UK Fintech and InsurTech

All about collaboration

@devie_mohan

global corporate banking executives believe that digital will change both the

competitive landscape and the economics of the business

stated that they have an

explicit digital strategy

believed their organization has market-

leading digital capabilities

Fees drop57%Declining profits45% 16%Pretax returns fall below

hurdle rate of 16%

30%

of traditional corporate banking

revenue will be attracted by of

digital platforms and channels.

86%

43% 19%

Financial stakes are high for corporate banks

HOWEVER, ONLY

Source: Moody’s Analytics

Add to that an overwhelming burden of compliance

globally

27 FinTech unicorns

out of which

B2B FinTechs

44%

of FinTech unicorns are

B2B FinTechs

B2B FinTech unicorns emerging across the globe

44%

22

12

only current, savings accounts

plus cards plus mortgage plus insurance, investments, etc.

Specialists

Simple product offerings such as savings account,

current account, credit cards. Vast majority of

challengers play in this space.

Generalists

Full scale and relatively conventional product offerings such

as mortgage, insurance, payments etc. Most of these are

pseudo challengers launched by large organisations.

Segmentation: BY BUSINESS MODEL

B2BB2B

BLOCKCHAIN BASED PAYMENTS

PAYMENTS

P2P LENDING

PAYMENTS

STUDENT LENDING

PAYMENTS

Sub-accounts for family members

Borderless accounts for travellers

Retail banking products

Current account

Foreign exchange

Current account

Foreign exchange

Credit cards

SME banking

FinTech offering Challenger bank offerings

PAYMENTS Salary accounts

Cards

The ecosystem is complex, multi-layered and getting more

complex by the day

Proprietary

Parent

bank’s

Parent

bank’s

Parent

bank’s

Proprietary

Proprietary

Parent

bank’s

Parent

bank’s

Proprietary

Proprietary

Proprietary

Proprietary

Proprietary

Proprietary

ProprietaryParent

bank’s

IN-HOUSE CAPABILITIES

Products, sales

and marketing

Channels

Back office

Bank License

Examples TSB, Metro Simple, Moven Hello, Soon Fidor, Atom

Large

ChallengersNeo Banks

Digital

Subsidiaries

Digital

Native

RELIANCE ON PARENT BANK

Digital

Only

Loot, Pockit

Proprietary

Proprietary

Bare-minimum

Not Required

SELF-RELIANT

PSEUDO-CHALLENGERS CHALLENGERS EMBRYONIC

Digital Darwinian

Evolution

REGTECHS

Automated Compliance Management KYC & Identity

Reporting Market Surveillance

Cyber Security Fraud Detection/ Management

Risk Management Monitoring

The back-end The f ront -end

RegTech has tremendous cost savings potential

Data analytics use-case for regulatory compliance

NAB's digital bank UBank has created RoboChat with IBM Watson to respond to

questions on home loans.

Bank of America partnered with HighRadius and launched Intelligent Receivable, a new

service that uses AI to improve straight-through reconciliation of incoming payments.

Westpac Banking Corp is working with local start-up Hyper Anna, whose technology uses

AI to conduct data analytics and visualisation

ANZ Banking Group has created biometric voice capability with technology company

Nuance to allow customers to bank by talking to the app.

Artificial intelligence is the hot topic of 2019

But it offers significant benefits..

Operation-Focused

Trading and

portfolio functions

Regulatory compliance

and supervision

FINANCIAL INSTITUTIONS USE CASE BENEFITS

Customer-Focused

Operational

efficiency

Automation

Regulatory

Compliance

Customer

centricity

Chatbots are very popular

The PoC with ATB, Canada, in FB

Messenger through Finn.ai

Canadian online lender Thinking

Capital announced the launch of its new AI fintech

chatbot, “Lucy”, on FB.

Axis Bank has partners with Active

Intelligence (Active.ai) to launch intelligent

banking chat bots

Russia-based Tochka Bank launched the world’s

“first” Facebook bot for a range of financial

services.

Ally Financial, a branchless, online bank

recently launched a mobile personal

assistant, by voice or text, with Personetics.

Barclays Africa is also piloting a chatbot, making it

the “first bank” to do so in Africa.

American Express is partnering with

Facebook to provide an Amex bot for its card

members.

HDFC Bank uses chatbot developed by Niki.ai to

foray into commerce on social media

DBS plans to start the conversational AI on

FB Messenger through KAI, an AI assistant

BOA launches AI chatbot Erica, which will be

available inside the bank's mobile app starting

next year

Banks collaborate for blockchain

FINANCIAL INSTITUTIONS USE CASE BENEFITS

BLOCKCHAIN

INVESTMENTS

Bank GuaranteesOperational

efficiency

Faster

settlementsPayments

Risk

reductionSecurities Lending

Faster

disbursalCorporate Lending

Operational

efficiencyTrading

Token is an Open Banking Platform on the

blockchain leveraging smart-contracts to

monetize access for banks for TPPs

FCA has authorized Token to deliver payment initiation and account

information services, under the terms of PSD2.

TrueLayer is an API platform for

developers to access bank data they need

to build new apps and services

Zopa has worked with TrueLayer to create an income verification

product which removes the need to manually upload documents to

verify income - replacing it with Open Banking data.

Plaid offers a suite of API tools to

allow developers to integrate with

bank infrastructure and access and

authorize user bank accounts

CustomersInvestors

Open Banking has possibilities, but monetisation hard to get right

C2FO and Citi have partnered to offer an end-to-end trade finance solution that

includes Dynamic Discounting, amongst a suite of other bank provided payables

solutions.

Kabbage is offering SME loans in partnership with ING, Scotiabank and

Santander

JPMorgan Chase collaborated with OnDeck, a leader in online small-business

lending, to offer a proprietary credit score based on loans granted to small- and

mid-tier corporates.

TD Bank partnership with nCino allowed TD Bank to digitalize the entire consumer

lending process from start to finish.

DBS joined forces with peer-to-peer lending sites, funding societies and MoolahSense,

to better serve small businesses. In return, the two lending platforms refer borrowers

with good credit to DBS for commercial banking solutions such as cash management

Banks partner with fintechs for digital lending

Banks partner with fintechs to automate treasury operations

• KeyBank partnered with AvidXchange to provide a software-as-a-service solution as part of KeyBank’s treasury management platform.

• The solutions replaces paper-based invoicing and payment processes with digital capabilities.

• BBVA acquired Holvi, an online business banking service.

• Holvi is geared towards entrepreneurs, and small and medium sized-businesses and provides them a range of business services (traditional banking, online sales platform, cashflow tracker, etc.) with integrated features that offers a one-stop-shop for businesses.

• Capital One joined forces with Bill.com and Gusto to simplify cash flow for small businesses and integrate HR into their business processes.

• The collaboration will work with the bank’s existing suite of financial products and help to manage all aspects of cash flow and HR-related processes.

Investment collaboration with B2B fintech platforms

Digital banking collaboration for customer experience

Channel partnershipIntelligent financial assistant and conversational

interface to improve customer engagement

Technology partnershipWhite-label modular and API-driven platforms

from challenger banks to improve customer

experience

Product partnershipChallenger banks’ data-driven personalised

products with better rates and improved

transparency

Experience partnershipCustomer-facing challenger banks’ platfomrs for

improved onboarding experience and self-serve

capabilities

Digital subsidiariesMobile-first bank subsidiaries to capture niche

customer segments, especially millenials

Insurance collaboration catching up

No one knows what’ll be the impact of Brexit (really)

WTO Model

Turkey Model

Swiss Model

Norway Model

Long-termMid-term

What are the next steps for fintech’s?

Short-term: Uncertainty Assess immediate impact | Avoid hasty strategic decisions | Develop several strategic scenarios |

Active communication strategy

Mid-term: New Roadmap

Short-term

Regularly evaluate UK and EU negotiations roadmap and timeline

[Article 50, new UK legislation, 27 EU states negotiations]

Evaluate scenario impact

Long-term: Vision

123

1

2

3

Movement of Talent | Investment and Funding | Passporting and Regulatory | Customer Data | Contracts and Costs | Innovation and IP

Movement of Talent | Investment and Funding | Passporting and Regulatory | Customer Data | Contracts and Costs | Innovation and IP

Movement of Talent | Investment and Funding | Passporting and Regulatory | Customer Data | Contracts and Costs | Innovation and IP

Movement of Talent | Investment and Funding | Passporting and Regulatory | Customer Data | Contracts and Costs | Innovation and IP

Minimal impact | Significant or uncertain impact | Maximal impact

London will remain a financial hub.

Will it be the fintech hub?

What is your company vision?

Potential Impact

Investment and Funding

Impact

o Uncertainty leading to temporary decrease of funding

o Affects early stage incubator/angel investments more than VC investments

Next Steps

o Revisit timeline of current and future funding plans (especially early stage funding)

o Pro-active investor relations

Global VC funding

Pre-Brexit investor

anxiety

UK VC funding

Q2 2015 Q2 2016

$33bn $40bn >>

>

$4.3bn $2.8bn

>>

>

EU VC funding

$1bn $994m

>>

>

Potential Impact

Passporting and Regulatory

Impact

o Depends on EU-UK negotiations

o Window of opportunity for lobbying

Next Steps

o Assess related risk and costs for your product/service

o Plan alternative strategies

Potential Impact

Innovation and Intellectual Property

Impact

o UK will likely repatriate EU Intellectual Property legislation

o Crisis creates new threats and also opportunities

o Benefits to creative, innovative and agile startups

Next Steps

o Research post-Brexit customer needs

o Investigate new partnership, M&A and exit opportunities

o Review your patent and trademark strategy

o Prepare for changes in application processes

Potential Impact

Cross-border Movement of Talent

Impact

o Free movement of workers

o Additional personnel costs

o Motivation of your key non-UK talent

Next Steps

o Assess your exposure

o Retain your key talent

60,000FinTech jobs in the UK [Fortune.com]

30%are talent from

overseas

[Innovate Finance]

Potential Impact

Customer Data

Impact

o Major policy change is unlikely

o Depends on ‘adequacy’ provision from EU

Next Steps

o Assess your current data location, ownership and flow

o Review the contracts, user agreement and privacy policy

Potential Impact

Contracts and Costs

Impact

o Lack of clarity when EU territory is referenced

o Additional costs

Next Steps

o Assess the contractual agreements

o Revisit contractual, currency and operational risks and costs

£50 000Estimated UK-EU relocation cost per

1 employee in financial industry

London’s fintech status could be under debate, but it still rules the scene post-Brexit

Blockchain – Dilbert’s view

Collaborate.

Thank you!

devie @ burnmark.com@devie_mohan

Collaborate.

Thank you!

@devie_mohandevie@ burnmark.com