israeli innovation can accelerate china's fintech revolution
TRANSCRIPT
Israeli Innovation Can Accelerate China's FinTech Revolution
Esther Loewy
A slowing Chinese economy has stimulated the disruption of local financial institutions. The tool of
disruption is financial technology and the race is on for adoption.
China’s Economic Growth is in Decline
Source: Embassy of Switzerland in China "China Economic Report", 2016
Chinese Bank Revenue in Decline
Source: EY China, "Banking Industry Report: Decline in profit growth drives transformation of listed banks", May 2016; Translated by: Upround Ventures
Bank Profits Slide to Negative
Source: Bloomberg, Company Statements, China's Banks Are Running Out of Ways to Keep Profits Growing. 2016 figure based on estimates in a Bloomberg Survey
Loan Defaults on the Rise
Source: EY China, "Banking Industry Report: Decline in profit growth drives transformation of listed banks", May 2016; Translated by: Upround Ventures
Banks Reduce HeadcountBank* # of Employee Exits % of Total Employees
Bank of China -6,881 -2.22%
Industrial and Commercial Bank of China
-7,635 -1.64%
Construction Bank of China
-6,721 -1.82%
Agriculture Bank of China -4,023 -0.80%
Bank of Communications -577 -0.63%
Source: Sohu Finance, "25,000 employees leave the national-five-banks in first half year of 2016", Sept. 2016; Translated by: Upround Ventures
*Representative Sample
Key Talent Flee to DisruptorsExecutive Former Position & Bank Current Position & Internet Finance
Li Renjie Industrial Bank, President Lufax, ChairmanWang Yongli Bank of China, VP LeEco Finance, CEOHuang Hao China Construction Bank,
Department of Internet Finance, GM
Ant Financial, Executive Assistant
Zhang Xuyang Everbright Bank, Department of Asset Management, GM
Baidu, Vice President
Cao Tong Export-Import Bank of China, Vice President
We Bank, President
Source: "Why Bank managements abandon their golden bowl and join Internet Finance?", ChinaVenture.cn, July 2016
*Representative Sample
Chinese Banks Lack “Inclusive Finance”
Deferred Action for Childhood Arrivals
Source: McKinsey Greater China FIG Practice, "Disruption and Connection: Cracking the Myths of China Internet Finance Innovation", July 2016
What Happens When You Ignore 80% of your Potential Customers?
Internet Finance Delivers Where Banks Fail
Low Fees 24/7 AvailabilityPersonalization of Services
The Ignored 80% Rush to Internet Finance
Creating Competiton for 100% of the Market Entrant
ServiceAlibaba Tencent JD PingAn Baidu Xiaomi 360
Payment X X X X X X
Loan X X X X
Wealth Mgmt. X X X X X X X
Insurance X X X X X
Securities X X X X X X
Banking X X X X
Credit X X X X X
Funding X X X X X X
Crowd-Funding X X X X X
Source: Layout of Internet Finance Industry in 2015, SINA Technology & IT Orange Internet VC Database, 2016 Translated by: Upround Ventures
The Chinese Digital Finance Disruption
China’s Digital Finance Delivers Full Service
Source: Deloitte, "The New Journey of "Internet +", Online Overhaul: Banking in the Digital Stage", 2016
\
Leading to Soaring Internet Finance Adoption
Source: McKinsey Greater China FIG Practice, "Disruption and Connection: Cracking the Myths of China Internet Finance Innovation", July 2016
1.Including money market funds2.Including mutual funds
Chinese Internet Finance | $2 Trillion and Growing
Source: McKinsey Greater China FIG Practice, "Disruption and Connection: Cracking the Myths of China Internet Finance Innovation", July 2016
(Units in RMB 100 million)
Fund sales Other Wealth Management
products(trust, PE, etc.)
Small and micro loan P2P
Crowd funding
Insurance
Cloud, direct banking and others
Digital Finance Provides a Competitive Edge
Source: McKinsey Greater China FIG Practice, "Disruption and Connection: Cracking the Myths of China Internet Finance Innovation", July 2016
Stoking Disruption
“Internet Plus” Declared a Chinese National Strategy in 2015
Powered by the PM
"The internet market is massive in China...We can have the great
acheivement if we integrate the crowd's intelligence... (with)
internet innovation."
Li Keqiang, Prime Minister of China Speech at Executive Meeting of State Council
June 24, 2015
Source: The State Council, China
The Genesis of "Internet Plus"Nov. 2012: "Internet Plus" coined by Yu Yang, Chair of Analysys International @ the fifth Yiguan Mobile Internet Expo in Beijing
Nov. 2014: World Internet Conference: Prime Minister, Li Keying presents on innovation & entrepreneurship
March 2015: Ma Huateng, Tencent Chairman & Founder, proposes "Internet Plus" at NPC
July 2015: Prime Minister acclaims "Internet Plus" in work report
Dec. 2015: Alibaba, Baidu and Tencent establish "China Internet Plus Alliance"
The Disrupters
New Entrants to Internet Banking
Created by: Ant Financial (Alibaba) TencentFounded: 2015 2014Customer base: Alibaba's business customers &
TaoBao e-commerce retailersWeChat & QQ
Focus: SME financing and personal loans big data, blockchain, consumer financing and machine learning
Baidu | Internet Search to Finance
Financial Services • Financial Baidu Wallet• Baidu Finance• Baidu Wealth• Baixing Bank• Baian Insurance• Baidu's & CITIC
Source: 2015 China Internet Finance Investment Analysis, China Big Data Industrial Observation, February 2016
Alibaba | Extending the E-Commerce Empire
Financial Services • Alipay• Yu'e Bao• Ant Financial• My Bank• Zhima Credit• Tianhong Fund• ZhongAn Insurance• Huabei• Ant Small Loans
Source: 2015 China Internet Finance Investment Analysis, China Big Data Industrial Observation, February 2016
Tencent | Finance Meets Social
Financial Services• Tencent Pay• WeChat Pay• WeBank• Zhongan Insurance• People Loan• Tencent Credit Rating
Source: 2015 China Internet Finance Investment Analysis, China Big Data Industrial Observation, February 2016
JD.com | Consumer & Supply Chain Financing
Financial Services• Chinabank Payment• Supply Chain Financing• Consumer Financing• JD Insurance• MOM Wealth
Management
Source: 2015 China Internet Finance Investment Analysis, China Big Data Industrial Observation, February 2016
"Banking is necessary, banks are not"
Bill GatesMicrosoft Co-Founder
Chinese Banks Fight Back andAdopt Their Own Digital Strategy
Traditional Banks Embrace Technology
Omni-Channel Inclusive of Physical and
Digital
Comprehensive Platform of
Products and Services
Smart Bank Client
Management
Source: Deloitte, "The New Journey of "Internet +", Online Overhaul: Banking in the Digital Stage", 2016
Everbright: Pioneer in Big Asset Management
Sunshine (Online) Bank Cloud Payment Digital Mall and E-Wealth Mgmt.
Ping An: 2016 Best Internet Innovative Bank
Orange E
• "Safe Loan"• Online Wealth Mgmt.
Pingan Manager SaaS Platform
• SME/e-Commerce • Cross-Border
Pingan Orange Pocket Bank
•Personal Banking
Additional Innovation
• IoT in Warehouse• Port & Manufacturing
Minsheng:'16 Leading SME Service Provider
Retail Banking
•Ruyi Bao: Online Wealth Management
Mobile Platform
•SMB one stop mobile loan processing platform
Payments
•Support ApplePay & developed Minsheng Pay
Consumer Loans
•Credit and debit card financing channel
Consumer Credit
•Online multi-channel platform
China’s Insurance Industry is Facing Upheaval
Traditional Products and Sales Don’t Deliver
Long Reimbursement
Process
Non-Personalized
Sales
Poor Product Design
Insurance Forced to Innovate To Address Customer Pain Points
"Data is revenue"
Chen Dongsheng, Taikang Life Chairman & CEO
Ping An Insurance | Industry Pioneer
Digital Products
•Life and property insurance
Innovative Credit System
•Merging public and in-house credit history
Healthcare Insurance Reimbursement
• Quick customer approval process
Tai Kang | Merging Internet, Insurance & Healthcare
Combine mHealth Tech & Services
•Train clients to form healthy habits
Healthcare Endowment Community Investment
•$100B RMB
Introduce Big Health to Internet
•Wearables I.e. diabetes detection
ZhongAn | IT Dipping into InsuranceA joint venture funded by Tencent, Alibaba and Ping An Group
Product Design
•Scenario Customization
Big Data Analytics
•Personalized Dynamic Pricing
Transparent Reimbursement
Process
• Built on Ali Cloud
Chinese Financial Institutions Must Innovate or Die
Winners Will Incorporate and Acquire Leading Global Technology
Banks Need New Technology to Compete
CLOUD TECHNOLOGY BIG DATA CAPABILITY OMNI-CHANNEL• IT cost savings • Increasing operational
efficiency• Faster application
process• IT risk reduction
• Customer targeting• Service personalization• Fraud detection and
cyber security
• Seamless personalization
• Digital apps• In-person
and telebanking• Live person or bot
...And Tackle the Breadth of Fintech
Source: Deloitte "The New Journey of "Internet +", Online Overhaul: Banking in the Digital Stage", 2016
Israeli Innovation Excels at Transformative Technologies
Which Attracts Multi-Nationals to Israel
Source: Israel's Ministry of Industry, Trade and Labor, 2016
To Harness a Broad Range of Innovations
Israeli FinTech Delivers Core Technologies
For Critical Infrastructure
Cyber Security Insurance Tech Other Banking Tech
To Deliver Customer Experience
SME Lending Personal Finance Engagement
To Invest and Enhance ReturnsTrading and Investment Platforms and Technologies
And Improve the Money Trail
Blockchain Payments
Funding for Israeli FinTech Startups Exceeded $100M
in Q3 2016 Alone
China's Role
China-Israel Collaboration Since 2013Bilateralincubators
Pure financialinvestment
Acquiring mature enterprises
China-Israelindustry park
Strategic investment in Israeli funds
Market penetration and tech transfer
Joint research lab & innovation center
Chinese Investments in Israeli Technology
*Representative Sample
Time is Ripe for China to Accelerate with Israeli Fintech
Can China Become The Global FinTech Leader?
YES!
China Dominates The Internet
Source: Citi GPA "Digital Disruption" March 2016
Ecommerce Digital Finance
China's Financial Incumbents Lag Behind U.S. Peers and
Seek Innovation
China Needs Israeli FinTech To...
Capture 80% of long tail customers
Create competitive advantage to grow market share
Replace the U.S and UK. as the leading fintech powerhouse
Deliver enhanced products and services: better, faster, cheaper
Source: KPMG & CB Insights "Pulse of FinTech Q3" 2016
Upround. Disruptive Israeli Tech. China First.