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SVB Analytics Asia Tour

2015 SSVB Frontier Technology Forum

—Fintech Forum

Steve Allan, SVB Analytics

Dec 18, 2015

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Utilities of a Bank

Intermediary Risk Mgmt. Enforcement Custody Transit

SOUR

CES USES

Trust Reputation Regulation Utility Location

Functions

Attributes

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Unbundling the Platform

Lending

Wealth Management Insurance

Personal Finance Payments

Payroll & Benefits Funding

Remittance & FX

Banking

Financial Services

Lending Club

Affirm

SoFi

Zopa

Kabbage Azimo

TransferWise

WorldRemit

Ripple Labs

Square

Stripe

LevelUp

Venmo

Simple

Digit

BillGuard

Moven

WePay

peerTransfer

WealthFront

Personal Capital Acorns

Betterment

Robinhood

Oscar

CoverHound

Insureon

Credit Karma

Zenefits

ZenPayroll

JustWorks

AngelList

Equitynet

Kickstarter

Crowdfunder

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29%

54%

16%

25% 28%

12% 9%

4%

0%

20%

40%

60%

80%

100%

# of Deals Investments ($MM)

Payments Lending Other

Wealth Mgmt Markets Risk & Security

Insurance

Exploding Level of Investment in Fintech

Source: Accenture, CB Insights

Investment ($MM) # of Deals

While the broader Fintech ecosystem has experienced incredible investment growth, the lending and payments areas have dominated the landscape, accounting for nearly 80% of all Fintech

venture investment dollars in 2014

0

100

200

300

400

500

600

700

800

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

2010 2011 2012 2013 2014

United States EuropeAsia Pacific Other# of Deals

2014 Investment Mix Fintech Investment Volume

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Fintech Investment Maturation

Source: Pitchbook

$-

$10

$20

$30

$40

$50

$60

2009 2010 2011 2012 2013 2014 2015

0%

20%

40%

60%

80%

100%

Seed Series A Series B Series C Series D Series E+

Fintech venture investments have steadily migrated towards later-stage funding rounds (Series C and above) since 2013, driven by lending and payments. These once nascent areas shifted to

scaling businesses

Invested Capital by Round Median Round Size ($MM)

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Fintech Crowned “Unicorns”

Source: CBInsights

Fintech Segment Unicorns Market Value

Lending 8 $23.7B

Payments 8 $21.9B

Other 5 $11.8B

Total 21 $57.4B

With the explosion of “unicorn” valuations over the past three years, Fintech has seen a

disproportionate share of those esteemed valuations concentrated in lending and payments

$0 $2 $4 $6 $8 $10 $12

FundingCircle

Jimubox

Coupa

China Rapid Finance

Kabbage

Zuora

TransferWise

Oscar

Prosper

One97

Avant Credit

Klarna

Adyen

Mozido

Powa Technologies

CreditKarma

SoFi

Zenefits

Stripe

Square

Lufax

Company Valuation ($B)

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Alternative Lending

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Low Interest Rates Drive Alternative Lending

Source: Lending Club, Prosper Marketplace, Federal Reserve Bank of St. Louis

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2009 2010 2011 2012 2013 2014 2015*

Lending Club Prosper

Loan Volume ($M)

Origination Volume Growth

In an environment of sustained low interest rates, coupled with the technology advancements, investors on P2P lending platforms are increasingly finding enhanced yield opportunities in

alternative lending investments, driving loan origination volume growth

ROI Spread over Deposits

0%

2%

4%

6%

8%

10%

12%

2009 2010 2011 2012 2013 2014 2015*

60-month CD Rates <$100k

Lending Club - ROI (Adjusted for Charge Offs)

Prosper - ROI (Adjusted for Charge Offs)

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Platform Efficiencies

Source: Left Chart: Company filings Right Chart: Lending Club SEC Form 10-Q 09/30/2015 1. Based on borrower responses to survey conducted by Lending Club between 10/1/14 – 10/1/15. 2.

60-month CD rates < $100k, St. Louis Federal Reserve. 3. Average interest rate for borrowers who received a loan to consolidate existing debt or pay off credit card balances per Lending Club survey. 4. Median Adjusted Net Annualized Return for investors with 100+ notes, note concentration of <2.5% of portfolio value, all loan grades, and portfolio age of 12-18 months

Illustration of Platform Lending Efficiency

Platform lending efficiencies driven by technology and business model lead to 50-70% lower operating expenses over traditional lenders, resulting in greater savings for borrowers and

improved returns for investors

Platform Lending Business Model Drives Lower Costs

0%

5%

10%

15%

20%

25%

Costs, Revenue, & Charge

Offs

22.1%1

0.79%2

Traditional Banks

Lending Club

Net

Annualized Return4

7.9%+

14.7%3 4.9% 5.1%

5.9% 6.2%

7.1%

8.5%

2.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Median

OpEx % of Loan Balances

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Refinancing 49%

Credit Card Payoff 19%

Other 32%

The Refinance Incentive

Source: Lending Club, Federal Reserve Bank of St. Louis

Revolving vs Term Loan Interest Rate Spread

8%

10%

12%

14%

16%

18%

2000 2002 2004 2006 2008 2010 2012 2014

Finance Rate on Personal Loans, 24 Months

Credit Card Interest Rate, All Accounts

Borrowers, presented with a substantial cost savings incentive to refinance existing credit card and other debt, represent the predominant borrowing use-case. At the same time, platform investors are presented with an opportunity to gain exposure to an asset class previously restricted to banks and financial institutions with the infrastructure to facilitate such

transactions

Lending Club Reported Loan Purpose

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Payments

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Technology Fuels Card Payments Growth

Driving….

Cloud Networks Devices

$2.7

$4.9

$7.6

$10.0

2005 2013 2018P 2023P

U.S. Card Payment Volume Growth

Technological advancements in the payments sector has lead to the popularization of card payments and the increased acceptance of card payments

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Payors Payees

Payment Networks

Fed ACH / Wire / Check

Card Networks – Visa, MasterCard

Value-add layer: innovating at the endpoints

Considering the strength and viability of the traditional payments ecosystem, there is a clear trend with investments in payments companies to innovate on top of this existing

ecosystem and disrupt incumbents at the endpoints

Leveraging the Existing Payments Networks

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Global Remittance Market

• Drivers of Growth

–Globalization

–Internet Proliferation

–Mobility

• Disruption Opportunity

–$600B Market

–Billions Put Back in the Hands of Consumers

–Closed Loop Advantage

Source: World Bank

4%

5%

6%

7%

8%

9%

10%

Global Cost of Sending Remittances

Global Weighted Average Global Average

The historical concentration of players in the remittance market coupled with high transaction fees creates a tremendous opportunity for technological improvements

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Blockchain Technology over Bitcoin

0%

50%

100%

150%

200%

250%

300%

350%

400%

2013/1/1 2014/1/1 2015/1/1

BTC Annualized Volatility

S&P Annualized Volatility

GLD Annualized Volatility

0

50,000

100,000

150,000

200,000

250,000

Daily Transactions

Daily Transactions - BTC Volatility - BTC

Source: Coindesk, Yahoo Finance

Focus is shifting from the promise of Bitcoin to the power of the Blockchain, a technology that leverages the power of a distributed ledger to simplify financial transactions

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Concluding Summary

Technology enablement and regulatory constraints are unbundling the value chain of many core financial products, moving it away from centralized financial institutions back to the nodes of capital supply and demand

The rise of alternative lending models holds a lot of promise for both borrowers and investors; recent economic trends have greatly contributed to the sector’s growth, but their tech stack and customer experiences are re-writing the playbook for consumer and SMB lending

Extension of financial services will grow to the previously “underbanked” or “uncardable” populations as technology reduces barriers to individualized financial servicing while lowering the overall costs of financial transactions with the greatest impact on the underserved

Payments innovation is highly focused on the endpoints, leveraging the existing payments infrastructure in new ways to create value for both consumers and merchants

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Disclaimers

This material, including without limitation to the statistical information herein, is provided for informational purposes only. The

material is based in part on information from third-party sources that we believe to be reliable, but which have not been

independently verified by us and for this reason we do not represent that the information is accurate or complete. The information

should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decision. You

should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material

should be construed as a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other

transaction.

©2015 SVB Financial Group. All rights reserved. Member Federal Reserve System. SVB>, SVB Financial Group, and Silicon Valley

Bank are registered trademarks. SVB Analytics is a member of SVB Financial Group and a non-bank affiliate of Silicon Valley Bank.

Products and services offered by SVB Analytics are not FDIC insured and are not deposits or other obligations of Silicon Valley

Bank. SVB Analytics does not provide tax or legal advice. Please consult your tax or legal advisors for such guidance.

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Thank you.