Review of IT Services, BFSI and Fintech Startups devices at industrial locations and home and wearables to remotely monitor and assess losses in case of accident. • Digital transformation

© Bizoforce Inc., 2016. Confidential.

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Review of IT Services, BFSI and Fintech Startups


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Agenda

• Indian IT Services Market and Growth

• BFSI Market Size and Components

• BFSI Outsourced IT Spend

• Banks Spend More in Tech

• Trends in Banking sector

• Implications of trends in Banking sector

• Disruption by Fintech Startups


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Indian IT Services Growth from 2015 to 2025

0

100

200

300

400

2015 2025

Domestic

Exports

$350 B

$150 B

11%

Over all, the share of digital technology investment in cumulative expenditures will rise from 10 per cent in 2014 to 35 per cent in 2020 and 60 per cent in 2025. About 80 per cent of incremental

expenditures will be driven by digital technologies. These could be platforms, cloud-based applications, big data analytics, mobile systems, social media, and cybersecurity, as well as services needed to integrate these technologies with legacy tech.

Half of this incremental investment will be funded by a projected 20 to 25 per cent cut in legacy expenditures. These reductions will be largely in spends on infrastructure, traditional application development and packaged software.

– NASSCOM McKinsey ReportSource: Nasscom

http://www.nasscom.in/nasscom-perspective-2025-shaping-digital-revolution


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IT Services Market Size

$700 Bn ~70% of $1 trillion (Size of total US IT spend)

70% of US (IT) market - IT Hw, Sw, Services and rest 30% is Telecom Services

$175 Bn ~25% of $700 Bn

25% of US IT spend is on IT services

52% of US IT services spend is outsourced to India growing at 15-20%

$91 BnUS IT services outsourced to India

US IT services spend

US IT spend

Source: Comptia

https://www.comptia.org/resources/it-industry-outlook-2016-final


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Global IT Spending to Reach $3.5 Trillion in 2017

2016 Spending

2016 Growth

(%)

2017 Spending

2017 Growth

(%)

Data Center Systems

173 1.3 177 2.0

EnterpriseSoftware

333 6.0 357 7.2

Devices 597 -7.5 600 0.4

IT Services 900 3.9 943 4.8

CommunicationsServices

1,384 -1.1 1,410 1.9

Overall IT 3,387 -0.3 3,486 2.9

Table 1. Worldwide IT Spending Forecast (Billions of U.S. Dollars)

Source: Gartner (October 2016)


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Global IT Spending in BFSI to reach $664 Billion

• Banking IT spending accounts for the largest portion of BFSI IT spending at more than $ 275 billion worldwide, as well as delivering the largest growth at 4.5%.

• Insurance accounts for $205 billion worldwide

599

480

534

539

184

222

180

162

131

103

81

0 100 200 300 400 500 600 700

Manufacturing & Natural Resources

Banking & Securities

Government

Communications: Media Services

Insurance

Retail

Utilities

Transportation

Healthcare Providers

Wholesale Trade

Education

In $ Billion

IT Spend in 2016

Source: Zdnet IDC

http://www.zdnet.com/article/it-budgets-2016-surveys-software-and-services/

http://www.idc.com/getdoc.jsp?containerId=prUS41216616


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Key Components of Global Outsourcing in Banking Sector

Source:Everest

http://www.everestgrp.com/2014-07-it-outsourcing-in-banking-annual-report-2014-the-return-of-the-king-market-insights-14621.html/


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30% of Outsourced IT Spend is from BFSI sector

BFSI Outsourced Enterprise IT

Spend ~ $28Bn

Key Verticals

Large size

Banks

Medium and Small size Banks

$6Bn

Core Banking44%

Online Banking

Multi channel integration and CIS

Mobile Banking, Big Data, Cloud

Compliance and security

21%

14%

8%

13%

$22Bn

Source: IDC

Source: American BankerCayman Finance CIO

https://www.idc.com/getdoc.jsp?containerId=US41548616

https://www.americanbanker.com/news/how-banks-are-allocating-their-tech-budgets-for-2015

http://www.cayman.finance/2014/12/how-banks-are-allocating-their-tech-budgets-for-2015/

http://www.cio.com/article/3096125/outsourcing/big-banks-big-applications-big-outsourcing.html


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Small and medium size banks constitute 23% of US Banks Market Share

Source: ILSR

https://ilsr.org/bank-market-share-by-size-of-institution/


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Banks to Spend More in Tech: Security, Data Analytics, Compliance

Source: American Banker

https://www.americanbanker.com/news/banks-to-spend-more-on-tech-in-2016-especially-security


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Top 10 trends in Banking sector

• New entrants such as fintech firms are targeting profitable aspects of the banking business and the banking industry is at an inflection point with an increasing threat of disruption

• With the increasing threat from new entrants and changing customer demographics and preferences, banks are making investments to drive innovation

• Banks are facing an unprecedented challenge of data breaches and are therefore strengthening their security and authentication systems

• Banks are increasingly using cloud services for core business activities

• Banks will continue to leverage digital technologies to enhance customer experience

• Since banks are looking to establish an omnipresence across all mobile devices and platforms in order to offer seamless navigation, they are undergoing a massive transformation in their IT architectures to incorporate robust core banking systems

• Banks and non-banks are focusing on distributed ledgers as a transformation opportunity

• Banks are working to fully integrate risk management and compliance practices

• Banks are embracing advanced analytics in addition to traditional business intelligence solutions

• Banks need to develop an innovative service delivery mechanism using digital technologies to mitigate the cost –side implications, as they target unbanked and underbanked segments.

Source: Capgemini

https://www.capgemini.com/resource-file-access/resource/pdf/banking_top_10_trends_2016.pdf


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Implications of Trends in Banking sector

• Assets managed by robo advisors will continue to grow as banks, insurance companies and wealth managers adopt the technology

• Refining the customer experience will be the primary driver for transformation, digitization and automation

• Changes in regulatory regime will cause the change in front office staff goals related to selling practices and cross-selling

• Automation will be utilized the most by trading and capital markets for client screening, background checks, automated trade capture, transaction monitoring, and reconciliation, client services reports, payables and receivables.

• Commercial Banking: Banks are likely to use big data and predictive analytics to offer tailored financing and lending solutions to corporate customers. RPA tools will be merged with cognitive intelligence across both the front and back office.

• Payments: The global drive towards faster payments and has pushed US banks to adopt mobile banking and e-wallet systems.

• Bank will move some of their back office operations to be front facing so that systems can collaborate and accommodate networked digital technology

• High demand for managed services among banks ranging from $100 million to $1 billion in assets.

Source: Deloitte

https://www2.deloitte.com/us/en/pages/financial-services/articles/banking-industry-outlook.html


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Statements by Indian competitors in BFSI space

Mindtree Q2 Profit Slumps 37% To Rs. 948 Million“The volatile macroeconomic environment has resulted in slower ramp-ups and cautious spending in a few large clients across our verticals.” said Rostow Ravanan, CEO & Managing Director, Mindtree. “However, we are encouraged by our new wins and strong pipeline. With our investments in digital and managed services, our strategic direction will continue to drive positive outcomes in the medium term.” Source: openingbell.in

TCS bets on digital, banking to revive growth as Q3 net rises 11%Tata Consultancy Services (TCS), the country's largest software exporter, said third-quarter (Q3, September-December) profits grew 11.2 per cent from a year before to Rs 6,778 crore, with higher growth from digital services, mainly via banking customers which have resumed spending on technology to compete in a digital environment.Source: Business Standard

http://www.openingbell.in/nse-mindtree-2/

http://smartinvestor.business-standard.com/market/story-435745-storydet-TCS_bets_on_digital_banking_to_revive_growth_as_Q3_net_rises_11.htm


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Decline in growth in ADM space in BFSI

Source: Livemint

http://www.livemint.com/Industry/TgTQjKPYT2d21QXxHy0ABI/Slowing-growth-in-revenues-from-BFSI-a-worry-for-Indian-IT.html


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Disruption by Fintech Startups


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Theme1: Replacing Banking Services

• Personal Banking

• Payment Services

• Online Trading

• Lending

• Accounting

• Insurance

• Wealth Management

3i

New entrants such as Fintech firms are targeting profitable aspects of the banking business and the banking industry is at an inflection point with an increasing threat of disruption

3i


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Theme2: Providing services to Banks

• Business Intelligence Solutions

• Cyber security

• Security Authorization

• Cloud based services

• Application Testing and Management

• Marketing Automation

3i

3i

3i

With the increasing threat from new entrants and changing customer demographics and preferences, banks are making investments to drive innovation

Acquiring Fintech firms

Investing in Fintech firms

Establishing Innovation Labs

Establishing Incubators

Approach to Drive Innovation in Banking


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Theme3: Disrupting banks and payments industry

• Blockchain

• Cryptocurrency


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• The threat to banking services is highest in the payments and personal finance management domains where fintech disruptors in particular are focused.

• This is followed by investing and investment businesses, as banks are witnessing moderate levels of competition from new players such as lending club, zopa and prosper

Fintech Unicorns

Source: Capgemini



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BI solutions in Banking Industry

Areas Startup Location Funding

Type of Customers

Credit Card Fraud Detection

Feedzai US $17.5 m

Funded by Citi Ventures

Risk Management MotivitySolutions

US $3 m acquired by Black Knight Financial Services

Marketing and Sales Automation

Eloqua US Used by 53rd

bank

Regulatory Compliance

Arachnys Global

BI Solution AdaptiveInsights

US $75 m

Source: Crunchbase


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BI Solutions trend in Banking industry

• Big data platforms will be integrated with conformance policies like data governance and compliance mandates.

• Lots of banks are interested in building or buying systems that allow them to take credit decisions on loan in 5 minutes.

• In real estate management, banks are using big data to analyze customer demographics against lease trending to position branches, kiosks and other service offices in key locations to maximize business

• Non bank alternative lending are using big data for underwriting loans, banks are also going to join the bandwagon soon

• Marketing is moving away from brand focused to more algorithmic, programmatic and context driven using data collection

Source: ngdata

https://www.ngdata.com/big-data-technology-trends-in-banking/


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Cloud based services in Banking industry

• The public cloud market is expected to grow at a CAGR of 17% to $191 billion in 2020 from $72 billion in 2014.

• Major global banks are increasing their cloud investments with the overwhelming majority focusing on private cloud deployments which accounted for almost 70% of banks’ cloud initiatives by 2014.

• Cloud based services are easily adopted by mortgage industry

• Owing to security concerns, US Banking industry has been a laggard in adopting cloud based services

• Refining the customer experience will be the main driver in adopting any cloud based services

• Some banks are interested in single application cloud services such as email or mobile device management

Source: Capgemini



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Startups providing cloud based services in banking industry

Areas Startup Location Funding Type of Customers

Enterprise App TheBankCloud

US $2 m Banks

Enterprise App Tagit US $3m Axis Bank, Citibank, RBC, Standard Chartered

Authentication and Transaction Aggregation

Plaid US $2.8 m Used by Robinhood

Chat bots Personetics US First International Bank

Core banking solution Nymbus US $12 m

Computer security Zscaler US $100 m

Source: Crunchbase


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Insurtech: Fintech trends in Insurance

• Usage based insurance is becoming more relevant especially for auto insurance and the current focus is shifting from underwriting to the customer

• Data capture and analytics for remote monitoring is the emerging trend. IoT devices at industrial locations and home and wearables to remotely monitor and assess losses in case of accident.

• Digital transformation of carriers started in 2015, took off in 2016 and will become mainstream in 2017. Insurers are going to optimize cost in the areas of claim expenses, costs of operations and customer acquisition costs.

• Customer engagement innovation: Insurers will collect information from devices and social media to assess customer risks and provide personalized insurance products

• The shift from push to pull based products. Whereas push is about force feeding products to the customer, pull is about understanding and solving the need behind the insurance solution.

• More and more carriers will use marketplace model because every carrier cannot be best at everything. In this model, a carrier can give access of third parties products to its customers.

• Robo advisor will be used to help frontline staffs to assess behaviour of customers on prepayments, payment default, bad loans and customer churn

Source: Accenture

https://www.accenture.com/in-en/insight-trends-insurance-fintech-evolving-landscape


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Global IT spending in Insurance sector

Source: Celent

http://celent.com/reports/it-spending-insurance-global-perspective-2016


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Compliance Opportunity

• Total litigation costs and penalties paid by US and European officials between 2009-2016 is $300 B

• Banks are trying to keep up with changes in regulations resulting in increased adoption of technology and aggregation capabilities:

• Overhauling IT infrastructure including storage and computing capacity to support requirements of stress tests

• Making provisions for providing real-time data to employees for making decisions related to regulations such as KYC and AML

• Banks are looking for integrated compliance software as a medium to respond to fast changing regulatory requirements

• Banks are also putting compliance processes in place to address risks associated with their third-party vendors

• Worldwide spending on risk and compliance technology is expected to reach $79.2 Billion in 2015 and $97.3 Billion by 2018

Source: Capgemini



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Appendix

• Growth in BlockChain Investment

• Big Data Analytics Market Size and Growth

• Cloud Computing


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Banks spend on Blockchain to surge to $400 million by 2019

Blockchain could reduce banks’ infrastructure costs by US$15 – 20 billion per annum by 2022.Source: Whitecase

http://www.whitecase.com/publications/insight/beyond-bitcoin-blockchain-revolution-financial-services


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Worldwide Big Data Analytics Spending by Industry

~17 B

Source: IDC

https://www.idc.com/getdoc.jsp?containerId=prUS41826116


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Big Data Analytics Market Size By Technologies

Financial Services firms are projected to spend $6.4B in Big Data-related hardware, software and services in 2015, growing at a CAGR of 22% through 2020.

Source: Cloudtech

http://www.cloudcomputing-news.net/news/2014/jul/10/roundup-of-analytics-big-data-business-intelligence-forecasts-and-market-estimates-2014/


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Financial Services predict how their companies would utilize technology and big data capabilities by 2020

1. Develop a singular client view2. Harness big data for market transparency and efficiency3. Improve cash management activities 4. Enhance data security and prevent data breaches5. Achieve faster processing capabilities6. Implement front-to-back office platforms7. Reduce all manual tasks and redundancies8. Redefine core vs non-core capabilities9. Reduce operating costs significantly10. Define new products or asset classes11. Strengthen pre-trade analysis12. Enhance client services and experience 13. Better understand customer needs 14. Integrate regulatory, risk and capital requirements 15. Enable seamless view of risk across organization with real-time reporting 16. Manage costs, risk and standardization 17. Real time performance and P&L attribution

Source: SearchITChannel

http://searchitchannel.techtarget.com/feature/Financial-technology-partners-find-compliance-work


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42% of C-level executives are increasing their investments in cloud

computing over the next twelve months

Source: Forbes

http://www.forbes.com/sites/louiscolumbus/2014/03/14/roundup-of-cloud-computing-forecasts-and-market-estimates-2014/

Thank You

Documents

Review of IT Services, BFSI and Fintech Startups devices at industrial locations and home and wearables to remotely monitor and assess losses in case of accident. • Digital transformation