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  • FinTech ecosystem playbook

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    FinTech ecosystem playbook

  • FinTech ecosystem playbook

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    Foreword

    Inrecentyears,servicesprovidedbyfinancialtechnology(FinTech)start-upshavegainedprominence,andareincreasinglyimpactingconsumers,financialinstitutionsandeconomies.Subsequently,ecosystemshaveemergedaroundtheseFinTechs,consistingofmultipleinterdependentandinterconnectedstakeholders.

    AFinTechecosystemismadeupofconsumers,financialinstitutions,FinTechstart-ups,investors,regulatorsandeducationalinstitutions.Thehealthydevelopmentofsuchanecosystemwillresultinmutuallybeneficialcooperationamongstakeholders,andeventually,helpfinancialservicesbedeliveredatlowercost,higherspeedandatbetterqualitytomoreconsumers.Thedevelopmentisparticularlydistinctinemergingmarketswherefinancialservicespresentuniqueopportunitiesandchallenges.

    In FinTechecosystemplaybook,theteamsbringyouapanoramicviewofaFinTechecosysteminemergingmarketsinASEAN,LatinAmerica,Central,EasternandSoutheasternEurope&CentralAsia(CESA),theMiddleEast,Africa,andAsia-Pacific.

    TheregulatorsandpolicymakersintheseemergingmarketsareactivelyseekingtodevelopattractiveFinTechecosystemsthrougharangeofpoliciesandotherinterventions.Thisreporthighlightssomeleadingpracticesandprovidesasummaryofwhatisgoingonattheregionalandcountrylevel.

    Thereportwillnotberankingthehubsastheobjectiveistohelpeachhublearnfromglobalpeersandgrowtheindustryasawhole.SharingtheseleadingpracticesandsuccessstorieswiththeglobalFinTechcommunity,theteambelieveswillhelpusmakeadifference,together.

    EYteamsexpressourgratitudetoFinTechassociationsandecosystemenablers,includingFintechGalaxy,FINNOVASIAandFinTechConsortium(FTC).

  • FinTech ecosystem playbook

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    ContentsFast facts

    Objective of the study

    Pillars of a FinTech ecosystem

    Approach and coverage

    FinTech hub trends

    Cluster analysis

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    Key cluster takeaways

    ASEAN

    Latin America

    CESA

    The Middle East

    Africa

    Asia-Pacific

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  • FinTechinvestmentsVC-backed total FinTech investment reached

    US$32.6b8b in 9M18 driven by a record investment of

    US$14b raised by Ant Financial in 2Q18 from domestic and international investors

    $ The deal volume in 9M18 stood at 1,164 deals.North America accounted for the maximum FinTech funding of approximately

    US$9.3b in 9M18

    Asia accounted for approximately

    US$6.1bof the global FinTech funding in 9M18, excluding the Ant Financial deal

    Europe accounted for approximately

    US$2.7bof the global FinTech funding in 9M18

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    Scopeofthestudy

    GlobalFinTechlandscape

    Globalregulatorynetwork

    unicorns are present in the global FinTech industry, with the most in North America

    Global Financial Innovation Network (GFIN)was created by the UK Financial Conduct Authority, in August 2018 in collaboration with 11 financial regulators and related institutions

    26 hubs in emerging marketsacross 6 clusters

    Fastfacts

    Source:FinTechinvestmentdata: GlobalFinTechReportQ32018,CBInsights

    FinTechecosystemplaybook

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  • Objectiveofthestudy

    FinTechsareventuresthatleveragetechnologytodevelopnewandaugmentexistingcapabilitiesforthediscovery,distribution,operationsandservicingoffinancialproductsandservices.

    AFinTechecosystemcomprisestech-savvystart-upsandscale-ups,regulators,governments,traditionalinstitutions,investors,andtalentinstitutions.EachFinTechecosystemisconstantlyevolving,withplayerscontinuallyinteractinganddeveloping.Regulatorsaretaskedwiththechallengeofevolvingwith

    theindustry.Theyneedtoensurethatcompetitionandinnovationarenotstifledwhilemaintainingthesafetyandsoundnessofthefinancialsystem.

    The FinTech ecosystem playbook capturesthejourneyof26FinTechhubsintheemergingmarketstheirexperiencesandlearningsintheprocessofbuildingastrongfinancialservicesecosystem.Theteamshighlightthebestindustrypracticesfromthesemarketssothatparticipantslearnfromeachother

    This report will facilitate hubs to think global and act local.

    Reviewofhub-levelbestpracticesthatdrivethedevelopmentoflocalFinTechecosystems

    Local drivers

    OverviewofkeyglobalFinTechtrendsthatareredefiningthefinancialserviceslandscape

    Global trends

    Studyofsixregionalclusters,assessingtheirmacroeconomicenvironmentandregionalopportunities

    Regional opportunities

    FinTechecosystemplaybook

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  • FinTech ecosystem playbook

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    PillarsofaFinTechecosystem

    Strong:Collaborationwithincumbents;andpresenceofaccelerators,incubators,communityenablersandco-workingspaces(publicorcorporate)

    Scalable:Easeofaccesstolocalandinternationalmarkets

    Sustainable:Governmentandindustrysupportforsustainabledevelopment

    Enablingenvironment

    Attract:Accesstointernationaltalent,easeofmobilityandvisapolicies

    Upskill:Developmentoftalentpipelineuniversitycourses,researchanddevelopmentinvestment

    Retain:Policiesandinitiativesthatwouldreducebraindrainandprovideconduciveenvironmenttogrowandflourish

    Talentavailability

    Sustaineddemand Consumers:Digitalreadinessintermsofmobileandinternetpenetration,

    smartphonepenetration,bankingpenetrationandeaseofaccesstofinancialservices

    Corporations:Demandfromenterprises,includingsmall-andmedium-sizedenterprises(SMEs)andinstitutions

    Financialinstitutions:DemandfromfinancialinstitutionsforFinTechofferings

    Riskcapital:Accesstoangelfunding,high-net-worthindividuals(HNIs)andgovernmentfunds;easeofraisingcapitalfromalternativesourcessuchasinitialcoinofferings(ICOs)

    Growthcapital:AccesstoVCandgovernmentfunds,financialinstitutionsandtechcompanies

    Strategiccapital:Fundingfromtraditionalinstitutions,techfirms,corporatesandprivateequity(PE)funds

    Accesstocapital

    FinTechlaws:Specificregulationsandpolicies

    Overallregulatoryenvironment:Easeofdoingbusiness,creditavailability,taxationpolicies,visapoliciesandpresenceofregulatorysandboxes

    Competition:Encouragementofcompetitionthroughpolicies

    Regulatoryopenness

  • FinTechecosystemplaybook

    Approachandcoverage

    Africa ASEAN Latin America CESA Middle East

    Nigeria

    Kenya

    Singapore

    Philippines

    Malaysia

    Brazil

    Mexico

    Estonia

    Russia

    UAE

    Turkey

    Bahrain

    HongKongSAR,China

    SouthAfrica Indonesia Lithuania China

    SouthKorea

    India

    Vietnam

    Cambodia

    Thailand CzechRepublic SaudiArabia Japan

    Asia-Pacific

    Thesixclustersandrespectivehubsarepresentedbelow:

    Thefollowingfour-stepapproachisundertakentoanalyzetheFinTechecosystemof26hubs:

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    UAEconstitutestwohubsDubaiandAbuDhabi

    Identifytheoveralldrivers,trendsandopportunitiesateachofthesixregionalclusters

    AssesstheFinTechecosystemof26hubsbyleveragingEYextensiveresearchcapabilities,andnetworkofEYfinancialservicesandFinTechprofessionalsacrosstheglobe

    Understand themacroeconomicanddigitalfactorsdrivingFinTechdevelopmentatcluster andhublevel

    Discussthesuccessstoriesof26hubsbystudyingtheFinTechinitiatives

  • Advancingtechnologies,rapidlyexpandingeconomiesandchangingcustomerexpectationsaresomeofthefactorsdrivingdemandforFinTechproductsandservicesacrosscountries.Broadly,thedemandforFinTechscanbecategorizedinto:

    FinTech hub trends

    Demand

    Individuals:Inestablishedhubsthatenjoyhighbankingpenetration,demandislargelydrivenbytech-savvyconsumerslookingforabetterexperienceandawiderrangeofservices.Inemergingmarketswherefinancialinclusionisachallenge,FinTechsarehelpingbridgetheexclusiongap.Rapidurbanization,mobileandinternetpenetration,andeaseofusearedrivingindividualdemandforFinTechservices.AccordingtoWorldBanksThe Global Findex Report 2017,69%ofadults,i.e.,3.8billionpeople,haveanaccountwithabankoramobilemoneyprovider,whichisanincreasefrom62%in2014andjust51%in2011.Theriseisattributabletotheincreasinguseofmobilephonesandtheinternet.Between2014and2017,thepercentageofuserssendingandreceivingpaymentsdigitallyincreasedfrom67%to76%globally;andfrom57%to70%inthedevelopingworld.

    Corporations and SMEs: SMEspresentanattractiveopportunityforFinTechs.Limited

    financialhistory,smallticketloansandhighservicingcostresultedinthissegmentbeingunderservedbytraditionalinstitutions.Thedigitizationofthelendingprocess,includingtheassessmentofcreditrisk,isprovidingSMEswithanalternativewayoffunding.Digitalidentityprojectsinhubs,suchasSingapore,India,ChinaandEstonia,arepresentingnewopportunitiesforFinTechstoservicethisunmetdemandinanefficientmanner.

    Financial institutions: BanksacrosscontinentsarepartneringwithandinvestinginFinTechsacrossthebankvaluechaintodriveefficiencies,offernewproductsandaugmentcustomerexperience,resultinginrisingdemandforbusiness-to-business(B2B)solutions.

    Governments and regulators: RegulatorsareleveragingFinTechscapabilitiestoimprovetheirprocesses.Forinstance,theMonetaryAuthorityofSingapore(MAS)haspartneredwithFinTechfirmAnquanforblockchain-basedProjectUbin.

    Hub subsector specialization

    Globally,successfulhubstendtohavediversityintheecosystem,withstart-upsspanningacrossmultiplesubsectorsandgrowthstages.

    FinTechecosystemplaybook

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  • FinTechecosystemplaybook

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    Atthesametime,someFinTechhubshaveidentifiedsubsectorswheretheyhavecertainadvantages,andhavemanagedtotakeleadershiporarepositioningthemselvestobecomethedominanthubforthosesubsectors.

    Someexamplesinclude:

    Switzerland for cryptocurrencySwitzerland,whereregulatorsdisplayedaclearandfriendlystanceinfavorofcryptocurrencyfromasearlyas2014,i

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