fin-tech: global and india perspectives

© Copyright Kalaari Capital 2016

Fin-tech: Global and India perspectives

Bala Srinivasa April 2016


What is fin-tech?

4000+ Start-ups | $25B+ in funding

$1T+ Financial services industry

Digital consumer experience

Technology Financial products


Few industries face this level of attack

Unbundling the Bank

Source: Venture Scanner


Forces driving disruption

Information connectivity and

access

Rewired consumer “spillover effect”

Low cost, secure cloud infrastructure

Advanced tech and digitization

Why Now?


New entrants showing traction

Consumer Lending Payments Remittance SME

Lending Credit

Scoring

178K Members

$8B+ Loans

15 Min Loan

Disbursal

$1B+ Loans in 2015

100K+ SMEs

6 Min Loan

Approval

$11B+ in Fx

Volumes

70% Cheaper than Banks

20K+ Data points

scored per application

35 Sec Decision 15 Min Disbursal

500K+ Loans

23 Countries

$20B+ Payments

processed


Fin-tech disruption formula

Better Faster Cheaper

Reimagine at the product line level

Data, analytics & Automation

Self-service digital experience

Value Creation

10x


Neo Banks: Glimpse into the future

Germany

United Kingdom

United States

China

•  Partnership (Mondo, Simple)

•  Full stack

(Atom, Fidor) •  Non-bank platforms

(Alibaba, Tencent)

Types of Models


How are global banks responding?

Opportunities


From alarm to strategic action

Board and C-level impetus

Rethinking the digital consumer experience

Heavy investments in data, analytics and automation

Aggressive participation in fin-tech ecosystem


Engaging with Disruption

40%

20%

20%

10%

7% Incubating

Corporate Venture Funds

Partnering

Acquiring

Own Subsidiaries

19 deals in last 2 years for $700M+ through Citi Ventures 9 deals in last 2 years for $500M+

21 seed deals in last 2 years through Accelerator program

4 deals in last 2 years for $200M+ 6 deals through Accelerator program


A new ecosystem rapidly falling in place

Timothy Draper

Peter Thiel

Angels & Incubators

Reputed VC Funds

Large Banks

Corporate Investors


Emerging India landscape


Regulatory impetus Payment Banks Aadhar IMPS Jan Dhan Yojana

Digital experiences

Digital footprint accelerating 700M+ Indians online by 2020

Next gen bank customer 800M under age 35 12M join workforce every year

Disruption will be larger in India

Digitization and connectivity unlocking demand


Mobile is THE platform

AI based customer support

Core banking

Mobile data credit scoring

Consumer loans

Verification eKYC

Payments


Representative challengers, but it’s early days

Lending

Payments

Brokerage Insurance

Credit Scoring

Personal Finance

$600M* Invested in 2015

80+ deals in 2015

22% Growth deals >=$10M

*Does not include Paytm`s $575M round by Alibaba


Indian e-commerce platforms are a wild card

Online Bank Personal Loans

SME Loans

Credit Scoring Services

B2B & B2C Ecommerce $370B in GMV for CY14

Payments 500B+ in Annual Transaction Volume 42B+ Transactions till 2015 900M+ AliPay Accounts

Yue Bao

Money Market Fund AUM $108B

Zhaocai Bao

Lending Marketplace $50B* in Transaction Value since

launch in Apr 2015

*Kalaari Estimates

Alibaba Ecosystem example


Yin and Yang for Indian banks

Challenges

•  20% – 40% revenue exposure?

•  Massive digitization and automation gap

•  Cannibalization of profitable product lines

•  Potential loss of a new generation of consumers

•  Cultural resistance to technology change

Opportunity •  Use disruption to “rethink” •  New technologies can

accelerate customer acquisition/lower costs

•  Start-ups have tech but lack –  Consumer reach –  Brand

–  Volumes

•  Partner/acquire for mutual benefit

•  Need a Fin-tech strategy to shape evolution


Thank You

[email protected] Partner, Kalaari Capital [email protected] Analyst, Kalaari Capital

fin-tech: global and india perspectives

Economy & Finance