Fintech:
a journey through the present
&
future of Finance
Master in Fintech & Innovation
a.y. 2019-2020
6/5/2020
1
A changing world
“There are hundreds
of startups with a lot of brains and
money working on various alternatives to traditional
banking”
Jamie Dimon - CEO, J.P. Morgan
“Alibaba becomes
Top 10 Global
Bank”
Disruptive Finance, June 2018
“Developments in technology could see some 30% of
banking jobs disappearing in the next five
years”
Vikram Pandit - Former CEO, Citigroup
“AI will fundamentally change
the banking business”
Axel Lehmann - COO, UBS
2
Workforce and skills disruption
“I think one of the increasing skill sets of the future
is your ability to learn because the hard skill set that
you learn today very quickly becomes out of date in
three or four years time”
Peter O’Hanlon, Lloyds Bank
Head of group corporate treasury technology
The accelerating pace of technological, demographic and socioeconomic disruption is transforming industries and business
models, changing the skills that employers need and shortening
the shelf-life of employees’ existing skill sets in the process.
Many of the major drivers of transformation currently affecting
global industries are expected to have a significant impact on
jobs (e.g. widening the skills gap).
In many industries and countries, the currently most in-demand
occupations or specialties did not exist 10 or even five years ago,
and the pace of change is set to accelerate.
The World Economic Forum estimates as many as 65% of
children in school today will end up working in jobs that do not
even exist today.
It’s no surprise that people across industry are emphasizing the
ability to learn and learn quickly when it comes to employability.
Source: Future of Jobs Report. World Economic Forum
74%
of banking executives
believe the Industry
will be completely
transformed by new
technologies
Accenture, 2018
Source: Future of Jobs Report. World Economic Forum
3
3
Education needs Innovation… and Innovation needs Education
“I think one of increasing skill sets of the future is
your ability to learn because the hard skill set that
you learn today very quickly becomes out of date in
three or four years time”
Peter O’Hanlon, Lloyds Bank
Head of group corporate treasury technology
The “Future of Jobs and Skills” report of the World Economic
Forum suggests among its recommendations for actions to
rethink education systems.
Source: Financial Times (2018) - https://www.ft.com/content/e336d938-f7ca-11e7-a4c9-bbdefa4f210b
Education has the power to shape the future.
However, in this fast-changing tech world, we need a
fundamental change in mindset and in the way we train the next
generation of talents.
4
3
OK….. Now, fasten your seatbelt
and
LET’S START!!!!
5
AGENDA
05
04
03
02
01
History
Global
Journey
Let’s
see
If we have time:
How is the traditional banking
system changing and some hints
on the main financial technologies
A trip around the world to
discover fintech champions
together
A deep dive into Fintech
concepts and verticals
Fintech
How did we get to the Fintech
Revolution?
From 2008 Fin. Crisis untill
today
A biref brainstorming about
Financial technology
Intro
6
But first…. 2 simple requests:
Turn on Your camera – If possible ;) …………………… AND:
7
AGENDA
05
04
03
02
01
History
Global
Journey
Let’s
see
If we have time:
How is the traditional banking
system changing and some hints
on the main financial technologies
A trip around the world to
discover fintech champions
together
A deep dive into Fintech
concepts and verticals
Fintech
How did we get to the Fintech
Revolution?
From 2008 Fin. Crisis untill
today
A biref brainstorming about
Financial technology
Intro
8
What about your experience with
financial services?
9
First question for YOU!!
10
Let’s see what came out…
11
… and list some important concepts!
FINANCE
STARTUPS
P2P lending platf
Robo-Advisory platf
Evolution &
Platforms
BIG TECH – Daily touchpoints with us (trust
and confidence)
Financial Inclusion – 2bln people unbanked -> Vicious cycle of poverty (
Only poor countries affected?
Not at all  Miami – Detroit more than 40% of households are unbanked)
World Bank Data: 700 mil in 2012-2017 from being unbanked to banked
IoT, AI, Biometric data, Gamification and VR
70% of millennials would rather go to dentist than hear what their bank has to say
New Skillset: Programmers and Designers
12
Tube Riding and Fintech
13
Nevertheless pay attention to two concepts:
HYPE
OVER
EXCITEMENT
14
AGENDA
05
04
03
02
01
History
Global
Journey
Let’s
see
If we have time:
How is the traditional banking
system changing and some hints
on the main financial technologies
A trip around the world to
discover fintech champions
together
A deep dive into Fintech
concepts and verticals
Fintech
How did we get to the Fintech
Revolution?
From 2008 Fin. Crisis untill
today
A biref brainstorming about
Financial technology
Intro
15
Brief History Lesson
Defining Financial Technology
FinTech Success Factors
“Technologically enabled financial
innovation that could result in new
business models, applications,
processes or products with an
associated material effect on financial
markets and institutions and the
provision of financial services.”
Financial Stability Board
Source: Copenhagen FinTech
16
3
Brief History Lesson
FinTech is not a “New
Thing”
1950
First Credit Card
1973
SWIFT launched
1983
Beginning of
Online Banking
(UK)
1998
PayPal launched
2008
Bitcoin released
Source: ValueWalk
17
3
Brief History Lesson
2008 Financial Crisis
Regulatory Backlash
Regulation moving forward in leaps and bounds, adding
complexity and cost to financial institutions’ bottom lines
Source: Vanguard
18
3
Brief History Lesson
2008 Financial Crisis
Regulatory Backlash
Regulation moving forward in leaps and bounds, adding
complexity and cost to financial institutions’ bottom lines
Source: Vanguard
19
3
Brief History Lesson: what do you notice?
20
Brief History Lesson: Top 10 Companies by market cap - 2020
01
04
07
02
05
08
03
06
09
10
21
Brief History Lesson
2008 Financial Crisis
Consumer Confidence, particularly with respect to
financial institutions, shattered
Prompting greater competition
Global movement towards open banking
Source: Advisory Perspective
Source: Vanguard
22
3
Brief History Lesson
Technological Progress
Enablers
Intersection of major developments across several
technological areas:
Computing Power
-
Artificial Intelligence
Edge Computing
-
Machine Learning
Wireless Data
-
Blockchain
-
Cloud Computing
Source: Vanguard
23
3
Brief History Lesson
How did FinTech go to where it is today?
Financial
Markets

2008 Financial Crisis

Basel III, Solvency II, MiFID 2 …

Open Banking
Enablers for

High Speed Internet
Technology

Mobile Data (3G, 4G, 5G)

Microchip technology
Enablers for
Creation of Digital Business Models
24
3
Brief History Lesson
Why is FinTech particularly relevant today?
• Focus on Productivity enhancements towards the Intelligent Enterprise
Source: SAP, “The Intelligent Enterprise”
25
3
Unbundling of Financial Services
Why is FinTech particularly relevant
today?
• Banks developing a platform approach
• Finance (especially banking) traditionally offers
bundled services
• Open banking reforms are slowly unbundling
financial services
• Especially relevant for underbanked / unbanked
Source: thefinancialbrand.com
26
3
Unbundling of Financial Services
Why is FinTech particularly relevant
today?
• Amazonification of Finance?
27
3
Unbundling of Financial Services
Why is FinTech particularly relevant today?
• Emerging trend towards Democratization/Decentralization of finance (DeFi)
Areas of Application
Examples:
Decision
Making
Peer-to-Peer Lending
Risk
Taking
Peer-to-Peer Lending
Record
Keeping
Distributed Ledger Technology
28
3
Unbundling of Financial Services
FinTech since the Global Financial Crisis
• New entrants quickly establishing itself in various verticals
Source: Financial Technology Partners
29
3
FinTech Applications: example
Which areas of finance is FinTech relevant to?
• Example: Capital Markets
➘ Falling Return on Equity
➚ Increasing costs
30
3
FinTech Applications: example
Which areas of finance is FinTech relevant to?
• Example: Capital Markets
• FinTech applications across all functions
Source: Celent Securities
31
3
Regulatory Considerations
Regulation catching up
EBA
European Banking Authority
FATF
Financial Action Task Force
ESAs
European Supervisory Authorities
IOSCO
International Organization of Securities
Commissions
FSB
Financial Stability Board
Source: KPMG
32
Regulatory Considerations
Regulation moving
head
PRA
Prudential Regulation Authority (UK)
FCA
Financial Conduct Authority (UK)
Source: KPMG
33
Regulatory Considerations
Establishment of Regulatory Sandboxes
“A framework set up by a financial sector regulator to allow small scale, live testing of innovations by private
firms in a controlled environment”
CGAP
Source: Innovate Finance
34
Regulatory Considerations
The cost of regulatory obligations foster
Regtech leap
An overview of the
Regtech universe
Source: Deloitte (2017) – Regtech universe in the rise
35
AGENDA
05
04
03
02
01
History
Global
Journey
Let’s
see
If we have time:
How is the traditional banking
system changing and some hints
on the main financial technologies
A trip around the world to
discover fintech champions
together
A deep dive into Fintech
concepts and verticals
Fintech
How did we get to the Fintech
Revolution?
From 2008 Fin. Crisis untill
today
A biref brainstorming about
Financial technology
Intro
36
FinTech
Words most associated with FinTech
Source: Relatedwords.com
???
37
FinTech
Google search for “FinTech” over the last years
???
Source: Google Trends
38
The FinTech Industry at a Glance
Source: CB Insights – Global Fintech Report Q2 - 2019
39
The FinTech Industry at a Glance
Global Phenomenon
Source: CB Insights – Global Fintech Report Q2 - 2019
40
The FinTech Industry at a Glance
Fintech Unicorns 2018
Source: CB Insights – Global Fintech Report 2019
41
The FinTech Industry at a Glance
Fintech Unicorns 2019
Source: CB Insights – Global Fintech Report 2019
42
The FinTech Industry at a Glance
Global Phenomenon – but China and the US dominate
Source: Innovate Finance
43
The FinTech Industry at a Glance
Chinese size dominance not reflected in deal flow dominance
Source: Innovate Finance
44
The FinTech Industry at a Glance
Source: CB INsights
45
The FinTech Industry at a Glance
Gaining Strong Investment Traction
$33.9 B as of
31/12/2019
46
The FinTech Industr: top 10 2020 predictions
Source: KPMG – Pulse of Fintech
47
The FinTech Industry at a Glance
2019 is the FinTech biggest M&A year
Source: Financial Technology Partners
48
The FinTech Industry at a Glance
The US dominates FinTech M&A activity
Source: Financial Technology Partners
49
FinTech Verticals
FinTech applies to all finance
activities
Source: Financial Technology Partners
50
The FinTech Industry at a Glance
FinTech companies active in all major financial activities
FinTech business activities, about 5000 companies surveyed by Deloitte
51
The FinTech Industry at a Glance
Mirroring widespread adoption in all major finance verticals
Payments dominate the market
Source: Statista
52
The FinTech Industry at a Glance
FinTech revenues growing strongly
Digital Payments also are the key revenue generator to date
53
The FinTech Industry at a Glance
FinTech revenues growing strongly
Revenues per user increasing in all FinTech verticals
54
The FinTech Industry at a Glance
FinTech Adoption Rate across the world
Comparison of FinTech adoption
across countries
Source: EY
Source: EY
55
The FinTech Industry at a Glance
SMEs have become a significant user of FinTech
Top Reasons by SMEs for using FinTech globally
Source: EY
Source: EY
56
The FinTech Industry Key Players
Early Stage Investors
Source: CB Insights
57
The FinTech Industry Key Players
Venture Capital winners
Source: CB Insights
58
FinTech Vs or With Banks?
US Banks are “coopeting” with
FinTech
•
Goldman Sachs, Citigroup and JP Morgan investing
across FinTech verticals
•
Moving faster into Tech: Goldman working with Apple
on Apple Card
Source: CB Insights
59
FinTech Business Models
Different areas of focus
•
Infrastructure / Technology solution providers
•
Financial Service providers
•
Platforms
60
FinTech Business Models
FinTech starting to re-bundle
services
Dec 2018
EU Banking License
Revolut and “backdoor” banking
Jul 2015
Launch
💱Started as FX
platform
🇯🇵 But stuck in Japan
Apr 2016
300k users
Feb 2017
UK e-money license
Apr 2018
USD 1.7bn valuation
61
FinTech Business Models
But it’s not just Revolut
•
FinTech companies focusing on leveraging their client-base quickly into new areas
Source: CB Insights
62
The Other “Techs”
FinTech has grown to an extent that sub-categories have emerged
InsurTech
Technology-focused solutions for the Insurance industry
RegTech
Technology-focused solutions for Regulatory requirements
SupTech
Technology-focused solutions for Financial Supervisors
WealthTech
Technology-focused solutions for the Wealth Management industry
PropTech
Technology-focused solutions for the Property industry
… and many more!
63
Defining the FinTech Industry
A Useful Glossary of Key Terms
Source: Mike Quindazzi
64
AGENDA
05
04
03
02
01
History
Global
Journey
Let’s
see
If we have time:
How is the traditional banking
system changing and some hints
on the main financial technologies
A trip around the world to
discover fintech champions
together
A deep dive into Fintech
concepts and verticals
Fintech
How did we get to the Fintech
Revolution?
From 2008 Fin. Crisis untill
today
A biref brainstorming about
Financial technology
Intro
65
Fintech in … ASIA
66
FinTech in Asia: Growing and growing
KMPG’s Top 100 Leading FinTech Innovators
• 7 Asia-based companies in the Top 10, 5 in the Top 5
🇨🇳
🇸🇬
🇨🇳
🇮🇩
🇮🇳
🇨🇳
1. Ant Financial (China) is the world’s largest third-party payments platform.
2. Grab (Singapore) uses data and technology to improve everything from transportation to
payments across a region of more than 620 million people.
3. JD Digits (China) is a digital technology company, dedicated to providing digital, online and
offline all-scenario services around three key points - data, user and connectivity, using emerging
technologies such as big data, AI, cloud computing, blockchain and IoT.
4. GoJek (Indonesia) a multi-services platform with more than 20 services including Gopay,
Gobills, Gopoints, Paylater, and Gopulsa serving millions of users in Southeast Asia.
5. Paytm (India) is the largest digital payments company in India with more than 380 million
registered users and 12 million merchants on-board its Paytm platform.
🇮🇳
6. Du Xiaoman Financial (China) provides short-term loan and investment services.
8. Ola (India) off the back of its ridesharing userbase Ola Money is making payments easier and
simpler
67
Source: KPMG
FinTech in Asia: The Rise of the Hub
Asia developing several mega Hubs
Hub Ranking
1. Yangtze River Delta
2. Silicon Valley
3. Greater Beijing
4. Greater London
5. Guangdong HK-Macau Region
6. Greater New York
7. Greater Sydney
8. Singapore
9. Greater Boston
10. Benelux
11. Greater Tokyo
Source: Sinai Labs
68
FinTech in Asia: Mobile Vs Banking Penetration
69
FinTech in Asia: A Tale of Many Places
Asia cannot be compared to the US or European homogenous markets
Four Major Blocks:
China
India
Japan
South-East Asia
Different demographics, regulations, wealth
(and wealth distribution), technology and banking
services
70
FinTech in Asia: A Tale of Many Places
China
•
•
•
Largest FinTech market in Asia
Dominated by a few companies
Highest consumer penetration rate in the world
Source: SCMP and 500 Startups
71
FinTech in Asia: The Chinese infrastructure mismatch
As perhaps the leading example, China possesses specificities that make it arguably more suitable than developed
markets to deploy mobile-based financial services and products.
72
FinTech in Asia: A Tale of Many Places
India
•
•
•
Rapidly growing market
Dominated by a few companies
Highest consumer penetration rate in the world
Source: Medici
Source: CB Insights
73
FinTech in Asia: A Tale of Many Places
Japan
•
•
•
Open Banking enacted
Government drive towards productivity improvements
Established crypto legislation
Unprecedented governmental focus on
financial technology innovation
Strong
Fundamentals
• Global Financial City Vision
• FinTech Accelerator Program
 Third largest world
economy
 High GDP per capita
• New Economic Policy Package
2020
• Comprehensive Policy
Recommendations
• FinTech Support Desk
• FinTech Proof-of-Concept (PoC) Hub
 Regulated crypto market
 Increasing VC
investments in FinTech
start-ups
 Major financial
institutions taking a more
active role in FinTech
market
74
FinTech in Asia: A Tale of Many Places
South-East Asia
•
•
•
Rapidly growing population and GDP
Generally low banking services penetration
FinTech as a driver of financial inclusion
Source: Bain & Co
Source: Bain & Co
75
FinTech in Asia: The Rise of the Mega App
Asia developing several mega Apps
• 1 Stop solution for consumers

Alipay and WeChat in China


Food
Delivery
Social Media
Line in Japan
Travel
Payments
Grab and Go-Jek in South East Asia
Ride hailing
Investments
Insurance
76
Fintech in … the US
77
FinTech in the US
US market at a
glance
•
Diversified and maturing
market
•
Pushing FinTech adoption
across the American
Continent
Source: CB Insights
78
FinTech in the US
US FinTech Regulation
•
April 2012: Jumpstart Our Business Startups (“JOBS”) Act led to Crowdfunding ($17bn+ North American Market)
•
Licensing required for money transmission or exchange services and for companies acting as lenders or brokers
•
Open Banking encouraged but not legislated nor a regulatory requirement
•
Market forces driving openness of US banking:
API connection to 99% of US Banks
APIs with over 1700 banking institutions
79
FinTech in the US
Not only Silicon
Valley
State
Company
Total Equity Funding
($M)
California
SoFi
2540
New York
Oscar Health
1268
North Carolina
AvidXchange
724
Illinois
Avant
655
Ohio
Root Insurance
509
Massachusetts
Toast
503
Georgia
Kabbage
490
Minnesota
Bright Health
440
Kansas
C2FO
400
Washington
Remitly
312
Utah
Divvy
253
Rhode Island
Upserve
191
Texas
Alkami Technology
174
Missouri
PayIt
133
New Jersey
Cross River Bank
129
Tennessee
Digital Reasoning
Systems
116
Pennsylvania
Dynamics
111
Florida
Cortera
81
Arizona
EmailAge
66
Iowa
Businessolver.com
65
DC
Pie Insurance
60
Michigan
Clinc
60
Colorado
IP Commerce
55
Delaware
College Ave Student
Loans
50
80
Source: CB Insights
FinTech in the US
US Millennials driving adoption
Digital P2P Provider Adoption by Generation
81
FinTech in the US
US Neobanks slowly capturing wallet-share
Neobank Accounts and Deposits
More than 3.5m
accounts opened
82
FinTech in the US
US Neobanks growth not driven
by Millennials
Older Millennials and Gen Xers
expressed the most interest and
involvement towards Neobanks
Consumers are “accessorizing” their
checking accounts by adding/linking
accounts from Neobanks to take advantage
of better debit card rewards, personal
financial management features, and higher
savings rates
83
Source: Cornerstone Advisors
FinTech in the US
FinTech supporting Millennials’ Impact Investing
Source: CB Insights
84
FinTech in the US
US Heavy Hitters
2017
Latest Valuations
Stripe: $20+B (Sep ’18)
Payments
Robinhood: $7.6B (Jul ‘19)
Stock investing
85
FinTech in the US
But still small compared to US financial institutions
USD 404bn
USD 225bn
USD 295bn
USD 80bn
86
FinTech in the US
US Banks heavily
invested
•
Payments as key area of focus
•
Investments across several
verticals
87
Source: CB Insights
Fintech in the USA
“Silicon Valley is coming. There are hundreds
of startups with a lot of brains and money
working on various alternatives to traditional
banking.”
Jamie Dimon
CEO - JPMorgan Chase
88
Fintech in the USA
The most active US bank investors in fintech
(by number of portfolio companies) are
●
●
●
Goldman Sachs,
Citigroup,
JP Morgan Chase & Co.
While all three have ramped up their fintech
investment activity in recent years, they’ve
taken different strategic approaches.
Suggested reading https://www.cbinsights.com/research/fintechinvestments-top-us-banks/
89
USA: JP Morgan
• In 2019, it allocated $25 million and $11.4 million to
finance fintech and tech startup respectively.
• it partnered with Revolut to collect $1.5milion
• Main focus on investments in capital markets and
internal payments services
• Fintech Campus opening in Palo Alto, California able
to welcome around 100 employees
90
USA: Goldman Sach
• In 2016, they developed Marcus, their first online bank.
-
Marcus has originated $7B+ since its launch
• Between 2013 and 2017 $37 B invested in fintech
Top Bank for fintech investments - followed by Citi Banks ($25B) and JP
Morgan ($14B)
• Investment focus: real estate, data analytics, payments, regtech and lending
• $26mln invested in Raisin - July 2019
• Most recent investment in fintech → $15mln in an Indian fintech startup
called ZestMoney (Finextra, 2020)
• Partnership with Apple for Apple card, new digital credit card. Launched in
August 2019!
• Relevant investments in Fintech in South America (ie., Nubank)
• Goldman in talks with Amazon to offer small business loans over Amazon’s
lending platform
91
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