Fintech is a hot sector among investors, but why? As a fintech focused VC, take a look at our perspective on why financial services is on the cusp of change.

1. Why Fintech?

2. We’re in a golden age of technological transformation
Source: Visual Capitalist

3. An example of technology disrupting a traditional industry
Amazon is a prime example of how technology can transform an industry. Through offering a better customer
experience and reducing overhead costs, Amazon has grown to the point where it’s market capitalization is larger
than those all the publically-traded department stores added together.
Source: Visual Capitalist

4. Financial services stands out in terms of potential value creation
$6.8
$6.5
$4.4 $4.4
$3.7 $3.6 $3.4
$1.8 $1.8
$1.1 $1.1
Market Cap ($T)
Source: Fidelity Investments
As one of the largest sectors in the economy, financial services is a clear target for disruption.

5. Factors opening the way for new financial service providers
Market Timing and
Regulation
Technology
Unmet Demand
Customer
Expectations`
• Low NPS scores for many leading providers in financial services
• Shift in the way people interact with services including financial services (mobile and
online capabilities expected, ability to connect data sources increasingly common)
• Banks running on legacy systems due to the complexity, cost, and risks in migrating to
newer system
• Dropping costs of technology development and spread of online sources of data has
made it much easier for startups to enter the market
• The credit crisis of 2008 and the resulting regulation has impeded innovation as banks
dedicated more resources to compliance and risk management programs
• 17M adults in the US are unbanked and 43M are estimated to be underserved
• New data sources and data science enable companies to provide services that might
have been economically viable before

6. Leading fintech entrants have shown that they can produce returns
1
2
3
4
Clear monetization strategy
Proven and measurable customer demand
Reduced cost structure
Highly scalable business models
5 Exit multiples on par in some instances with internet and software companies

7. Venture dollars have flooded into fintech…
US venture deal count and capital invested has increased dramatically in the last 2 years.
$405M
$783M $639M $607M $685M
$1B
$2B
$2B
$5B
$9B
$10B
58
95 102 116
153
230
333
461
629
705
589
0
100
200
300
400
500
600
700
800
$0M
$2B
$4B
$6B
$8B
$10B
$12B
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total Capital Invested Deal Count
Source: Pitchbook

8. ...spurring innovation across the various subsectors of financial services
Source: Venture Scanner

9. Numerous fintech startups have come to scale
Source: CB Insights

10. And we expect the trend to continue
We're just at the beginning of this renaissance in
alternative lending--and I look forward to the day
it's not called alternative.
- Rob Frohwein, Kabbage