Rainbow or storm?


Two parts of rainbow on mint background. Front view.
Image Credits: Anna Efetova (opens in a new window) / Getty Images

elcome to the TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s inspired by the daily TechCrunch+ column where it gets its name. Want it in your inbox every Saturday? Sign up here.

Some fintech companies are weathering the storm better than others and seeing an end in sight. In particular, startups using AI to fight money laundering and fraud seem to be enjoying tailwinds.— Anna

Consolidation ahead

If you are a freelancer in Europe, you have probably heard of Qonto, a challenger bank for individual and small businesses that now boasts of 400,000 customers in France, Italy, Spain and Germany.

I had a call with CEO Alexandre Prot earlier this week, and he used a metaphor I found quite telling to describe the current state of fintech in Europe: a rainbow in a storm. “There are people who see the rainbow, and then there are people who still see the storm,” he said.

Klarna’s Q2 earnings, for instance, were unexpectedly good. Only a few months after lowering its valuation and conducting layoffs, the European BNPL giant reported a profitable month “as revenue and GMV continued to grow.”

Qonto, too, is in the rainbow camp. Having raised more than $709 million to date, it presumably doesn’t have to worry too much about running out of cash. And since it’s not focused on loans, it isn’t overly concerned with rising interest rates, either. But Prot is aware that for many fintechs, “unfortunately, there’s still a lot of turbulence ahead.”

As usual with startups, turbulence means consolidation. Qonto already bought German competitor Penta earlier this year and is open to other opportunities, Prot told me.

Just to be clear, Qonto’s acquisition targets don’t necessarily have to be struggling companies; for instance, our conversation also touched on Ramp’s move to nab, an AI-powered customer support tool of which it was already a paid customer.

As the generative AI craze rages on, Ramp acquires customer support startup

I am curious to see which startup Qonto might acquire in the next few months, if any. But even if it doesn’t, there are plenty of other players willing to write checks to companies applying AI to fintech.

AI against fraud

AI applied to fighting fraud seems to be one of the hottest segments within AI-powered fintech. At least, anecdotally. For one, I spotted two startups doing just that in Y Combinator’s latest batch: Accend and Greenlite.

YC alums tend to go on and raise a fair amount of funding, but these two will join a group of already-quite-well-funded competitors. One of them is ThetaRay, a startup out of Israel that just nabbed $57 million for its AI-based anti-money-laundering (AML) platform. Another one is Strise, which is doing something similar out of Norway and which just raised a $10.8 million Series A round.

ThetaRay nabs $57M for AI tools to fight money laundering

Venture capital interest for this category is more than a week old, though. Last year, Sardine picked up $51.5 million to sniff out fishy fintech transactions. The U.K.’s Quantexa raised $129 million at a unicorn valuation in April. Hawk AI raised a $17 million Series B in January.

It’s not just VCs, either; Stripe acquired Bouncer in 2021 to integrate it into its AI-based anti-fraud technology toolset. Meanwhile, Oscilar’s co-founders poured $20 million into their company, which is using AI to help financial institutions protect online transactions from fraud and theft. Ring any bells?

While this isn’t new, I find it noteworthy that interest has waned since Google Cloud announced the launch of its own Anti Money Laundering AI solution in June. But perhaps that was to be expected; after all, just because Google starts doing something doesn’t mean it is committed to it in the long-term or will be the best at it. What it shows, though, is that there is demand for it.

When it comes to fighting fraud, financial institutions have a renewed incentive to up their game. Two months ago, ​​the U.S. Federal Reserve fined Deutsche Bank $186 million for failing to sufficiently address concerns with regard to money-laundering control.

But sanctions aside, it is only logical not to leave the AI advantage to threat actors. If fraudsters and money launderers are using AI, there’s a good chance AI can help catch them, too.

If the opportunity doesn’t sound big enough for that many startups, though, it’s worth keeping in mind that a new market could soon open up for them in adjacent spaces.

Per VC firm Atomico, which led Strise’s Series B, “there will also be further growth opportunities for [the company] with the passage of the EU’s Digital Services Act, where large marketplaces such as Amazon will need to verify each seller, meaning KYC [Know Your Customer] will encompass everything from partners and suppliers to potential ESG policies of businesses.”

There’s definitely quite a lot that the DSA might soon change for European citizens and for companies operating in the region, including foreign tech giants, so it will be interesting to see if this actually results in new opportunities for some startups — and if it does, which ones.

More TechCrunch

Ahead of the AI safety summit kicking off in Seoul, South Korea later this week, its co-host the United Kingdom is expanding its own efforts in the field. The AI…

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

10 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities