trends in fintech

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Rajesh Kandaswamy

Research Director, Gartner

Twitter: @rajeshkan

Trends in Fintech – Observations From Money20/20 25 November 2014



T-Mobile offers Debit card

3

Bitcoins

PayPal to be spun-off

PayPal buys

Braintree Paym Launched in UK

Square Cash + Snapchat

9000+

attendees at

Money20/20



T-Mobile offers Debit card

4

Bitcoins

PayPal to be spun-off

PayPal buys

Braintree Paym Launched in UK

Square Cash + Snapchat

9000+

attendees at

Money20/20

In The Past 12 Months.... In The Past 12 Months....

Public Company With The Largest Market Capitalization In The World Has Public Company With The Largest Market Capitalization In The World Has Entered Payments

World’s Largest Retailer Has World’s Largest Retailer Has Announced That It Will Offer Banking And Payments



Presentation Outline

Forces Impacting Banking and Payments

Key Trends

1. Banking And Retail Are More Interlinked Than Ever Before

2. Technology To Transform Branches & ATMs Are Ready, But Adoption Lags In Mature Markets

3. Security Solutions Extend To Make Better Use Of Outside Technologies And Data

4. Bimodal Thinking By Clients Provides Entry Points for New Technology Providers

5. Mobile Payment Companies Acknowledge Apple Pay, But Impact Analysis Does Not Go Far Enough

6. Non-Banks Are Growing With Complementary And Substitute Products

7. Governments Look At Mobile to Improve Financial Inclusion

8. Understanding of Bitcoins Remains Low, Even Among Payment Companies

Recommendations

Suggested Reading

Q & A

5



Banking & Payments Are Impacted By Large Forces

6

Consumer Other Countries

Banking &

Payments

Investo

rs

No

n-b

an

ks

Social Media, Mobile, Sharing

Economy

Social Media, Mobile, Sharing

Economy

SEPA, AliPay SEPA, AliPay

Revenue

vs.

Ris

k

Revenue

vs.

Ris

k

T-m

obile

, W

alm

art

T

-mobile

, W

alm

art



Banking And Retail Are More Interlinked Than Ever Before

7

Banking &

Payments

Banking &

Payments

Retail &

Other Merchants

Retail &

Other Merchants

Payments

Credit

Disputes

Security

Offers

Mobile Mobile

Analytics Analytics

Big Data Big Data

Cloud Cloud

Bio-metrics Bio-metrics

Bitcoin Bitcoin

Loyalty

How well are your external offerings and internal operations aligned to take How well are your external offerings and internal operations aligned to take

advantage of this growing overlap?

Our future is in Payments, Commerce and Lifestyle Services – Kenneth Chenault, CEO, American Express at Money2020



Poll #1: Usage Of Bank Branches

In the last 6 months, I have visited a bank branch (not for ATM)….In the last 6 months, I have visited a bank branch (not for ATM)….

8

1. Never

2. Less than 3 times

3. Less than 6 times

4. More than 6 times



Technologies

Technology To Transform Branches & ATMs Are Ready, But Adoption Lags In Mature Markets

9

Are your solutions working with consumer trends or are they working against Are your solutions working with consumer trends or are they working against

them?

Do digital channels create an ‘Adverse Selection’ issue for banks? –Jane Fraser, CEO, Citi US Consumer & Commercial Banking at Money2020

Customers are migrating to mobile and online channels

Banks are not successful in selling products on digital

BRING THE CUSTOMER BACK -

ATMs, Branches and POS

FOLLOW THE CUSTOMER – Home FOLLOW THE CUSTOMER – Home

and Outside

??



Bio-metrics

Channels

Security Solutions Extend To Make Better Use Of Outside Technologies And Data

10

Data

Richer Use of Telecom And

Network Data

Richer Data From Banks

and Retail

Security

Increased use of mobile, cloud and digitization will drive demand for security Increased use of mobile, cloud and digitization will drive demand for security

solutions

Payment Payment

Retail Card



Bimodal Thinking Provides Entry Points for New Technology Providers

11

What are such bi-modal opportunities at your clients? How can you best

serve them?

What are such bi-modal opportunities at your clients? How can you best

serve them?

Mode 2 is exploratory, emphasizing agility and speed.

Having two modes of IT, each designed to develop and deliver informationHaving two modes of IT, each designed to develop and deliver information- and technology-intensive services in its own way.

Mode 1 is traditional, emphasizing safety and accuracy.

Mod

e 1

Pro

duct

Mod

e 1

Pro

duct

Mod

e 1

Pro

duct

Mo

de

2

Pro

du

ct

Price/ Unit (r)

Total Units (n)

Increase in volume

might not justify

reduced price

New product – less

volume, simpler

service needs

Areas where new

technology

providers have

emerged:

Card Processing

Core bank

Processing



Poll #2: Mobile Payments

Will I use my mobile phone to pay for purchases instead of cash or a plastic card (retail store, restaurants, vending machines, parking, etc

Will I use my mobile phone to pay for purchases instead of cash or a plastic card (retail store, restaurants, vending machines, parking, etc.)?

12

1. I already use it and expect to use more in the future

2. I have not used it, but expect to use in the future

3. I do not plan to use mobile for payments at all



Mobile Payment Companies Acknowledge Apple Pay, But Impact Analysis Does Not Go Far Enough

13

If you are in mobile payments, which of your assumptions need to be If you are in mobile payments, which of your assumptions need to be

revisited?

Changing Narrative Since Apple Pay

•

•

Changing Narrative Since Apple Pay

• More Understanding of Security Aspects of Mobile Payments

• More Expectations on Retailers to Support Mobile Payments

1. Silver Lining Mentality 1. Silver Lining Mentality – ‘Apple Pay leaves 60%

of the market open’ 2. Not Factoring In New

Information - ‘Mobile Payments cannot succeed without Loyalty, Coupons

and Offers’

Old Belief - Loyalty & Offers

New Information - Usability & Security

3. Not 3. Not Revalidating Earlier Assumptions – ‘We are

focused only on payments at the retail store since that

market is much larger’



How Millenials And The Unbanked Impact Banking and Payments

Banks Are Struggling to

Increase Revenue, But Risk-Averse

Under-banked and Unbanked

Remain Growing

Millennials / Gen Y

Population

Technology Has Changed

Consumer Lives

Minnennials / Gen Y

adopt technology at a

higher rate

Both do not use banking products, do not visit

branches and have less discretionary income

Technology enables reaching

consumers anytime and

anywhere at less cost.



Non-Banks Are Growing With Complementary And Substitute Products

15

High-Tech

Retail Alternative Fin.

Services Bank

Substitutes Other

Payments, Consumer Lending, Small Business Lending, Money Transfer, Bill Payment, PFM, Payments, Consumer Lending, Small Business Lending, Money Transfer, Bill Payment, PFM, Student Loans

Check Check Cashing, Payday

Loans, P2P Payments,

Money Transfer

Small Business Lending, Debit & Small Business Lending, Debit & Prepaid Cards, Mobile Money

Check

Money, Debit

Check Cashing,

Small Business Lending,

Consumer Lending, Mobile

Money, Debit & Prepaid

Cards

Debit Cards, PFM, Bill Payment, Debit Cards, PFM, Bill Payment, ATM Access

Is your strategy to serve non-banks Accidental or Intentional?



Governments Look At Mobile to Improve Financial Inclusion

16

COUNTRIES

COUNTRIES

Brazil – Payment Institution

India – Cash-out provisions for non-banks

Pakistan – Reduced limits for accounts

China – Large presence of non-banks

Nigeria, Indonesia – Bank-centric mobile money

US – retail-led (nearly 70 million unbanked/underbanked)

M-Pesa Succeeds in

Kenya

M-Pesa Succeeds in

Kenya

Awareness of Mobile’s Potential

Awareness of Mobile’s Potential

Moderate Success

Elsewhere

Moderate Success

Elsewhere

Realization of Need for

Additional Support

Realization of Need for

Additional Support

TRENDS

out provisions,

TRENDS

Larger role for Mobile Network Operators

Success is mostly in remittances, followed by payments

Legislative push– cash-out provisions, payment banks, cost of cash

Inhibitors

Telecom and banking structure

Lack of credit information

Lack of suitable products

Need low-value payment systems

Do you operate in any of the geographies where mobile money will have a Do you operate in any of the geographies where mobile money will have a

large impact? How you do you plan to serve the mobile money operators?



Understanding of Bitcoins Remains Low, Even Among Payment Companies

17

Awareness has Improved, But Little Understanding of….

Key Aspects of How it Works

Areas of Applicability

Regulatory Direction is Evolving Among Agencies. Challenges in Balancing Consumer Protection and Encouraging Innovation

Awareness has Improved, But Little Understanding of….

Key Aspects of How it Works

Areas of Applicability

Regulatory Direction is Evolving Among Agencies. Challenges in Balancing Consumer Protection and Encouraging Innovation

If you are in payments, have you done an assessment on how Bitcoins can If you are in payments, have you done an assessment on how Bitcoins can

impact your clients and your products?

1. Dies or Fades

Away 2. Some Adoption

3. Large-scale

Adoption

4. Technologies

Get Adopted

Regulation

Speculation

Perception

Regulation

Speculation

Perception

Some areas:

Remittances, Non-

returnable goods

Tech-savvy

customer

Some areas:

Remittances, Non-

returnable goods

Tech-savvy

customer

Online payments

P2p transfers &

remittances

Bank Support

Favorable

legislation

Online payments

P2p transfers &

remittances

Bank Support

Favorable

legislation

Block chain

technology

Federated

transaction

validations

Block chain

technology

Federated

transaction

validations



Recommendations

18

Look which segments of emerging non-banks could be of interest 2. Look which segments of emerging non-banks could be of interest to you. Assess if your go-to-market approach is suitable to serve these clients.

Ensure that your innovation investments uncover both new business value and provide technology innovation. Do not settle for

3. Ensure that your innovation investments uncover both new business value and provide technology innovation. Do not settle for incremental value-only offerings or technology-only offerings that do not link to business value.

Monitor Fintech companies in functional and technology areas 1. Monitor Fintech companies in functional and technology areas that are relevant to you. They are a source of ideas, potential partnerships and could be emerging clients.



Suggested Reading

Market Insight: A Banking Industry Primer, 2014, G00261044

Market Trends: Banking, Worldwide, 2014, G00258490

Market Trends: Emerging U.S. Nonbanking Consumer Financial Services Providers, 2013, G00258599

Cool Vendors in Consumer Financial Services, 2014, G00262583

Competitive Landscape: Business Service Providers, Banking and Securities, North America, 2014, G00269231

Competitive Landscape: Business Service Providers, Banking and Securities, Western Europe, 2014, G00269319

Market Trends: The Rising Importance of the Business Buyer — Fact or Fiction?, G00258700

Marketing Essentials: How to Develop and Assess a Vertical Market Strategy, G00171151

Bimodal IT: How to Be Digitally Agile Without Making a Mess, G00268866

Are Mobile Biometrics Ready for the Enterprise?, G00259859

19

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