This presentation examines trends and innovations in financial services (focusing on banking, insurance, credit cards). In the last few years, the financial services industry has undergone a digital evolution. Now, it is time for a digital revolution, due to growing disruptive "Fintech" start ups and their innovative models.

1. Financial Services Trends &
Innovations: the Digital Disruption
Schieber Research | April 2016

2. Introduction
• This presentation examines trends and innovations in financial services (focusing on
banking, insurance, credit cards). It is the 2nd report in the series, with the 1st published in
2014.
• The presentation is based upon the Schieber Research Disruption Model which
examines the following elements:
Consumer
demand
• unmet / new needs
created by macro
changes
Market trends
• rate of innovation
adoption
Trend setters
new & promising start
up companies
affecting the industry
Best in class
• competitors ahead
of the curve

3. Disruption Model (1): Consumer Demand
• The following Consumer Mega-Trends are affecting the current
state of financial services:
– Collaboration economy – driven by social media
– On the go behavior – driven by intensive lifestyles and the rise of
mobile technology
– Convenience seeking – driven by connectivity (“the internet of
things” and wearable technology)
Consumer
demand
•unmet / new
needs created
by macro
changes

4. Consumer | Mobile Penetration Data
• Global Mobile penetration continues to
rise, giving birth to more on the go mobile
financial solutions
Ericsson 2015
the Discover card
offers a mobile app
enabling to freeze
your account using
Freeze itSM, an on/off
switch that lets you
freeze your account in
seconds to prevent
new purchases, cash
advances and
balances transfers if
you misplace your
card.

5. Consumer | Social Penetration
GlobalWebIndex & Statista, 2015
• Time spent on social networking by internet users worldwide is on the rise,
causing more sharing and peer to peer behaviors resulting in the
“collaboration economy”

6. Consumer | IoT & Wearables
• Internet of Things continues to grow, including Wearables.
Ericsson 2015; IDC 2015
Visa is expanding its Visa Ready program to include Internet of Things (IoT) companies, such as
manufacturers of wearables, automobiles, appliances, public transportation services, clothing and almost
any other connected device

7. Consumer | Wearables
• According to research from Intelligent Environments
(October 2015), nearly half of 18-30 year-olds have used a
smartwatch to deal with money matters in the UK
Nationwide strategically focuses on
delivering value to customers through
digital innovation, with its Innovation Lab
projects harnessing emerging
technologies including next generation
biometrics, wearables, future payments,
artificial intelligence and beacons. The
company’s N.Band successful trial
allowed customers to make contactless
payments using a wristband for any
transaction under 20 GBP
NatWest bank - Apple Watch

8. Disruption Model (2): Market Trends
• To respond to the aforementioned needs and behaviors, the market is
undergoing a shift towards digital financial services.
• Online banking adoption rates still haven’t reached 50% in the EU, but
in some countries, as well as in the USA, penetration surpassed 50%.
• We expect Mobile financial services to grow at a faster rate, due to the
increase in solutions offered through mobile devices as well as
younger demographics demand for ultra-convenient solutions.
Market
trends
•rate of
innovation
adoption

9. Market Trends | Rate of Disruption
• The World Economic Forum has identified
11 clusters of innovation exerting
pressure on traditional business models
• According to the WEF report, the most
imminent effects of disruption will be felt
in the banking sector; however, the
greatest impact of disruption is likely to be
felt in the insurance sector
Source: WEF, “the Future of Financial Services”,
http://www 3fdp.secivres_laicnanif_fo__erutuf_ehT_FEW/scod/gro.murofew.

10. Market Trends | Rate of Disruption
• Citi believes that personal loans
are the closest and biggest threat
in terms of disruption by new
entrants, followed by digital
payments. The company believes
that the mortgage market is more
resilient to disruption.
However, in our opinion, mortgage is set for disruption, being a
complicated and stressful – yet rather common – task. For
example, Rocket Mortgage by Quicken Loans claims that it has
reinvented the mortgage process to put the power in the hands of
the consumers.

11. Market Trends | Digital Banking Adoption
55.1%
46%
USA EU
Digital Banking Penetration, 2015,
% of adult population • Perhaps surprisingly, Statista data demonstrates that
digital banking penetration has not yet reached 50%
of adult population in the EU, while in the US
penetration stands on 55.1%.
• Schieber Research expects digital banking adoption
rates to rise, with 39% of 18 – 34 year olds in the US
saying that they would consider switching to a bank
with no physical branches (a purely digital bank),
compared to 29% of 35 – 55 year olds and 16% of
55+ (source: Accenture).
• The growth will be driven from mobile banking
adoption, due to the rise in on-the-go activity, affecting
payment and insurance transactions. Already, the
main reason for using mobile banking among
millennials in the US is convenience and time saving.
• According to a new report commissioned by Fiserv,
the number of UK mobile banking users is set to
almost double from 17.8 million to 32.6 million by
2020.

12. Market Trends | Mobile Banking Adoption
• In the UK, 27% of people used mobile banking in 2014, compared to only 10% in 2011 (source:
Accenture).
37%
49%
44%
41%
44%
40%
41%
35%
37%
33%
26%
25%
23%
38%
56%
50%
48%
48%
43%
42%
38%
37%
34%
34%
27%
22%
17%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Europe
Turkey
Netherlands
Poland
Spain
Austria
Luxembourg
United Kingdom
Italy
Germany
Czech Republic
Belgium
France
Romania
Share of respondents
2013 2014

13. Market Trends | Fintech Adoption
• According to Ernst & Young
(2015), Fintech adoption is
the highest in Hong Kong
(29% of digitally active
people have used at least 2
fintech services in the last 6
months), followed by the US
(17% of consumers).

14. Market Trends | Personalization
• The accumulation of data from digital transaction creates new
opportunities for segmentation, and consumers will increasingly
demand personalized offers from their financial service providers.
According to Lloyds Bank, online
users typically make 10% to 15%
more contact with the bank than
face-to-face users, so they
represent a great opportunity for
banks, data and sales wise. By
analyzing the spend patterns of
customers, Lloyds is able to
provide users with better offers.

15. Disruption Model (3): Trend Setters
• Fintech companies are offering new ways of responding to consumer
needs.
• While existing competitors need to adopt more slowly, developing
channel after channel, start ups are concentrating on entirely digital
solutions, thus designing cutting-edge solutions which in turn, create
new consumer expectations.
Trend
setters
new & promising
start up
companies
Schieber Research separates between “tech based financial services”
(those relying specifically on digital channels and would not have existed
without use of technology), and “digitally adapted financial services”
(those which utilize channels / capabilities which are not digital in
addition to adapting to the digital age).

16. Trend Setters | The Disruptors
• According to research by Citi, investments in financial technology have grown exponentially
in the past 5 years, rising from $1.8 billion in 2010 to $19 billion in 2015 — with over 70% of
this investment focusing on the "last mile" of user experience in the consumer space.
• The majority of this investment has also been concentrated in the payments area and this is
where banks are seeing the most competition with new entrants.

17. Trend Setters | The Disruptors
• According to Statista, Fintech segment
transaction value (for Digital Payments,
Business Finance and Consumer
Finance) will reach USD 2.8 trillion in
2016, mostly due to digital payments
transaction value (USD 2.57 trillion) and
experience 19.6% CAGR between 2016
– 2020 to USD 5.7 trillion in 2020.
BI Intelligence – major companies in the Fintech
sector by segment

18. Trend Setters | The Disruptors
• Table by CBInsights: Top Fintech “Unicorns” (worth over $ 1 billion), ranked by value

19. Trend Setters | Comparison & Management Sites
• Complex insurance products
and services are being
disentangled by 3rd party
websites. Therefore,
navigating between different
companies’ solutions will
become easier, and we expect
that companies will build
specialties for specific market
segments rather than a “one
size fits all” attitude.
• Websites such as mint.com enable consumers to manage
their accounts online
• In 2010 Google added a price comparison tool to its
search engine – Google Compare. The platform was
discontinued in March 2016.

20. Trend Setters | Peer-To-Peer Lending
• The term “peer–to–peer lending” has its origins in the facilitation of unsecured
personal lending between individuals (rather than a company) via digital tools.
• P2P lending are a major industry, still far from reaching its full potential:
Lending Club’s IPO filing cites the size of the consumer credit market at $3.2 trillion,
yet most of the market concentrates on US citizens and on specific segments.
• For that reason, traditional competitors have been responding via partnering /
acquiring / investing in competitors. For example, BBVA, Credit Suisse and JP
Morgan, have directly invested in Prosper while Silicon Valley Bank and Norwest
Venture Partners (Wells Fargo) have invested in Lending Club. JP Morgan
partnered with OnDeck Capital, and Goldman Sachs is building a new lending unit,
which has been dubbed “Mosaic”.
• The leading competitors are Lending Club (estimate $ 8 billion in loans in 2015) and
Prosper ($ 3.7 billion in loans in 2015 with revenues of $ 200 million).

21. Trend Setters | Peer-To-Peer Lending
• Competitors such as SoFi and OnDeck are targeting new segments, further contributing to
the overall market growth. For example, SoFi is now the student largest provider of student
loan refinancing.
• According to Bain, 2016, competitors such as WeChat, PayPal and Square now offer digital
messaging or payment platforms onto which they have added short-term finance.

22. Trend Setters | Peer-To-Peer Lending
• Some companies have identified the problem of low credit score, or the lack of credit score,
offering “potential based” loans.
Upstart: “Founded by
ex-Googlers—fair and
fast personal loans”

23. Trend Setters | HR and Finance Websites
• Fintech competitors have recently entered the
field of small business financial management,
replacing services outsourced to HR and CPAs
personnel.
Gusto offers an app for small businesses,
with services like automatic tax filings &
digital paystubs, as well as workers’
compensation.
Abacus provides a way for businesses to reimburse their
employees for company expenses, reconcile corporate
cards, and implement expense policy

24. Trend Setters | Mobile Only Banks
• Atom Bank will be the UK's first mobile-only bank and it claims to make banking easier and
more intuitive by offering all of its services through a smartphone app.

25. Disruption Model (4): Best in Class
Established competitors, as well as emerging competitors, use a mix of
strategies to maintain competitive advantage in the financial services
field, including adoption of new technologies (using enabling start ups),
innovation labs (to provide access to trend setting technologies) and
M&As (of disruptive start ups).
Best in class
•competitors
ahead of the
curve

26. Best in Class | Company Strategies
Main strategies in the financial sector:
Google Ventures (GV) is Google’s
investment arm, through which the
company has been investing in
Fintech startups.
Adoption of new
technology
Innovation labs
and accelerators
Fintech start up
acquisitions
Spain's BBVA acquired online bank
Simple in 2014 for $ 117 million.
Amazon Payments has 23 million active
users today, compared to PayPal’s 179
million active users. Now, Amazon is
looking for acquisitions.
Apple Pay is the mobile
payment / digital wallet service
by Apple.

27. Best in Class | Social Adaptation
• Facebook enables people to
send and receive money on its
Messenger chat app.
PayKey is an enabler for industry
competitors, connecting banks to
social media for secure everyday
activities.
NIC Bank Group has announced that it will be the
first bank in Kenya to launch an innovative social
media banking platform, dubbed "NIC KONNECT

28. Best in Class | Social Adaptation
• Bank of America has
implemented Real-Time
person-to-person (P2P)
transactions.
• Aviva partnered with an
independent review company, to
collect, collate and publish
insurance product reviews from
Aviva customers.

29. Best in Class | Mobile Adaptation
• American Express offers Touch ID Log in for
new card members.
In North America, MasterCard began
to roll out “Selfie pay” - Biometric
corporate card program.

30. Best in Class | Mobile Adaptation
• The main challenge in mobile financial
services is keeping them simple and
intuitive, as financial services can be
complex.
The Citibank tablet app replaces lists of
transactions with interactive financial graphs to
make the most of the device’s capabilities.

31. Best in Class | Hyper Convenience
• American Express offers Amex
express check out (an alternative to
PayPal) – “a fast, secure way through
which U.S. cardmembers can check
out quickly online by using their
AmericanExpress.com login”
• In Kyiv, passengers of the Kyiv
metro can pay fares using their
MasterCard contactless cards or
devices while passing through
the turnstile.

32. Remember – How to Utilize Digital for Growth
• Financial Services brands must provide the following advantages in order to
attract new clients and cross-sell new services to new clients:
– Building Trust through: Personal connection (utilizing social platforms),
content ownership / expertise (utilizing blogs, micro sites etc.) and targeting
niches, through transparency.
– Offering Convenience. On time / on place (utilizing mobile devices). Self
service (utilizing mobile, online and tablet).
– Providing Personalization. Online / mobile customizable tools, device-
specific presentation (such as tablets).
– Offering Simplicity. The industry is perceived as complicated and
confusing. Digital channels are enabling new strategies such as
gamification and simple analysis tools.
Source: Schieber Research & Carmelon, Digital-Inspired Trends &
Innovations in Financial Services, 2014

33. Time to Personalize
• Our 2014 report found that convenience, as well as simplicity, were the key growth
drivers for the industry, in terms of customer benefit: time saving, schlepping-free
transactions, etc.; next in line were money saving and personalization. And indeed,
key competitors focused on delivering more convenience through omni-channel
tools, with a specific focus on mobile devices.
• This report identifies personalization as the key driver for today’s companies, as a
result of the use of Big Data, the rise of Internet of Things (including wearable
devices, smart homes and smart cars); and the growing competition from new
industry disruptors, forcing companies to a deeper understanding of micro-clusters
needs, or a “mix and match” between products and services.
• We expect that in 2016 – 2017 more competitors in the banking, payment and
insurance will focus on micro-segments, followed by an entirely personalized
offer.

34. Thank You!
The research was conducted by:
Hamutal Schieber
Schieber Research | Market Research & Competitive Intelligence
www.researchci.com | hamutal@researchci.com
Executive Summary. For the full research - please contact
Carmelon Digital Marketing
http://www.carmelon-digital.com