fintech outlook for 2017 report discussing trends, opportunities and challenges

© Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited

presents&FinTech Outlook

for 2017

Trends, Opportunities

& Challenges

© Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited2

Objectives of the Report

SynopsisA3

A Primer: The Current State of the FS Industry and Key Segments

Which Constellation?: The Emerging Technology and Market Forces

Snapshot of 2017

Incumbents and Startups: Opportunities & Challenges

A Game Theory View of Winners and the Residual Forces of Cooperation

Takeaways

B5

C13

D17

F32

G37

E26


Synopsis

A


This paper is intended for readers who want to better understand the dramatic changes that have begun to take place—and that are

accelerating—in the global FinTech landscape. The payments industry which is one of the focus areas of this report has never been

more exciting. The pace of innovation has been shaken the banks (although not dramatically as some media claims), but they have

realized that they need to keep the customer at the center as they go forward and meet her/his needs first. This would also mean that

the infrastructure supporting the payments industry—which has never been touched upon—has to be transformed. FinTech players

have also given an opportunity to banks to venture where it was prohibitively costly to venture. With the trust of customers and data

available, the banks can take advantage of FinTech disruption and convert it to an opportunity either through collaboration and/or

through becoming very customer-focused or recalibrating their business models.

• Payments

The payments industry would be in a transformational state in 2017. The ongoing war with alternate payment

channels will intensify and challenges in emerging markets would force the incumbents to take drastic

measures. Some key drivers would be:

– Real-Time Payments: RTP represents a new phase of evolution within the payments industry, with several key features that

differentiate them from current payment methods, specifically speed, value-added messaging capabilities and immediate

availability of transaction status. RTP will provide FIs with the functionality/features to innovate and meet customer demand.

– Blockchain: Blockchain has the potential to completely change the financial transaction processing cost model amongst its

various applications. It also enables all processing to be done over a distributed system network or in the cloud avoiding the

usage of costly datacenters or mainframes.

• Remittances

Cross-border payments have become a critical part of millions of lives as we have become a more globalized

world. As cross-border payments have become more common, customers of remittance products/solutions are

looking for the most convenient, cost-efficient and transparent options. Digital and mobile-based solutions, new

cost-efficient models in the back-end and even the use of virtual currencies is being tried out by providers.

FinTech Outlook Report – Focus on Payments, Remittance and Blockchain


Current State of the FS Industry and Key Segments:

Payments, Remittance and Leading Drivers (e.g. Blockchain)

Primer

B


Current State of Payments – 2016

• Year 2016 is a special one in the payments world where credit card payments have overtaken the cash payments for

the first time.

• And we all know that global non-cash transaction volumes have been growing at 8% to 9% every year.

• In 2015, global payments revenue was $1.16 trillion, representing 29% of banking revenues. The growth engines are

transaction-related revenue (around 40%) and account-related (around 34%).

• Key drivers for the revenue are movement from cash to e-payments and broader financial Inclusion.

Mature and Emerging

economies are moving

at faster rates fueled by

the regulatory

environment, economic

and population growth,

migration from cash to

non-cash and rise in

financial inclusion.

With growing non-cash

transaction, alternative

payments are estimated to

account for 59% of all

transaction methods by 2017.

Alipay and PayPal continue

to dominate globally as the

most prevalent e-wallet

types.

Emergence of specialized

mobile payment solutions

are growing with technology

advances and rising

smartphone penetration.

The value of mobile

transactions are expected to

reach $117 billion by 2017.

Within 10 years, the

revenue from APAC

(Emerging) will surpass

North America.

Western Europe is

expected to fall while

Latin America will gain.

$$


• Innovation in open loop, closed loop and integrated payment apps are augmenting customer and merchant experience.

• Payment processing transformation acting as a key to meet the next-generation payment methods.

• Emerging economies are witnessing disruptive growth in financial services.

• Growth of RTP across the globe is providing FIs with the functionality and features to innovate for the future.

• Digitization of payments lies at the top of agenda for all market players. End-to-end customer experience that maximizes security,

reduces complexity and provides a compelling value add would be the winner.

Developments in the Payments Space

• The Apple, Android and Samsung

Pay eligible/user populations are

becoming more mainstream.

• Merchants are realizing that

mobile pay acceptance is a driver

to merchant selection whether

users are shopping in-store, in-

app or on the web.

• Contactless spending is expected

to continue to increase in a

number of markets.

• Contactless ticketing adoption in

2016 will be driven by the

following key markets; Asia

(including Japan, China, Hong

Kong and Taiwan), Russia,

France, Spain, the Netherlands

and Italy.

• This is expected to give NFC

ticketing a similar boost to that of

the retail sector.

• Emerging as threat to the

traditional issuers.

• Consumers adopt mobile

commerce experiences, not just

another payment type.

• Visa and Mastercard are creating

easy on-ramps for issuer wallets.

Alternate Payments Mobile Wallets

Contactless

Payments on the Rise


Current State of Real-Time Payments – 2016

• There are currently 18 countries ‘live’ with RTP systems, 12 countries that are ‘exploring/planning/building,’ and an

additional block of 17 countries that are ‘exploring’ through a pan-Eurozone initiative.

• ISO 20022 is seen as a way to improve payments efficiency, to create a common, level playing field.

• In the United States, the Federal Reserve Board has called for the implementation of “a safe, ubiquitous, faster payments

capability” and The Clearing House has announced that it will create a national RTP system.


Current State of Remittance – 2016

• In 2015, worldwide remittance flows are

estimated to have exceeded $601 billion. Of

that amount, developing countries are

estimated to receive about $441 billion,

nearly three times the amount of official

development assistance. The true size of

remittances, including unrecorded flows

through formal and informal channels, is

believed to be significantly larger.

• High-income countries are the main source

of remittances. The United States is by far

the largest, with an estimated $56.3 billion

in recorded outflows in 2014. Saudi Arabia

ranks as the second largest, followed by the

Russia, Switzerland, Germany, the United

Arab Emirates and Kuwait. The six Gulf

Cooperation Council countries accounted

for $98 billion in outward remittance flows in

2014.

Remittances

• New online players have emerged and have

raised the bar in terms of customer

experience (digital/mobile channel) and

costs of remittance.

• Almost all major players successfully raised

new funding rounds in the past six months:

WorldRemit – $45M (total – $192,7M),

TransferWise – $26M (total – $117M),

Remitly – $38.5M (total – $61M), Azimo –

$15M (previous round – $20M).

• High scope for mergers as customer

acquisition is quite expensive.

• Social remittances hasn’t picked up except

WeChat.

Online Remittances


Current State of Remittance – 2016

Highly fragmented, with market growth attracting additional participants .

The incumbents… …niche players… …and innovators.

• Big cash-to-cash players wary of

cannibalization

• Look to retain end-to-end control of

the service

• Cherry-picking specific corridors

• Leveraging ethnic market loyalty

• Market share increasing rapidly

• Generating the biggest flows towards

mobile money services

Annual Remittance Market 2015: $582 BillionRemittance Companies Powered by

Blockchain Technology

~ 85% Cash

~ 12% Bank

< 3% Other (mobile wallets, cards, etc.)


Current State of Blockchain – 2016

• Expected to be the future of financial infrastructure

and could lead to rewiring.

• Awareness of Distributed Ledger Technology (DLT)

has grown rapidly, but significant hurdles remain in

large-scale implementation.

• Digital identity is a critical enabler to broaden

applications to new verticals; digital fiat (legal

tender) has the ability to amplify benefits.

• Applications of DLT will differ by use case, each

leveraging technology in different ways.

Blockchain

Implementation of the blockchain technology as real business is curbed by the very benefit that if offers.

The technology is developed for mass adoption (with all stakeholders involved) and has no use without it.

• Most projects (a range of wallets and money transfers has

appeared over the last half-year) are in their experimental and

product adjustment stage and have a long way to go to influence

the market. There are a few projects (such as Everledger) which

could show scale but there is a need of many such projects.

• Rising of Etherium “The digital currency ether has been

generating substantial visibility, a development that could draw

attention – and trading activity – away from bitcoin.”

• R3 completes “biggest-ever” trial of blockchain solutions with 40

banks.

• Debate emerges over speed of blockchain adoption – will major

changes take place soon (e.g. within two years) or 5–10 years

away?

Areas of

Focus

Corporate

BondsRepos Swaps Insurance

SystemInteroperability

Payments SettlementTrade

Finance


Current State of Blockchain – 2016

DLT Activity

Global

Interest

Bank

Experimentation

Research Venture

Capital

Consortium

EffortsPilots

80% of banks predicted to

initiate DLT projects by 2017

Over US$ 1.4 Billionin investments over the

past 3 years. VC

investment in blockchain

startups exceeds

bitcoin startup investment

for first time

2,500+ patents filed

over the last 3 years

24+ countries currently

investing in DLT

R3 completes “biggest-ever”trial of blockchain solutions with 40

banks

Microsoft’s Azure Blockchain-

as-a-Service (BaaS) adds 21

new partners Hyperledger

Project grows to 40 members


The Emerging Technology and Market Forces

Constellation

C


CloudFinTech are major adopters of the cloud services. Apart from scalability

and cost benefits, cloud service providers also help FinTech startups

build compliant IT Infrastructures.

OmnichannelBanks are looking to integrate their multiple digital channels into an

omnichannel customer experience and leverage their existing customer

relationships and scale.

APIsThe incorporation of application program interfaces (APIs) enables third

parties to develop value-added solutions and features that can easily be

integrated with bank platforms.

Big data, AI & CognitiveThe growth of digital universe across industries has led to the Big Data

revolution. Some of the areas in financial services that are seeing major

overhaul include credit scoring, customer acquisition and retention, risk

management, investment management.

Another growth segment has been cognitive sciences. The explosion of

data availability and lowering data storage costs has led to better

customer behavior models built utilizing machine learning, artificial

intelligence and natural language processing techniques.

IoTThe IoT focus for financial institutions has been on products. The most

important business process improvement is tailoring their products and

services for customers. From recognizing customers who step into a

branch, to customers who favor drive-through banking to pay for

products at places like restaurants and gas stations while in their car,

have all been possible with IoT technologies.

Omni

Channel

APIs

Big data, AI

&

Cognitive

IoT

Cloud

Technologies

Key Technologies Shaping FinTech


What's Next From a FinTech Perspective?

• API-based financial services are on the rise. In fact, APIs are the main reason that startups are able to build their products faster.

• Open APIs enable developers to build customized applications that cater to users across the board.

• As FinTech startups continue to benefit from open APIs, banks are also waking up to the fact that offering an open API is the way to

engage and retain their digital customers.

API Based

• The demand for wearables such as smartwatches and smart fitness wristbands has escalated substantially over the last few years.

• In fact, many financial institutions have displayed a deep interest in wearable technology.

• About 82% of financial professionals believe that smartwatches will facilitate financial transactions in the future! What’s more, 72% of

these professionals have wearable applications on their three-year road.

Wearables

• Twitter has proven to guide and help predict the stock market. Some examples of how tweets can move stock prices include 20%

plummeting of Twitter’s stock after disappointing quarterly earnings were tweeted ahead of their expected release. On the other

hand, Tesla’s shares jumped four percent when Elon Musk tweeted about a new product line.

• With around 85% of US equity trades being executed by algorithms, the trend of predictive analysis through social media is on ly

going to grow in 2016.

• Apart from equity trading, rising social media usage has led to better behaviour profiling of customers, personalization of offers,

security features based on users location, customer service management and other services being adapted by financial institut ions.

Social Media

• Banks have recently begun to leverage technology to improve processes, customer experience and security.

• There has been a convergence of banking and FinTech, especially since both are evaluated on the same metrics by regulators, investors and

consumers.

• This trend will continue in 2016 as the difference between traditional banking and FinTech disruptors gets blurred.


The threat of disintermediation in the payments industry is both real and imminent

• The world of payments remains in constant flux, reflecting an ongoing rebalancing of power among incumbent banks, digital

giants, financial technology (FinTech) startups, card networks, and of course, consumers and merchants.

• Driven by rapid advances and investments in digital payments offerings and capabilities, the global payments landscape is

undergoing a profound transformation.

By 2017, alternative

payments will account for

59% of all transaction

methods.

New payment players

defining frictionless user

experience.

Shift would have big

impact on sources of

revenues across market.

Two markets emerge:

Developed: Customer

convenience and front-end

innovation.

Emerging: Financial

inclusion and way to reach

customer innovation.

New Methods New Players Rev Impact Markets

Retail Payments/Remittance Future – Market Forces at Work


Snapshot of

2017

D


Share of Global Revenues in % Terms Is Going to Change Quite a Bit by 2024

28% 28% 28% 27% 24%

20% 21% 22% 22% 27%

16% 15% 14% 13% 11%

13% 14% 14% 14% 15%

10% 9% 9% 9% 8%

8% 9% 9% 9% 8%

3% 3% 3% 3%4%

2% 2% 2% 2% 3%

2014 2015 2016 2017 2024

N. America APAC W. Europe Latin America

Asia Pacific E Europe Middle East & Africa RoW

2014 - 2017

World Wide

100%


Volume, Value and Total Revenue

145 153 163 173

273307 320 337 354

478

2014 2015 2016 2017 2024

46 49 52 5692

145 161 169 179

295

2014 2015 2016 2017 2024

32 34 36 3858

8798 104 112

168

2014 2015 2016 2017 2024

99 98 101 105 137

172 167 169 170

215

2014 2015 2016 2017 2024

40 45 50 55 109

221 236 262291

543

2014 2015 2016 2017 2024

8 9 10 11 25

29 30 3439

77

2014 2015 2016 2017 2024

432 453 481 512 811

1090 1145 1215 1293

1989

2014 2015 2016 2017 2024

910 11 12 22

2326 28

31

57

2014 2015 2016 2017 2024

North America Eastern Europe Western Europe

Latin America Middle East & Africa Asia Pacific

World Wide Rest of the World

Value ($ Bn)Total Revenue ($ Bn)Volume (Bn)


Emerging Markets

Payments: 2017 Outlook

North America

• Credit cards continue to

generate bulk of revenue.

• Issuers to focus on digital

channels.

• Focus on m-wallets to ensure

engagement.

Europe

• Payment revenue under

pressure due to regulatory

framework.

• Focus on pricing models as

transaction fees are squeezed

and interest income on

accounts has shrunk due to

low interest rates.

Asia Pacific

• Clear winner.

• High margin cards source of

strong transaction revenue.

• Digital channels are key as

markets are value-conscious.

• Strong growth from emerging markets.

• Transaction revenues are a source of

growth.

• Strong government and industry initiatives

to move towards e-payments.

Developed Market

• Stable slow growth.

• Integrated payment applications are

augmenting customer and merchant

experience.

• In-app payments where the payment

mechanism is embedded in the mobile app.


How Would 2017 Look Like for Blockchain?

• About 15% of banks and 14% of financial market institutions intend to implement full-scale, commercial blockchain solutions

in 2017.

• Faster than expect adoption of blockchain by banks.

We will likely see a number of

real-life applications of

blockchain applied to

payments, beyond digital

currencies, in the next five

years.

Private permissioned

blockchain-based systems will

gain significant transaction

volumes.

Digital currency will evolve and

be more accepted in the

mainstream. Most of the

countries would start looking at

having a digital currency of

their own.

IoT and digital payments will

ensure a more automated and

seamless retail customer

experience.

Transition to a blockchain-

dominant payment system will

depend mainly on

interoperability.

Direct payment flow between

two end points would be a

reality.


How Would 2017 Look Like for Cross-Border Remittances?

Estimate and Projection for Remittance Flow to Developing Countries ($ Billions)

0

100

200

300

400

500

600

700

2015E 2016F 2017F 2018F

Regions 2015E 2016F 2017F 2018F

World 581.6 603.2 626.4 651.3

Developing Countries 431.6 447.9 465.7 484.7

East Asia and Pacific 127.0 131.0 135.5 140.3

Europe and Central Asia 34.6 36.3 38.3 40.3

Latin America and Caribbean 66.7 69.3 71.9 74.6

Middle East and North Africa 50.3 51.6 53.0 54.5

South Asia 117.9 123.3 129.3 135.8

Sub-Saharan Africa 35.2 36.4 37.7 39.1

Regions 2015E 2016F 2017F 2018F

World -1.7% 3.7% 3.8% 4.0%

Developing Countries 0.4% 3.8% 4.0% 4.1%

East Asia and Pacific 4.2% 3.2% 3.4% 3.6%

Europe and Central Asia -20.3% 5.1% 5.4% 5.2%

Latin America and Caribbean 4.8% 3.9% 3.8% 3.8%

Middle East and North Africa -0.9% 2.6% 2.7% 2.8%

South Asia 2.0% 4.6% 4.9% 5.1%

Sub-Saharan Africa 1.0% 3.4% 3.7% 3.7%

In $ Billions

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

2015E 2016F 2017F 2018F

In % Growth Rate


The growth rate of remittance flows to developing

countries is projected…

Cross-border remittance revenue…

The non-banks using proprietary networks….

High penetration of mobile banking and last mile

connectivity has led to surge of firms…

Remittances to developing countries are

expected …


to

RISE

to

RISE

will

INCREASE

have

CAPTURED

offering

LOW VALUE

Cross-Border

Remittances

Significant

Market Share

In All

Regions

4% a Year in

2016-17

4% a Year in

2016-17



• Existing business

model under

pressure from newer

business model.

• Decrease in

remittance fee.

• Global average fee is

expected to reduce to

7.52%.

• Uptick in overall

remittance growth.

• In 2015–16, the

remittance growth slowed

down owning to weak

economies and weaker

currencies.

• This trend is likely to

reverse due to US

recovery.

• Social media for money

transfer.

• Exploring social media

for money transfer.

• According to the World

Bank, 90% of money

transfers happens

between friends and

families.

$$

The titans (WU, Moneygram, likes) of the “cross-border money transfer” market, with a ~15%

worldwide market share, are being challenged by multiple well-capitalized upstart companies targeting

the

$582-billion remittance market.


How Would 2017 Look Like for Real-Time Payments?

SWIFT announced a global initiative designed to use its existing global network of correspondent banks

to enable same-day payments between businesses anywhere in the world.

• The emergence of innovative real-time payment services is having a transformational impact on the underlying payment

systems.

• Interoperability and efficiency gains are key aspects for both FIs and regulators.

• Adoption of ISO 20022 would be a trigger point for faster adoption of real-time payments.

• Standardization and innovation is the key.

• Focus on speed and making it better.

• Non-bank network players such as Dwolla and Pop Money.

United States

Big banks in the US have a “growing sense of urgency that they are behind and getting. Testing for real-time

payments should go live toward late 2017. US real-time payments initiatives are ambitious and focused on

ubiquitous payments, with the top 24 US banks accounting for 60% of the industry. Of course, the real challenge is

reaching the entire financial ecosystem, which encompasses 14,000 financial institutions in the US.

Europe

The real-time payments services in the Single Euro Payments Area that was created by the European Payments

Council has goals to be in place on that timeframe.


Incumbents

and Startups

E

Opportunities & Challenges


Key Opportunities for Startups

More than 20% of

FS business is at risk

to FinTechs by 2020.

FinTechs are

succeeding

where banks

have failed.

Disintermediation: FinTech’s most powerful weapon

Key Drivers: Radical shifts to client demographics, behaviors and

expectations.

Expectations: State-of-the-art customer experience, speed and

convenience will further accelerate the adoption of FinTech solutions.

Funding of FinTech startups

more than doubled in 2015

reaching $12.2bn, up from

$5.6bn in 2014.

Consumer banking and payments, already on

the disruption radar, will be the most exposed

in the near future, followed by insurance and

asset management.

Customer centricity is fueling disruption:

FinTech is riding the waves of disruption with solutions that can better

address customer needs by offering enhanced accessibility,

convenience and tailored products.

20%


Key Opportunities for Startups

Region Segment Total MarketFinTech Addressable

PotentialExamples

GlobalPayments &

Remittance$1.1 trillion (revenue)

$110 billion

(revenue) • Stripe has processed an

estimated $20 billion in

payments volume in 2015.

• Adyen & Braintree both

processed $50 billion each,

(payments volume in 2015).

• TransferWise: An estimated

$6.6 billion transferred in 2015.

United States

Consumer

Payments

Consumer

Remittance

$91.5 billion

(revenue)

$3.8 billion

(revenue)

$15.5 billion

(revenue)

$950 million

(revenue)

Global Asset/Wealth/

Investment

Management

$76 trillion (AUM) $2.5 trillion (AUM)• Betterment $3.9 billion AUM

• Wealthfront $3 billion AUMUnited States $30.1 trillion (AUM) $1 trillion (AUM)

Global Lending$4.7 trillion

(loan origination)$1.6 trillion

• Lending Club $15.9 billion

• OnDeck $1.9 billion


Key Opportunities for Incumbents (Banks)

Customer

Relationship1 |

Banks have been the

backbone of modern

economies since

their inception and

will continue to be

so well into the

future.

FinTech Need

Banks 2 |

Banks have gone

through legal and

regulatory

compliance for

years. FinTech would

definitely to

collaborate with

banks.

Data and

Trust3 | Scale 4 |

Banks have big data

— really big data.

The new

technologies would

enable banks to

reduce the cost of

operations and

innovate.

Banks’ sales force

and customer

service

infrastructure are

huge.


Key Challenges Faced by Banks (US)


Key Challenges Faced by Startups

While FinTechs have been quick to move ahead on the technology innovation and customer relationship, they have huge

disadvantages in terms of retail presence (channels) and regulation/compliances. The other key handicap would be brand/trust

and data which is critical for scaling up.

Bank/FI Profile

Retail

Presence

Organizational

Knowledge of

Money Movement

Infrastructure

Loyalty/

Customer

Relationships

Regulatory

Infrastructure

including Legislative

Influence &

Compliance

BrandOperational

Infrastructure

Technology

/UX/UI

Top 10BofA, Wells, Citi

Regional

BanksSuntrust, BB&T

Credit Unions/

Community

Banks

Online/ mobile

only BanksCBW, MetaBank,

Ally Bank,

Synchrony

FinTech ? ?


Game Theory

F

A Game Theory View of Winners and the Residual Forces of Cooperation


Many banks are realizing that they need to act and are planning their future

actions to partner or compete with startups.

Innovation is at the top of the strategic agenda.

Winners (and WAR) or Coopetition (and Cooperation)

• A clear intent to innovate will be important. The sooner banks start working on improving experiences and the farther

they are ready to go, the winners and losers will be separated.

• Open Innovation and Open APIs are the underlying drivers for the next phase of growth that banks are set to

explore. This is seen as a natural step forward to embrace the growing need for co-development, reusability and

agile/rapid application development requirements.

• The rhetoric around FinTech disrupting the banks is tapering down and giving way to discussion around cooperation and

partnerships.

Banks and FinTechs

are working

together now.

Consumer Behavior and Technology Drivers are forcing banks

to innovate and close the gaps.

The FinTech threat is very real. The most profitable services for

banks such as lending/loans are being targeted and mainstream

customers are opting for new experiences.


Internal

Incubator

Strategic alliances with FinTech players:

The goal is to explore new business

opportunities, technologies and to share

knowledge.

Designing, developing and applying internal

initiatives with the collaboration of 'intern'

entrepreneurs or developing projects in

conjunction with strategic partners.

A few banks have reinforced their capacities

and expertise in design, big data and user

experience through the acquisition of innovative

business models such as Simple, Atom,

Holvi or SpringStudio.

Strategic

Alliances

Digital M&A and

Direct Investments

What are the ways for Co-operation


Game Theory Approach for Banks & FinTech Startups — Win for All

• Innovation loss

• Longer GTM timelines

• Legacy overrule

• Siloed efforts

• More investments

• Innovation loss

• No result competition

Compete

• Service accessorization

• Industry innovation

• Win-Win model

• Legacy & innovation alignment

• Shorter GTM

• One sided innovation model

• Un- sustainable

• Industry distrust

• Distress industry consolidation

Collaborate

BanksF

inTe

ch

Sta

rtu

ps

Co

mp

ete

Co

lla

bo

rate


Working Together

Co-Exist

Compete

Finding Niche

Startups like Lending Club and Square are

growing into billion-dollar businesses overnight,

and they have the potential to become mini-

banks in their specialized areas within the next

five years. These new companies are

attempting to scale their core businesses with

other diversified offerings. Venmo, for example,

is a free digital wallet that has opened the door

for merchants to use their credit facilities.

Creating Capabilities

BNY Mellon and several other banks are

working with the digital payments company

Early Warning® to automate business-to-

consumer (B2C) payments without requiring

their business customers to store and maintain

consumer banking information (e.g., transit

routing and account numbers). Banks can offer

this solution to their business clients who need

to make payments to consumers who hold US

bank accounts.

London-based TransferWise, the

money transfer firm valued at $1

billion, has integrated its service into

the smartphone app for LVH,

Estonia's largest bank.

BBVA Compass teamed up with the

online investment company

FutureAdvisor, with the hopes of

reaching a new segment of customers

with an appetite for lower-cost

automated advice. Again, this kind of

tiered offering – robo-algorithms,

supplemented with personalized

human guidance at a higher price

depending on customer requirements

– is intended to expand and enhance,

rather than replace, banks’ current

services.

Collaborate

Examples


Takeaways

G


• We are seeing almost a perfect storm for technology-

and experience-driven consolidation and/or atrophy

over the next decade, as opposed to macro-

economic/financials-driven structural changes.

• Over the next 5–10 years, the financial services

delivery will not remain with the incumbents and

FinTech players of today. Enabled by open APIs,

commerce players, brands and others would be able

to accept payments and disburse loans using bank

APIs directly.

Takeaways…

Takeaways


Almost every FinTech startup wants to disrupt the big

banks, but the problem is that it isn’t a fair fight. The US

banking sector (and globally) is so entrenched and

protected that challenging it from the outside is an

exercise in futility. The smart startups know this and will

use it to their advantage. In this coming of FinTech 3.0,

FinTech startups will partner.

FinTech 2.0 based innovation

starts when incumbent players in

the market were trying to leverage

their considerable resources to

remain competitive amongst

startups. Everyone from American

Express to Bank of America now

have “innovation centers” where

they try to foster the startup

mentality while leveraging their

established brands and

infrastructure.

The challenge, of course, is that

no matter how hard they try,

incumbents can never match the

agility and risk appetite of

startups. Corporate politics,

changing strategies, and an

overwhelming desire to protect the

brand serve as hindrances to

innovation.

At the end of 2008 financial crisis,

new regulations and changing

consumer demands began to

emerge as the world tried to pick

up the pieces of the “great

recession.”

These changes made certain

lines of business significantly less

profitable for banks and other

financial institutions, creating an

opening for tech-enabled startups

and brought up FinTech 1.0 to

step in and fill the void. This

coupled with the changing

demands of consumers and the

democratization of big data, led to

a FinTech renaissance of sorts.

1.0

FinTech

2.0

FinTech

3.0

FinTech

FinTech 1.0 to 3.0 ..

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fintech outlook for 2017 report discussing trends, opportunities and challenges

Economy & Finance