Fintech and other things are coming to Town
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This document discusses the rise of financial technology (Fintech) companies and their disruption of traditional banks. It finds that private investment in Fintech is increasing exponentially, with 1% of banking revenue already migrating to Fintech firms. Additionally, some Fintech companies in China have similar numbers of clients as major banks. The document concludes that blockchain technology could transform legacy banking systems through applications like money transfers.
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Fintech and other things are coming to Town
- 1. Pietro Leo Executive Architect IBM Italy CTO for Big Data Analytics & Watson IBM Academy of Technology Leadership Team @pieroleo www.linkedin.com/in/pieroleo Fintech and other things are coming to Town A reading of “DIGITAL DISRUPTION: How FinTech is Forcing Banking to a Tipping Point” report from Citigroup and other sources 1
- 3. Fintech Financial technology, also known as FinTech, is an economic industry composed of companies that use technology to make financial services more efficient. Financial technology companies are generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software. Source: https://en.wikipedia.org/wiki/Financial_technology 3
- 4. Source: https://www.cbinsights.com/blog/disrupting-banking-fintech-startups/ Fintech are « UNBUNDLING » tranditional banks 4
- 5. Download full report here: https://ir.citi.com/SEBhgbdvxes95HWZMmFbjGiU%2FydQ9kbvEbHIruHR%2Fle%2F 2Wza4cRvOQUNX8GBWVsV “DIGITAL DISRUPTION: How FinTech is Forcing Banking to a Tipping Point” 5
- 6. Which is the level of private investments in global Fintech? Finding: It is increasing exponentially in last 5 years! Major banks are increasing commitments: last weeks: BBVA 250M, Unicredit 200M, ISP 30M - It has now a relevant critical mass: fresh mind and money Growing factor: 10x Source: Ciigroup 6
- 7. 99% 1% Market Capitalization Top 10 Largest Banks vs Fintech Capitalization Data From: https://en.wikipedia.org/wiki/List_of_largest_banks Top 10 Largest Banks Fintech 7
- 8. Which is the target of the new Fintech entrants? Finding: B2C is the major target for Fintech Why B2C dominates? Fintech provides better customer experiences and agility.... better and simplified interfaces.... Source: Ciigroup 8
- 9. Revenue ALREADY migrated from NA consumer banking from OLD to NEW Finding: Only 1% of Revenue already migrated During next 4 years it is estimated that the 17% of revenue in this segment will migrate to Fintech from tranditional banks Source: Ciigroup 9
- 10. China Fintech companies have ALREADY similar number of clients of major banks Finding: High unbanked population, weak consumer banks and high mobile phone penetration make emerging markets ripe for FinTech disruptions. 10
- 11. Less capital-intensive activities are more likely to be disrupted by FinTech Finding: The shift to mobile means a disintermediation of bank branches rather than banks themselves: Specifically, it will mean the shift to mobile distribution being the main channel of interaction between customers and the bank. Payment is the major challenged area of FinTech to the transitional banks 11
- 12. • Credit Karma is a credit- monitoring site that provides free credit scores, reports and monitoring as well as insights into the meaning of that. • Based on the user’s credit profile, the website shows product recommendations, like credit cards and loans. • The company recently raised $360 million in funding rounds, bringing its valuation to $3.5 billion. • The website has more than 40 million members and taps into $2.3 trillion of America’s household debt information. • Credit Karma provides its members with free financial information monitoring, data- driven resources and personalized recommendationsSource: https://www.creditkarma.com/faq/howitworks & https://letstalkpayments.com/22-hottest-fintech-startups-from-silicon-valley/ 12 Credit Scoring Advisor Example
- 13. • Nutmeg, founded in 2012, is UK robo-adviser comany, an online investment service that’s intelligent, straightforward & fair. • Specialising in investments, ISAs & pensions. Capital at risk. • The company recently raised $50 million in funding rounds and 70 staff • Nutmeg has 50.000+ • Nutmeg is loss-making but should be profitable in two to three years, said the CEO Source: https://www.nutmeg.com/ & http://www.reuters.com/article/us-banking-wealth- nutmeg-idUSKBN0OS0W420150612 & http://uk.businessinsider.com/wealthfront- launches-30-update-2016-3?r=US&IR=T 13 • U.S. robo-adviser Wealthfront, founded in 2008 • The company recently raised $129 million in funding rounds and is reportedly valued $700M • It has $2.4 billion in assets under management, thousands of customers • Aim to become an all-in-one financial hub, powered by artificial intelligence. Robo Advisors examples
- 14. New York, FifthAvenue Moscow, Avia Park Clients over time will move almost entirely to mobile channels. Banks will look like Uber The future of the branches is about advisory and consultation rather than transactions. A bank branch is only one of bank distribution channels. 14
- 15. Bank branch levels are forecast to fall significantly given their high cost Commercial Bank Branches per 100k Adults Italy Bank Branches: 59.6 Finding: Additional motivations: the increased ubiquity of mobile Internet, increasing FinTech competition and a sluggish revenue and profitability environment France = 38 UK = 25 Sweden = 21 15
- 16. A reduction in banks' physical networks could lead to a 40-50% decline in staffing levels from pre-crisis levels Finding: If the banking system in Europe, Japan, and the US operated with the same cost/income ration as the best-in-class Nordic region, it would remove $175 billion from their cost base (or 23%) and add 39% to the pre-tax profit of the banks in 2016. 16
- 17. There is a strong positive correlation between employee productivity and the banks' profitability The Higher Number of Customers Per FTE, the More Profitable A Retail Bank • Measured By Revenue/FTE • Measured By Risk Adjusted Income/FTE • Measured By Pre- tax Profit/FTE) • Measured By Gross Operation Profit/FTE Finding: The higher unit labor cost in the Nordic and Benelux countries forced the banks to adopt a higher level of automation and digitalization 17
- 18. Next Big Big Thing? > Blockchain could be a catalyst for transforming existing legacy systems Finding: The existing payment infrastructure remains the backbone. But Blockchain technology could be different. It could replace the current payment rail of centralised clearing with a distributed ledger for many aspects of financial services, especially in the B2B world. 18
- 19. Blockchain could be a catalyst for transforming existing legacy systems 19
- 20. ABRA is an example of Fintech company leveraging Blockchain for P2P money transfer Finding: American Express is a key investor in Abra: Blockchain could play an important role in the evolution of money transfer and commerce, especially in emerging markets. 20
- 21. 21 Top 22 Fintech in Italy (according to StartupItalia!) Source: http://smartmoney.startupitalia.eu/open-summit/50790-20151214-migliori- startup-fintech-2015 & http://www.osservatori.net/dati-e- pubblicazioni/dettaglio/journal_content/56_INSTANCE_VP56/10402/1859041 Data •ClickMeter •FacilityLive •Innaas •Quokky •SpazioDati Ecommerce •Brandon •Depop •Eboox Virtual Currencies •Sardex Payments •Growish •Jusp Rating •S-Peek Servcies/App •BeMyEye •DoveConviene •Fatture in Cloud •MoneyFarm Lending •Prestiamoci According to Italian Government We have in Italy 4.500+ start-ups (Fintech and not) officially registered (overall investments in 2015 was 133M Euro)