1.
Pietro Leo
Executive Architect
IBM Italy CTO for Big Data Analytics & Watson
IBM Academy of Technology Leadership Team
@pieroleo www.linkedin.com/in/pieroleo
Fintech and other things
are coming to Town
A reading of “DIGITAL DISRUPTION: How FinTech is Forcing
Banking to a Tipping Point” report from Citigroup and other
sources
1

2.
Credits: http://www.arkive.org/whale-­shark/rhincodon-­typus/
What is
Fintech?
2

3.
Fintech
Financial technology, also known as FinTech, is
an economic industry composed of companies
that use technology to make financial services
more efficient.
Financial technology companies are generally
startups founded with the purpose of disrupting
incumbent financial systems and
corporations that rely less on software.
Source: https://en.wikipedia.org/wiki/Financial_technology
3

4.
Source: https://www.cbinsights.com/blog/disrupting-­banking-­fintech-­startups/
Fintech are « UNBUNDLING » tranditional banks
4

5.
Download full report here:
https://ir.citi.com/SEBhgbdvxes95HWZMmFbjGiU%2FydQ9kbvEbHIruHR%2Fle%2F
2Wza4cRvOQUNX8GBWVsV
“DIGITAL DISRUPTION: How FinTech is Forcing
Banking to a Tipping Point”
5

6.
Which is the level of private investments
in global Fintech?
Finding: It is increasing exponentially in last 5 years!
Major banks are increasing commitments: last weeks: BBVA 250M, Unicredit 200M,
ISP 30M -­ It has now a relevant critical mass: fresh mind and money
Growing factor: 10x
Source: Ciigroup
6

7.
99%
1%
Market Capitalization
Top 10 Largest Banks vs Fintech Capitalization
Data From: https://en.wikipedia.org/wiki/List_of_largest_banks
Top 10 Largest Banks
Fintech
7

8.
Which is the target of the new Fintech entrants?
Finding: B2C is the major target for Fintech
Why B2C dominates? Fintech provides better customer experiences and agility....
better and simplified interfaces....
Source: Ciigroup
8

9.
Revenue ALREADY migrated from NA consumer
banking from OLD to NEW
Finding: Only 1% of Revenue already migrated
During next 4 years it is estimated that the 17% of revenue in this segment will migrate
to Fintech from tranditional banks
Source: Ciigroup
9

10.
China Fintech companies have ALREADY similar
number of clients of major banks
Finding: High unbanked population, weak consumer banks and high mobile phone penetration
make emerging markets ripe for FinTech disruptions.
10

11.
Less capital-­intensive activities are more likely
to be disrupted by FinTech
Finding: The shift to mobile means a disintermediation of bank branches rather than banks
themselves: Specifically, it will mean the shift to mobile distribution being the main channel of
interaction between customers and the bank.
Payment is the major
challenged area of
FinTech to the
transitional banks
11

12.
• Credit Karma is a credit-­
monitoring site that provides
free credit scores, reports and
monitoring as well as insights
into the meaning of that.
• Based on the user’s credit
profile, the website shows
product recommendations, like
credit cards and loans.
• The company recently raised
$360 million in funding rounds,
bringing its valuation to $3.5
billion.
• The website has more than 40
million members and taps into
$2.3 trillion of America’s
household debt information.
• Credit Karma provides its
members with free financial
information monitoring, data-­
driven resources and
personalized
recommendationsSource: https://www.creditkarma.com/faq/howitworks &
https://letstalkpayments.com/22-­hottest-­fintech-­startups-­from-­silicon-­valley/
12
Credit Scoring Advisor Example

13.
• Nutmeg, founded in 2012, is
UK robo-­adviser comany, an
online investment service
that’s intelligent,
straightforward & fair.
• Specialising in investments,
ISAs & pensions. Capital at
risk.
• The company recently raised
$50 million in funding rounds
and 70 staff
• Nutmeg has 50.000+
• Nutmeg is loss-­making but
should be profitable in two to
three years, said the CEO
Source: https://www.nutmeg.com/ & http://www.reuters.com/article/us-­banking-­wealth-­
nutmeg-­idUSKBN0OS0W420150612 & http://uk.businessinsider.com/wealthfront-­
launches-­30-­update-­2016-­3?r=US&IR=T
13
• U.S. robo-­adviser Wealthfront,
founded in 2008
• The company recently raised
$129 million in funding rounds
and is reportedly valued $700M
• It has $2.4 billion in assets under
management, thousands of
customers
• Aim to become an all-­in-­one
financial hub, powered by
artificial intelligence.
Robo Advisors examples

14.
New York, FifthAvenue
Moscow, Avia Park
Clients over time will move almost entirely to
mobile channels. Banks will look like Uber
The future of the
branches is about
advisory and
consultation rather than
transactions.
A bank branch is only one
of bank distribution
channels.
14

15.
Bank branch levels are forecast to fall
significantly given their high cost
Commercial Bank Branches per 100k Adults
Italy Bank Branches: 59.6
Finding: Additional motivations: the increased ubiquity of mobile Internet, increasing
FinTech competition and a sluggish revenue and profitability environment
France = 38
UK = 25
Sweden = 21
15

16.
A reduction in banks' physical networks could
lead to a 40-­50% decline in staffing levels from
pre-­crisis levels
Finding: If the banking system in Europe, Japan, and the US operated with the same
cost/income ration as the best-­in-­class Nordic region, it would remove $175 billion from their cost
base (or 23%) and add 39% to the pre-­tax profit of the banks in 2016. 16

17.
There is a strong positive correlation between
employee productivity and the banks' profitability
The Higher Number
of Customers Per
FTE, the More
Profitable A Retail
Bank
• Measured By
Revenue/FTE
• Measured By Risk
Adjusted
Income/FTE
• Measured By Pre-­
tax Profit/FTE)
• Measured By
Gross Operation
Profit/FTE
Finding: The higher unit labor cost in the Nordic and Benelux
countries forced the banks to adopt a higher level of automation and digitalization 17

18.
Next Big Big Thing? > Blockchain could be a
catalyst for transforming existing legacy
systems
Finding: The existing payment infrastructure remains the backbone. But Blockchain
technology could be different. It could replace the current payment rail of centralised clearing
with a distributed ledger for many aspects of financial services, especially in the B2B world. 18

19.
Blockchain could be a catalyst for
transforming existing legacy systems
19

20.
ABRA is an example of Fintech company
leveraging Blockchain for P2P money transfer
Finding: American Express is a key investor in Abra: Blockchain could play an
important role in the evolution of money transfer and commerce, especially in emerging markets.
20

21.
21
Top 22 Fintech in Italy (according to
StartupItalia!)
Source: http://smartmoney.startupitalia.eu/open-­summit/50790-­20151214-­migliori-­
startup-­fintech-­2015 & http://www.osservatori.net/dati-­e-­
pubblicazioni/dettaglio/journal_content/56_INSTANCE_VP56/10402/1859041
Data
•ClickMeter
•FacilityLive
•Innaas
•Quokky
•SpazioDati
Ecommerce
•Brandon
•Depop
•Eboox
Virtual Currencies
•Sardex
Payments
•Growish
•Jusp
Rating
•S-­Peek
Servcies/App
•BeMyEye
•DoveConviene
•Fatture in Cloud
•MoneyFarm
Lending
•Prestiamoci
According to Italian Government
We have in Italy 4.500+ start-­ups
(Fintech and not) officially
registered (overall investments in
2015 was 133M Euro)

22.
Pietro Leo
Innovation Agitator
@pieroleo
Grazie!
22