GUIDE...2016, % Traditional insurer (one of the market leaders in China) The first exclusively...
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© Top Lead LLC All rights reserved 2018 GUIDE
Transcript of GUIDE...2016, % Traditional insurer (one of the market leaders in China) The first exclusively...
© Top Lead LLCAll rights reserved
2018GUIDE
INTRODUCTIONFinTech-industry is a sophisticated combination of the existing financial system and modern technology.
This symbiosis changes the financial services market. New niches are formed. New financial products are handy, intuitive, personalized and affordable. They are attracting more people to the financial system. Traditional financial institutions are compelled to compete or co-operate with fierce FinTech start-ups.
Ukrainian banks play an important role in the establishment of the national FinTech industry.
Dmytro Zarahovych, Dmytro Bogatyrev, Julia Kyrpa,Andriy Pyshnyy, Volodymyr Moskalenko,Julia Chervonooka
NBU ◆National Financial Services ◆
Commission SCFM ◆
NSSMC ◆
Regulatory environment
FinTech-providers
Payment providers ◆Marketplaces ◆
Scoring services ◆Analytical Centers ◆
Developers ◆
FinTech products
Mobile applications ◆Web services ◆
SAAS ◆
State Statistics Service of Ukraine (SSSU)Internet Association of Ukraine (InAU)National Financial Services Commission National Bank of Ukraine (NBU)OschadbankPrivatBankRaiffeisen Bank AvalUkrainian Association of Payment Systems (UAPS)Universal BankAEQUO Law Firm (AEQUO)B-HiveBNP ParibasBusiness InsiderBusiness Insider Intelligence (BI Intelligence)CapgeminiCB InsightChina Pacific Insurance CompanyCNBCCraftCrowdfundingCrunchbaseDeloitteErnst & Young (EY)European Banking FederationEuropean Central Bank (ECB)EurostatFinance.uaGartnerHelgiLibraryInnovate Finance
International Monetary Fund (IMF)KPMGMassolutionMastercardNewzooOpensignalPagan ResearchPromontory Financial Group (PFG)QuoraRevolutSwiss Re InstituteTechfolianceThe BalanceThe Consultative Group to Assist the Poor (CGAP)The GuardianThe New York TimesThe Royal Bank of ScotlandThe World BankTransUnionVenture ScannerWiredWorld Bank Group (WBG)ZhongAn
Why we created this guide
In our guide, we explain the meaning of FinTech, the players in the financial technology market and how the segments of the FinTech market are built. We have represented the evolution of the financial and banking system, showed the legal incentives and obstacles to the development of the young industry in Ukraine and in the world.
What is shown in this guide
How FinTech-industry is organized Special gratitude
Sources
Banks ◆Credit institutions ◆
Insurance companies ◆Stock exchanges ◆
Investment funds ◆ Pension funds ◆
Traditional financial
institutions
2
FINTECHIN UKRAINE
FINTECH REGULATION
FINANСIAL SYSTEM
FINTECHIN THE WORLD
FINANCIAL TECHNOLOGIES EVOLUTION FINANCIAL SYSTEM
Sources: KPMG, CB Insight, IMF, Business Insider, The New York Times, The Guardian, B-Hive, Quora, CNBC, BNP Paribas, Venture Scanner, EY
PayPalis created
The first electronic money transfer (Western Union)
Cash register is patented
First credit card, payment is possible in 20 restaurants
First ATM(London, Barclays)
Establishment of SWIFT — an international interbank
payment system
Online banking is launched in the USA
Security First Network Bank,the first exclusively online bankin the USA
The first mobile payment madeby SMS
Contactless credit card is created
M-Pesa is launched in Kenya.Mobile banking through the network operator
The entry into force of the PSD2 Payment System Directive
The first bachelor programin FinTech, Frankfurt Schoolof finance and management
Mastercard launches testing of biometric bank cards
BNP Paribas launches a VR application for mobile banking
$58 bln — investment in FinTech in the first half of 2018
>2000FinTech- companies
1860
1875
1950
1967
1973 1981
1995
1997
19982003
2007
2009
2010
2011
2014
2013
2016
2017
2018
Kickstarter, a crowdfunding platform, is launched
FirstBitcoin-transaction
Google Wallet is launched
Apple Pay is launched
The first ICO is announced
4
Sources: SSSU, HelgiLibrary, Eurostat
400
300
200
100
THE ROLE OF THE BANKING SECTOR IN THE ECONOMYAssets of banks from GDP,2017, %
France
ChinaSingapore
Australia
Switzerland
UAE
Czech Republic
Italy USA
Serbia
Belarus
Ukraine
The role of the financial and insurance sectors, 2017, %
Finance and insurance ensure the movement of capital in the economy, which stimulates its development and accelerates growth. FinTech is an opportunity to significantly improve the efficiency of the financial and banking system and, as a result, the entire economy.
In GDP In employment
EU
Ukraine4.4%
2.3%
1.3%
2.3%
FINANCIAL SYSTEM
5
Sources: NBU, WBG*2016
In the financial system, banks play a major role. They provide monetary interconnection of all economic actors. By accumulating free financial resources from the population and business, they lend to sectors that are in need of it. The reliability and efficiencyof the banking system is a guarantee of a stable economic development. Cutting-edge solutions in FinTech can accelerate and improve risk management and analysis of the creditworthiness of customers, which will improve the qualityof the loan portfolio.
BANKS ARE BASIS OF INVESTMENTS IN ECONOMY
The share of problem loans of the total amount of loans granted, 2017, %
Ukraine Greece Italy Poland Denmark Switzerland*
55%46%
14%
4% 2% 1%
TOP-10 banks by volume of loans grantedas of July 1, 2017, bln hryvnias
Raiffeisen Bank Aval
UkrsybbankUkrsotsbankUkrgasBank FUIBOschadbank Ukreximbank Alfa-BankPrivatBank Sberbank
66 57 44 35 31 30 27 23 18 17
FINANCIAL SYSTEM
6
Sources: NBU, European Banking Federation, ECB*as of 01.01.2018 **EU + Iceland, Monaco, Switzerland, Liechtenstein, Norway, San Marino
A large number of branches has ceased to be a characteristicof efficiency and convenience forthe bank. Smartphones replacedthe bank branches, and the searchfor the nearest available cash desk turned into a visit to the payment terminal, in the next house
In the EU, 77% of users use mobile banking, and the number of cashless transactions is steadily increasing
12 banksper 1 mln people
359 branchesper 1 mln people
EUROPE**2017
EVOLUTION OF THE BANKING SYSTEM
The increase in the numberof cashless transactions in the EU in 2016 relative to 2011
35%
UKRAINE
2010 2017
2 banksper 1 mln people*
223 branchesper 1 mln people*
4 banksper 1 mln people
458 branches per 1 mln people
37 thsATMs
30 thsATMs
35 mlnactive cards
29 mlnactive cards
2.3 blncashlesstransactions
0.1 blncashless
transactions 252 thsterminals*
108 ths terminals -50%
-51%
+23%
+21%
+1 553%
+133%
FINANCIAL SYSTEM
7
Taiwan
Hong Kong
South Korea
United Kingdom
Japan
Switzerland
Australia
USA
Germany
China
India
Ukraine
20
15
10
5
Sources: National Financial Services Commission, WBG,Swiss Re Institute, ZhongAn, China Pacific Insurance Company
*by volume of premiums
ROLE OF THE INSURANCE SECTOR IN THE ECONOMYGross insurance premiums from GDP, 2016, %
Traditional insurer
(one of the market leaders in China)
The first exclusively online insurer
in China
ZhongAn
Growth of insurance premiums, 2017–2016, %
Number of employees, 2017, ths people
Insurance reduces losses from the realization of risks. In this way, the quality of life is improving, and the economy is growing.At the moment Ukraine lags behind the level of insurance penetration. InsurTech significantly simplifies access to insurance products and reduces their costsand accelerates their distribution.
Life
Non-life
The structure of the insurance market*, 2017, %
The worldUkraine
93% 46%
China Pacific Insurance Company
102
20% 75%
3
FINANCIAL SYSTEM
8
FINTECHIN UKRAINE
FINTECH REGULATION
FINANСIAL SYSTEM
FINTECHIN THE WORLD
POSSIBILITIES FOR FINTECH DEVELOPMENT IN UKRAINE
Sources: InAU, Newzoo, Opensignal, World Bank Group
Share of people using the Internet,second quarter of 2018, %
Level of penetration of financial services, share of population aged 15+, 2017, %
Level of penetration of smartphones,September 2018, %
3G network coverage level or higher, September 2016, %
Have an accountat a financial institution
13.2 mlnpeopleUnbanked-population
Have a debit card Used a debit or credit cardto make a purchase
Used the Internet to pay bills or make a purchase
Used the Internet to pay bills or make a purchase
Used the Internet to access a financial account
Used the Internet to access a financial account
65% 48% 45%
63% 49% 39% 29% 18%
22.5 mln peopleuse financialservices
FINTECH
10
Payment system
On-demand- insuran-
ce
Crypto-currency
Smart contracts
Decen-tralized
data-bases
Tokens
Chatbots Fin-trackers
Р2Р- insuran-
ce
Micro insuran-
ce
Insuran-ce social networks
Legisla-tion
analysis
Onlinebanking
Big Data
Analysis
Scoring Market-places
Open Data
Aggre-gators
Р2Р- lending
Micro lending
Balance crediting
Custo-mized
lending
Mobile banking
Payment services
Alter-native trans-
fers
Robo-advisers
Personal Finance Mana-
gers
Source: analysis of Top Lead
FINTECH VALUE CHAIN
REGULATORY ENVIRONMENTcreates rulesfor market players
TRADITIONAL FINANCIAL INSTITUTIONSkeep financial resources,developed infrastructureand client base
FINTECH PRODUCTS
Issuer Paymentaggregator
Scoringservices
Insuranceaggregators
Crypto-currency exchanges
Tradingplatforms
Automated Investment Management Companies
Personal finance management companies
Crypto wallets Blockchain developers
Informationand analyticalcenters
Identificationproviders
Monitoring companies
Scoringservices
Platforms for gamified insurance
Р2Р- platforms
Crowdfundingplatforms
Paymentprovider
FINTECH-PROVIDERSwith the help of technology improvefinancial services and expandopportunities for users
Payments and remittances
Credit institu-
tions
Insuran-ce compa-
nies
Pension funds
Stock exchan-
ges
Banks
Invest-mentfunds
Lending
Insurtech
Regtech
Cryptocurrency and blockchain
Financial Management
NBU
National Securities and Stock market commission
StateFinancialMonitoring
SCFM
National Financial Services Commission
Tax Management Companies
Risk Management Companies
Р2Р-platforms
Credit marketplaces
Acquirer
Mining companies
Processing centers
FINTECH
11
FINTECH-PROVIDERS IN UKRAINE
20:18 68
Source: open data sources *random sample of companies and applications
FINTECH
Mobile banking
Analytical and
scoringsystems
Micro lending
ChatbotsCrypto
applica-tions
Personal Finance
Managers
Crowd-funding
platformsP2P/P2V-lending
Compa-nies
checking services
OpenData
Aggre-gators
Mobile wallets
Paymentsand
remittan-ces
Oschad 24/7
Raiffeisen Online
OTP Smart Monobank
Privat24
Wallet Factory
Pay Force
Portmone
Easypay
Global Money
UAPay
MOSST
iPay
Moneyveo
My Wallet
iFinance
MyCredit
Taplend
CreditPlus
bNesis
YouControl
Kuna
BTC Trade UA
Karbo
Paytomat
Finance Controlling
Finkee
mTax
HomeMoney
CoinyPay
PayLasticLeoBot
Ustarter
MO CashFinhub
Na-StarteSpilnokosht
IntelScoring
Verdictum
Smart Data
YouScore
Liga Zakon
OpendatabotProzorro
12
CASHLESS PAYMENTS IN UKRAINE
Ukraine is actively moving towards a cashless economy. You can already see some successes, but lagging behind developed countries is significant. This creates opportunities for the active development of FinTech-industry in Ukraine
Volume of operations,II quarter 2018,
USD bln
With payment cards issued by banks
Sources: NBU, UAPS, IMF
2 26
Share of cash in money supply for various countries, July 2018, %
Denmark Austria Finland Poland Moldova Ukraine
28%24%
19%12%9%
4%
residents
within Ukraine
to Ukraine
from Ukraine
non-residents
1.41.3
TYME0.5
Postal transfer "UKRPOSHTA"0.4
Financial world0.1
City 240.1
Others0.2
Western Union 0.4Money Gram0.1
Others0.2
0.6
1.3
0.1
0.5
0.1
0.0006
0.0004
incr
ease
d 9
tim
es
0.1
in their own bank network
in the network of foreign banks
in the network of other banks
21Mastercard
17.5
Visa8.5
PROSTIR (National Bank) 0.2
Others0.01
4
1
0.6
Through the money transfer system(with the exception of banks, card payment systems
and post offices)
an increase in the number of card cashless transactions in 2015–2017+80%
FINTECH
13
Source: NBU
PAYMENT CARDS IN UKRAINE
Payment cards market in Ukraine is constantlygrowing. Despite the economic crisis,over the last five years:
+5% — the number of active payment cards increased+48% — the number of trade and service entities accepting cashless payments increased+55% — the number of payment terminals increased
Availability of contactless payment technology as of I half of 2018,%
76% 5% CardsTerminals
transactions with payment cardsin 2017 to
3bln
₴1,3 T
The structure of transactions with payment cards in volume, %
Structure of cashless transactionsby volume, %
Cashlesspayments
Receiving cash
2008 2010 2012 2014 2016 1st half of 2018
On the Internet
Transfers from card to card
In the trading network
In self-service devices3%
36%
31%
30%
5% 7%12%
25%35%
44%
FINTECH
14
LEADERS IN THE FIELD OF PAYMENT CARDS
The payment card market is currently monopolized. However, recent trends indicate a gradual diversification of issuers
Source: NBU*at least one expense transaction for the last three months
Total number of payment cards in Ukraine, 01.07.2018, mln units
TOP-5 banks by the number of active cards,total number of cards and share of active ones, 01.07.2018, mln units
activeamong them*
reduced
4 tim
es
60.1
59%
Distribution of active payment cards by issuers, % of the total number
01.01.2017 01.07.2018
54%54%
24%
8%
18%
49%PrivatBank
PrivatBank
29.7
Oschadbank
11.0
53%
RaiffeisenBank Aval
4.9
45%
UkrSybbank
2.3
47%
67%
Alfa-Bank
2.0
90%
23%
7%
17%
Others
Raiffeisen Bank Aval
Oschadbank
FINTECH
15
MOBILE BANKING IN UKRAINE
Sources: PrivatBank, Oschadbank, Universal Bank, Raiffeisen Bank Aval
Comparison of the most popular mobile banking applications
availablefunction
unavailable
Transfers by phone number
Payment to free details
Utility payments
Payment templates
Limit management
Linking cards to Apple Pay/Google Pay
Cash withdrawal without a payment card
Issue and reissue of cards
Deposits opening
Changing the PIN-code
Issue of a virtual card
Sign in with a fingerprint
Blocking and unblocking cards
Support — messengers/in the application
Privat 24 Oschad 24/7 monobank Raiffeisen
Online
FINTECH
16
PAYMENT PATH
Source: Oschadbank
FINTECH
Payment for utility services via mobile banking Oschad 24/7
Preparatory steps of the bank
Integration of systems for the possibility to accept payments in favor of the service provider and consolidate all personal accounts into a single receipt
Making an agreement on accepting payments in favor of the service provider
Client Oschad 24/7 Supplier
Choosing a service provider(for example, CityEnergo) and entering a personal account
Editing and verifying payment
4
Transferring funds to client's personal accounts
8
Processing center
1
Invoicing payment
3
Request and receiving customer debt data
2
Checking the balance on the account and directing the withdrawal request
5
Formation of a receipt and payment notification
6
Transfer of funds to the account of the supplier
9
Transfer of registers of accepted payments
7
17
BANKS AND FINTECH
Source: open data source *the list is not exhaustive
InternationalFinTech products
Accelerationprograms
Finalists' projectsof accelerations
Banking Fintech-products*
Bank
Oschadbank
UKRSIB QRchatbotsUkrsybbank
OTP Bank
Alfa-Bank
PrivatBank
TASCOMBANK
RaiffeisenBank Aval
Google Pay
Apple Pay
Garmin Pay
How ukrainian banks interact with FinTech*
FINTECH
FUIB
POPCORP
Open Banking Lab
Alfa Digital
Raiffeisen Digital HUB
Oschad 24/7(mobile)
Oschad PAYchatbot "Onlineassistant"
Raiffeisen Online
Raiffeisen Pay
FUIB OnlinePayHub
FUIB mobile
TAS24
MAXI CARD
TAС Link
TAS2U
UKRSIB online
OTP Smart
Alfa-mobile
YouScoreFuture Agro Finance
CoinyPaybNesis
Airpay
LiqPAY
IPay Privat24
QR-PAYMENTS
18
FINTECH-SOLUTIONS OF OSCHADBANK
Sources: NBU, Oschadbank, Finance.ua
The main technological achievements on the way of Oschadbank reforming
Electronic archive — the archive of clients: individuals and legal entities
The first contactless fare on the subway
Mobile offices(based on KrAZ)
Free and instant "entry point" to Oschadbank —
"My card"
№1 in active paymentcards growth
(2015–2016)
Prepaid-cards
Opening a deposit online
Google PAY
Updated Oschad 24/7was launched
Bank ID (developed by Oschadbank and transferred tothe NBU)
Municipal cards issue begins (Kyiv, Lviv, Chernivtsi, Chernihiv, Mukachevo,Zhytomyr)
№2 in the market of commercial acquiring
2011 — №32
Electronic pensioncertificate
Updated bank website
CorpLight — a remote-servicing system for SMEs
OshcadPAY
NFC-ring for payments
№2 in the market by the number of self-service zones
Apple PAY
The first to use SWIFT gpi(the system of online tracking of Swift payments)
Digital Prepaid Card(the first issuing bank in Ukraine)
28 mln contactless fare payments on the subway for 3 years
Acquirer of the biggest events(Atlas Weekend, Champions League finals)
Implementation of United Data (the only IT infrastructure for allregional offices)
3 mln usersof Oschad 24/7
Garmin Pay
2018
2017
2016
2015
FINTECH
19
IDENTIFICATION
Source: NBU
Client Personal identification Service
Individual or legal entity
For majority of services personal identification of the client is required by the financial institution or agent. Thus there are some shortcomings
High cost
(retention of premises and the need in staff)
Long duration
(need to visit the premises of the relevant subject)
Geographic limitation
(difficulty of access for people who are
geographically distant)
Bureaucratic obstacles
(need to have all the necessary documents
with you)
◆ Opening an account◆ Issues of a payment card◆ Obtaining admin services◆ Getting a loan◆ Signing the contract
The current identification process
Allows to identify the user on the Internet using the data that he has previously provided to the bank
The basic condition for the further development of BankID is the legislative regulation. Changes that will allow BankID to be used as a mechanism for authorization on an equal basis with others will provide conditions for its active dissemination.
Client Service
NBU BankID opportunities(developed by Oschadbank)
Remote identification with
BankID
BankID advantages
High level of penetration of banking services
(35 mln activepayment cards)
Standardizeddata
(the data is set by the National Bank)
High security level(2-step
authenticationof users)
Easy to use
(no additional agreements required)
FINTECH
20
FINTECHIN UKRAINE
FINTECH REGULATION
FINANСIAL SYSTEM
FINTECHIN THE WORLD
USA
NewZealand
3
Sweden
3
Ireland
3
Israel
3
Australia
10
Brazil
2
Poland
2
Nigeria
2
Singapore
2
Mexico
2
Canada
6
19
1
Taiwan
1
Kenya
1
Malta
1
Japan1
Finland
1
Switzerland
1
Belgium
1Turkey1
Italy
1
SouthKorea
4India
9
China8
UnitedKingdom
5
Germany
5
France
Netherlands
2
Sources: KPMG, СB Insights, Crunchbase
*TOP-100 companies based on KPMG's methodology for capital accumulation, product and geographic diversification, etc. The categorization was basedon the company's core product
FINTECH STRUCTURE Geography of TOP-100 FinTech-companies
as of November 2017
Lending32%
Payments21%
Transfers and capital market
15%
ІnsurTech12%
Financial management
7%
Other 22 — unicorns that cost less thanUSD 3 bln
The structure of TOP-100 FinTech-companiesby industries *as of November 2017,%
Ant Financial
Lu.com
JD Finance
Stripe
Paytm
Robinhood
SoFi
Credit Karma
GreenSky
Oscar
BGL Group
Circle
150.0
30.0
18.5
9.2
7.0
5.6
4.04.03.5
3.63.2
3.0
3.0
23.47
Total capitalization of 34 FinTech unicornsas of June 2018, USD bln
272,07
RegTech and cyber security
6%
Blockchain and digital currency
4%
Analytics
3%
FINTECH
22
INVESTMENTS IN FINTECH
FINTECH
Main investment regions in FinTech,USD bln
Global investment in FinTech-companies, USD bln
FinTech is characterized by venture investments reflecting the dynamics of industry development. Investors are willing to take risks and often invest in projects on the initial stages of their existence, actually investing in the idea. During the first half of 2018, the average volume of such transactions amounted to USD 1.7 mln.
The geography of investments in FinTech has changed substantially since 2014.Asia is currently the most attractive region for investment in financial innovation.
Source: KPMG*excluding the UK
2014
2015
2016
2017
1st half of 2018
UnitedKingdom
16.1
4.5
0.8
6.8
5.5
Asia
16.8
5.4
11.8
9.4
4.2
Europe*
12.6
6.5
6.7
9.9
4.5
USA
20.3
24.1
16.5
14.2
39.2
2012 2013 2014 2015 2016 2017 1st half of 2018
12.9 blnacquisition of WorldPay, which specializes in payments
14.0 blnVC raised by Ant Financial
8.9 15.1
42.362.5
43.2 38.157.8
Structure of investments in FinTech-company according to the mechanism of realization, 2016–2017, %
Mergers and acquisitions
Venture investments
41%
59%
FINTECH
23
14
UnitedKingdom
USA
Italy
Brazil
2
Russia
2
Mexico
2
Germany
2
2
Finland
1
Sweden
1Denmark
1
SouthKorea
1
Japan
1
Egypt
1
Ukraine1
Canada
2
China
3
France
6
Spain
1
5Poland
2
Sources: Techfoliance, Craft, Crunchbase, Revolut, the Royal Bank of Scotland, Pagan Research
The number of neobanks by countries(as of January 2017)
Neobanks are the companies that provide banking services. They do not have physical departments and are presented as a mobile application (web service)
Neobanks can function as an independent institution having received theis own banking license, or on the basis of existing banks using their license
The advantage of neobanks is their convenience and low
commissions due to the absence of branch expenses
Neobank-unicornRevolut
One of the largest banksin the United Kingdom
The Royal Bankof Scotland
3since 2015
291since 1727
34.5
625% 104%
728.0saved for
customers for all the duration
3 191.5earned in commissionsin 2017
0 744
2.0 5.5
31.1
Time of existence, years
The ratio of income per worker, 2017,
USD ths
Income growth, 2016/2017, %
Commission,USD mln
Number of branches, 2017
Number ofonline users,
2017, mln people
The ratio of indicators of the neo- and traditional bank
NEOBANKING FINTECH
24
Sources: KPMG, CB Insights, Crunchbase, Capgemini
Dynamics of investment volumein InsurTech (venture capital, M&A and direct investment), USD bln
2010 2011 2012 2013 2014 2015 2016 2017
3.4
0.6 1.21.8
8.6
4.5
12.3
7.4
Estimated value of unicorns in the sphere of InsurTech, USD bln
Oscar, USA
BGI Group, United
Kingdom
Zhong An Insurance,
China
Clover, USA
3.2 3.0 2.0 1.2
INSURTECH
On-demand insuranceSasha values her guitar. So she insured it for 10 days of touringin the Far East
P2P-insuranceHer musical band has a subscription to P2P insurance. They pay contributions and determine the terms of insurance payments
Insurance social media and gamificationThe lessors are happy about Sasha.
Therefore, she has an excellent rating on scoring services. She can rent an apartment without a deposit. Sasha does not cross the
road to red light, adheres to a healthy lifestyle and is regularly inspected by
doctors — insurance companies offer her substantial discounts on life insurance
Customized andpersonalized insuranceFrom Sasha's Instagram page,the insurance company knows that she is a fan of exotic dishes. Therefore, before the tour to the Far East, the company offered her insurance in case of poisoning from overeating exotic dishes
MicroinsuranceSasha plays concerts only in her "happy" boots. She insured them in case of theft and damage
Artificial intelligence, machine learning, Internet of things, Big Data, open API — technologies that make possible the emergence of new insurance niches,which simplify and expand accessto insurance services
of insurance claims up to 2030 will be processed automatically with the help of artificial intelligence90%
FINTECH
25
Sources: CB Insights, Crunchbase, TransUnion
LENDTECH
Estimated value of FinTech unicorns in the field of lendingat the beginning of 2018, USD bln
Lu.com,
China
SoFi, USA
Credit
Karma, U
SA
Avant,
USA
Affirm
, USA
Tuandaiwang, C
hina
ACORN OakNorth
,
United K
ingdom
Funding C
ircle
,
United K
ingdom
Kabbage, USA
18.5 4 3.5 2 2 1.4 1.2 11
Investments in the field of alternative lending, USD bln
2013 2014 2015 2016 2017 2018
0.6
2.3
5.64.3 4.0
1.5
Dynamics of the lending market structure to creditors, %
Traditional financial institutions
(banks, credit unions, etc.)
FinTech
The total amount of unsecured loans to individuals in the US, USD bln
2012 2017as of the second quarter
45
106
4%96% 68%32%
FinTech contributes to the growth of consumer credit market. It allows to capture the sector of high-risk borrowers, accelerating the process of lending and reducing risks by applying advanced methods for assessing them.
Companies in this segment are engaged, for example, in the analysis of big data (social network activity, payment history, fairness of performance of obligations, etc.), collecting information that would be relevant to obtaining a credit or a loan.
Digital platforms that combine borrowers and lenders are, in fact, credit services for small, medium and private individuals. For the latter, they usually offer microloans or installments for consumer goods.
Due to these models, individuals who were not able to receive traditional loans can be connected directly with the investor or receive a loan without collateral from the loan portfolio of such a FinTech company.
0101010101010101010101010101010101010101010101010101010101010101010101010101010101010101
01010101010101010101010101010101
Credit marketplaces
P2P lending;Balance crediting
Credit scoring
FINTECH
26
CROWDFUNDING
Sources: Crowdfunding, CGAP, Massolution
2015
20111,5
The amount of funds involved through Crowdfunding platform in the world,
USD bln
Models for receiving rewards for sponsors
CROWD SPONSORS
FUNDRISERS
100,0
◆ Getting a share in the project◆ Selfless participation in the project◆ Getting a reward for participating in the project◆ Project lending
small sumfrom one sponsor
significant amounts of investment from many sponsors to
one project
Individuals
Lenders
Financial institutions
Venture companies
Private investors
Business
Individuals
Non-governmental organizations
Startups
Charity organizations
Small and medium business
Fundamental principles of Crowdfunding:
Significant amount of contributionsSmall sums of contributions Transactions are carried out via online platform
The results of popular Crowdfunding platforms
50 9 14Total number of sponsors, mln people
Gofundme Indiegogo Kickstarter
3Total funds raised, USD bln 5 1
it's infrastructure contains payment services,
a system of rewards, control over the implementation
of projects, etc.
CROWDFUNDINGPLATFORM
FINTECH
27
Sources: Capgemini, The Balance, BI Intelligence, CB Insights, Crunchbase, KPMG, Gartner
*Visual compilation of electronic/mobile services and financial management applications
**Forecast
WEALTHTECHUnicorns in the finance management segment, USD bln
of the interaction of consumers with business by 2020 will be without "live" communication85%
Robo-adviser*
Analyzes costs and offers waysto optimize them, creates a plan for repayment of financial obligations: mortgages, loans, credits
Provides financial support to the user in real time, warns of excess spending in a day, recommends where to eat, where to relax, where to fill the car
Independently performs utilities, taxes and debts on loans
Provides financial operations of connected to it user's smart devices, for example, allows controlling the expenses of the refrigerator for food through a single financial application in the smartphone
Monitors expenses, savings, tax and credit obligations of the user
It monitors financial, insurance, retail offers —
loyalty programs, promotions, discounts.
Analyzes securities markets, offers
investment objects
Due to machine learning and analysis of big data, it
effectively manages client assets: engages in
financial trading, updates portfolio, etc.
It can adapt to nature, lifestyle and user needs
Robinhood,
USA
GreenSky, USA
Lakala,
China
AvidXchange,USA
51Credit,
China
TongDunTech, China
JD Finance,
China
30.0
5.6
3.6
1.6
1.4
1.0
1.0
Assets managed by robo-advisers**,USD bln
2018 2019 2020 2021 2022
402
760553
1 437
1 045
FINTECH
28
BIOMETRICSMastercard introduced the Identity Check system, and Alibaba - Smile to Pay. They provide an opportunity to confirm payment by makinga selfie or just having a smile on the camera
In Brazil and Japan, ATMs can scan the image of the veins in the palm of your hand
Royal Bank, TD Bank and Mastercard test identification for online payments based on an electrocardiogram that the bracelet reads
Users of the mobile application USAA Bank can verify transactions via voice
Biometrics
«has»
who it
«is»
«knows»
The FinTech biometry is used to confirm financial transactions and to identify. Its application simplifies and accelerates the interaction of users with FinTech products
There are three main principles of authentication — something that person:
FINGERPRINT
IDENTIFICATION BY THE VOICE
You have 4 new notifications
According to analysts, the number of users of financial services using biometrics as a means of authentication will reach 1 bn in 2020
mln people
2015 2020
350 1 000
IDENTIFICATION BY HEART RATE, PULS
IDENTICATION BY KEYSTROKES
FACE RECOGNITION, IRIS SCAN, IDENTIFYING THE MANNER OF WALKING
2101469657
258
2016
2017
2018
2019
2020
2021
Forecast of transactions volume using biometric technologies,USD bln
Source: PFG
FINTECH 4G
29
Chronology of the appearance of applications for contactless payment in Ukraine
Tokenization is a technology that transforms a connected device into a secure payment facility using a digital code (token) instead of a card number
Annual increase in the number of contactless payments by smartphone based on Mastercard tokenization platform, August 2017–August 2018
The basis for the tokenization dissemination in Ukraine
TOKENIZATION FINTECH
Sources: Mastercard, НБУ, Newzoo, Apple
The penetration rate of smartphones, September 2018, %
The share of terminals supporting contactless payments, as of 1st half of 2018, %
Monthly growth of devices connected to MasterCard tokenization technology in Ukraine
+25%
76%
Token is the "digital name" of the card, a 16-digit combination of digits that replaces the card number. A complex encryption system makes it impossible to use data in case of interception
Ukraine became the 12 th (among 43) country in Europe which started using Apple Pay
Advantages of tokenizationSecure payment method (stolen token doesn't give the necessary information)
Convenient method of payment (no additional devices or contracts are required)
by 68 times
February2017
November2017
May2018
July2018
The first NFC-wallets of Ukrainian banks
Google Pay
Apple Pay
Garmin Pay
48%
30
FINTECHIN UKRAINE
FINTECH REGULATION
FINANСIAL SYSTEM
FINTECHIN THE WORLD
REGULATORY INCENTIVES FOR FINTECH DEVELOPMENT
Regulatory "sandbox" is a legal space in which new business models are tested, which are not regulated by the current legislation and are not subject to regulatory control.
In the sandbox, companies can test new financial products without risks for real customers before applying for a license.
"FinTech bridges" contribute to the expansion of FinTech in the world. These are bilateral agreements that governments use to exchange information on financial innovation, simplify scaling procedures of FinTech companies and their operation.
Sources: BI Intelligence, Deloitte, EY, Innovate Finance
Already functioning
FinTech-hub
There are official plans to creat
Status of regulatory "sandbox"
Canada Denmark
Netherlands
United Kingdom
Russia
Indonesia
Malaysia
Thailand
Bahrain
India
Brunei
Hong Kong
Taiwan
Norway
Switzerland
USA
Australia
Singapore
Japan
Dubai(UAЕ)
Abu Dhabi(UAE)
Application for participation
Experimental stage
Approval stage
Launching the product
◆ Presentation of company and product
◆ Assessment of commercial feasibility, legal risks and product innovation
Preparatory stage
◆ Development of test parameters, determination of criteria for success or failure
◆ Identify security measures for users
◆ Development a plan of action in case of failure and a transition period after the "sandbox"
◆ Establishing the term of participation in the "sandbox"
◆ Testing period: continuous reporting, audit by other companies
◆ Obtaining a license
◆ Consideration of the application by the regulator
Operating model of participation in the "sandbox" consists of 4 stages:
Two years existence of the British regulatory
"sandbox":
276 applications89 products tested
32
OPEN BANKING
Source: Wired
FINTECH
What is Open Banking? Opportunities given by Open Bankingfor FinTech
Advantages of Open Banking
Important aspects
How Open Banking works?
A system that provides banks the access to their data for other market players
Types of data and opportunities opened by banks:◆ Access to customer accounts (at customer request)◆ Initiating payments from customer accounts (at customer request)◆ Data on financial products◆ Data on branches and ATMs
Who uses Open Banking? Open Banking in UkraineThe EU and the UK have legislated Open Banking. In the United Kingdom, the nine largest banks have to open access to their data; in the EU, this is mandatory for all banks
The Association Agreement with the EU provides for a gradual transition to the EU legal framework, including the Open Banking
A set of solutions that enables one type of software to interact with another
New financial intermediaries that can provide services to users based on open bank data
At the client's request, "the company" can aggregate data on all his accounts in all banks and provide a comprehensive analysis. It includes monitoring expenses, loans, deposits, etc.
The initiation of payments implies that "the company" may, at the request of the client, initiate a payment on his behalf in the system of the bank. This contributes to reducing the number of participants serving the payment, and as a result, to reduce its cost, as each participant receives a commission fee.
By accessing data on financial products from banks, "companies" will be able to create services to compare the terms of products in real time.
Reducing the problem too big to fail by decreasing the
concentration of banking services
Increasing competition with the appearance of new technology players
Creating new financial productsImproved usability
Reducing costs forend users
Banks are prohibited to set fees to "companies" for access to their data
"Companies" can act as a financial intermediary between a client and his bank without concluding a special agreement with the latter
Bank «Companies»API
33
FINTECH LEGAL FIELD IN EUROPE
Source: AEQUO
enhancement of EU regulation in order to ensure an appropriate and proportionate regulatory framework that allows crowdfunding platforms to operate cross-border with a comprehensive passporting regime under unified supervision
an assessment of the suitability of the current EU regulatory framework for ICOs and cryptoassets
hosting an EU FinTech Laboratory where European and national authorities will engage with tech providers in a neutral, non-commercial space with a view to building capability and knowledge
work on a comprehensive strategy, considering all relevant legal implications, on distributed ledger technology and blockchain addressing all sectors of the economy, including enabling FinTech and RegTech applications in the EU
by Q1 2019, presentation of a report on best practices for regulatory Sandboxes
by Q2 2019, to assess whether there are unjustified regulatory obstacles to financial innovation in the EU financial services regulatory framework
development of more coordinated approaches on standards for FinTech by Q4 2018 by liaising and working with major standard-setting bodies, including in the blockchain area
REGULATION
05.2016 04.2017 The UK’s HM Treasury publishes a regulatory innovation plan for financial services, which involves supporting and promoting innovation and reducing market entry requirements.
The revised Payment Services Directive (PSD2) applied introducing transparent and open banking concept throughout EU Member States.
01.2018 02.2018 The UK’s Financial Conduct Authority announces that it would start working with partners in Europe, Asia and the US with the goal of a global regulatory Sandbox for FinTech.
The European Commission publishes a 2018 Fintech Action Plan setting out a number of initiatives aimed at creating a unified and more future-oriented regulatory framework within the EU, including:
03.2018
The UK’s Financial Conduct Authorityis the world’s first regulator launcheda FinTech regulatory Sandbox initiative. It provides an opportunity to test out new, innovative financial services without incurring all the normal regulatory consequences of engaging in those activities. Later other European countries, like Switzerland, the Netherlands and Denmark has launched the same initiatives.
34
FINTECH LEGAL FIELD IN UKRAINE
Source: AEQUO
no dedicated legal framework no regulatory sandbox initiatives
Current position
In July 2018, the Financial Stability Board endorsed the draft concept of state regulation of crypto transactions in Ukraine, which sets out the main aspects of the initiation of legislative regulation in this area
Positive trendsThe Comprehensive Program of Ukrainian Financial Sector Development (NBU resolution #391 dd. 18.06.2015) provides the following government initiatives to be implemented until 2020:
liberalization of currency and investment regulation
electronic documents turnover development
adjustment of legal environment for the needs of innovative IT-technologies usage
implementation of digital identification
cashless strategy and improvement of payment systems regulation
The above services are subject to traditional banking and/or financial regulation which is obviously out-of-date, not flexible enough and does not meet current market needs. Most FinTech sectors remain not clearly regulated or restricted at all, which requires creative legal solutions for introducing innovative products and services.
FinTech companies have to receive regular licenses, which significantly slows down their development
accepting deposits and opening of current/card accounts —
banking license
lending — banking or financial institution license
insurance — financial institution license
the issue of e-money — banks only
however, their further distribution, loading, exchange and discharge may
be carried out by other legal entities involved as commercial agents
REGULATION
35
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