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FinTech and the Future of Finance---
Central Bank of Sweden
March 2016
March 2016
Professor Robin Teigland [email protected]
Claire [email protected]
Michal [email protected]
.se
Nicholas Wesley [email protected]
om
www.slideshare.net/eteigland
http://www.slideshare.net/eteigland
If the rate of change on the outside exceeds the rate of
change on the inside, the end is near....
-Jack Welch
Thx to R. Wieselfors, Ericsson for photos
Thx to R. Wieselfors, Ericsson for photos
2015
Valuecreation
People• Millenials• Digitally removing
friction• Sharing not owning• Sustainability• Global yet local• 24x7 “mobile”
workforce
Technology • Broadband• Smart phones• The cloud• Internet of Things • Big Data• 3D printing• Robotics/AI• VR/AR• Holography
Open Source IP
• Software • Hardware• Physibles
Convergence of…..
Finance•
Microlending/microfinance
• Crowdfunding/equity/P2P
• Cryptocurrencies• Blockchain• Mobile
money/payments • M2M payments
Uber• Launched June 2010
• >330 cities in 60 countries • Limited physical assets• > USD 60 bln valuation (Ericsson – USD 30 bln)
“Doing more with less” through a global platform
The Sharing Economy is enabled through peer-to-peer (P2P) transactions on
multi-sided platforms (MSPs)
http://sloanreview.mit.edu/article/strategic-decisions-for-multisided-platforms/
Cost to launch a tech start-up
Local Stockholm success story: Flippin’ Burgers
Money raised: SEK 36,502 / €4,000
Number of investors: 186
Date funded: September 2011
Sector: Food
Enabling local, small-scale solutions
Top 5 Best American
Restaurants in Europe
http://travel.cnn.com/best-americana-restaurants-europe-023346
Crowdfunding
Accumulation of small investments in individual projects by large number of
individuals (the “crowd”) via or with help of Internet and social networks (De Buysere et
al., 2012)
Picture: FundedByMe
What is FinTech?
Technologies for banking and corporate finance, capital markets, financial data
analytics, payments, and personal financial management
- Accenture/CB Insights
Finance TechnologyFinTech
What is Fintech?
Banking is essential,
but banks are not.
Bill Gates
Recent surveys of millennials
Commoditization of banking
Negative trust in banks
Heavily increasing regulatory activity
FinTech customer segments & products 2015
>USD142015E
12 top VC FinTech investments since 2007
And other big corporates investing too
Crowdfunding growth 2012-2015
USD 34 bln E
But in China alone in 2015…
http://www.crowdfundinsider.com/2016/01/79612-report-china-p2p-lending-topped-150-billion-in-2015/
Rethinking risk analysis
Automated investing based on algorithms
Profits from non-mortgage retail lending, e.g., credit cards, car loans, could be reduced by 60% and revenues by 40% over next decade.
In just the past few years in Stockholm…
Company Founded BusinessKlarna 2005 E-commerce payment servicesMyLoan 2006 Loan brokerTrustly 2008 Online paymentsiZettle 2010 Mobile paymentsFundedByMe 2011 Crowdfunding, crowd equityKivra 2011 Digital mailboxTink 2012 Personal financeSafello 2013 Cryptocurrency exchangeKnCMiner 2013 Cryptocurrency mining equipmentToborrow 2013 P2P lending for companiesDreams 2013 Savings bank
Company Founding Year
Newly Found Source Description Segment
Inkassogram 2015 x 2016 Crowdsourcing Simplifies debtor and creditor relationship LendingLenovium 2015 x 2016 Crowdsourcing Mortgage maturity optimization service Lending
Primepilot 2015 x Tobjörn AI based investing advice Wealth Management
XBT Provider 2015 x 2016 Crowdsourcing
XBT Provider manages Bitcoin Tracker One and Bitcoin Tracker Euro. With these instruments anyone
can invest in Bitcoin as ETN:s, exchange-traded notes, from anywhere in the world
Crypto Currency
ZignSec 2015 x 2016 Crowdsourcing
ZignSec is Scandinavia´s most modern verification platform. ZignSec help bank customers (Merchants) to verify users through a series of look-ups in real-time; Nordic eID, IP-checks, device geolocation,
device usage, blacklists, credit checks, AML checks and much more.
Other FinTech
Zimpler 2015 x Tobjörn Mobile gaming focused payment service provider Payments
Barnpengar 2014 x Industrifonden Personal finance tool for children Wealth ManagementBillecta 2014 x Industrifonden Billing software Other FinTechBitrefill 2014 x Tobjörn Recharge your mobile phone with bitcoin Crypto Currency
Capcito 2014 x Industrifonden Short term loans against receivables Lending
Chromaway 2014 x Tobjörn Enterprise platform for coloured bitcoins Crypto CurrencyCo-Owning 2014 x 2016 Crowdsourcing Crowdfunding for real-estate investments CrowdfundingConsector 2014 Previous Study Personal loan comparison services Lending
Cryex 2014 Previous Study Institutional financial trading platform Crypto CurrencyLeaseonline 2014 x NFT Ventures Online car leasing service Lending
Leasify 2014 x NFT Ventures Business lease managagement system Other FinTechlendify 2014 Previous Study Loans between private individuals Lending
Monetise 2014 x Industrifonden Short term loans against receivables Lending
NOWO 2014 x NFT Ventures Credit card with automatic retirement savings Other FinTechPensionera (Pensionera förmedling
i Sverige AB) 2014 x Industrifonden Pension comparison and monitoring Wealth Management
Pensionskraft 2014 x NFT Ventures Pension comparison and monitoring Wealth ManagementPepins (Pepins Nordic AB) 2014 x Tobjörn Equity crowdfunding platform Crowdfunding
Prello 2014 Previous Study mobile POS Payments
Qliro AB 2014 Previous Study Online payment solution provider Payments
Slipp 2014 x 2016 Crowdsourcing Accounting solutions provider Other FinTech
Strawpay 2014 x Tobjörn Developing a highly scalable open trasaction protocol Crypto Currency
Tessin Nordic AB 2014 x NFT Ventures Property Crowdfunding Crowdfunding
TradeVenue 2014 x Industrifonden Social meeting place for savers Wealth Management
Stockholm #2 FinTech city after London in EU
2010-2014 investment
● $532 Mln
2014 investment● $266 Mln ($141 Mln VC)
2015 investment● $96.4 Mln VC
Top 2014 Investments in
Stockholm FinTech Companies (USD Mln)
Klarna $125
iZettle $55
Trustly 29
Bima Mobile $22
KNC Miner $14
http://www.slideshare.net/eteigland/stockholm-49722748
1950 1960 1970 1980 1990 2000 2010
1959, Bankgirot founded
1985, Swedish financial and credit markets deregulated
1968, World’s first online ATM in Sweden
First wave of electronic trading software companies emerges
2003, First BankID issued in Sweden
1990s, Sweden invests in Internet infrastructure, today country with 3rd highest Internet penetration
2010, iZettle founded
2010, Neonet $160M exit 2014,
iZettle raises $55M
2014, Klarna raises $125M in PE
1967, First ATM installed in Sweden
1984, Optionsmäklarna (OM) opens in Stockholm, Sweden’s first stock option market, electronic trading introduced
2012, TriOptima, $160M exit
2005, Klarna founded
1998, Merger between Stockholm’s Stock Exchange and OM Stockholm
2007, NASDAQ acquires OMX Group
Unicorns such as Skype, King, Spotify and Mojang founded
2014, FinTech Funding in Stockholm Explodes
Long history of “FinTech” in Stockholm
http://www.slideshare.net/eteigland/stockholm-49722748
Forming partnerships…
+…to rethink and encourage saving among
millenials
+
Disassembling the value chain
Transforming insurance
Toborrow.se
FinTech Companies in Stockholm by Segment
Segment 2009 2010 2011 2012 2013 2014 2015Transfers 1 1 1 2 2 2 2
Crowdfunding 0 1 2 3 3 6 6Crypto Currency 0 0 0 3 5 9 10
Wealth Management 2 2 2 4 5 9 10
Other FinTech 3 6 8 9 10 14 15Trading and
Banking Tech 14 15 15 15 15 15 15
Lending 5 6 6 8 9 14 16Payments 10 12 16 18 20 22 23
Total 35 43 50 62 69 91 97
No. of FinTech companies in Stockholm per Year
20152014201320122011201020090
10
20
30
40
50
60
70
80
90
100
PaymentsLendingTrading and Banking TechOther FinTechWealth ManagementCrypto CurrencyCrowdfundingTransfers
# of
Com
pani
es
Stockholm FinTech Revenue and Employee #s
2010 2011 2012 2013 2014 2015 (est)0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
RevenueEmployees
Reve
nue
(bn
SEK)
Empl
oyee
s
2010 2011 2012 2013 2014 2015 (est)Revenue (bn SEK) 7.5 7.8 9.0 12.0 13.2 14.3
Employees 2,889 3,210 4,255 4,710 5,261 5,812
In 2015 VCs invested USD 96 mln in Stockholm FinTech Companies
Company Segment 2015 Investment (m USD)iZettle Payments 66.6
KNC Miner Crypto Currency 15.0Cryex Crypto Currency 10.0Tessin Crowdfunding 1.8
Mr Shoe Box Other FinTech 0.7Capcito Lending 0.6
Pensionskraft Wealth Management 0.6Fidesmo Crypto Currency 0.5
TradeVenue Wealth Management 0.5Safello Crypto Currency 0.1
2015201420132012201120100
50
100
150
200
96.4
141.0
14.0
41.4
181.4
11.1
m U
SD
https://safello.com/
Within 6 years: Challenging
the fiat money system?
Bitcoin – An emergent phenomenon
• Open source project on SourceForge in Jan 2009 • Original source code by “Satoshi Nakamoto” –
pseudonym?• Developed by self-organizing community of
thousands of strangers across globe• Approx USD 6.3 bln market cap and approx 180,000
daily transactions volume 1 BTC = USD 413 (March 2016)
Teigland, Yetis, Larsson 2013 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707
What is a cryptocurrency?
DigitalDecentralized, peer-to-peer (P2P), i.e., no
central, third party
Uses cryptography to validate/secure transactions
Also uses cryptography to generate currency itself
Non-technical explanation of Bitcoin−https://www.youtube.com/watch?v=t5JGQXCTe3c
InstitutionsEmergent Collective v
s
E.g., Central Bank~ Long-standing financial
institutions and regulations
E.g., Bitcoin Community ~ Emergent collective of users across globe connected through internet
Teigland, Yetis, Larsson 2013
Screenclip from: How Bitcoin Works under the hood, by “Curious Inventor”
Bitcoin: one application of the block chain
Block chain
• Shared digital ledger anyone can access
• Run by all participants
• All transactions logged and transparent
• Chronology and integrity enforced by cryptography
Betting on the Blockchain - together
42 banks and counting…Goldman Sachs, JPMorgan,
Credit Suisse, Barclays, Commonwealth Bank of
Australia, State Street, RBS, BBVA,
UBS, Nordea, SEB, + ……
+
IBM + Samsung on blockchain
The (Ethereum) Blockchain
Benefits of blockchain technology
Core concept is very powerful for financial services −Lower costs through shared infrastructure−Faster settlement that leads to lower capital and
liquidity needs−Increased transparency, especially with cross
border payments−Perfect record-keeping−Greater security through cryptography,
transparency
Citi Research, Jan 2016
Issuing private equity and public shares
Enablers of a “true” Sharing Economy?
Blockchains
Sharing/ Collaborative Economy
IoT/sensors
P2P/M2M micropayments
Big data
Enabling smart contracts
Imagine a blockchain-based script that is activated when two parties send bitcoins to an escrow Bitcoin account controlled by the script, and which will release the bitcoins in the future to whoever wins a bet on the average level of rainfall over a certain period. This smart-contract is programmed to read data from weather agencies, and after a set amount of time releases the bitcoins from the escrow, sending it to a farmer who requires protection against low rainfall. This is a blockchain-based weather derivatives contract.-Brett Scott
robots
Some FinTech challengesRegulation
−How to avoid stifling innovation?
Privacy −Ensuring integrity of data?
Security−Preventing security breaches/hacking
Untested −In periods of high interest rates, increased
risk, and reduced investment
A reversal of early “onerous” regulations
Italy’s recent changesExpand definition of ”professional investor”Allows a limited amount of public
advertisingMaking transactions completely online
State of regulations in Sweden
Tax considerations VAT due on reward-
based crowdfunding money raised
Tax deductions on private investments under 50,000 kr per year
Jurisdictional problems Much of FinTech is
consumer-facing Problem: who
oversees? Finansinspektionen or Konsumentverket?
In Europe, PSD2 actually mandates “opening up”
Opening up innovation…
Citigroup Capital OneBBVA Compass Silicon Valley BankBank of America
Democratizing innovation through access to capital?
“Made in Africa” 3D printer (Togo)
Winner of International Space
Apps Challenge
http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/5712/E-Waste-3D-Printer-to-Mars.aspx
Enabling financial inclusion
FinTech – An increasingly crowded space
• Growing number of entrepreneurs with experience from established finance industry
• Increasing number of FinTech incubators • Collaboration among established banks• Open innovation through open APIs• Other big non-banking entrants
https://www.cbinsights.com/research-venture-capital-2015
State of the VC industry?
Previously…..
From Netscape IPO in 1995 to PayPal
acquisition by eBay in 2002, more than 450
attackers – new digital currencies, wallets,
networks, etc. challenged incumbents
McKinsey, 2015
Fewer than five survive as stand-
alone entities today.
The future is already here, it’s just not very
evenly distributed.
- William Gibson
Robin [email protected]
e@robinteigland
Claire [email protected]
Michal [email protected]
.se
Nicholas Wesley [email protected]
om
Robin [email protected]
www.slideshare.net/eteiglandwww.funnovation.se
@robin.teigland
If you love knowledge, set it free…
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