Digital hybrid finance presentation for fintech online-to-offline conference in Hong Kong - how the traditional finance can cooperate with and utilize fintech and digital finance.

1. Grow VC Group ++
www.growvc.com ++
@growvc ++
Enabling Digital Finance ++
Copyrights © Grow VC Group 20161
Digital Hybrid Finance:
Bringing Traditional Finance and Fintech Together
Jouko Ahvenainen, Hong Kong, September 27, 2016
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2. Digital Finance
Companies
Digital Finance
Startups
New Concepts in
Acceleration
Grow VC Group
Worldwide pioneer and leader
in the digital finance, fintech and crowd & p2p finance solutions
Hong Kong - London - New York - San Francisco - Milan

3. Global leader of digital finance groups
■ Started its operations in 2009 being the pioneer to start digital finance service
■ Grow VC Group was the first in the world to launch an online startup equity
investing service in the world
■ The group includes 10 businesses
■ Grow VC Group companies have more than 100 active customers with
millions of end users globally having launched new digital finance services
■ The main hubs are in London, New York, San Francisco and Hong Kong
■ Several its companies are leaders in their own areas, e.g. Crowd Valley,
DealIndex and TradeUp Capital Fund
People
■ Grow VC Group’s management and founders have been listed as top
influencers in the world in digital finance, Fintech, crowdfunding and digital
business
■ Our key people are serial entrepreneurs who have experience to launch
several new companies and products around the world to consumer and
business market
■ Our people have been in executive roles to launch international corporates’
products to new markets and build data analytical approach for go-to-market
and sale
Grow VC Group
FinTech Firm of the Year
Award Winner 2015
3

4. Grow VC Group Works with Industry Leaders
4

5. Demand from capital requirements,
customers and efficiency needs
The Great Disruption
5

6. Finance Sector Challenges
6
1. The finance crisis in 2008 started a chain reaction
that impacted regulation, credibility and business
models of banks
2. More regulation and requirements on capital have
limited banks’ capability to lend to business
customers
3. Digital currencies and especially underlining
technology, like blockchain, enables new ways to
make transactions without payment processors and
banks
4. People and companies are more critical towards finance
institutions and service costs, e.g. in fund raising, wealth
management and asset management
› Leads to try alternative providers
› Crowdfunding and p2p lending have emerged
5. Goldman Sachs has estimated that the alternative finance
addressable market is $3.3 Trillion
6. Average growth rate of the UK alternative Finance market is
159%
47%
68%
23%
49%
UK US
Level of confidence in banks
2008 2013
Source: Edelman Trust Barometer
350m
873m
2337m
0
500
1000
1500
2000
2500
2012 2013 2014
The UK alternative
finance market growth
Source: University of
Cambridge and EY: The
European Alternative Finance
Benchmarking Report

7. EARLY ADOPTERS ARE SKEWED TOWARDS MILLENNIALS
Boomers Gen X Millennials Gen Z
6.2m
We can build a
vibrant digital
community that
increases
connections
► Born 1946–1964
► 4.2% use FinTech
products
5.7m
Established in the
business world,
mostly married with
homes and children
► Born 1965–1980
► 17.9% use FinTech
products
6.2m
Largest customer
group in history,
target group for most
major corporations
► Born 1981–1998
► 28.4% use FinTech
products
5.5m (7m in 2020)
The first truly mobile
generation
► Born 1998–present
► Attention span of ~8s
► Make up ~25% of
workforce in 2020
= 1m customers
Source:
http://www.forbes.com/sites/danschawbel/2013/09/04/why-you-cant-ignore-millennials/
http://urbantimes.co/2013/07/the-difference-between-baby-boomers-gen-x-and-gen-y-infographic/, http://www.huffingtonpost.com/rhonda-l-randall-do/baby-boomers-redefining-
aging_b_1448949.html
EY FinTech Adoption Index http://www.ey.com/GL/en/Industries/Financial-Services/ey-fintech-adoption-index
Grow Advisors material

8. HIGH-INCOME MILLENNIALS ARE PARTICULARLY HEAVY
FINTECH USERS
44%
58%
24%
43%
15%
33%
Current
use
Future
use
6%
18%
Over US
$150,000
US
$70,001-150
,000
US
$30,001-70,
000
Less than
US$30,000
Consumers who have
used at least 2 FinTechs
in the past 6 months
Current and expected use of
FinTech by income segment
US$150,001 over
Source: EY FinTech Adoption Index
US$70,001 - 150,000
Grow Advisors material

9. DRIVERS AND BARRIERS TO THEIR FINTECH ADOPTION
Source:http://www.ey.com/GL/en/Industries/Financial-Services/ey-fintech-adoption-index
9.0% for better quality of
service
Why use fintech?
13.0% do not trust it
Why not use fintech?
52.5% think it is easy to set
up an account
13.4% use for access to
different products and
services
8.1% use for the better online
experience and functionality
7.8% think there are more
attractive fees
51.7% were not aware it
existed
29.1% prefer to use a
traditional Financial services
provider
35.3% did not have a need
to use it
19.0% don’t understand
how it works
Grow Advisors material

10. ALIGNING FINTECH TO THEIR THINKING
Consumers have new expectations of how
they interact with providers of products
and services – these are set outside of
financial services
Companies need to engage emotionally
with their customers
A robust social media strategy is quickly
becoming table stakes for reaching
target consumers
82%
trust a brand more
when an executive
is active on social
media2
73%
used their smart-
phone to
research a
product3
90%
trust peer
recommendations1
Trust
Know me
Human
Guided
Collaboration
Grow Advisors material

11. Two categories of fintech and digital finance
Approach based on products
1. Digital
transaction
processing
• Payments
• Money transfer
• Process
transactions to 3rd
parties
• Success based on
# of transactions
2. Digital finance
services and
instruments
• Investing & lending
• Instruments for
alternative finace
• Success based on
long-term healty
profitability
The success of transactions and instruments are measured
in very different way

12. How incumbents can operate in digital finance?
Form a “white label”
partnership
Launch own digital
finance platform
Collaborate as an
investor or offer
finance instruments
Collaboration models Compete directly

13. Some collaboration examples
Blackrock purchased
$320mio consumer debt
Santander Consumer
agrees to buy 25% of
all loans issued
Estimated 80% of all
loans purchased by
institutions
2/3rd of all loans
purchased by HNWI,
institutions, private
banks
€230 mio. agreement
with Victory Park
capital to lend
through platform +
agreements with
many institutions
Santander direct
borrowers who don’t
meet traditional
requirements
Source: Grow Advisors

14. Translating data into actionable insights to drive business outcomes
TRACK PRIVATE
COMPANIES
RAISING CAPITAL
IN REAL-TIME
USE
INTELLIGENT
FILTERS TO
SCREEN DEALS
HOW DOES
DEALFLOW
FLUCTUATE
OVER TIME?
WHERE’S
INVESTOR
MONEY
GOING?
INTERNATIONAL /
AGGREGATE EQUITY
CROWDFUNDING GLOBAL
INDEX
Equity Crowdfunding Marketplace Lending RE Crowdfunding Online M&A Private Deals

15. Combine, Optimize, and Distribute
Digital Hybrid Finance
15

16. Emerging New API Ecosystems
16
Digital Back Office Services:
• Authentications, transaction processing, user accounts, transaction history, reporting
• Assets and their securities, ownership ‘tables’, finance instrument models
• Interfaces to 3rd party components, databases, ‘blockchain ledger’processing
Payment
processing
Credit RatingID verification3rd party
services
Blockchain
‘type’ services
Investing
Service A
Investing
Service B
P2P Lending
Service A
Users: Private & Institutionals
MarketData
Services
Wealth
Management A
Secondary
Market
Service A
Asset
Management A
Syndicate
Service A
Digital Fund
Service A
RiskManagement
and
insuranceservices

17. Many possible positions in the ecosystem
Wholesale
offering
Consumer
offering
Transaction
focus
Refined
instruments
Independent
offering
API economy

18. Ecosystem example: Crowd Valley –
the fast lane to implement a digital finance service
● 100+ enterprise clients served, including banks
● Digital Infrastructure enables online finance models and
facilitates billions in deals globally
● Open API, Certified Developer Ecosystem
● Use cases from real estate, private company financing,
solar bonds, investment banking, multi asset strategies
● Clients from California to Japan
Digital Finance Infrastructure: a Back Office
platform to create, operate and manage
your online investing or lending marketplace
Origination Compliance
Deal
Origination,
Investor
Onboarding
KYC, AML, ID
Verification,
Accreditation
services
Diligence Execution
Screening,
Deal Rooms,
Document
Access
Control
Payments,
Escrow, E-
Signature
Settlement
Closing &
Settlement,
Digital
Ledgering

19. Four Forces Drive Disruption
19
New finance models and
instruments
2. Distribution: Need for
new scalable cost-effective
distribution channels
3. Instruments: New
Alternative Finance
instruments
1. Capital:
Increased
requirements
to have
capital for
loans
4. Customers:
Look for
competitive
prices and
better ROI

20. 1. Better Capital Efficiency
20
Investors
• Combining equity and lending enables, for example, to
1. Leverage equity investments
2. Get collateral for loans
• Investors can use platforms to attract more co-investors and
syndicate investments
• Participate in the securitization of p2p loans as an additional
option to invest
Banks
• Banks have regulatory requirements (e.g. Basel II / III) to
have a certain capital ratio for their risk-weighted assets
• Even well profitable loans can tie so much capital that
capital requirements make them to have sub par ROI
• Equity investors, other lenders, different lender seniority
levels and use of equity or loan from p2p as a collateral
helps manage the capital ratio
• Possible to develop instruments (funded through platforms)
that can offset loan liability or in cases work as a guarantee
for loans
Ins,tu,onal
Investors or Lenders
P2P Lenders or
Investors
Required Capital
Less capital required,
if other investors or lenders
decrease risk of loans

21. 2. More Effective Distribution
21
Platform as a Customer Interface
• Investors and lenders can operate in equity and lending
platforms
• Platforms take care of many needed processes like
customer acquisition, origination, KYC, Due Diligence,
collection
• Typically possible to choose a risk level
• Open API also enables to automate a part or all of this work
• Requires trust in platforms, and agreements and T&C that
are in line by all parties
Automated Allocation to Smaller Ticket Size
• Pension funds and other large LP’s cannot handle small
investments (e.g. less than $500M) in a cost effective way
• Funds to make smaller investments have significant
management fees
• Technology enables the automation of smaller investments
based on given criteria
• Hybrid models combine automated processes and
professional work
Large Fund (e.g. $100B)
Small
Fund
Small
Fund
Small
Fund
Small
Fund
Investment Opportuni,es
Automated
Inves,ng
Alloca,on PlaMorm
Management
fees

22. 3. New Instruments for Investors
22
New Finance Instruments
• Alternative Finance offers new attractive investment
opportunities and its securitizations make the market more
liquid
• Instruments to invest and lend money in platforms
• E.g. ‘p2p trust’ type instruments
• Securitization of online and p2p loans
• Risk management and guarantee instruments
• Work needed to find optimal regulatory and instrument models
for these instruments (e.g. Open-Ended, Closed-Ended, ETF, or
Evergreen fund)
• Crucial to have enough data from platforms and assets
Fund Simulators
• Technically implemented investment services that work like
funds
• Investors can define their investment criteria, e.g.
• Geographical, industry sector, and risk level
• No costs from traditional management work
Investment /
Lending
PlaMorm
Investment /
Lending
PlaMorm
P2P Fund
Crowd
Fund
Securi,za-
,on
Fund
Simulator
Investors

23. 4. Customers Expect Better ROI and Prices
23
Enable Smaller Fees
• Competition in fund and wealth management business is
more and more about lower fees and more scalable models
• More effective and automated customer acquisition,
investment processes and more scalable investment models
make it possible to cut fees
• Data, Analytics and Artificial Intelligence offer new solutions
to manage and optimize investments and instruments
• APIs to cooperate with 3rd parties
Better ROI with Alternative Finance
• Alternative Finance, e.g. p2p loans, real estate and growth
capital, offers new high return opportunities to funds and
portfolios
• More uncorrelated assets and better diversification
• Need a scalable and cost effective solutions to invest in
different assets
• APIs to invest in Alternative Finance platforms
Investment / Fund Management
Open API
Robo-
advisor
Bank
Investmen
t advisor
Investment
plaMorm
Open API
Investors
Stock
Exchange
P2P
Lending
Equity
Crowdfund
Deal
Aggregator

24. What Enables All This?
24
1. Knowledge and Competence to Develop New Models
■ Combination of finance, banking, technology, and data science competences
■ Important to understand the API Ecosystem and innovate new business models
■ More global knowledge and mindset are needed
2. Data
■ Data enables institutional investors and banks to participate in the market
■ Data is the key component to develop new instruments and service
■ Advanced analytics and Artificial Intelligence (AI) enables new services and instruments
3. Technology
■ Open API
■ Ubiquitous back offices and middle ware for fundamental finance functions
■ Agile models to develop new applications on an open API back office
4. New innovation models
■ Building a new ecosystem, no one can do it alone
■ Accelerate innovation and ecosystem with partnering and open interfaces

25. Where is your organization?
25
Business
Unit 1
Business
Unit 2
Business
Unit 3
Digital Digital Digital
Digital centre of excellence
Business
Unit 1
Business
Unit 2
Business
Unit 3
Digital Digital Digital
Business
Unit 1
Business
Unit 2
Business
Unit 3
Digital centre of excellence
Digital DNA
Digital
Opportunism
Digital
Centralism
Source: Grow Advisors analysis adapted from an original idea by BCG
Pros
• Builds digital tools, digital
processes, and digital talent at
scale
• Provides clear ownership and
specialised expertise
• Delivers integrated and
standardised end-to-end
customer experience
Cons
• Requires a strong mandate to
create change
• Requires strong digital leaders
• Requires tight integration
between the centre and
business units for execution
Pros
• Manages digital policy from the
centre to maintain quality and
create scale
• Entrusts digital execution fully
to business units
• Ensures a cohesive digital
strategy at the enterprise level
Cons
• Resistance from business units
around strategic priorities
• Requires significant resources
in each business unit that
deeply understand digital
Pros
• Champions digital adoption
within the business, building
groundswell of support
• Allows for quick wins
Cons
• Limits innovation outside the
core business
• Creates business-unit-centric
thinking and fragmented
customer experience

26. Summary – 4 points to remember
26
1. Digital and Alternative Finance are changing finance value chain and products
■ More de-centralized models, e.g. based on API ecosystem and blockchain
■ From service silos to more more seamless collected services
2. Four key areas: 1) Capital, 2) Distribution, 3) Instruments, and 4) Customers
■ This is not only about technical, but it is one key driver to enable new services, business
models, better efficiency, and new finance instrument
■ Data is a key components for many new services
■ Develop fast – test – improve
3. Accelerating innovation and competence development
■ Open interfaces are needed to be fast enough and utilize ‘external resources’
■ New comers need to build competence and work with right partners, incumbent must
especially focus on culture and attitude change
■ Digital economy is not just add technology or services, but adapt to a new business
4. Grow VC Group works in the core of these changes
■ Competence, technology, data, global presence, and constant innovating

27. Jouko Ahvenainen – jouko@growvc.com
+44 7889 833 165 (UK), +1 646 363 6664 (US)
Twitter: @jahven, LinkedIn: joukoahvenainen
Grow VC Group - growvc.com
ENABLING
DIGITAL
FINANCE
27
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