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See Appendix A-1 for Analyst Certification, Important Disclosures and non-US research analyst disclosures
Citi Research is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be
aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Certain products (not inconsistent with the author’s published research) are available only on Citi's portals.
This presentation was approved for distribution on 3 October 2016; the disclosures in Appendix A1 are current as of the same date.
.
DIGITAL DISRUPTION
03 October 2016
Yafei Tian
Citi Banks Research
+44 (0) 20 7986 4100
How FinTech is Forcing Banking to a Tipping Point
13
Follow the Money
Private Investment in Global FinTech Companies ($bn)
“Silicon Valley is coming. There are hundreds of start-ups
with a lot of brains and money working on various
alternatives to traditional banking.” - Jamie Dimon
FinTech investments have grown exponentially: $19bn in
2015 was up two-thirds from $12bn in 2014. By client
segment, Consumer and SME are the focus (73%). By
product, Marketplace/P2P lending (46%) and Payments
(23%) dominate FinTech dollars invested.
B2C dominates due to changing consumer behaviour, the
smartphone revolution and lower switching costs. Future
investment into B2B could grow.
Source: Citi and CB Insights; Includes first round and subsequent private investments.
0
5
10
15
20
2010 2011 2012 2013 2014 2015
14
Follow the Money
Capital Deployed in Private FinTech Companies By Segment
Capital Deployed in Private FinTech Companies By Business Area
Source: CBInsights, KPMG, Crunch Base and Citi Research; Based on c120 private companies from CBInsights FinTech Periodic table Dec 2014; KPMG’s top 50 most prominent FinTech innovators Dec 2015; Valuation based on Crunch Base Total Equity Funding for private companies and exit value for acquired companies
Personal & SME73%
Asset Management & Wealth10%
Insurance10%
Investment Banking4%
Large Corporate3%
Digital Currency3%
Equity crowdfunding2%
Institutional Tools3%
Lending46%
Money Transfer3%
Payment23%
Savings & Wealth10%
Insurance10%
15
Different is Better than Cheaper
For FinTech Competitive Edge, Different and Capital Light is Key
Not all FinTech new entrants will have a sustainable
competitive advantage. Many FinTech companies may be
better or lower cost than banks rather than different.
Companies that are different rather than having a lower
cost to serve are more likely to maintain their competitive
edge for longer.
Different does not need to be technologically different. It
can be a different target market (iZettle) or a new business
model (Credit Karma or Funding Circle).
A lower cost business model can – for a period of time – be
a form of a differentiation. But lower cost models may get
copied faster by competitors and incumbents.
Banks’ have a natural advantage in capital intensive
products. Most plain vanilla retail and corporate banking is
capital intensive and relatively low cost.
Activities that are capital light (credit scoring, payments,
P2P lending as an agent not principal) are more likely to be
disrupted by new digital business models
Source: Citi Research
Marketplace Lending (Funding Circle)
PoS/ Card Acceptance (iZettle)
Payments (Klarna)
Credit Scoring (Credit Karma)
Lending Platforms (Kabbage)
Corporate Lending
Wholesale Banking
Mortgage Lending
Robo Advisors (NutMeg)
DifferentCheaper
Cap
ital L
ight
Cap
ital I
nten
sive
16
Phones versus Bank Accounts: the EM Opportunity
Mapping the Risk of Digital Disruption
Underdeveloped banking systems. Emerging markets
such as China, India and Philippines have a large
unbanked/underbanked population. Consumer banking is
often underdeveloped in many emerging markets.
High level of smart phone penetration. Some countries
such as China and Malaysia have smart phone penetration
on par with DM counterparts. Others may have fewer smart
phones but a lot of mobile phones eg India, Africa.
Dominant position of technology or telecom giants. Ant
Financial (owner of Alipay) benefits from Alibaba’s e-
commerce ecosystem. Mobile Money’s success in Kenya
is a result of Safaricom’s dominant market share (~70%).
Pragmatic regulatory environment. China had limited
regulation around online payment and P2P lending until
recently. Kenya’s regulatory environment was conducive to
the success of M-Pesa over the past decade.
Policy Matters. Government policy can foster a positive
environment for FinTech growth. See India government’s
J.A.M initiative (Jan Dhan – financial inclusion, Aadhaar –
National Identity Card and Mobile).
Source: Consumer Barometer with Google (smart phone penetration), Company Reports and Citi Research; Retail bank penetration is measured as retail loans% total loans. Size of the bubble is retail bank loans, the larger the bubble, the higher the retail bank loans.
BelgiumNetherlands
Austria
France
Germany
Greece
Spain
Israel
Italy
Sweden
Russia
United Kingdom
USA
Brazil
Mexico
Japan
China
South Korea
Hong Kong
India
Singapore
Malaysia
Philippines
TaiwanThailand
10%
20%
30%
40%
50%
60%
70%
20% 30% 40% 50% 60% 70% 80% 90% 100%
Ret
ail B
anki
ng
Pen
etra
tio
n
Smart Phone Penetration
Innovation Frontier
Ris
k of
losi
ng e
xist
ing
reve
nue
pool
Ris
k of
losi
ng n
ew r
even
ue p
ool
Digital leadersDigital Followers
New Entrants Led Disruptions
Incumbent LedEvolutions
Future GrowthAreas
DigitalFollowers
17
At the Tipping Point in the West, Past the Tipping Point in China
Sub 1% of North America Consumer Banking Revenues are on New Digital Business Model
US (or European) consumer banking is at the early stages
of the disruption cycle. Currently only c1% of North
American consumer banking revenues have migrated to
new digital business models but this could accelerate.
China, led by tech giants such as Alibaba and Tencent, is
well past the tipping point. China’s e-commerce system is
the largest in the world (40% of GMV, 2015). Alipay’s total
payment value in 2015 was over 3x PayPal in 2015.
For Chinese banks, earnings lost to FinTech innovators
may be only a small part of the existing profit pool, but it is
an opportunity lost to a big and growing market segment.
Source: Citi Digital Strategy
18
At the Tipping Point in the West, Past the Tipping Point in China
Global Ecommerce Mainly Comes From China & US 2015
Alipay TPV bigger than Paypal 2015 ($bn)
Source: eMarketer, Citi Research; Based on Gross Merchandise Value (GMV) Source: Company Reports and Citi Research; Alipay TPV 2015 is estimated based on discloser in 2014 adjusted for growth in Alibaba’s GMV.
Global $1.7tr
China $0.67tr (40%)
US $0.34tr (20%)
Alibaba $0.45tr (26%)
931
282
0
200
400
600
800
1000
AliPay PayPal
AliPay3.3x
PayPal
19
BATs Provide a Roadmap for GAFA
GAFA vs BAT
BATs are ahead of GAFAs when it comes to expanding to financial
services (higher market share).
Due to early entrance. Alipay and Tenpay were created over a decade
ago. Google was the first to venture into payments among GAFAs in
2011, seven years after Alipay.
Finance is strategically important for the BATs. In a country with a
relatively underdeveloped consumer banking system, payment is now
seen as core to their online to offline (O2O) strategy.
GAFAs operate in an existing well developed consumer payments
system and financial services are not as strategically important as it is
for BATs.
Amazon is more likely to be a major player in financial services due to
its focus on e-commerce.
Android Pay and Apple Pay are part of Google and Apple’s broader
strategy to further enhance customer stickiness to their OS ecosystem.
Payment Leaders in the west include PayPal, Buy rated, due to
exposure to rapidly growing online payment; Visa and Master Card,
both Buy Rated, because of solid market position, trend of cash to
electronic payments.
Western Union, Sell rated, is most at risk due to potential pressure on
remittance volumes and margin from increased FinTech competition.
Number of Users 2015
Business Model
Finance Products Volume
Google Around 200m monthly unique users
data monetisation
* Google Wallet (2011)
* Android Pay (2015)
Around 20m devices have Google wallet installed in the US; 1-2m active users in the US
Apple 800m (iTunes) data, software and hardware
* ApplePay (2014) * Around 24m Apple Pay compatible devices in the US; Around 4m users have used it at least once and 1-2m active users in the US
*< 2% transactions at top US retailers
Facebook 1,550m data monetisation
* Messenger Payments (2015) -
Amazon 304m eCommerce * Amazon Lending (2012): Loan to sellers
* Amazon Payments (2007): Online payment
* Globally more than 23 million customers (<10% of customers) have used the Pay with Amazon service since 2013.
* Payment volume from Pay with Amazon increased 150% year-over-year in 2015;
Number of Users 2015
Business Model
Finance Products Volume
Baidu 590m data monetisation
* Baidu Wallet (2014)
* Baidu Finance (2013): Including consumer credit, marketplace lending, wealth and so on
45m Baidu Wallet users
< 2% of third party payment (online + offline) market share
Alibaba 407m (number of active buyers over LTM)
eCommerce * Alipay (2004)
* Yu'e Bao (2013)
* Mybank (2015)
* Zhima Credit (2015)
* 33% third party transactions (online + offline) market share
* Around RMB 17tr ($2.6tr) transactions in 2015
Tencent 697m (WeChat) data monetisation
* Tenpay (2005)
* WeBank (2015): online/mobile bank
* Wilidai (2015): consumer credit
* 10% third party transactions (online + offline) market share
* Around RMB 5tr ($0.8tr) transactions in 2015
Source: Citi Research
22
Diminishing Return of Physical Assets
Commercial Bank Branches Per 100k Adults By Region
“The number of branches and people may decline by as much as 50% over the
next years" - Antony Jenkins, the former CEO of Barclays
Northern Europe has already done a lot — Nordic and Dutch banks have cut total
branch levels by around 50% from recent peak levels.
The US banks on average appear to be about 5 years behind European banks
who are in turn about a decade behind the Nordic banks.
“Over the past one year, US banks have started to cut back, as they have realized
that interest rates are unlikely to increase any time soon… some banks in the US
will more than halve their branches over the next 5 years” - Citi GPS Report:
Digital Disruption March 2016
Source: WorldBank, Citi Research
-
5
10
15
20
25
30
35
40
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2018 2020 … 2025
Euro area United StatesEast Asia & Pacific (all income levels) Latin America & Caribbean (all income levels)Nordics
Forecasts
-33%
-45%
-50%
We Are At the Tipping Point of FTE Reduction
FTE in European banks is down 11% since 2008 crisis and down 5% for US banks
(2% per annum).
We see another ~30% reduction in staff next decade with a 3% decline per year
– Driven by automation: Branches and associated staff costs make up about
65% of the total retail cost base of a larger bank and a lot of these costs can be
removed via automation.
– Focus on Return in a Low Growth & Low Rate Environment: For countries
that have gone through a more severe financial crisis and consolidation FTE
reduction ranges between 3%-5% per year.
Source: ECB, United States Bureau of Labor Statistics, Citi Research Estimates
2.933.26
2.572.89
1.80 1.82
-
1
2
3
4
US Europe
Mill
ion
s
Peak 2015 2025
-40% -45%
23
People: Automation Tipping Point
Mill
ions
24
People: Automation Tipping Point
FTE Reduction 2014 vs 2008
Source: ECB, Sweden Banker’s Association , United States Bureau of Labor Statistics, Citi Research
-40%
-30%
-20%
-10%
0%
Latv
ia
Gre
ece
Den
mar
k
Irel
and
Spa
in
Est
onia
Rom
ania
Lith
uani
a
Net
herla
nds
UK
Fin
land
Bel
gium
Por
tuga
l
Slo
veni
a
Cyp
rus
EU
28
Italy
Hun
gary
Slo
vaki
a
Pol
and
Aus
tria
Ger
man
y
Fra
nce
Sw
eden US
26
The Competitive Threat
China is the Silicon Valley of FinTech
EM Banks as Low PE Businesses?
DM Banks and FinTech: Co-opetition
DM: Watch Amazon ....
27
A FinTech Bubble?
“Over 100,000
Downloads”
Citi GPS: Global Perspectives and Solutions:
DIGITAL DISRUPTION: How FinTech is Forcing Banking to a Tipping Point
https://www.citivelocity.com/citigps/ReportSeries.action?recordId=51
28
Appendix A-1
Analyst Certification
The research analysts primarily responsible for the preparation and content of this research report are either (i) designated by “AC” in the author block or (ii) listed in bold alongside content which is attributable to that analyst. If multiple AC analysts are designated in the author block, each analyst is certifying with respect to the entire research report other than (a) content attributable to another AC certifying analyst listed in bold alongside the content and (b) views expressed solely with respect to a specific issuer which are attributable to another AC certifying analyst identified in the price charts or rating history tables for that issuer shown below. Each of these analysts certify, with respect to the sections of the report for which they are responsible: (1) that the views expressed therein accurately reflect their personal views about each issuer and security referenced and were prepared in an independent manner, including with respect to Citigroup Global Markets Inc. and its affiliates; and (2) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in this report.
IMPORTANT DISCLOSURES
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Analysts’ compensation is determined by Citi Research management and Citigroup’s senior management and is based upon activities and services intended to benefit the investor clients of Citigroup Global Markets Inc. and its affiliates (the “Firm”). Compensation is not linked to specific transactions or recommendations. Like all Firm employees, analysts receive compensation that is impacted by overall Firm profitability which includes investment banking, sales and trading, and principal trading revenues. One factor in equity research analyst compensation is arranging corporate access events between institutional clients and the management teams of covered companies. Typically, company management is more likely to participate when the analyst has a positive view of the company.
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NON-US RESEARCH ANALYST DISCLOSURES Non-US research analysts who have prepared this report (i.e., all research analysts listed below other than those identified as employed by Citigroup Global Markets Inc.) are not registered/qualified as research analysts with FINRA. Such research analysts may not be associated persons of the member organization and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. The legal entities employing the authors of this report are listed below:
Citigroup Global Markets Ltd Yafei Tian, CFA
OTHER DISCLOSURES
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36Confidential -- 2016 Nutmeg Saving & Investment Limited
A mission to democratise finance
Nick HungerfordNutmeg co-founder
Fintech 2016 - Edinburgh
38Confidential -- 2016 Nutmeg Saving & Investment Limited
It also has a tech problem
Source: KPMG report on UK challenger banks, May 2016
Complex IT
Complex
products
Costly real
estate
Legacy
compliance
Manual
operating
models
39Confidential -- 2016 Nutmeg Saving & Investment Limited
And more broadly, while interest rates are low, society has a savings problem…
40Confidential -- 2016 Nutmeg Saving & Investment Limited
…so the old ways of saving – pension, house, bank deposits – are no longer working.
41Confidential -- 2016 Nutmeg Saving & Investment Limited
FinTech meets an urgent social need
DIY
IFA
Wealth managers
House & pensionW
ealth
Ways to save and invest
Exclusion / complexity
Bank
42Confidential -- 2016 Nutmeg Saving & Investment Limited
The Scots are saving pretty well!UK
% who feel confident they are “on track” to achieve desired income in retirement
30% 43%
% saving more than £500/month for retirement 11% 18%
Average pension pot size £34k £48k
Target income in retirement £27k £29k
% worried about impact of Brexit on pension 30% 37%
43Confidential -- 2016 Nutmeg Saving & Investment Limited
It’s not just tech change that is required
Established firms Nutmeg / other FinTechs
IT / tech stack Legacy, paper-based, few APIs APIs used throughout the business, cloud-based, proprietary purpose-built systems
Reporting Paper via direct mail, charges for ad hoc statements Online-first, live or daily reports
Transparency Many complex fee schedules, lack of reporting on total fees paid One simple management fee and no exit fees.A running total of fees paid on the dashboard
On boarding Paper-based 100% online-only for 80%+ of customers
Performance Net of fees - rarely if ever calculated for the customer Transparently presented and consistently top-quartile among UK wealth managers
Financial insight and advice
Delivered via humans, charged by hour, charges opaque Financial planning tools delivered online, as part of the Nutmeg service
44Confidential -- 2016 Nutmeg Saving & Investment Limited
Disaggregation of a bank
Foreign exchange
Payday
Payments
Banking
Personal credit
Investing and wealth management
Mortgages
Business lending
Disruption is yesterdays word: now it’s the norm
SalaryFinance
45Confidential -- 2016 Nutmeg Saving & Investment Limited
Where might all this lead?
• Tech firms moving into finance • Virtual reality pensions
• “Emotional surveillance” –tech to stop emotions upsetting investment strategies
• Wealth managers moving into concierge / family office services to protect HNW market share
• AI / chatbot advisors
46Confidential -- 2016 Nutmeg Saving & Investment Limited
Regulators have helped so far… and they need help
• Project Innovate
• Advice Unit
• Regulatory Sandbox
Pension Dashboard
FinTech Panel
Professional services hub for FinTech
FinTech bridges with priority global markets
New Bank Unit
BoE Open Forum
47Confidential -- 2016 Nutmeg Saving & Investment Limited
And together can do more…
• Government can speed up change
• Require electronic ISA and pension transfers (i.e. no paper forms) • Impose maximum ISA and pension transfer times• Introduce higher transparency standards on performance and fees
• Regulators can be more flexible
• Allow us to speak in language people understand – “money at risk” not “capital at risk”
• Allow wealth managers to rely on the due diligence of banks
• The tax system can channel capital to entrepreneurs
• Enterprise Investment Scheme (EIS) for university lecturers and students: Prof-EIS
48Confidential -- 2016 Nutmeg Saving & Investment Limited
So in conclusion
• Established firms in finance lack trust, have tech legacies, and struggle to balance profit and social responsibility (no VC money!)
• This creates an opportunity: help people to improve their finances –winning trust by doing so
• Regulators are keen, and have eyes on the future
• But policymakers can do more to help FinTechs grow and keep innovating
• The societal necessity is too great for us to slow down!
51© 2016 IBM Corporation |
Innovation Timeline: 1900 - 2008
1900 20081950
Automobile
Safety Razor
Transatlantic Flight
Aeroplane
Tape Recorder
Tabloid Newspaper
Vacuum Cleaner
Cornflakes
Nylon
Instant Coffee
Helicopter
Plastics
Bra
Traffic Lights
Assembly Lines
Hydrofoil
E=MC2
Sonar
Spin Dryer
Band Aid
Television
Lego
Jet Engine
Chocolate Chip Biscuit
Hearing Aid
Sliced Bread
Microwave Oven
Ballpoint Pen
Velcro
Photocopier
Jet Airliner
Nuclear Fission
Electronic Computer
Credit Card
DNA
Tupperware
Frisbee
Polaroid Camera
Colour TV
Silicon Chip
Superglue
Nuclear Power
Radial Tyres
The Pill
Plate Tectonics
Heart Transplants
Satellites
Hovercraft
Jacuzzi
Cassette Tape
Carbon Dating
Computer Mouse
Artificial Heart
Source: http://www.nowandnext.com
Radar
Pocket Calculator
Floppy Disk
Dot Matrix Printer
Moon Landing
Walkman
VCRSpace Station
IVF
Fax Machine
Gore-tex
IBM PC
Cell Phone
Space Shuttle
Compact Disk
Camcorder
eBay
MySpace
Yahoo
Amazon
Skype
YouTube
Netscape
GPS
Apple Mac
CD-ROM
Disposable Camera
Post-it Notes
Home Computing
3-D Gaming
Flickr
Penicillin
Laser
Cats Eyes
Parking MetersAtom Bomb
ATMInternet
Games Console
Starbucks
Barcodes
Word Processor
Astroturf
52© 2016 IBM Corporation |
The Greatest Innovations Of All Time?
Airplane
Car
Bicycle
iPod
SKY +
Helicopter
Mobile Phone
Cats Eyes
Sliced Bread
Some Contenders …
53© 2016 IBM Corporation |
Innovations that never took off
A snow screen for the face !! The family bicycle !! The one-wheel motorcycle !!
54
© 2016 IBM Corporation
1. Augmenting products to generate data
2. Digitising Assets
3. Combining Data Within and Across Industries
4. Trading Data
5. Codifying a Distinctive Service Capability
5 Patterns of Innovation
55© 2016 IBM Corporation |
Cloud MobileData and
Analytics
Security and
Privacy
SocialProcess
AutomationIoT Content
Hardware and Software Optimisation
Infrastructure
57© 2016 IBM Corporation |
Digital and Cognitive Era
User Centric
Value Centric
Collaborative
Speed and Agility
Scale
Secure
Transparent
58© 2016 IBM Corporation |
Source: June 2015 World Economic Forum, The Future of Financial Services
6 Core Functions of
Financial ServicesThe World Economic Forum developed
the first consolidated taxonomy for
disruptive innovation in financial services
around 6 core functions that comprise
financial services:
Transactions / Payments
Deposits & Lending
Investment / Wealth Management
Insurance
Capital Raising
Market Provisioning
1
© 2015 IBM Corporation |
2 11 Clusters of Disruptionclusters were identified that were exerting
pressure on traditional business models
Disruptors are deploying better customer propositions in lower-cost models
1.Data Intensive
2.Platform / Ecosystem
3.Capital Light
64
Convert center screen resolution to 1920 x 782 @ 140dpi (13.714 x 5.586)
$4.8 Trillion Market by 2025
Source: Ovum: Digital Economy 2025: Core Scenario
66
© 2016 IBM Corporation
Ecosystems – Its all about customers needs
Speed
Bankingreal time booking,
payments, loans, …
Aggregation of traditional assets and new P2P
and
social banking products
ConvenienceMoney transfer, deposits, currency
transactions via twitter, mobile number,
Open Architecture: natively adaptable to
innovations e.g. Virtual
currencies like Bitcoin, open
protocols like Ripple, …
Open APIprovides powerful and easy to
understand, to setup and to use
interface to access all fidorOS
functions
Alternative Assetse.g. Travel loyalty miles, precious
metals
The Fidor Plusmulti-language, multi-currency, multi
jurisdiction, multi-CBS, white-label
fidorOS
67© 2016 IBM Corporation |
fOS is API based,
Modular and Free of
Legacy
“Cloud native” bank built
on a cloud ecosystem of
financial product providers
Built it’s own API centric
core bank platform
Social is used exclusively
for acquisition, retention,
cross sell, R&D
Fidor has a community
of 500k+ users and 100k
“KYC” customers
CASE STUDY: Fidor Bank operating environment allows for a substantially lower cost structure
IT cost per user: -
$200
Traditional
Bank
$3 $15
Customer acquisitions costs: -
€7
Traditional
Bank
<€1
74
Bob Ferguson, Head of Project InnovateScot-Tech Fintech Conference 11 October 2016
Promoting Innovation through a collaborative approach to regulation
FCA: Project Innovate
75
• Launched in October 2014
• Promote FCA’s competition objective by:
Providing direct support to innovative businesses
Policy and process improvement
• While balancing opportunities and risk
Project Innovate: Aims
Aims
• “Innovation-friendly” regulatory system – policy and process improvement, balanced approach to opportunity and risk
• Help for innovative businesses to learn how to live with regulation, and to achieve market entry as smoothly as possible – fintech start-ups, pure tech players, large firms
Not
• A deregulatory initiative
• A soft option for innovative businesses
• An initiative just aimed at start-ups
76
How and with whom we collaborate
• Direct support for innovative businesses
• Regulatory sandbox
• Themed weeks
• Fintech ecosystem representative bodies
• Overseas regulators
77
Direct Support
• Provides one-to-one interaction with the regulator for innovative businesses
• Advice on regulatory implications of business concepts
• Advice on how to prepare an application for authorisation – but Hub does not make
authorisation decisions
• An “end-to-end” regulatory experience
• Service is confined to regulatory matters
78
Statistics: September 2016
Total number of requests for help – 608
Help given – 312
Firms authorised or awaiting decision – 42
Informal steers – 86
Eligibility criteria
• Genuine innovation?
• Consumer benefit?
• Research done?
• Need for support?
79
Regulatory Sandbox
80
• Created as a safe space to test new ideas with real customers without incurring disproportionate regulatory consequences
• Aimed at helping firms test the viability of an idea on a small scale, reducing product development time/cost
• An experiment for all parties involved, including the FCA
• Consumer safeguards built in to each pilot
• First cohort of firms due to begin live testing very shortly
• 69 applications received and 24 chosen to develop towards testing
• We have seen partnerships between start-ups and incumbents
• Second round of applications due to open in November
Contact
https://www.the-fca.org.uk/firms/project-innovate-innovation-hub
Phone: +44 (0)20 7066 4488
Email: [email protected]
81
Fintech 2016Scot-Tech
Edinburgh
Yvonne Dunn, Partner
Luke Scanlon
Head of Fintech Propositions
11 October 2016
Overview
Todays aim…
• Engaging with
regulators
• Blockchain and
DLT – beyond the
hype
• The future of
robo advice
• Digital
currencies in
their own right
• Project Innovate
• Regulatory Sandbox
• Challenger Bank Unit
• Robo Advice
• International co-operation
FCA and
Fintech
• Digital IDs
• Smart contracts
• Regulatory reporting
• Privacy issues
• Governance
• Cyber, fraud, money
laundering
Regulatory
concerns
Background and
drivers…
• Perception of an “advice
gap”
• Robo advice to plug the
gap
• Threats and opportunities
• Different concepts across banking,
securities and insurance
• Advice vs guidance
What is
“advice”?
• Definitional challenges
• Policy priorities of
different jurisdictions
• Consumer protection
• Taxation
• Anti-money laundering
The future
of money?
The way forward
…• Fourth Money
Laundering Directive
(MLD4)
• Second Electronic
Money Directive
• Payment Accounts
Directive
• Payment Services
Directive (2)
• HM Treasury's views
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Adoption of modern technologies outside of Advance Analytics, Risk Profiling and Social Monitoring is too low
IT change is considered as too expensive
Do you …
…have large amounts of documents or data which you need to be able to review and search accurately in multiple sources?
…need to answer detailed questions on demand?
…want to reduce your search time for specific documents and improve the quality of discovery?
…require easy access to all your information?
How do we gain value …
WHOLEDOCUMENT
S
DOCUMENTS
BY SECTION
CONTENT BY
PARAGRAH
A SINGLE SENTENCE
• Big Data service focussed on unstructured data
• We use the inherent textual structure of your documents and data content to
enable precise and accurate searches – capturing the Digital DNA of your data
• Scalable from single and small numbers of project documents to corporate shared
drives containing millions of documents
Discovery Techniques …
• Content Categorisation
• Topic highlighting
• Entity highlighting
• Content Summarisation
• Sentiment Analysis
• Word Clouds – Heat Maps
Discovery – What is the reality …
NDA’s Contracts NDA’s Contracts
Pharma
Food Oil & Gas
Retail
A
A
Template
Customer
A VariationsNDA’s
A
A
Template
Customer
AVariationsContract’
s
Analysis
• Redact Sensitive
Information
• Keep it simple
• Put the power into the
hands of all applicable
users – not just the select
few
• Use precise search tools,
else you are wasting time!
Still to confirm Regulatory Technical Standards
Short timeframes
Strong Customer Authentication - SCA
XS2A – Access to account rules
4
3
2
1
122
PSD2 key points
OPEN API?
DATA STANDARD
RULES BY WHICH DATA
ARE DESCRIBED AND RECORDED
API STANDARD
SPECIFICATIONS THAT INFORM THE DESIGN,
DEVELOPMENT AND
MAINTENANCE OF AN OPEN API
SECURITY STANDARD
SECURITY ASPECTS OF THE API STANDARD
Open Banking Standard
A set of specifications and rules addressing the data, technical and security aspects in an open API environment,
supported by a Governence Model
https://uk.openbankproject.com
GDPR
SECURITY CONSIDERATIONS.
Authentication
Malware / Social Engineering
Scale
DDOS
http://blog.smartbear.com/readyapi/api-security-testing-how-to-hack-an-api-and-get-away-with-it-part-1-of-3/
DYRE - ZEUS
Internet of things
Al kazeem cyber fighters
© F5 Networks, Inc 127
Attack vectors – IOT v API v PSD2
IoT PlatformMQTT
MQTT
HTTP
Gatewa
y
Gateway
MQTT
HTTP
MQTT
HTTP
Customers
DDoS
Attack
HTTP
What’s the problem
• Protocol heterogeneity
• Weak cryptography
• Complex Authentication
• Tricky Authorization
• Siloed Security
• Global scalability
https://f5.com/about-us/news/articles/mirai-the-iot-bot-that-took-down-krebs-and-launched-a-tbps-ddos-attack-on-ovh-21937
COMMERCIAL IN CONFIDENCE © Copyright 2016 Fujitsu Limited
Passwords – Do Not Resuscitate
David Cameron
Business Development Director – Digital Financial Services
1 COMMERCIAL IN CONFIDENCE
Bill Gates – But what was the year?
“Traditional password-
based security is
headed for extinction,
because it cannot meet
the challenge of
keeping critical
information secure.”
2004 RSA Conference -
Copenhagen
ID as currency: put these in order of ‘value’
Driving Licence
Open market value approx. £15-30
4
FUJITSU RESTRICTED - UK & IRELAND EYES ONLY
Debit/Current Account
approx. £4
Credit Card £ 0.60
The Challenge
80%of account
opening
and ID theft
fraud is
committed
on line.
6
FUJITSU RESTRICTED - UK & IRELAND EYES ONLY
The Challenge
52%increas
e in
fraud
for the
under
30’s
7
FUJITSU RESTRICTED - UK & IRELAND EYES ONLY
The current baseline is Password based
authentication…
8
FUJITSU RESTRICTED - UK & IRELAND EYES ONLY
How do you verify identity at enrollment?
ID Document
3rd party data check
LivelinessCheck
Biometrics
Facial and or Voice
Know your Device Check
Geolocation check
14 COMMERCIAL IN CONFIDENCE
Current approach in the market
ID Document
3rd party data check
LivelinessCheck
Biometrics
Facial and or Voice
Know your Device Check
Geolocation check
16 COMMERCIAL IN CONFIDENCE
Do not resuscitate does not mean do not treat!
Don’t rely on biometrics alone
for Identity and Verification
Do maximise alternative
identification technologies
20 COMMERCIAL IN CONFIDENCE
Do not resuscitate does not mean do not treat!
21 COMMERCIAL IN CONFIDENCE
Don’t push all your customers
through a standard process
Do trust 3rd party data sets to
remove friction and provide insight
Do not resuscitate does not mean do not treat!
Don’t try to do everything yourself!
22 COMMERCIAL IN CONFIDENCE
www.chyp.comPlease Copy and Distribute157
Who will make money?
A discussion about the future of
digital currency
Dave Birch
@dgwbirch
Fintech 2106
Edinburgh
October 2016
www.chyp.comPlease Copy and Distribute
David G.W. Birch
Director of Innovation at Consult Hyperion
Visiting Professor, University of Surrey Business School
An internationally-recognised thought leader in digital identity and digital money;
Named one of the global top 15 favourite sources of business information (Wired magazine);
In the London FinTech top 10 most influential commentators (City A.M.);
One of the top ten Twitter accounts followed by innovators, along with Bill Gates and Richard Branson (PR Daily);
One of the top ten most influential voices in banking (Financial Brand);
Named one of the “Fintech Titans” (NextBank);
Ranked Europe’s most influential commentator on emerging payments (Total Payments magazine).
158
www.chyp.comPlease Copy and Distribute
Agenda
159
What is digital currency?
Who might issue digital currency?
Who do I think will issue digital currency?
www.chyp.comPlease Copy and Distribute
Currency and Digital Currency
160
Let’s agree on the terminology
And then we can move on
www.chyp.comPlease Copy and Distribute
Digital Currency
Strictly speaking a currency board, not a currency
163
www.chyp.comPlease Copy and Distribute
Central Bank
There are obvious +ve GDP benefits to a digital currency
168
www.chyp.comPlease Copy and Distribute
Community
Reduce internal transaction costs, increase external transactions costs
171
www.chyp.comPlease Copy and Distribute
Cryptography
Distributed Autonomous Organisations powered by ETH
172
www.chyp.comPlease Copy and Distribute
BritCoin or BritPESA?
174
I look forward to a
time when the
successors to Bill
Gates will have put
the successors to Alan
Greenspan out of
business.
Edward de Bono
(1993)
www.chyp.comPlease Copy and Distribute
Looking Forwards
175
The electronic money
world looks much more
like the neolithic world
economy before the
invention of money than it
looks like the market as
we have known it in the
past few hundred years
Social anthropologist
Jack Weatherford
The Fiscal Frontier (1998)
www.chyp.comPlease Copy and Distribute
Contact
176
Browse www.chyp.com
Follow @chyppings
Mail [email protected]
Comment http://www.chyp.com/media/blog/
Listen http://www.chyp.com/media/podcasts/
Consult Hyperion UK
Tweed House, 12 The Mount
Guildford, Surrey GU24HN, UK.
+44 1483 301793
Consult Hyperion USA
535 Madison Avenue, 19th Floor
New York, NY 10022, USA.
+1 888 835 6124
www.chyp.comPlease Copy and Distribute
Who Are Consult Hyperion?
Consult Hyperion specialises in working out the
opportunities and threats which result from the
harmony and collision of security, networks and
transactions.
We are constantly assessing these factors, as they
change continuously, and delivering ideas, solutions
and products to our clients
177
www.chyp.comPlease Copy and Distribute
What Do They Do?
We have a structured and practical approach to secure
electronic transaction systems from the local to the global
178
StrategyRoadmappingMarket AnalysisBusiness Modelling
PrototypingRequirements AnalysisRisk AnalysisSystem Architecture
Technical SpecificationProcurement SupportSoftware DevelopmentVendor Management
Project ManagementCertification ManagementAcceptance TestingEvaluation
We can help clients in all phases of the product and service lifecycle, from the whiteboard scribble to the person in the street’s everyday use
www.chyp.comPlease Copy and Distribute
Learn about tomorrow’s transactions
Understanding the
Blockchain
Mobile & Cloud-
Based Payments
The World of Payment
Acceptance & mPOS
Digital Identity &
Authentication
Our new education programme
Demystify the Blockchain &
Bitcoin to understand what it
means for your business & the
future of transactions
Easy-to-understand introduction
into the key concepts, practical
implications and opportunities
that this technology could bring
to financial services and other
sectors?
Essential learning on
implementing & launching
mobile NFC or tokenised m-
payment services
Key aspects of Secure Element
(SE) & Host Card Emulation
(HCE) technologies, deployment
models, tokenisation &
credential management are all
covered
Understand the new POS world
driven by innovation in an ever
changing retail payment
environment
Whether an acquirer, payment
provider or retailer, learn how to
build the right business case,
strategies & solutions to meet
the opportunities of the new
world of payments
Learn the importance of trusted
transactions in a digitally
connected world and what it
means for your business
Valuable insight into balancing
risk reduction vs customer
experience; showing you how to
select, implement and manage
the right identity solutions for
your business
In partnership withTo register / more information: www.paymentbusinessschool/events
@jasonbates
“11:FS is a team of fintech operators who help banks create
and launch truly digital services.”
@jasonbates
The ‘fintech approach’:
1. Use truly digital capabilities to ...
3. who are underserved or overcharged
2. deliver valuable services to customers…
@jasonbates
• Real time
• Intelligent
• Contextual
• Human
• Extendable
• Services
Digital R.I.C.H.E.S
1. Use truly digital capabilities
@jasonbates
THE GAP
Current Account:
balance
card
statement
transfer
pay
receive
interest
overdraft
2. to deliver valuable services to customers…
The jobs we need doing?How am I doing? (vs last month?)Get to the end of the monthManage monthly, quarterly, annual billsBuy something bigBe ready for a rainy daySave for my holidaySend money to friendsDeal with unexpected problemsBring my finances togetherKnow I’m getting a good deal….
www.seedrs.com
The Power of the CrowdFintech 2016, Our Dynamic Earth, Edinburgh
Karen Kerrigan (Chief Legal Officer, Seedrs / Director, UK Crowdfunding
Association)@KarenSeedrs 11 October 2016
DEBT EQUITY
DEBT BASED
SECURITIES
or BONDS
Individuals buy a
security, normally a
form of bond, to
earn interest and
their capital back.
P2PIndividuals lend
money to other
individuals to earn
interest and their
capital back
.
P2B
Individuals lend
money to
businesses to
earn interest and
their capital back
These fall under the new regulated
activity of Facilitating loans via an
electronic platform. The FCA calls
this loan based crowdfunding
A regulated activity
that the FCA calls
Investment based
Crowdfunding
‘PEER TO PEER’
or
‘MARKETPLACE’ LENDING
A regulated activity
the FCA includes in
Investment based
Crowdfunding
INVOICE
TRADING
Individuals buy
invoices at a
discount, then sell
them back to firms
at a profit.
Not regulated by
the FCA
Individuals buy
shares in early
stage businesses
for capital growth
or dividends
SNAPSHOT OF THE PEER/CROWD MARKET
IN 2016
£325mn £909mn £1.5bn £6.2mn £393mn
Individuals give
money in return
for a reward or
recognition,
product or service
REWARDS
No financial return
so not regulated
by the FCA
£54mn
A Bit of Context
• Early-stage investment was once limited to the very few—
those with lots of money and lots of time on their hands
• But many different types of people want to invest in these
businesses, whether to build a portfolio, support a friend or
be part of a company they like
• Meanwhile, many businesses want to raise capital from a
community rather than just a few angels and funds
• Crowdfunding has emerged in response to these needs
Emergence of Platforms
• Crowdfunding started around 2007 with the launch of
rewards-based platforms (Kickstarter, Indiegogo)
• Soon thereafter, platforms tried to expand to equity, but
they did so on an unregulated basis, and most failed
• Seedrs became the first regulated equity crowdfunding
platform in 2012
• Since then, dozens of equity crowdfunding platforms have
emerged across Europe
It's simple and free for anyone in
Europe to sign up. Once your investor
profile is complete you'll be able to
access all campaigns, ask
entrepreneurs questions, request further
information and invest.
Discover businesses
To invest, choose the amount and
securely pay for your investment
by debit card or bank transfer.
It's simple to create a diversified
portfolio of investments to spread
your exposure to risk.
Start investing
Become a legal, ordinary
shareholder when the round
closes. Receive regular updates
and engage with each business
through Seedrs or offline. If the
business does well you'll receive
a return on your investment.
Share the success
Start by answering our story-building
pitch questions. Explain your
business, show off your team, lay out
the market opportunity and highlight
what you plan to do with your
investment. Once you’re happy with
it, submit it to our team for review.
Create your campaign
You have up to 60 days to raise
investment. We’ll share best practise
creative marketing ideas for you to
reach out to your network of friends
and family, customers, business
angels, press and others. And we will
share your campaign with our active
investor base.
Get funded
Once all of the legal paperwork is
completed, we will transfer funds to
your business. You’ll be able to keep
in touch with your investors for
mentorship, marketing outreach,
networking and more, all through
your own investor relations portal.
Grow your business
Thank You
@KarenSeedrs
seedrs.com
Investing involves risks, including loss of capital. Seedrs Limited is authorised and regulated by the Financial Conduct Authority.
Scotland’s FinTech Opportunity – Executive Summary
2
Current Landscape – Deloitte, SFE and SE Research
1. Vision and Strategy
• With your support we aim to build a thriving globally connected Fintech ecosystem within Scotland. Leading to investment attraction,
new industries, employment and education – we need to strengthen the message and not be afraid to share it.
• Buy-in is required from all participants across the eco-system – we need to make sure the strategy incorporates every voice.
• There is a need to be bolder about the positive reasons why Scotland could be a key player in Fintech – we need to ‘extol the virtues’
2. Development support is required to FinTech start-ups
• No truly dedicated FinTech space for the whole ecosystem to use – a FinTech ‘hub’ is required to bind the community and accelerate growth.
• A ‘hub’ is required that contains a range of support functions and industry specialists to help move Scotland forward as a leader in FinTech.
• It is recognised that whilst there are a number of things happening in FinTech there is no ‘epicentre’ to draw it together.
3. Skills and Talent
• Attraction, development and retention of required skill sets to support FinTech is a challenge - there is a risk of ‘brain-drain’ if we can’t
create an environment that helps start-ups flourish.
• We need to focus time on highlighting how exciting ‘tech’ in FS can be – FS has historically been seen as an unlikely place for innovation.
• Dedicated ‘grass-roots’ school programmes, further education support and development initiatives are needed to help develop ‘business readiness’ and
awareness of the opportunities FinTech can create in Scotland.
4. Barriers to entry
• Key challenges include defining a clear use-case for products and services, navigating internal procurement process and regulation
restricting Banking/Fintech collaboration or acceptance.
• Accessibility of funding, pace of funding, and clarity around best funding options all hampers the ability of start-ups to really grow or
scale at pace.
•
5. Cohesion across the eco-system
• Little awareness of groups and support networks across the eco-system - action is needed to really ‘bind’ the community, physically and
virtually
• Agreement that the creation of a FinTech hub or centre would help massively in nurturing start-ups, driving innovation in the
incumbent firms, create partnering opportunities here and further afield and helping enlighten the next generation of talent.
6. Uncertainty of ‘when’
• Uncertainty around when FinTech will begin to flourish – no doubt it will, and a sense of momentum building (FS incumbents).
• Early opportunities in the next 3-5 years include Robotics, cognitive technology, distribution of payments, IoT and advanced
analytics.
• Start-ups are very clear that the opportunity is now, and keen to work with FS incumbents on accelerating growth.
Scotland’s FinTech Opportunity
Our Vision
6
A recognised FinTech centre where new ideas are generated, growth accelerated and communities are closely connected. A focus on our FinTech ‘youth’ and a desire to truly create a thriving industry.
.
• 20 new ‘home-grown’ FinTech
solutions.• 2 FinTech unicorns
‘born in Scotland’.
• £200m in new revenue into Scotland
• 20% growth in established Firms employing FinTech resource.
• 15 new FinTech courses through Scottish schools, colleges & universities
PROFILE I N F R A S T R U C TUR
E &
INNOVATION
T A L E N T F I N A N C E & S U P P OR T
A clear message and impactful brand - an agreed set of c lear messages the highlight what Scotland’s
FinTech focus is;
• Occupying a space that is emerging and fresh. Not a repeat of what is done elsewhere.
• A fresh, non-affiliated brand that is impactful and has international resonance.
• A dedicated set of programmes, events, that plants our strategy and vision firmly in the mind.
• Creates attraction / drives
‘FinTech Scotland’ brand.
Lead: T B C
A FinTech hub to connect our communities. A physical space that allows the eco-system to work together in creating or sharing solutions, and nurturing talent;
• A hub that supports talent growth, education, knowledge sharing and experience.
• A place for allparties from acrossthe eco- systems.
• Non affiliated, engendering the brand, focussed on success.
• Unique to Scotland but
connected globally.
Lead: T B C
A clear programme of support and education accessible to all who have an interest.
• From pre-school to
industry…
• Identified and empowered FinTech mentors to support all aspects of the pathway – from schools tobusiness.
• Wide-variety of support to all ages, leveraging but developing existing support and education bodies.
• In-house training via thehub to ‘throw open the
doors’ Friday.
Lead: T B C
Fine-tuning the existing support services and models that exist to support FinTech more closely;
• Closer collaborationbetween private andpublic funding.
• Clarity and simplicity of
funding models.
• Dedicated financial support model beyond series A funding.
• C lea r relationships in place with country initiatives and trade bodies that c a n support our growth.
• Funded access to SMEs
and dedicated support.
Lead: T B C
What could success look like 5 yrs from
now?
• Increase of investment
• Protection andgrowth in jobs in F S
• Retraining opportunities
• Growth in entrepreneurship
• Attraction of global
Potential targets:
FinTech Scotland: Our Vision
Scotland’s FinTech Opportunity
Connecting Scotland here and further – Four immediate areas we will
focus on:
1. Creating the Ecosystem – Physically and Virtually
• Strong and closely located Financial Services sector perfectly placed for collaboration and rapid development
of FinTech solutions.
• Strong heritage in creation of new technologies and solutions – exceptional skill base.
• Established communities and network in areas such as customer / service experience design (including
gamification), data management, distribution of payments and analytics.
• Creating the environment for established FS players with FinTech (disrupters and service providers) to share,
partner and develop ‘healthy’ relationships.
2. Connecting Scotland and Scotland into the broader Fintech Community
• Opportunity to build close connections and leverage the intellectual capital that exists in all of the
communities noted above.
• Geographical proximity of the eco-system – it all exists within easy reach.
• Some connection in place through current tech incubators – although not specifically focussed on FS.
• Well established infrastructure.
3. Value and Quality of Life
• Lower cost of living value compared to other sites such as London.
• High quality of life vs. lower cost of living.
• Progressive and outward looking community.
• A strong sense and willingness to collaborate.
4. Talent
• Leading Universities providing a platform to develop industry-focused graduates entering FinTech.
• Established ‘tech’ community – albeit not focussed on FS.
• Deep FS experience across multiple areas and segments.
Scotland’s FinTech Opportunity
What is in a network…
We should not underestimate the value that can be created through the creation of a successful
network.
218
Scotland’s FinTech Opportunity
Our target plan
We will develop detailed plans across our priority areas between now and the year end,
however we have identified some immediate / quick wins
u
u
Quick Wins
219
Scotland’s FinTech Opportunity
What we need from you
Considerable progress has been made to identify and clarify the scale and extent of FinTech in Scotland and the
'size of the opportunity’. The opportunity facing us is global and outward looking and will create a 'halo' effect for
Scotland's brand; as a transformational and innovative country.
1. Active engagement and signposting
To work with us on the 4 priority areas we have identified to ensure we start to leverage the full potential of Scottish
FinTech from a 'Team Scotland' standpoint. We need to work collaboratively with Government, Education, Universities and
business to make this happen; and at pace.
• Action: Ongoing ministerial approval, engagement and supportive commentary; will be very helpful, in keeping up
momentum
2. Creating the Ecosystem
We know from looking across the globe, that having a FinTech Ecosystem is a critical deliverable. A team should be
formed, reporting into FiSAB; or a sub group, to look at how a Hub might be jointly funded by Government, Academia,
Edinburgh City Council and Scotland's FS companies; and to identify possible locations/buildings.
• Action 1: Ministerial decision maker to work alongside this initiative and support in designing the overall ecosystem
solution. This contact will also be a liaison point with other ministerial areas which will be impacted (Education /
Economic Policy / Taxation / Enterprise / Immigration etc)
• Action 2: detailed plan to be established that signals the location, capabilities, infrastructure of a physical community hub
for discussion and agreement by the end of the year - Confirmation there is potential budget to support the creation of
a Fintech ecosystem
3. Communication strategy
A global digital marketing campaign will be required to support the above; similar to 'Visit Scotland', to put us on the
map. A Global FinTech conference/festival would be part of this 'hearts and minds' campaign with incremental
activities in between e.g. hackathons and spotlight sessions hosted by FS now
• Action 1: Now and onwards – all FS players to commit to one hackathon or spotlight session between now and end Q1
2017
• Action 2: Detailed communication and marketing campaign aligned to 2, to be agreed at end December
220
Scotland’s FinTech Opportunity
Artefact 1 – FinTech Steering Group and high level Terms of
Reference
• Colin Adams & Hugh Edmiston - Edinburgh
University
• Gillian Docherty - Datalab
• Lesley Downie - SFE, Secretariat
• Stephen Flaherty - JPMorgan
• Sameer Gulati - Innovate Finance
• Colin Halpin - HSBC
• Sharon Hamilton - SE
• Ian Hanson - SDS
Strategic Aim
To develop, agree and implement an industry led strategy for Financial Services Technology in Scotland which
includes an action plan, stakeholder roles and responsibilities, and an agreed resource plan for the
implementation of the action plan against agreed strategic objectives and KPIs.
Purpose and remit
The Fintech Steering Group will develop a Fintech Strategy for Scotland based on:
• Identification of the strengths of the Scottish ecosystem for Fintech including an assessment of our
international competitiveness
• Research into global trends and projections of growth
• Research into good practice for the development and implementation of industry-led strategies elsewhere
• Consultation with, and influencing of, a broad range of stakeholders including; academia, SMEs, large firms,
research institutes and public agencies
• A thorough appraisal of resource availability across all stakeholders
• A comprehensive monitoring and evaluation framework to assess progress towards the strategic objectives
Upon publication of the strategy, the group will have ongoing responsibility for overseeing the delivery of the
principal act ions, and to update the Financial Services Advisory Board (FiSAB) on progress
SFE FinTech Steering Group members
• Derrick Hastie - AAM
• Stephen Ingledew - Standard Life
• Russell Irwin - KPMG
• Graeme Jones - CEO SFE
• Stuart Lang - EY
• Gavin Littlejohn - FinTech practitioners representative
• Kent Mackenzie - Deloitte LLP
• Louise Smith - Chair RBS & Laura Thom
• Philipe Meyer - Avaloq
Scotland’s FinTech Opportunity
Artefact 3 – Supporting Research (Examples)
In March 2016 Deloitte were commissioned by Scottish Enterprise to produce a report “FinTech Scoping Review:Establishing Scotland as a FinTech centre”.
Deloitte have also drawn on their global network to also consider Scotland’s opportunity in relation to other centres across the world and
identify the common components that are required to make Scotland a successful FinTech centre.
Fi n Te c h S c o p i n g Re v i e w
Establ i shi ng Scot l and as a F i nTech centre
This project involved extensive primary and secondary research of the FinTech industry in Scotland as well as interviews
with key stakeholders in the Scottish FinTech eco-system to determine the opportunity for Scotland to emerge as a
FinTech centre, the challenges, and the actions required by each component of the eco-system to really help Scotland
accelerate its potential. The outputs from this research form the basis of our focus.
M arch 2016
In summer 2016 TheCityUK, in it’s capacity as delivery partner to the Financial Services Trade and Investment Board (FSTIB), asked Deloitte
to produce a report focused on enhancing the attractiveness of the UK to FinTech. The exercise included interviews with
industry experts, practitioners, the global Deloitte network and desk based research to review 5 key criteria and develop a
set of recommendations.
We are using the learnings from this to help as we consider the opportunity for Scotland to become a FinTech Hub.
A definition of the FinTech eco-system in Scotland has been created and documented by Deloitte.
The definition and view of the eco-system is being used to ensure each participant in the
community is engaged appropriately.
224
Panel DiscussionLoral Quinn – Sustainably
Kevin McCallum – FreeAgentLouise Smith – RBS
Gavin Littlejohn – FDATAGraeme Jones - SFE
#ftscot
Fintech 2016Scot-Tech
Edinburgh
Yvonne Dunn, Partner
Luke Scanlon
Head of Fintech Propositions
11 October 2016
Overview
Todays aim…
• Engaging with
regulators
• Blockchain and
DLT – beyond the
hype
• The future of
robo advice
• Digital
currencies in
their own right
• Project Innovate
• Regulatory Sandbox
• Challenger Bank Unit
• Robo Advice
• International co-operation
FCA and
Fintech
• Digital IDs
• Smart contracts
• Regulatory reporting
• Privacy issues
• Governance
• Cyber, fraud, money
laundering
Regulatory
concerns
Background and
drivers…
• Perception of an “advice
gap”
• Robo advice to plug the
gap
• Threats and opportunities
• Different concepts across banking,
securities and insurance
• Advice vs guidance
What is
“advice”?
• Definitional challenges
• Policy priorities of
different jurisdictions
• Consumer protection
• Taxation
• Anti-money laundering
The future
of money?
The way forward
…• Fourth Money
Laundering Directive
(MLD4)
• Second Electronic
Money Directive
• Payment Accounts
Directive
• Payment Services
Directive (2)
• HM Treasury's views
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