The potential for cloud-driven transformation—and

disruption is particularly strong in the financial

services industry. Digital payments, online banking,

and mobile transactions all offer powerful opportunities

for reinventing how people manage their money and pay

for goods and services, how banks serve their

customers, and how governments meet the needs of

their citizens.

It’s a transformation that is well underway, as evidenced

by everything from the rapid growth of mobile payments,

which are predicted to triple in value to more than 27

billion U.S. dollars in the United States in 2016,49 to

fierce competition among financial services institutions,

technology companies, and startups to deliver digital

wallets to the rise of entirely new forms of digital

currency, such as Bitcoin.

A Cloud for Global Good, Satya Nadella and Brad Smith, 2016

Digital Transformation

“Bankers think of how to apply finance to technology rather than how to

apply technology to finance.”

Chris Skinner

Fundamental changes are to be expected at the levels of:

• The Business Model of the entire ecosystem ‘payments’.

• The payment Instruments

• The technical Platform

The New Business Model

Fintech

Fintech (Financial Technology) is a line of business based on using software to provide financial services. Financial technology companies are generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software.

EBA

History of Fintech

Stage Years Duration (yrs) Technology Example

Fintech 1.0 1866-1967 101 Analogue Telegraph

Fintech 2.0 1968-2007 39 Digital ATM

Fintech 3.0 2008-2015 7 Direct Mobility

Fintech 4.0 2016-? < 7 Network Platform

Fintech in the World: Some Stats in 2015*

MARKET SIZE

(Billions of £)

INVESTMENT

(Billions of £) FINTECH STAFF

UK 6,6$ 0,5$ 61000

NEW YORK 5,6$ 1,4$ 57000

CALIFORNIA 4,7$ 3,6$ 74000

GERMANY 1,8$ 0,4$ 13000

AUSTRALIA 0,7$ 0,2$ 10000

HONG KONG 0,6$ 0,05$ 8000

SINGAPORE 0,6$ 0,04$ 7000

* http://www.ey.com/Publication/vwLUAssets/EY-UK-FinTech-On-the-cutting-edge-Executive-summary/$FILE/EY-

UK-FinTech-On-the-cutting-edge-exec-summary.pdf,

Fintech Specialization Share*

Insurance

7% Wealth

12%

Payments

16%

Lending

20%

Retail Banking

10%

Crowdfunding

7%

Other

14%

Security

5%

Currency and

Forex

9%

* H2 Ventures, KPMG and Matchi, “Fintech 100, Leading Global Fintech innovators, Report 2015”, 2016

Some Examples of Fintech Startups

Payments/Bill Pay/

Money Transfer

Personal Finance Management

Advising

Investment

Management

Lending/

Financing

Online/Mobile

Banking

1 Advanced security tools and technology

2 Faster payments

3 Digital wallet

4 Next gen point-of-sale

5 Cross-border transfer

6 Alternative retail-payment networks and fund-

transfer

7 Contactless technology for digital wallets

8 Simplification of online-checkout CX

9 P2P

10 IMerchant service offerings

11 Blockchain

The size of the bubbles is proportional to the number of related FinTech companies

Where are Fintech investing in Payment Services

The Payment Instruments

Virtual Currencies (e.g. Bitcoin)

“A digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically”

EBA.

In February 2015, the number of merchants accepting bitcoin for products and services passed 100,000. Instead of 2–3% typically imposed by credit card processors, merchants accepting bitcoins often pay fees in the range from 0% to less than 2%.

Cards in Bitcoin

Shift Card

The first U.S. bitcoin debit card. Connect Coinbase to spend online and offline at over 38 million merchants worldwide.

The Technical Platform

Blockchain Defined

A Blockchain is essentially a:

• Distributed

• Secure

• Ledger

A digital currency was in a lot of ways the first demonstrable use, but not only

13

Blockchain in Payments

• Everybody involved in a transaction could see the entire transaction lifecycle and everyone else’s involvement in it.

• Payment terms and positions more visible, reducing risk

• 24/7 payment mechanisms with everything linked already.

• Support distributed instant payments is that it’s distributed and shared between trusted institutions.

• Cross currency payments globally.

Now Blockchain

The Future

Financial Institutions and Fintech

• Some services will consolidate - Banks will snap up some of the great Apps that are being built.

• Some will fail, their ideas just will not fly.

• Some will flourish and grow in the model of Venmo or WeChat Pay.

• New players will continuously emerge and a few successful

There are other ways of making money than

charging interest, interchange fees, and foreign

exchange fees:

• referral fees (Shazam from Apple and Spotify),

• paid advertising,

• data monetization, and

• a million other things.

Intra-Industry Rivalry Strategic Business Unit

Bargaining

Power of Buyers

Bargaining

Power

of Suppliers

Substitute

Products

and Services

Potential

New Entrants

ApplePay

GooglePay

PayPal

…

Visa

Mastercard Virtual Currencties

CloudCurrencies

Payment Institutions

Retailers

Fintech startups

New Players: The Five Competitive Forces of Michael Porter

Conclusions

Digital payments increasingly part of a broader, integrated, converged offering:

• payments+ banking + commerce and

• other fintech products (Virtual currencies, P2P lending, Crowdfunding, Insurance, etc.)

Competition starting to hit at incumbent players both on specific vertical industry or

customer segments but also through general payments systems

Regulation is playing a key role in Intensifying the competitive heat

China’s most valuable financial technology company, Ant Financial Services Group, just completed a fresh $4.5 billion funding round –giving it a valuation of roughly $60 billion. The new round being raised by the financial services affiliate of e-commerce giant Alibaba Group Holding is the world’s largest private fundraising for any Internet company.

Resume

• Professor at the University of Tor Vergata in Rome, Italy, and CEO, Pinion Services

• Worked in 10 Countries in several companies • MIS and CTO in Alitalia

• Project Leader in Airplus

• Program Leader in Galileo

• CEO in Sigma Plus

• CTO in GE Money

• CIO in GE Oil & Gas

• Management Consultant

• CIO in AIG UPC Latin America

• Management Consultant

• Author of 20 books on Financial Services, including «The Future of Fintech», Palgrave-MacMillan, London, February 2017