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© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
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This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other intended recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Rajesh Kandaswamy
Research Director, Gartner
Twitter: @rajeshkan
Trends in Fintech – Observations From Money20/20 25 November 2014
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
T-Mobile offers Debit card
3
Bitcoins
PayPal to be spun-off
PayPal buys
Braintree Paym Launched in UK
Square Cash + Snapchat
9000+
attendees at
Money20/20
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
T-Mobile offers Debit card
4
Bitcoins
PayPal to be spun-off
PayPal buys
Braintree Paym Launched in UK
Square Cash + Snapchat
9000+
attendees at
Money20/20
In The Past 12 Months.... In The Past 12 Months....
Public Company With The Largest Market Capitalization In The World Has Public Company With The Largest Market Capitalization In The World Has Entered Payments
World’s Largest Retailer Has World’s Largest Retailer Has Announced That It Will Offer Banking And Payments
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Presentation Outline
Forces Impacting Banking and Payments
Key Trends
1. Banking And Retail Are More Interlinked Than Ever Before
2. Technology To Transform Branches & ATMs Are Ready, But Adoption Lags In Mature Markets
3. Security Solutions Extend To Make Better Use Of Outside Technologies And Data
4. Bimodal Thinking By Clients Provides Entry Points for New Technology Providers
5. Mobile Payment Companies Acknowledge Apple Pay, But Impact Analysis Does Not Go Far Enough
6. Non-Banks Are Growing With Complementary And Substitute Products
7. Governments Look At Mobile to Improve Financial Inclusion
8. Understanding of Bitcoins Remains Low, Even Among Payment Companies
Recommendations
Suggested Reading
Q & A
5
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Banking & Payments Are Impacted By Large Forces
6
Consumer Other Countries
Banking &
Payments
Investo
rs
No
n-b
an
ks
Social Media, Mobile, Sharing
Economy
Social Media, Mobile, Sharing
Economy
SEPA, AliPay SEPA, AliPay
Revenue
vs.
Ris
k
Revenue
vs.
Ris
k
T-m
obile
, W
alm
art
T
-mobile
, W
alm
art
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Banking And Retail Are More Interlinked Than Ever Before
7
Banking &
Payments
Banking &
Payments
Retail &
Other Merchants
Retail &
Other Merchants
Payments
Credit
Disputes
Security
Offers
Mobile Mobile
Analytics Analytics
Big Data Big Data
Cloud Cloud
Bio-metrics Bio-metrics
Bitcoin Bitcoin
Loyalty
How well are your external offerings and internal operations aligned to take How well are your external offerings and internal operations aligned to take
advantage of this growing overlap?
Our future is in Payments, Commerce and Lifestyle Services – Kenneth Chenault, CEO, American Express at Money2020
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Poll #1: Usage Of Bank Branches
In the last 6 months, I have visited a bank branch (not for ATM)….In the last 6 months, I have visited a bank branch (not for ATM)….
8
1. Never
2. Less than 3 times
3. Less than 6 times
4. More than 6 times
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Technologies
Technology To Transform Branches & ATMs Are Ready, But Adoption Lags In Mature Markets
9
Are your solutions working with consumer trends or are they working against Are your solutions working with consumer trends or are they working against
them?
Do digital channels create an ‘Adverse Selection’ issue for banks? –Jane Fraser, CEO, Citi US Consumer & Commercial Banking at Money2020
Customers are migrating to mobile and online channels
Banks are not successful in selling products on digital
BRING THE CUSTOMER BACK -
ATMs, Branches and POS
FOLLOW THE CUSTOMER – Home FOLLOW THE CUSTOMER – Home
and Outside
??
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Bio-metrics
Channels
Security Solutions Extend To Make Better Use Of Outside Technologies And Data
10
Data
Richer Use of Telecom And
Network Data
Richer Data From Banks
and Retail
Security
Increased use of mobile, cloud and digitization will drive demand for security Increased use of mobile, cloud and digitization will drive demand for security
solutions
Payment Payment
Retail Card
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Bimodal Thinking Provides Entry Points for New Technology Providers
11
What are such bi-modal opportunities at your clients? How can you best
serve them?
What are such bi-modal opportunities at your clients? How can you best
serve them?
Mode 2 is exploratory, emphasizing agility and speed.
Having two modes of IT, each designed to develop and deliver informationHaving two modes of IT, each designed to develop and deliver information- and technology-intensive services in its own way.
Mode 1 is traditional, emphasizing safety and accuracy.
Mod
e 1
Pro
duct
Mod
e 1
Pro
duct
Mod
e 1
Pro
duct
Mo
de
2
Pro
du
ct
Price/ Unit (r)
Total Units (n)
Increase in volume
might not justify
reduced price
New product – less
volume, simpler
service needs
Areas where new
technology
providers have
emerged:
Card Processing
Core bank
Processing
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Poll #2: Mobile Payments
Will I use my mobile phone to pay for purchases instead of cash or a plastic card (retail store, restaurants, vending machines, parking, etc
Will I use my mobile phone to pay for purchases instead of cash or a plastic card (retail store, restaurants, vending machines, parking, etc.)?
12
1. I already use it and expect to use more in the future
2. I have not used it, but expect to use in the future
3. I do not plan to use mobile for payments at all
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Mobile Payment Companies Acknowledge Apple Pay, But Impact Analysis Does Not Go Far Enough
13
If you are in mobile payments, which of your assumptions need to be If you are in mobile payments, which of your assumptions need to be
revisited?
Changing Narrative Since Apple Pay
•
•
Changing Narrative Since Apple Pay
• More Understanding of Security Aspects of Mobile Payments
• More Expectations on Retailers to Support Mobile Payments
1. Silver Lining Mentality 1. Silver Lining Mentality – ‘Apple Pay leaves 60%
of the market open’ 2. Not Factoring In New
Information - ‘Mobile Payments cannot succeed without Loyalty, Coupons
and Offers’
Old Belief - Loyalty & Offers
New Information - Usability & Security
3. Not 3. Not Revalidating Earlier Assumptions – ‘We are
focused only on payments at the retail store since that
market is much larger’
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
How Millenials And The Unbanked Impact Banking and Payments
Banks Are Struggling to
Increase Revenue, But Risk-Averse
Under-banked and Unbanked
Remain Growing
Millennials / Gen Y
Population
Technology Has Changed
Consumer Lives
Minnennials / Gen Y
adopt technology at a
higher rate
Both do not use banking products, do not visit
branches and have less discretionary income
Technology enables reaching
consumers anytime and
anywhere at less cost.
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Non-Banks Are Growing With Complementary And Substitute Products
15
High-Tech
Retail Alternative Fin.
Services Bank
Substitutes Other
Payments, Consumer Lending, Small Business Lending, Money Transfer, Bill Payment, PFM, Payments, Consumer Lending, Small Business Lending, Money Transfer, Bill Payment, PFM, Student Loans
Check Check Cashing, Payday
Loans, P2P Payments,
Money Transfer
Small Business Lending, Debit & Small Business Lending, Debit & Prepaid Cards, Mobile Money
Check
Money, Debit
Check Cashing,
Small Business Lending,
Consumer Lending, Mobile
Money, Debit & Prepaid
Cards
Debit Cards, PFM, Bill Payment, Debit Cards, PFM, Bill Payment, ATM Access
Is your strategy to serve non-banks Accidental or Intentional?
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Governments Look At Mobile to Improve Financial Inclusion
16
COUNTRIES
COUNTRIES
Brazil – Payment Institution
India – Cash-out provisions for non-banks
Pakistan – Reduced limits for accounts
China – Large presence of non-banks
Nigeria, Indonesia – Bank-centric mobile money
US – retail-led (nearly 70 million unbanked/underbanked)
M-Pesa Succeeds in
Kenya
M-Pesa Succeeds in
Kenya
Awareness of Mobile’s Potential
Awareness of Mobile’s Potential
Moderate Success
Elsewhere
Moderate Success
Elsewhere
Realization of Need for
Additional Support
Realization of Need for
Additional Support
TRENDS
out provisions,
TRENDS
Larger role for Mobile Network Operators
Success is mostly in remittances, followed by payments
Legislative push– cash-out provisions, payment banks, cost of cash
Inhibitors
Telecom and banking structure
Lack of credit information
Lack of suitable products
Need low-value payment systems
Do you operate in any of the geographies where mobile money will have a Do you operate in any of the geographies where mobile money will have a
large impact? How you do you plan to serve the mobile money operators?
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Understanding of Bitcoins Remains Low, Even Among Payment Companies
17
Awareness has Improved, But Little Understanding of….
Key Aspects of How it Works
Areas of Applicability
Regulatory Direction is Evolving Among Agencies. Challenges in Balancing Consumer Protection and Encouraging Innovation
Awareness has Improved, But Little Understanding of….
Key Aspects of How it Works
Areas of Applicability
Regulatory Direction is Evolving Among Agencies. Challenges in Balancing Consumer Protection and Encouraging Innovation
If you are in payments, have you done an assessment on how Bitcoins can If you are in payments, have you done an assessment on how Bitcoins can
impact your clients and your products?
1. Dies or Fades
Away 2. Some Adoption
3. Large-scale
Adoption
4. Technologies
Get Adopted
Regulation
Speculation
Perception
Regulation
Speculation
Perception
Some areas:
Remittances, Non-
returnable goods
Tech-savvy
customer
Some areas:
Remittances, Non-
returnable goods
Tech-savvy
customer
Online payments
P2p transfers &
remittances
Bank Support
Favorable
legislation
Online payments
P2p transfers &
remittances
Bank Support
Favorable
legislation
Block chain
technology
Federated
transaction
validations
Block chain
technology
Federated
transaction
validations
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Recommendations
18
Look which segments of emerging non-banks could be of interest 2. Look which segments of emerging non-banks could be of interest to you. Assess if your go-to-market approach is suitable to serve these clients.
Ensure that your innovation investments uncover both new business value and provide technology innovation. Do not settle for
3. Ensure that your innovation investments uncover both new business value and provide technology innovation. Do not settle for incremental value-only offerings or technology-only offerings that do not link to business value.
Monitor Fintech companies in functional and technology areas 1. Monitor Fintech companies in functional and technology areas that are relevant to you. They are a source of ideas, potential partnerships and could be emerging clients.
CONFIDENTIAL AND PROPRIETARY
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Suggested Reading
Market Insight: A Banking Industry Primer, 2014, G00261044
Market Trends: Banking, Worldwide, 2014, G00258490
Market Trends: Emerging U.S. Nonbanking Consumer Financial Services Providers, 2013, G00258599
Cool Vendors in Consumer Financial Services, 2014, G00262583
Competitive Landscape: Business Service Providers, Banking and Securities, North America, 2014, G00269231
Competitive Landscape: Business Service Providers, Banking and Securities, Western Europe, 2014, G00269319
Market Trends: The Rising Importance of the Business Buyer — Fact or Fiction?, G00258700
Marketing Essentials: How to Develop and Assess a Vertical Market Strategy, G00171151
Bimodal IT: How to Be Digitally Agile Without Making a Mess, G00268866
Are Mobile Biometrics Ready for the Enterprise?, G00259859
19
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved. 20
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