1. Bart Vanhaeren
Managing Director KBC Securities
CEO Bolero
Co-Founder Bolero Crowdfunding
@BoleroCrowdfund
Fintech conference
Sarajevo
2. Uberization
=
Disruption
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 of JPMorgan remarked in a letter to
shareholders in April 2015.
3. Fintech is nothing mystical.”
Jamie Dimon seemed less
worried about Silicon Valley
taking over Wall Street. On for
instance P2P lending and other
onsite lenders he stated: “Can
we do something like that?
Of course we can.”
The real threat is in the
payments transactions area.
“If you ask me, the biggest risk
will be in the payment systems.”
In march 2016 Jamie Dimon
said on fintech:
4. Before
Music Trading Retail Advertising
After
Global
Music Market
$28B
in 2000
$9B
NASDAQ trading
floor revenues
in 2000
US Newspaper
Print Ad Market
$65.5B
in 2000
$15B
in 2014
$2.5B
in 2014
5.8%
in 2013 but
75%* of growth
is coming
online
$17.3B
in 2013
Percentage
of US Retail
sales through
E-commerce
.09%
in 2000
*
Source: Oracle 2015
Financial impact of disruption
6. Our main advantage is speed, the speed at which
we integrate new things and adapt to them... and the
speed at which we deliver the customer experience.
In a downturn we’ll be adapting faster than others.
We operate in Russia and we adjusted our model to
the recession there.”
Alexander Graubner-Müller, Co-Founder and CEO, Kreditech (interview Crowdfund Insider, March 2016)
“
7. F
53% 70% 33%
Think their bank is
no different to other banks
Think the way we pay for
things will be totally different
in 5 years
Think they won’t need
a bank at all in 5 years
Source: Viacom 2015
8. “Expectations of banks are rapidly changing, and we understand that
we must adapt. The reality is customers demand faster and simpeler
access to their banking services, when and how they want.”
says Richard Davies, chief operating officer for UK commercial banking at HSBC
in an interview with the FT
9.
10. The “selfie” will be matched with a photo from a passport
or driving license.
“We also expect the convenience and speed of a selfie to
become the verification method of choice for our customers
who no longer needto visit a branch to complete the process,”
said HSBC’s global propositions head, Richard Davies in a statement released Monday.
The bank has roughly 45 million retail customers, and is
already using voice and fingerprint recognition software.
“
11. 2015 2017 2020 2023
1.1% 5% 10% 17%
$1.200 billion$1.050 billion$870 billion$850 billion
Total banking
consumer revenue
Revenue impact
from digital
disruption
Source: Citi Digital Strategy
12. Investment in Private Fintech Companies
Increased x10 in the past 5 years
Private Investment in Global FinTech
$1.8 billion
$2.1 billion
$2.4 billion
$4.0 billion
$12 billion
$19 billion
Source: Citi and CB Insights
2010 2011 2012 2013 2014 2015
Last year 19 billion dollar was invested
in Fintech start-ups
13. Source: Sirris
Deals over $1M
Fintech
51
Adtech
34
18
14 12
12
12
Security
LoT
HRtech
Health
care
Number of deals per industry (QI 2016)
14. Source: Sirris
als over $1M
0
300
600
900
1.200
1.500
Healthcare Adtech Travel Fintech Musictech
€140M €149M €188M
€518M
€1.3B
Amount raised per industry (QI 2016)
15. 0 5 10 15 20 25
2
3
10
9
14
6
12
25
2
4
13
1
Segments’ share
of global banking
revenues
Large
corporate4
Commercial
Retail
Large
corporate4
Commercial
Retail
<5%
5%-7.5%
7.5%-10%
>10%
Large
corporate4
Commercial
Retail
Large
corporate4
Commercial
Retail
Customer segments
Products/
capabilities
Account management5
Lending and financing
Payments
Financial assets and capital markets6
Fintech is going after most profitable banking areas
17. …as well as in the institutional banking domain
TRODUCTION
18. China: $66.9 bn
US: $16.6 bn
UK: $5.4 bn
China is past the tipping point with FinTech companies
having similar number of clients as the major banks
20. Alipay
payment
volume
Rmb bn
ICBC
credit card
transaction
CMB
credit card
transaction
0
1,000
2,000
3,000
4,000
5,000
4,825
1,869
1,331
* Alipay payment volumes for 12mos to June 2014 / Source: Company Reports, Citi Research
Current disruption in the payments
sector in China
21.
22.
23.
24.
25. $92.2M
$67.3M
$22M
$128M
Atom Bank
Online-only bank
Series B
$29.6M
RateSetter
Peer-to-peer
lending service
Unattributed-II
$58M
TransferWise
Online money
transfer
Series C
$83M
Ebury Partners
FX/currency services
for businesses
Private Equity
$100M
WorldRemit
Oline money
transfer
Series B
$150M
Funding Circle
Peer-topeer
lending service
Series E
$34.4M
Pret d’Union
Online credit
marketplace
Series D
$22M
Raisin
Marketplace for
term deposits
Series B
$128M
$92.2M
Kreditech
Online lender
Series C
$67.3M
iZettle
Mobile payments
company
Series D
$34.4M
$29,6M
$58M
$83M
$100M
$150M
26.
27. 2012 2013 2014 2015
Series C – II
$200M$4M $4M $7M $15M $40M $92.2M $11M
Total Funding
$372.7M
1 day
since last
funding
Klarna’s funding history
28. Europe’s leading Flintech hubs
During our research we also tracked the headquarters of the TOP 200 early-stage
fintech companies that were founded between 2015 and 2016. On that basis we
created a ranking with Europe’s leading fintech hubs. The word “leading’ reffers to
number of promising early-stage fintech startup, not funding numbers, company
valuations or other metrics.
It was no surprise to us that London is the clear leader in Europe’s financial technology
space. But recent political developments like the Brexit are probably going to impact
the further development of the fintech hub London and it’s European couterparts.
1. London (UK) 6. Frankfurt (Germany) 11. Limassol (Cyprus)
2. Berlin (Germany) 7. Oslo (Norway) 12. Brussels (Belgium)
3. Paris (France) 8. Copenhagen (Denmark) 13. Helsinki (Finland)
4. Amsterdam (Netherlands) 9. Luxembourg (Luxembourg) 14. Madrid (Spain)
5. Dublin (Ireland) 10. Vienna (Austria) 15. Zurich (Switzerland)
35. Source: Company information; UK data from Bank of England statistics
1 Average UK unsecured lending, fixed rate, 1 to 5Y fixed loan as of December 2015 (source: Bank of England statistics)
2 Average UK bank fixed rate deposits from households as of December 2015 (source: Bank of England statistics)
… as superior technology-driven platforms cut out inefficiencies of
traditional lenders…
Traditional Lender
Capital
requirements
Branch
infrastructure
Customer
acquisition
Underwriting
Servicing
Capital requirements
Underwriting
Servicing
Customer
acquisition
P2P Lender
0.0%
2.5%
5.0%
7.5%
10.0%
Cheaper loans
Better returns
Traditional bank loan rate
4.48%
7.98%
P2Pspread
Bankspread
1.71%2
8.37%1
Traditional bank deposit rate
P2P player’s lower cost business model drives value… ...to both lenders and borrowers
PEER-TO-PEERLENDING
P2P Lender
9
36. … resulting in the exponential growth witnessed in the P2P lending sector
Source: Company information; Positive Planet research, “New Insights Into An Evolving P2P Lending Industry”, August 2015
1 Data as of May 20, 2015 from AltFi.com
2 US cumulative lending based on latest available figures for top 3 players including Lending Club, Prosper and SoFi
201420132011201020092008200720062005 20152012
Nascent Period Subprime Crisis Credit Tight Environment Rapid Growth
UK
US
£6.8bn in cumulative
lending in the UK1
c. £23bn in cumulative
lending in the US2
New SEC
regulation for US
P2P platforms
UK government
places funds on
P2P platforms
A-rated
securitisation
$870mm IPO
1st P2P securitisation
by
UK announced P2P
ISA wrapper
announces its
plans to launch
London-listed
fund and to
raise £150mm
– UK related events – US related events
2016
PEER-TO-PEERLENDING
10
announces the
first
securitisation
in the Euro
P2P space
37. The underlying P2P business model is meant to be straightforward and
transparent, directly connecting borrowers and lenders…
P2P platform
Underwriting
Scoring
Servicing
Collection
Lender Borrower
Funding
–
Origination feeFunding
Repayments
+
Interest
+
Servicing fee
Repayments
+
Interest
PEER-TO-PEERLENDING
11
38. …but the pure model only exists in the UK…
Conducive regulatory environment
Supportive government initiatives
Dedicated P2P regulatory regime
FCA regulated (since April 2014)
Direct connection of lenders and borrowers without
financial intermediary
Self-regulating industry body – P2P Finance Association
ISA (tax free savings accounts) eligibility
Bad debt losses offsettable against interest income for tax
purposes
Tax exemption on up to $1,000 of annual earnings from
P2P lending interest
Government deployed its own funds through P2P
platforms¹
Source: FCA; Broker research
1 Through British Business Bank
P2P
lender
Borrowers
Application
1
Cash
Monthly repayment
+ Interest
Origination +
Servicing fee
3
UK model
Borrowers
Application
Commitment
Cash
Loan note
Origination feeCashLoan note
Loan note
Loan proceeds,
net of origination fee
1
2
867
4
3
5
9
US model
Lenders
4
2
P2P
lender
Lenders
12
Partner
bank
PEER-TO-PEERLENDING
39. Lending Club’s share price evolution is an indicator of the headwinds being faced
by the industry, especially in the US
Source: Lending Club press releases, FactSet as of May 20, 2016
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
Dec-14 Mar-15 Jul-15 Oct-15 Feb-16 May-16
Performance since May-16
Lending Club share price
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
02-May-16 11-May-16 20-May-16
Share price evolution of Lending Club
11-Dec-14
LendingClub
rose 56% on
its IPO, on a
list price of
€15.0
4-Mar-16
Class action
lawsuit filed
alleging
LendingClub sold
loans at usurious
rates
14-Aug-15
US Court of Appeals
refused to reconsider
its decision to restrict
marketplace lenders
from bypassing state
usury laws (Madden
vs. Midland Funding)
09-May-16
CEO resigned
after an internal
sales review
over faulty loans
25-Feb-15
Announced a loss
of $9mm in
Q4’14, even as
revenue doubled
Recent developments
In March and April 2016, $22mm of subprime
non-conforming sales were made to a single
unaccredited investor
A few Lending Club employees were aware
that this sale did not meet the investor’s
criteria
In early April 2016, Lending Club
repurchased these loans at par and
subsequently resold them at par to another
investor
The board hired an outside expert firm to
review all other loans facilitated in the first
quarter of 2016
The review began with discovery of a
change in the application dates for $3.0mm
of the loans described above
On 6th May 2016, Renaud Laplanche, the
CEO and Chairman of Lending Club
resigned over loan sale issues
As part of the review, the Board also
discovered that the CEO held an undisclosed
economic interest in a 3rd party fund that
Lending Club was considering to buy
Lending Club also announced that Investors
who contributed a significant amount of
funding for loans have suspended purchases
PEER-TO-PEERLENDING
19
(73.4%)
(49.7%)
Lending
Club S&P 500
Since CEO resigns (43.8%) (0.2%)
3m (55.1%) 7.0%
6m (68.4%) (1.8%)
12m (77.4%) (3.5%)
Since IPO (73.4%) 1.3%
40. VS Asia Pacific Europa Total %
Equity 598.050.000 1.012.390.000 600.155.902 2.210.595.902 1,6%
Lending 33.720.000.000 92.751.730.000 4.008.072.842 130.479.802.842 96,8%
P2B 4.890.000.000 81.459.000 1,398249426 47.334.951.554 35,1%
P2P 28.830.000.000 66.417.000 4,41904934 83.144.851.288 61,7%
Reward 658.370.000 65.081.276 54,24034157 1.737.102.761 1,3%
Donation 215.560.000 166.310.000 33.736.199 415.606.199 0,3%
Total 35.191.980.000 94.841.170.000 4.809.957.704 134.843.107.704 100%
% 26,1% 70,3% 3,6% 100%
Bronnen: Cambridge University. Douw&Koren, The current state of crowdfunding
Crowdfundingmarkt 2015 … wereldwijd (USD)
41.
42. The lending club has made a significant inroad in the lending business
and is considered the posterchild of alternative lending but
43. Maybe but what about funding loan loss ratios
and marketing costs?
44. IPO
Public Market
1st
2nd
Secondary Offerings
Break even
3rd
Mezzanine
Angels FFF
Early Stage
Later Stage
VCs, Acquisitions/Mergers
& Strategic Alliances
Seed Capital
Valley of Death
Crowdfunding
Time
Revenue
45. The chinese peer to peer market is basically
a scam says Guangchang and the president
of Ping an insurance calls P2P “fake”
More than 40 people arrested and put in jail
66 billion
dollar
46. Crowdfunding in België en buurlanden in 2015 (in miljoen euro)
0,9 7,5 1,4 4,4 54,2
10,2
België
128,1
Nederland
113,9
Duitsland
293,5
Frankrijk
3,530
Verenigd
Koninkrijk
per inhabitant per inhabitant per inhabitant per inhabitant per inhabitant
Bron: Eurostat, Douw&Koren
47. Challenges Are High
Marketplace lending or P2P lending offers online platforms to match borrowers and
lenders with the aim of lowering the borrowing cost for borrowers and increasing
returns for lenders. Marketplace lending has been around for over a decade but has
only seen a take-off in growth over the last few years. Zopa, founded in 2005 in
London, is the world’s first P2P lending platform.
Figure 70. Marketplace Lending
Source: Citi Research
We are still at an early stage of development for marketplace lending. Total loans
lent by the P2P platforms are less than 1% of total loans outstanding. Nevertheless,
the market has been growing exponentially, especially in the last three years. In the
US, P2P lending is dominated by two players Lending Club and Prosper, which
together account for over 90% of cumulative lending. The UK has the largest P2P
lending market in Europe and China has the largest P2P market in the world.
China’s cumulative lending of RMB440 billion ($67bn) is close to 4x that of US and
China US Europe
Despite marketplace lending being around
for over a decade, it has only really taken off
in the last few years
Total loans lent by P2P platforms are less
than 1% of total loans outstanding but the
market has been growing exponentially
49. Gemiddeld werd 200k opgehaald door online
crowdfunding versus 500k via traditionele
financieringsvormen
Source: Copenhagen Business School 2014. Master’s Thesis For Cand.soc.sc. Organizational Innovation And Entrepreneurship
In 2012, around 79 per cent of
all crowdinvesting rounds were
of a total volume smaller than
USD 250 thousand, with funding
volume of successful campaigns
averaging at USD 190 thousand.
Compared to this the average
value of BA or BA syndicate deals
at the seed stage averaged USD
590 thousand during 2013.
Equity
USD 190.000
Lending
USD 4.700
Reward
USD 2.300
Donation
USD 1.400
