FinTech Outlook

for 2017

& presents
Trends, Opportunities
& Challenges

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Objectives of the Report

A Synopsis
3

B A Primer: The Current State of the FS Industry and Key Segments

5

C Which Constellation?: The Emerging Technology and Market Forces

13

D Snapshot of 2017
17

E Incumbents and Startups: Opportunities & Challenges

26

F A Game Theory View of Winners and the Residual Forces of Cooperation

32

G Takeaways
37

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 A

Synopsis

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FinTech Outlook Report Focus on Payments, Remittance and Blockchain

This paper is intended for readers who want to better understand the dramatic changes that have begun to take placeand that are
acceleratingin the global FinTech landscape. The payments industry which is one of the focus areas of this report has never been
more exciting. The pace of innovation has been shaken the banks (although not dramatically as some media claims), but they have
realized that they need to keep the customer at the center as they go forward and meet her/his needs first. This would also mean that
the infrastructure supporting the payments industrywhich has never been touched uponhas to be transformed. FinTech players
have also given an opportunity to banks to venture where it was prohibitively costly to venture. With the trust of customers and data
available, the banks can take advantage of FinTech disruption and convert it to an opportunity either through collaboration and/or
through becoming very customer-focused or recalibrating their business models.

Payments
The payments industry would be in a transformational state in 2017. The ongoing war with alternate payment
channels will intensify and challenges in emerging markets would force the incumbents to take drastic
measures. Some key drivers would be:
Real-Time Payments: RTP represents a new phase of evolution within the payments industry, with several key features that
differentiate them from current payment methods, specifically speed, value-added messaging capabilities and immediate
availability of transaction status. RTP will provide FIs with the functionality/features to innovate and meet customer demand.
Blockchain: Blockchain has the potential to completely change the financial transaction processing cost model amongst its
various applications. It also enables all processing to be done over a distributed system network or in the cloud avoiding the
usage of costly datacenters or mainframes.

Remittances
Cross-border payments have become a critical part of millions of lives as we have become a more globalized
world. As cross-border payments have become more common, customers of remittance products/solutions are
looking for the most convenient, cost-efficient and transparent options. Digital and mobile-based solutions, new
cost-efficient models in the back-end and even the use of virtual currencies is being tried out by providers.

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 B

Primer

Current State of the FS Industry and Key Segments:

Payments, Remittance and Leading Drivers (e.g. Blockchain)

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Current State of Payments 2016

Year 2016 is a special one in the payments world where credit card payments have overtaken the cash payments for
the first time.

And we all know that global non-cash transaction volumes have been growing at 8% to 9% every year.

In 2015, global payments revenue was $1.16 trillion, representing 29% of banking revenues. The growth engines are
transaction-related revenue (around 40%) and account-related (around 34%).

Key drivers for the revenue are movement from cash to e-payments and broader financial Inclusion.

$$

Mature and Emerging With growing non-cash Emergence of specialized Within 10 years, the
economies are moving transaction, alternative mobile payment solutions revenue from APAC
at faster rates fueled by payments are estimated to are growing with technology (Emerging) will surpass
the regulatory account for 59% of all advances and rising North America.
environment, economic transaction methods by 2017. smartphone penetration. Western Europe is
and population growth, Alipay and PayPal continue The value of mobile expected to fall while
migration from cash to to dominate globally as the transactions are expected to Latin America will gain.
non-cash and rise in most prevalent e-wallet reach $117 billion by 2017.
financial inclusion. types.

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Developments in the Payments Space

Innovation in open loop, closed loop and integrated payment apps are augmenting customer and merchant experience.

Payment processing transformation acting as a key to meet the next-generation payment methods.

Emerging economies are witnessing disruptive growth in financial services.

Growth of RTP across the globe is providing FIs with the functionality and features to innovate for the future.

Digitization of payments lies at the top of agenda for all market players. End-to-end customer experience that maximizes security,
reduces complexity and provides a compelling value add would be the winner.

Contactless
Payments on the Rise
Contactless spending is expected
Alternate Payments Mobile Wallets
to continue to increase in a
number of markets.
Emerging as threat to the The Apple, Android and Samsung
traditional issuers. Contactless ticketing adoption in Pay eligible/user populations are
2016 will be driven by the becoming more mainstream.
Consumers adopt mobile
following key markets; Asia
commerce experiences, not just Merchants are realizing that
(including Japan, China, Hong
another payment type. mobile pay acceptance is a driver
Kong and Taiwan), Russia,
to merchant selection whether
Visa and Mastercard are creating France, Spain, the Netherlands
users are shopping in-store, in-
easy on-ramps for issuer wallets. and Italy.
app or on the web.
This is expected to give NFC
ticketing a similar boost to that of
the retail sector.

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Current State of Real-Time Payments 2016

There are currently 18 countries live with RTP systems, 12 countries that are exploring/planning/building, and an
additional block of 17 countries that are exploring through a pan-Eurozone initiative.

ISO 20022 is seen as a way to improve payments efficiency, to create a common, level playing field.

In the United States, the Federal Reserve Board has called for the implementation of a safe, ubiquitous, faster payments
capability and The Clearing House has announced that it will create a national RTP system.

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Current State of Remittance 2016

Remittances Online Remittances

In 2015, worldwide remittance flows are New online players have emerged and have
estimated to have exceeded $601 billion. Of raised the bar in terms of customer
that amount, developing countries are experience (digital/mobile channel) and
estimated to receive about $441 billion, costs of remittance.
nearly three times the amount of official
Almost all major players successfully raised
development assistance. The true size of
new funding rounds in the past six months:
remittances, including unrecorded flows
WorldRemit $45M (total $192,7M),
through formal and informal channels, is
TransferWise $26M (total $117M),
believed to be significantly larger.
Remitly $38.5M (total $61M), Azimo
High-income countries are the main source $15M (previous round $20M).
of remittances. The United States is by far
High scope for mergers as customer
the largest, with an estimated $56.3 billion
acquisition is quite expensive.
in recorded outflows in 2014. Saudi Arabia
ranks as the second largest, followed by the Social remittances hasnt picked up except
Russia, Switzerland, Germany, the United WeChat.
Arab Emirates and Kuwait. The six Gulf
Cooperation Council countries accounted
for $98 billion in outward remittance flows in
2014.

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Current State of Remittance 2016

Highly fragmented, with market growth attracting additional participants .

The incumbents niche players and innovators.

Big cash-to-cash players wary of Cherry-picking specific corridors Market share increasing rapidly
cannibalization Leveraging ethnic market loyalty Generating the biggest flows towards
Look to retain end-to-end control of mobile money services
the service

Remittance Companies Powered by

Annual Remittance Market 2015: $582 Billion
Blockchain Technology

~ 85% Cash

~ 12% Bank

< 3% Other (mobile wallets, cards, etc.)

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Current State of Blockchain 2016

Most projects (a range of wallets and money transfers has

Blockchain appeared over the last half-year) are in their experimental and
product adjustment stage and have a long way to go to influence
Expected to be the future of financial infrastructure the market. There are a few projects (such as Everledger) which
and could lead to rewiring. could show scale but there is a need of many such projects.

Awareness of Distributed Ledger Technology (DLT) Rising of Etherium The digital currency ether has been
generating substantial visibility, a development that could draw
has grown rapidly, but significant hurdles remain in
attention and trading activity away from bitcoin.
large-scale implementation.
R3 completes biggest-ever trial of blockchain solutions with 40
Digital identity is a critical enabler to broaden
banks.
applications to new verticals; digital fiat (legal
tender) has the ability to amplify benefits. Debate emerges over speed of blockchain adoption will major
changes take place soon (e.g. within two years) or 510 years
Applications of DLT will differ by use case, each away?
leveraging technology in different ways.

Corporate
Repos Swaps Insurance
Bonds
Areas of
Focus
System Trade
Payments Settlement
Interoperability Finance

Implementation of the blockchain technology as real business is curbed by the very benefit that if offers.
The technology is developed for mass adoption (with all stakeholders involved) and has no use without it.

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Current State of Blockchain 2016

Global Bank
24+ countries currently Interest Experimentation 80% of banks predicted to
investing in DLT initiate DLT projects by 2017

Over US$ 1.4 Billion

Research Venture
in investments over the
2,500+ patents filed Capital
past 3 years. VC
over the last 3 years investment in blockchain
startups exceeds
DLT Activity bitcoin startup investment
for first time

Microsofts Azure Blockchain- Consortium Pilots

Efforts
as-a-Service (BaaS) adds 21 R3 completes biggest-ever
new partners Hyperledger trial of blockchain solutions with 40
Project grows to 40 members banks

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 C

Constellation
The Emerging Technology and Market Forces

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Key Technologies Shaping FinTech

Cloud
FinTech are major adopters of the cloud services. Apart from scalability
and cost benefits, cloud service providers also help FinTech startups
build compliant IT Infrastructures.

Cloud
Technologies Omnichannel
Banks are looking to integrate their multiple digital channels into an
omnichannel customer experience and leverage their existing customer
Omni relationships and scale.
Channel
APIs
The incorporation of application program interfaces (APIs) enables third
parties to develop value-added solutions and features that can easily be
integrated with bank platforms.
IoT
Big data, AI & Cognitive
The growth of digital universe across industries has led to the Big Data
revolution. Some of the areas in financial services that are seeing major
overhaul include credit scoring, customer acquisition and retention, risk
management, investment management.
APIs
Another growth segment has been cognitive sciences. The explosion of
data availability and lowering data storage costs has led to better
Big data, AI customer behavior models built utilizing machine learning, artificial
intelligence and natural language processing techniques.
&
Cognitive IoT
The IoT focus for financial institutions has been on products. The most
important business process improvement is tailoring their products and
services for customers. From recognizing customers who step into a
branch, to customers who favor drive-through banking to pay for
products at places like restaurants and gas stations while in their car,
have all been possible with IoT technologies.

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What's Next From a FinTech Perspective?

Banks have recently begun to leverage technology to improve processes, customer experience and security.
There has been a convergence of banking and FinTech, especially since both are evaluated on the same metrics by regulators, investors and
consumers.
This trend will continue in 2016 as the difference between traditional banking and FinTech disruptors gets blurred.

API Based
API-based financial services are on the rise. In fact, APIs are the main reason that startups are able to build their products f aster.
Open APIs enable developers to build customized applications that cater to users across the board.
As FinTech startups continue to benefit from open APIs, banks are also waking up to the fact that offering an open API is the way to
engage and retain their digital customers.

Wearables
The demand for wearables such as smartwatches and smart fitness wristbands has escalated substantially over the last few years.
In fact, many financial institutions have displayed a deep interest in wearable technology.
About 82% of financial professionals believe that smartwatches will facilitate financial transactions in the future! Whats more, 72% of
these professionals have wearable applications on their three-year road.

Social Media
Twitter has proven to guide and help predict the stock market. Some examples of how tweets can move stock prices include 20%
plummeting of Twitters stock after disappointing quarterly earnings were tweeted ahead of their expected release. On the other
hand, Teslas shares jumped four percent when Elon Musk tweeted about a new product line.
With around 85% of US equity trades being executed by algorithms, the trend of predictive analysis through social media is on ly
going to grow in 2016.
Apart from equity trading, rising social media usage has led to better behaviour profiling of customers, personalization of offers,
security features based on users location, customer service management and other services being adapted by financial institut ions.

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Retail Payments/Remittance Future Market Forces at Work

The world of payments remains in constant flux, reflecting an ongoing rebalancing of power among incumbent banks, digital
giants, financial technology (FinTech) startups, card networks, and of course, consumers and merchants.

Driven by rapid advances and investments in digital payments offerings and capabilities, the global payments landscape is
undergoing a profound transformation.

By 2017, alternative New payment players Shift would have big Two markets emerge:
payments will account for defining frictionless user impact on sources of Developed: Customer
59% of all transaction experience. revenues across market. convenience and front-end
methods. innovation.
Emerging: Financial
inclusion and way to reach
customer innovation.

New Methods New Players Rev Impact Markets

The threat of disintermediation in the payments industry is both real and imminent

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 D

Snapshot of
2017

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Share of Global Revenues in % Terms Is Going to Change Quite a Bit by 2024

2% 2% 2% 2% 3%
3% 3% 3% 3% 4%
8% 9% 9% 9% 8%
10% 9% 9% 9% 8%

13% 14% 14% 14% 15%

16% 15% 14% 13% 11%

100%

20% 21% 22% 22% 27%

28% 28% 28% 27% 24%

2014 - 2017 2014 2015 2016 2017 2024

N. America APAC W. Europe Latin America
World Wide Asia Pacific E Europe Middle East & Africa RoW

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Volume, Value and Total Revenue

North America Eastern Europe Western Europe

478
168 215
337 354 172 167 169 170
307 320
273 104 112
98
87
153 163 173
145

58
32 34 36 38 99 98 101 105 137

2014 2015 2016 2017 2024 2014 2015 2016 2017 2024 2014 2015 2016 2017 2024

Latin America Middle East & Africa Asia Pacific

543
295
77

169 179 291

145 161 262
39 221 236
29 30 34

92 8 9 10 11 25 40 45 50 55 109
46 49 52 56

2014 2015 2016 2017 2024 2014 2015 2016 2017 2024 2014 2015 2016 2017 2024

World Wide Rest of the World

57
1989

1215 1293 28 31
1090 1145 26
23

432 453 481 512 811 10 11 12 22

9
2014 2015 2016 2017 2024 2014 2015 2016 2017 2024

Volume (Bn) Total Revenue ($ Bn) Value ($ Bn)

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Payments: 2017 Outlook

Developed Market Emerging Markets

Stable slow growth. Strong growth from emerging markets.

Integrated payment applications are Transaction revenues are a source of

augmenting customer and merchant growth.
experience.
Strong government and industry initiatives
In-app payments where the payment to move towards e-payments.
mechanism is embedded in the mobile app.

North America Europe Asia Pacific

Credit cards continue to Payment revenue under Clear winner.
generate bulk of revenue. pressure due to regulatory High margin cards source of
framework.
Issuers to focus on digital strong transaction revenue.
channels. Focus on pricing models as Digital channels are key as
transaction fees are squeezed
Focus on m-wallets to ensure markets are value-conscious.
and interest income on
engagement.
accounts has shrunk due to
low interest rates.

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How Would 2017 Look Like for Blockchain?

About 15% of banks and 14% of financial market institutions intend to implement full-scale, commercial blockchain solutions
in 2017.

Faster than expect adoption of blockchain by banks.

We will likely see a number of Digital currency will evolve and

real-life applications of Private permissioned be more accepted in the
blockchain applied to blockchain-based systems will mainstream. Most of the
payments, beyond digital gain significant transaction countries would start looking at
currencies, in the next five volumes. having a digital currency of
years. their own.

IoT and digital payments will Transition to a blockchain-

Direct payment flow between
ensure a more automated and dominant payment system will
two end points would be a
seamless retail customer depend mainly on
reality.
experience. interoperability.

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How Would 2017 Look Like for Cross-Border Remittances?

Estimate and Projection for Remittance Flow to Developing Countries ($ Billions)

In $ Billions 10% In % Growth Rate
700
5%
600

500 0%
2015E 2016F 2017F 2018F
400 -5%

300 -10%
200
-15%
100
-20%
0
2015E 2016F 2017F 2018F -25%
Regions 2015E 2016F 2017F 2018F Regions 2015E 2016F 2017F 2018F
World 581.6 603.2 626.4 651.3 World -1.7% 3.7% 3.8% 4.0%
Developing Countries 431.6 447.9 465.7 484.7 Developing Countries 0.4% 3.8% 4.0% 4.1%
East Asia and Pacific 127.0 131.0 135.5 140.3 East Asia and Pacific 4.2% 3.2% 3.4% 3.6%
Europe and Central Asia 34.6 36.3 38.3 40.3 Europe and Central Asia -20.3% 5.1% 5.4% 5.2%
Latin America and Caribbean 66.7 69.3 71.9 74.6 Latin America and Caribbean 4.8% 3.9% 3.8% 3.8%
Middle East and North Africa 50.3 51.6 53.0 54.5 Middle East and North Africa -0.9% 2.6% 2.7% 2.8%
South Asia 117.9 123.3 129.3 135.8 South Asia 2.0% 4.6% 4.9% 5.1%
Sub-Saharan Africa 35.2 36.4 37.7 39.1 Sub-Saharan Africa 1.0% 3.4% 3.7% 3.7%

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How Would 2017 Look Like for Cross-Border Remittances?

The growth rate of remittance flows to developing to 4% a Year in

countries is projected RISE 2016-17

Remittances to developing countries are to 4% a Year in

expected RISE 2016-17

will In All
Cross-border remittance revenue
INCREASE Regions

The non-banks using proprietary networks.

have Significant
CAPTURED Market Share

High penetration of mobile banking and last mile offering Cross-Border

connectivity has led to surge of firms LOW VALUE Remittances

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How Would 2017 Look Like for Cross-Border Remittances?

$$

Existing business Decrease in Uptick in overall Social media for money

model under remittance fee. remittance growth. transfer.
pressure from newer Global average fee is In 201516, the Exploring social media
business model. expected to reduce to remittance growth slowed for money transfer.
7.52%. down owning to weak According to the World
economies and weaker Bank, 90% of money
currencies. transfers happens
This trend is likely to between friends and
reverse due to US families.
recovery.

The titans (WU, Moneygram, likes) of the cross-border money transfer market, with a ~15%
worldwide market share, are being challenged by multiple well-capitalized upstart companies targeting
the
$582-billion remittance market.

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How Would 2017 Look Like for Real-Time Payments?

The emergence of innovative real-time payment services is having a transformational impact on the underlying payment
systems.

Interoperability and efficiency gains are key aspects for both FIs and regulators.

Adoption of ISO 20022 would be a trigger point for faster adoption of real-time payments.

Standardization and innovation is the key.

Focus on speed and making it better.

Non-bank network players such as Dwolla and Pop Money.

United States
Big banks in the US have a growing sense of urgency that they are behind and getting. Testing for real-time
payments should go live toward late 2017. US real-time payments initiatives are ambitious and focused on
ubiquitous payments, with the top 24 US banks accounting for 60% of the industry. Of course, the real challenge is
reaching the entire financial ecosystem, which encompasses 14,000 financial institutions in the US.

Europe
The real-time payments services in the Single Euro Payments Area that was created by the European Payments
Council has goals to be in place on that timeframe.

SWIFT announced a global initiative designed to use its existing global network of correspondent banks
to enable same-day payments between businesses anywhere in the world.

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 E

Incumbents
and Startups
Opportunities & Challenges

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Key Opportunities for Startups

More than 20% of

20%
Funding of FinTech startups Consumer banking and payments, already on
more than doubled in 2015 the disruption radar, will be the most exposed
FS business is at risk reaching $12.2bn, up from in the near future, followed by insurance and
to FinTechs by 2020. $5.6bn in 2014. asset management.

Disintermediation: FinTechs most powerful weapon

Key Drivers: Radical shifts to client demographics, behaviors and

expectations.
FinTechs are Expectations: State-of-the-art customer experience, speed and
succeeding convenience will further accelerate the adoption of FinTech solutions.

where banks
have failed. Customer centricity is fueling disruption:

FinTech is riding the waves of disruption with solutions that can better
address customer needs by offering enhanced accessibility,
convenience and tailored products.

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Key Opportunities for Startups

FinTech Addressable
Region Segment Total Market Examples
Potential
Payments & $110 billion
Global $1.1 trillion (revenue) Stripe has processed an
Remittance (revenue)
estimated $20 billion in
payments volume in 2015.
Consumer $91.5 billion $15.5 billion Adyen & Braintree both
Payments (revenue) (revenue) processed $50 billion each,
United States (payments volume in 2015).
Consumer $3.8 billion $950 million TransferWise: An estimated
Remittance (revenue) (revenue) $6.6 billion transferred in 2015.

Global Asset/Wealth/ $76 trillion (AUM) $2.5 trillion (AUM)

Betterment $3.9 billion AUM
Investment
Wealthfront $3 billion AUM
United States Management $30.1 trillion (AUM) $1 trillion (AUM)

$4.7 trillion Lending Club $15.9 billion

Global Lending $1.6 trillion
(loan origination) OnDeck $1.9 billion

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Key Opportunities for Incumbents (Banks)

Banks have gone

Banks have been the
through legal and
backbone of modern
regulatory
economies since
1| Customer
Relationship
their inception and
will continue to be
compliance for
years. FinTech would
definitely to
FinTech Need
Banks |2
so well into the
collaborate with
future.
banks.

Banks have big data

really big data.
Banks sales force
The new
and customer
3| Data and
Trust
technologies would
enable banks to
reduce the cost of
service
infrastructure are
Scale |4
huge.
operations and
innovate.

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Key Challenges Faced by Banks (US)

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Key Challenges Faced by Startups

While FinTechs have been quick to move ahead on the technology innovation and customer relationship, they have huge
disadvantages in terms of retail presence (channels) and regulation/compliances. The other key handicap would be brand/trust
and data which is critical for scaling up.

Regulatory
Organizational
Loyalty/ Infrastructure
Retail Knowledge of Operational Technology
Customer including Legislative Brand
Presence Money Movement Infrastructure /UX/UI
Relationships Influence &
Infrastructure
Bank/FI Profile Compliance

Top 10
BofA, Wells, Citi

Regional
Banks
Suntrust, BB&T

Credit Unions/
Community
Banks
Online/ mobile
only Banks
CBW, MetaBank,
Ally Bank,
Synchrony

FinTech ? ?
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 F

Game Theory

A Game Theory View of Winners and the Residual Forces of Cooperation

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Winners (and WAR) or Coopetition (and Cooperation)

Consumer Behavior and Technology Drivers are forcing banks

Banks and FinTechs to innovate and close the gaps.
are working
The FinTech threat is very real. The most profitable services for
together now. banks such as lending/loans are being targeted and mainstream
customers are opting for new experiences.

Many banks are realizing that they need to act and are planning their future
actions to partner or compete with startups.
Innovation is at the top of the strategic agenda.

A clear intent to innovate will be important. The sooner banks start working on improving experiences and the farther
they are ready to go, the winners and losers will be separated.

Open Innovation and Open APIs are the underlying drivers for the next phase of growth that banks are set to
explore. This is seen as a natural step forward to embrace the growing need for co-development, reusability and
agile/rapid application development requirements.

The rhetoric around FinTech disrupting the banks is tapering down and giving way to discussion around cooperation and
partnerships.

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What are the ways for Co-operation

Designing, developing and applying internal

initiatives with the collaboration of 'intern'
Internal entrepreneurs or developing projects in
Incubator conjunction with strategic partners.

Strategic alliances with FinTech players:

Strategic The goal is to explore new business
opportunities, technologies and to share
Alliances knowledge.

A few banks have reinforced their capacities

and expertise in design, big data and user
Digital M&A and experience through the acquisition of innovative
Direct Investments business models such as Simple, Atom,
Holvi or SpringStudio.

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Game Theory Approach for Banks & FinTech Startups Win for All

Banks
Compete Collaborate

Siloed efforts One sided innovation model

Compete

More investments Un- sustainable

Innovation loss Industry distrust
FinTech Startups

No result competition Distress industry consolidation

Service accessorization
Collaborate

Innovation loss Industry innovation

Longer GTM timelines Win-Win model
Legacy overrule Legacy & innovation alignment
Shorter GTM

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Examples

Creating Capabilities
BNY Mellon and several other banks are
Working Together working with the digital payments company
Early Warning to automate business-to-
London-based TransferWise, the consumer (B2C) payments without requiring
money transfer firm valued at $1 their business customers to store and maintain
billion, has integrated its service into consumer banking information (e.g., transit
the smartphone app for LVH, routing and account numbers). Banks can offer
Collaborate Compete
Estonia's largest bank. this solution to their business clients who need
to make payments to consumers who hold US
BBVA Compass teamed up with the bank accounts.
online investment company
FutureAdvisor, with the hopes of
reaching a new segment of customers
with an appetite for lower-cost
automated advice. Again, this kind of Co-Exist
tiered offering robo-algorithms,
supplemented with personalized
human guidance at a higher price
depending on customer requirements
is intended to expand and enhance, Finding Niche
rather than replace, banks current Startups like Lending Club and Square are
services. growing into billion-dollar businesses overnight,
and they have the potential to become mini-
banks in their specialized areas within the next
five years. These new companies are
attempting to scale their core businesses with
other diversified offerings. Venmo, for example,
is a free digital wallet that has opened the door
for merchants to use their credit facilities.

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 G

Takeaways

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Takeaways

Takeaways

We are seeing almost a perfect storm for technology-

and experience-driven consolidation and/or atrophy
over the next decade, as opposed to macro-
economic/financials-driven structural changes.

Over the next 510 years, the financial services

delivery will not remain with the incumbents and
FinTech players of today. Enabled by open APIs,
commerce players, brands and others would be able
to accept payments and disburse loans using bank
APIs directly.

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FinTech 1.0 to 3.0 ..

Almost every FinTech startup wants to disrupt the big FinTech

banks, but the problem is that it isnt a fair fight. The US
banking sector (and globally) is so entrenched and
protected that challenging it from the outside is an 3.0
exercise in futility. The smart startups know this and will
use it to their advantage. In this coming of FinTech 3.0,
FinTech startups will partner.

FinTech
FinTech 2.0 based innovation
2.0 starts when incumbent players in
the market were trying to leverage
their considerable resources to
remain competitive amongst
At the end of 2008 financial crisis,
new regulations and changing
FinTech startups. Everyone from American
consumer demands began to Express to Bank of America now
have innovation centers where
emerge as the world tried to pick
up the pieces of the great
1.0 they try to foster the startup
recession. mentality while leveraging their
These changes made certain established brands and
lines of business significantly less infrastructure.
profitable for banks and other The challenge, of course, is that
financial institutions, creating an no matter how hard they try,
opening for tech-enabled startups incumbents can never match the
and brought up FinTech 1.0 to agility and risk appetite of
step in and fill the void. This startups. Corporate politics,
coupled with the changing changing strategies, and an
demands of consumers and the overwhelming desire to protect the
democratization of big data, led to brand serve as hindrances to
a FinTech renaissance of sorts. innovation.

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