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FinTech market |Industryreportandrecommenda2ons

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Executive Summary IndustryOverview…………………………………………………………………3

Industrydefini2on……………………………………………………………………………...

Mainac2vi2es..........................................................................................

Maincompe2tors……………………………………………………………………………….

Keyfigures……………………………………………………………………………4Industrytrends……………………………………………………………………..5

Agrowingindustry……………………………………………………………………………..

AcloserlinkbetweenbanksandFinTechstart-ups……………………………..

Newdisrup2ons………………………………………………………………………………….

Morecompe22on………………………………………………………………………………

Keysuccessfactors……………………………………………………………….7Porter’s5forcesanalysis………………………………………………………8

Compe22veforces……………………………………………………………………………..

Whatdoesthatmeanforyourbusiness?...............................................

SWOTanalysis………………………………………………………………………10Ques2onstoaskyourself……………………………………………………..11

Resources……………………………………………………………………………..12

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Industry overview TheFinTechIndustryusestechnologytomakefinancialservicesmoreefficientanduser-friendly.FinTechcompaniesaregenerallysmallstartupsdisrup2ngthetradi2onalfinancialsector

insuchfieldsasmobilepayments,loans,moneytransfers,fundraisingandassetmanagement.

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•  FinancialCrimedetec2on

•  Cybersecurity•  Financialdata&Analy2cs•  PersonalLending•  BusinessLending•  Paymenttechonologies

•  Cryptocurrency•  Bankingandinsurance•  CapitalMarkets

•  PFMTech

•  Financialconsolidators

Industry definition

Main activities

InBri/shColumbia

•  Payso•  Payfirma

•  Control•  WealthBar

•  Zafin•  Trulioo•  Mogo.ca

InCanada

•  Payfirma

•  Aimia

•  PointsInterna2onal•  WealthSimple

•  Zafin•  Berkeley•  Shopify•  CartaWorldwide

•  Ethoca•  Grouplend•  Verafin

Main Competitors

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Key figures Industry at a glance $20

billionglobalFinTechInvestmentin2015

Otherinteres2ngfigures:•  43%ofconsumersadoptfintech

solu2onsbecausetheyareeasytouse.

•  With16.5%,theUSmarkethasthesecondhighestfintechadop2onrateaderHong-Kong.

8.2%

FinTechAdop2onRateinCanada

92%

Year-on-yearriseinFinTechinvestment(2015)

44%

ofmillennialswouldratherusetheirmobilephonetopaysmallitems

Moneytransfers,payments,savingsandinvestmentsaremostusedfintechservices

Mainbarrierspreven2ngconsumeradop2onoffintech

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Industry trends 5

Since2014thenumberofplayerswithintheFinTechindustryhasgrownexponen2ally:Start-ups,investorteams,VentureCapitals,andaccelerators;Theyareallbrandnewplayerschangingquicklyindustryfeatures.

OneofthemainreasonstheFinTechindustryisevolvingatsuchafastpaceisthetremendousgrowthininvestmentoverthepasttwoyears.GlobalFinTechinvestmentdoubledin2015reaching$20bn.

Thisinvestmenttrendisfosteredbythepublicmarket’sappe2teforFinTech:TechnologyspendingbyCanadianfinancialsectorwillrisebymorethan$1.5bnby2018.

Thenumberofconsumersadop2ngisalsoexpectedtorise

drama2cally.Today,only8.2%ofdigitallyac2veconsumersuseFinTechproductsinCanada.Thisyear(2016),thispercentageshouldalmosttriple,whichisforeveryindustryplayeraprimeopportunitytogrow.

AnothertrendgoingonisthenewrapprochementbetweenFintechstart-upsandfinancialins2tu2ons.Asamameroffact,banksneedFintechasmuchasFintechneedbanks.Financialins2tu2onsarechallengedontheirproductsbystart-upswhoaremoreeffec2velymatchingconsumer’sneedsforeasy-to-useproducts/serviceswithlowermanagementandinterestfees.

Conversely,FinTechcompaniesneedbank’sclientsastheirbusinessmodelsrequirealargebaseofcustomerstomakemoney.

OneofthegreatestchallengesforFinTechstart-upswillbetoearnthetrustofcustomersandmaketheirbrandknown.

FinTechcompaniesareexpectedtogrowfastasventurecapitalmodelgenerallyprovidefundsforonly3or4years.

WeaknessesofbanksmatchthestrengthsofFintechfirmsandconversely,theweaknessesofFinTechfirmsmatchthestrengthsofbanks.

FinancialIns2tu2onsandFintechcompanieshavemoreinterestinworkinghandinhandthanwagingwaruponeachother.

VancouverisoneofthebestplacesinCanadaforFinTechinvestment.Adensenetworkofstart-ups,agreatabilitytoamracttalent,agloballensandadeepsenseofentrepreneurshipareallreasonstothinkthatVancouverisuniquelyposi2onedforFinTechsuccess.

A growing industry

A closer link between financial institutions and Fintech start-ups

“Fintechischangingthefaceofglobalpayments.Globalinvestmentinfintechventurestripledin2014“

FormanyFinTechcompanies,thekeytosuccesswillbepartneringwell.

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In2015,2mainsegmentsrepresentedmostfinancialinnova2ons:paymentsandlending.In2016,newcategoriesofdisrup2onsuchasinsuranceandmortgagesshouldbeontheway.

InsurancerepresentsahugeopportunityforFinTechcompanies:abigmarket,alackofsa2sfac2onandtrustwithmajorplayers,highbarrierstoentryintomeanstheinsuranceindustryisbeggingfordisrup2on!

Bestinnova2onexamplesinthisIndustryare:usingcrowdsourcingtoreducecostsandclaims,andusingtechnologyanddatatogatherdataand…

calculatepremiums.(Usingspeedandmileagetrackersinyourcarforexample)ThemortgageIndustryisalsoprimedfordisrup2on.Consumerscannowfindalltheyneedandcalculatetheirmortgageonlinewiththehelpofrobotsinsteadofhumans.Soon,theywillalsocallonP2Plendingplasormstogettheirloaninsteadoftradi2onalchannels.

New disruptions

InsuranceandMortgageIndustryareexpectedtobethenextfron2ersforFinTech.

FinTechmarketisamrac2veandcompe22onishea2ngupquickly.

Therearebetween100and200companiescompe2ngintheCanadianmarketplacecurrentlywiththenumberofnewentrantsexpectedtoincreasesignificantly

FinTechcompanieswillhavetocopewithamorecompe22veenvironmentwhichcreatesafewpossibili2esforallplayers:

1)Increasedcompe22onwillputgreaterdownwardpressureonprices,furthererrodingmarginsfortradi2onalins2tu2ons.

2)Itwillcreategreaterinnova2onwithinexis2ngandnewfirmsputngmorepressureontradi2onalins2tu2onstoinnovateandadapttechnologyinordertostaycompe22ve.

More competition

Industry trends

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Key success factors

4)Abilitytoraisesignificantamountsofmoney

FinTechstartupsrequirehugeamountsofcapitaltoreachmillionsofcustomersandgainasignificantmarketshareasquicklyastheycan.

Foranewventuretobesuccessfulinacompe22vemarketitneedslargeamountsofcash.

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3)PartnershipswithFinancialIns/tu/onsAcloserlinkbetweenbanksandStart-upsiscertainlythekeysuccessfactorinthisindustry.Bankshaveeverythingtomakeastart-upgrow:anexis2ngcustomerbase,areputa2onfortrust,experiencewithregulators,effec2veriskmanagementprogrammesnottomen2onabiginvestmentcapital.

Forexample:BankslikeBBVAalreadyunderstoodtheopportunityofFinTechandstartedtoinvestmassivelyincompe22vestartupslikeDwolla.-Forbes:hmp://buff.ly/1WGGc3t

1)  LargecustomerbaseAsmen2onedearlier,oneofthebiggestchallengesforFinTechcompaniesistogetalargecustomerbasetomakeprofits.Theycanachievethisgoalbyeitherincreasingtheirvalueproposi2onontheirownorpartneringwithbanks.

2)Knowledgeofthetargetcustomers

KeyconsumersforFinTechIndustryaremillennials.AccordingtoarecentstudyfromEY,millennialsrepresentmorethan25%ofFinTechadoptersandthispercentagecouldreach50%thisyear.

Theyarealsoconsideredthemostvaluablebecauseoftheirpropor2onalcontribu2onofincomeintoinvestments

Forthesereasons,FinTechcompaniesshouldtargetmillennialsandcreateproductsthatmeettheirneeds.

5)AbitlitytoaHracttalent

Innova2onisalsoastrategickeytostaycompe22veinFinTechindustry.;tofosterinnova2onyouneedtalent.

Canada-andmorespecificallyVancouver-isahotbedoftalentwhenitcomestofinancialtechnologies,privacyandsecuritytechnologies.

Themostsuccessfulplayerswillbethosewiththebestpeopleandculturearoundthem.

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Porter’s 5 forces analysis 8

Competitive forces

Porter’s5forcesallowsyoutodeterminehowprofitableyourmarketisnowandhowprofitableitwillbeinthefuture.

Byevalua2ngthepowerandimpactofcustomers,compe2torsandthelandscapeofthemarketithelpsyouplanwhereyoucanbesuccessfulandavoidmorechallengingmarkets

ThreatofnewentrantsHigh-Thenumberofcompe2torsisexpectedtorisesignificantlyandbanksarealsogetngintothegamepartneringwithmajorFinTechcompanies.

Bargainingpowerofsuppliers

Low–Fewornosuppliers.

Threatofsubs2tuteproductsorservices

Medium/High–Innova2onintheFinTechindustryarespreadingquicklyandsubs2tutesarebeinglauncheddaily.

Bargainingpowerofclients

Low–andIncreasing.Asmoreop2onsarise,marginswilldecreaseforallorganiza2ons.

Rivalryamongexis2ngcompe2tors

Medium–FinTechisabrandnewmarketgainingmomentumandcompe22onisincreasing

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WecandrawseveralconclusionsfromPorter’s5forcesanalysis:

•  Therearenewopportuni2esofdisrup2oninFinTechwhichmeansthemarketmightturnouttobehighlyprofitable.

•  FinTechmarketisgrowingquicklyandtherearemanynewopportuni2estoinnovateandgainmarketshare.

•  NonethelessFinTech’sprofitabilityisthreatenedbecauseofanincreasinglycompe22vemarketplace

•  Thethreatofnewcompe2tors,andthelikelihoodthattheydevelopsimilarproductsorservicesarehigh..

assuchahighlydefensiblecompe22veposi2onneedstobeadoptedasquicklyaspossible.

•  Thosewhowillsucceedarethoseabletodevelopin-imitablesolu2onsorthosethatgrowmuchfasterthantheircompe2tors.

•  Tobesuccessfulyouneedtoprovideahighervaluethanyourcompe2tors,havealargecustomerbase,andcon2nuetoinnovatetomaintainyourmarginsandprofitability.

Theques2onis:Doyouofferenoughvaluetowinagreatermarketshare?

What does that mean for your business?

Themarketwillgrowquicklydrivenbyinnova2onandconsumerdemand,andthencontractascompe22onincreases.

IsFinTechaprofitablemarket?Yes,forthemoment,innova2vestartupshavebeenabletocarvemarketsharefromestablishedins2tu2onsslowtoadapt,innovateandchange.

Porter’s 5 forces analysis

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SWOT analysis 10

Opportuni2es•  Marketgrowth.

•  Themillennials:earlyFinTechadopters,higher-incomecustomers.

•  Partnershipswithbanksorotherplayers.

•  BiginvestmentinFinTech:Venturecapital,banks…

Threats•  Newcompe2tors.

•  Newpartnershipsbetweenyourcompe2torsandbanks.

•  Newregula2onsonFinTechmarket(law?).

•  ConsumerslackoftrustinFinTech.

•  AFinTechbubble(unicorns)?

Strengths

____________________________

____________________________

____________________________

Weaknesses

___________________________

___________________________

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Whatareyouorganiza2on’sstrengthsandweaknesses?

WhatSpecificOpportuni2esandthreatsexistforyourorganiza2oninthenearfuture?

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Questions to ask yourself 11

•  Whatisyourstrategyandac2onplanforthefuturegiventheseindustrytrends?

•  Doyouthinkyourteamsandac2vityarealignedwiththisstrategy?

•  Doyouhaveaplaninplacetoimplementyourstrategy?

•  Whatchallengesdoyouseegiventhistrends?•  Doesyourwholeteamseethefutureinthesameway?

•  Howdoesyourcompanyvisionfitwithinthisfuture?•  Whatneedstochangeforyoutoachieveyourdesiredfuture?

•  Howareyougoingtoreacttoyourcompe22on?

•  Wanthelpansweringtheseques2ons?

Contactus:

SMEStrategyConsul2ng778-895-5447|Info@smestrategy.net

128Has2ngsStreetVancouver,Canada.V6B1G8

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Resources 1.  hmp://techcrunch.com/2015/08/05/insurance-is-the-next-fron2er-for-fintech/

2.  hmp://www.techvibes.com/blog/the-amazing-poten2al-of-financial-technology-in-vancouver-2015-09-02

3.  hmps://info.bbva.com/en/news/general/five-fintech-trends-for-2016/

4.  hmp://business.financialpost.com/news/fp-street/canadian-adop2on-of-fintech-products-set-to-triple-in-a-year-report

5.  hmp://www.theglobeandmail.com/report-on-business/small-business/sb-money/next-big-sector-to-face-disrup2on-financial-services/ar2cle23025801/

6.  hmp://business.financialpost.com/news/fp-street/credit-unions-beginning-to-embrace-fintech-the-way-canadians-use-financial-services-is-rapidly-changing

7.  hmp://www.bcic.ca/blog/2015/industry-spotlight-fintech

8.  hmp://www.finyear.com/Les-FinTech-en-2015-Infographie_a34928.html

9.  hmp://www.adweek.com/news/adver2sing-branding/why-mobile-payments-are-millennial-must-161163

10.  hmp://thefinancialbrand.com/56561/fintech-adop2on-banking-disrup2on-index/

11.  hmp://www.pwc.com/ca/en/media/release/2016-03-10-investment-fintech-canadian-banking.html

12.  hmp://www.ey.com/GL/en/Industries/Financial-Services/ey-fintech-adop2on-index

13.  PwCreportonInvestmentFintechCanadianbanking2015

14. McKinseyreportonFintechIndustry2015