risk appearing irrelevant to the client or providing them with the wrong financing.
Looking ahead, Martin predicts that many tier 1 banks are preparing to offer POS solutions. When they do, Jifiti will be there.
“We have expanded and gone deeper,” he concluded. “We’ll also have some new markets, but what we’re really doing is doubling down. We are present in 12 markets and are doubling our presence in many of them.”
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Tony is a long-time contributor in the fintech and alt-fi spaces. Twice named journalist of the year at LendIt e winner in 2018, Tony has written more than 2,000 original articles on blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT’s Unchained, a blockchain expo in Hong Kong. Email Tony here.