commerce and fintech 2020 outlook - first data...02. fintech unicorns: stay private or go public?...
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FORTUNE Magazine World's Most Admired Companies®
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020
Commerce and Fintech 2020 Outlook
FORTUNE Magazine World's Most Admired Companies®
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020
Glenn Fodor, CFASenior Vice President and
Head of Data & Analytics
January 23, 2020
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FORTUNE Magazine World's Most Admired Companies®
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020
02. Fintech unicorns: Stay private or go public?
08. Amazon to expand in 800B U.S.
grocery market
09.B2B eCommerce
10. Retailers explore rental and resale
05. Crypto –Beyond Bitcoin and Libra
04. Challenger banks come calling for small business
61%
Of small businesses
use mobile banking
compared with
53% in 2018.1
+5.9%
YoY holiday spending growth:
06. AI –Everywhere you want to be
of consumers used
take out more often
than the previous year1
29%
11. Consumers hunger for food delivery
07. The state
of installment loans
01.
Consumer
update
Commerce and
Fintech 2020
Outlook
03.
Banking moves to the cloud
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FORTUNE Magazine World's Most Admired Companies®
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020
Note: Figures include Brick & Mortar and e-commerce channels.Source: Fiserv aggregated same-store consumer spending data.
01.Consumer spending update: Holiday Highlights
Full Holiday Season
+2.9% Brick & Mortar
+9.8% eCommerce
+5.9% +3.8%Total Spend Retail Spend
+1.4% Brick & Mortar
+8.1% eCommerce
-1.5% Furniture and
Furnishings
-0.8% Sporting
Goods
8.4%Electronics and
Appliances
4.8%General
Merchandise
3.0% Specialty
Retail
Slowest Growth Fastest Growth (Retail)
YoY Spending Growth
Dollars
5.7%
2.6%
5.1%
11.9%
7.1%
11.5%11.3%
5.0%
13.9%
6.2%
3.4%
5.9%
2017 2018 2019
Pre-Holiday Thanksgiving + Black Friday
Thanksgiving Thru Cyber Monday Full Season
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FORTUNE Magazine World's Most Admired Companies®
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020
01.Consumer spending update
Source: Respective bank quarterly earnings reports. FORTUNE Magazine World's Most Admired Companies®
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020
“– JPMorgan, January 14, 2020
“So the fourth quarter definitely, I would say, stabilized…
stopped getting worse. And we saw sentiment improve a
bit. The U.S. consumer remains in very strong shape, both
from a credit perspective, sentiment, spending. Obviously,
the labor market is very strong. Capital spending still a bit
soft, but sentiment is at least certainly better than it was
6 months ago. So, broadly speaking, we have a
constructive outlook as we're heading into 2020.
– Bank of America, January 15, 2020
“ In our consumer business, we see that our
customers are coming off a strong finish in 2019
in their spending activity.
“Consumer payment volume
growth remains solid.
Issuer Metric 3Q19 4Q19
Capital One Credit +11% +11%
Chase Credit +10% +10%
Chase Debit +7% +7%
Citi Credit (Branded) +7% +7%
Wells Fargo Debit +6% +6%
Bank of America Debit +6% +6%
Wells Fargo Credit +5% +4%
Bank of America Credit +7% +5%
U.S. Bank Credit +8% +4%
U.S. Bank Debit +7% -0%
Citi Credit (Retail Services) -2% -2%
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FORTUNE Magazine World's Most Admired Companies®
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02. Fintech unicorns: Stay private or go public?
Many that did go public have
underperformed, as public
market investors remain skeptical
of their paths to profitability.
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Mar Apr May Jun Jul Aug Sep Oct Nov Dec
S&P 500
~7x as many tech
companies (and Fintechs)
raised mega-rounds in
private financing than
conducted IPOs in 2019.1 -21%
+14%
-27%
-38%
-45%
Source: 1. The 2020 Tech IPO Pipeline, CB Insights.
2019 Stock price performance since IPO
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02. Fintech unicorns: Stay private or go public?
Opendoor
$500 M
Chehaoduo
$1.3B
Didi Chuxing
$15B
Tokopedia
$1.3B
Rappi
$1B
Compass
$1B
ParkJockey
$900M
Doordash
$900M
Oaknorth
$390 M
Grofers
$380M
Brandless
$240M
$9.3 B
$3B
Grab
$5.8 B
The We Company
$19.9B
Lemonade
$420M
Valuation of (Select)
SoftBank investments
Many outsized valuations
of private companies
were driven by
Softbank investments.
Source: 1. Business Insider, “SoftBank is reportedly taking control of WeWork.Here's a running list of all the Japanese giant's major investments in tech.”, October 22, 2019
FORTUNE Magazine World's Most Admired Companies®
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While 2019 saw some successful debuts, most are
likely to continue taking private money in 2020.
02. Fintech unicorns: Stay private or go public?
Some of the largest privately
held Fintechs do not appear
to be heading to IPO anytime
soon, as they are sitting on a
large amount of funding to
fuel growth.
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FORTUNE Magazine World's Most Admired Companies®
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03. Banking moves to the cloud
“We’re all-in
on the cloud.”
Scott Blackley
Capital One Chief Financial Officer
September 10, 2019
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FORTUNE Magazine World's Most Admired Companies®
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Capital One was one of the
first large banks to move a
substantial part of their
technology to the public
cloud, using Amazon AWS. Number of data centers
Capital One is planning
to have by end of 2020
(down from 8 in 2014).1
0
03. Banking moves to the cloud
Source: 1. Fortune, August 24, 2019.FORTUNE Magazine World's Most Admired Companies®
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FORTUNE Magazine World's Most Admired Companies®
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Bank of America recently announced it
was partnering with IBM to build a
cloud for banks running on IBM’s
existing public cloud.
Servers Data Centers
Past
200,000+
Today
70,000
Key benefits:
• Consolidate and
simplify infrastructure
• Cost savings
• Improve client service
Today
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Past
67
03. Banking moves to the cloud
Source: CIO Dive, “Bank of America prioritized internal cloud. Now it's evaluating third-party providers”, October 17, 2019.
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FORTUNE Magazine World's Most Admired Companies®
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After some initial hesitancy, banking service providers
and FIs of all sizes will increasingly embrace the public
cloud.
Historically:
• Large FIs kept everything in-house, preferring to
maintain control over security and compliance,
believing scale = cost-effectiveness
• Smaller and mid-sized FIs outsourced to private
systems operated by specialized providers
03. Banking moves to the cloud
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The last few years brought
an influx of challenger and
digital-only banks.
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Source: General industry information.
04.Challenger banks come calling for small business
Business models are based on targeting
retail consumers and driven by mobile
banking adoption and consumer comfort
with Fintech.
FORTUNE Magazine World's Most Admired Companies®
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FORTUNE Magazine World's Most Admired Companies®
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The digital-only bank
market may have
reached a tipping point
for small businesses.Are adopting
mobile banking
61% now use mobile banking
compared with 53% in 2018.1
Overall satisfaction among
mobile users is higher than
among non-users.1
Don’t feel appreciated
by their banks
37% say their bank
appreciates their business.
Only 32% say their bank
understands their business.2
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04.Challenger banks come calling for small business
Small businesses:
Source: 1. J.D. Power 2019 U.S. Small Business Banking Satisfaction Study. 2. J.D. Power 2018 U.S. Small Business Banking Satisfaction Study. American Banker, November 1, 2018.
– Jacob Jegher, President at Javelin Strategy &
Research, November 1, 2018
“Small business is still an orphan from
a business banking standpoint.
“
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FORTUNE Magazine World's Most Admired Companies®
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Expect greater focus on, and competition for, small
business digital banking in the next year and beyond.
Recent digital-only banks have arrived
that target small businesses, startups,
and entrepreneurs.
04.Challenger banks come calling for small business
Source: General industry information.
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05. Crypto –Beyond Bitcoin and Libra
Bitcoin price in 2019
$3,000
$5,000
$7,000
$9,000
$11,000
$13,000
Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19
In 2019, headlines
were again dominated
by Bitcoin’s ups and
downs, as well as
the launch of, and
reaction to, Libra.
Source: CoinDesk, CNBC, CNET, Fortune. FORTUNE Magazine World's Most Admired Companies®
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Source: Reuters, December 19, 2019, General industry information.
In 2020, it may be the
seemingly lower profile
projects that will drive
the crypto sector forward.
“
– Patrick Ellis, board member of the Libra Association
At this stage, there is no strategy set in
stone for the markets or the product, or
how it will actually get rolled out.
“
05. Crypto –Beyond Bitcoin and Libra
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FORTUNE Magazine World's Most Admired Companies®
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06.AI – Out of sight (but not out of mind)
AI is already powering many
leading consumer experiences.
Source: General industry information.FORTUNE Magazine World's Most Admired Companies®
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FORTUNE Magazine World's Most Admired Companies®
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06.AI – Out of sight (but not out of mind)
Investing in AI will lead
the way in the future.
Big…
58% of large
companies report adopting
AI in at least one function or
business unit in 2019, up
from 47% in 2018. 1
..and small
$26B+ invested
globally in AI startups in
2019, up from $22B+ in
2018, and $16B in 2017. 2
AI investing happening across entities both:
– Kevin Johnson, President and CEO at
Starbucks, October 30, 2019
“ We have been dialing up our in-house capabilities
and investments in AI with an initiative we call Deep
Brew. Deep Brew will increasingly power our
personalization engine, optimize store labor
allocations and drive inventory management in our
stores. We plan to leverage Deep Brew in ways that
free up our partners so that they can spend more
time connecting with customers. Deep Brew is a
key differentiator for the future and as we continue
our quest to build world-class AI capabilities to
better support partners.
“
Source: 1. AI Index 2019 Annual Report, Stanford University. 2. CB Insights, retrieved from VentureBeat, January 22, 2020.FORTUNE Magazine World's Most Admired Companies®
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Approximately 75% of
consumers who made a
big ticket, installment
purchase decided to do so
well before the actual
transaction took place.
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Source: McKinsey, “US lending at point of sale: The next frontier of growth,” November 4, 2019; TransUnion, “FinTechs Continue to Drive Personal Loan Growth,” February 21, 2019.
07.The state of installment loans
Regardless of revenue model,
omnichannel merchant
integration will be crucial.
FORTUNE Magazine World's Most Admired Companies®
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FORTUNE Magazine World's Most Admired Companies®
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07. The state of installment loans
Blue chip incumbents are in the
market, looking to incorporate
these technologies into their core
offerings.
Acceleration of investment in
deployment to continue thru 2020
Lasting impacts?
Source: Company reports.
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FORTUNE Magazine World's Most Admired Companies®
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Amazon confirmed plans to open a
grocery store distinct from its Whole
Foods brand. Initial plans indicate:
Will not use
Amazon Go
cashierless tech
Will target
mainstream
consumers who shop
at traditional grocers
Will facilitate online
orders and
test new tech
08.Amazon to expand in $800B U.S. grocery market
Source: Company reports; CNET, “Amazon will launch new grocery store as alternative to Whole Foods,” November 11, 2019.
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$1.1B
$1.8B
$0.0
$0.4
$0.8
$1.2
$1.6
$2.0
2018 2023
B2B eCommerce
Marketplaces are a
$1 Trillion opportunity.
09.B2B eCommerce
Though not as prominent as
consumer eCommerce, the
sector is growing fast.
Source: Forrester Research, “Landscape: The B2B eCommerce Playbook,” January 28, 2019.
US B2B eCommerce Sales
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FORTUNE Magazine World's Most Admired Companies®
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Changes in B2B
buying behavior and
online efficiencies
are fueling growth.
Advancing digital-first approaches to discovery
and purchasing
09.B2B eCommerce
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Source: Company reports; Forrester Research, “Landscape: The B2B eCommerce Playbook,” January 28, 2019.
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Rental clothes subscription market expected to
more than double in next 5 years
Changes in consumer
preferences have driven
retailers across a variety of
industries to explore rental
services.
$1B
$2.5B
$0.0
$1.0
$2.0
$3.0
2018 2023
Clothing retailers
Other retailers
10.Retailers explore rental and resale
Source: Company reports; Reuters, “Garments for lease: 'rental' apparel brings new wrinkles for retail stores,” September 18, 2019.
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Key benefits:
• New revenue streams
• Add customers
• Valuable feedback
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Secondhand market
expected to reach
$51B by 2023.
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Source: Company reports; ThredUP, “2019 Resale Report,” Mach 19, 2019.
Retailers are now adapting to
a generation no longer buying
with the intent to keep
10.Retailers explore rental and resale
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– Neil Saunders, Managing Director and Retail
Analyst at GlobalData Retail, March 19, 2019
“Compared to the overall apparel market,
resale’s growth has been phenomenal. As
the market uniquely meets consumers’
preference for variety, value, and
sustainability, we expect the high growth
to continue.
“
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11.Consumers hunger for food delivery
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Source: 1. 2019 National Restaurant Association and Technomic.2. 2018 QSR Drive-Thru Performance Study. 3. Statista, January 2020.
When it comes to food,
consumers love
“convenience”…
…and that attraction is driving the growth of food
delivery
$22B
$29B
$0B
$10B
$20B
$30B
$40B
2019 2024
Revenue for online food delivery in the U.S.3
Number of users of online food delivery3
85M116M
0M
50M
100M
150M
2019 2024
+32%
+22%
39%of consumers used drive-thrus
more often than last year1
29%of consumers used take out more
often than the previous year1
70%of QSR sales come from
drive-thru2
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FORTUNE Magazine World's Most Admired Companies®
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11.Consumers hunger for food delivery
– Grubhub, October 28, 2019
“The easy wins in the market are disappearing
a little more quickly than we thought. This is a
significant change in our industry that will require
us, and everyone else, to compete by creating the
most value for diners and restaurants rather than
relying on industry tailwinds…
“As the food delivery market
grows, increasing
competition is close behind.
Source: 1. Statista, January 2020. FORTUNE Magazine World's Most Admired Companies®
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Source: 1. Merriam-Webster, General industry information.
11.Consumers hunger for food delivery
As the impact of food delivery
grows, how we define “restaurant”
may ultimately change.
Restaurant noun
res-tau-rant
Definition:
A business establishment where meals or
refreshments may be purchased1, or prepared.
Synonyms:
Cloud kitchen, shared kitchen, dark kitchen, ghost
kitchen, virtual restaurant or restaurant-as-a-service.
Cloud kitchens are dedicated to
preparing food for delivery, or take
out, and not for serving in-house.
These could be a shared common
kitchen for multiple “restaurants” or an
internal kitchen for a single food brand.
Allows testing of new food
concepts without taking on
leases or hiring staff.
Increases efficiency
of delivery operations.
VC firms are investing in
startups in the space.
Established food outlets
are investing as well.
Long term viability
remains a question.
Source: 1. Merriam-Webster, General industry information.
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Glenn Fodor, CFA
https://www.firstdata.com/en_us/insights/spendtrend.html
212-515-0278
Senior Vice President and Head of Data & Analytics
First Data is a registered trademark owned by First Data, a subsidiary of Fiserv Inc. All trademarks referenced are the property of their respective owners.