Vladislav SolodkiyManaging Partner @ Life.SREDA VC

Banks and regulators in 2016

Life.SREDA I Life.SREDA II Asia Banking on Blockchain Fund

Moscow Singapore London

2012 2015

2016

2014

13 investments(US, UK, Germany, CIS)

A new venture fund dedicated to investing in the blockchain ecosystem7 successful exits 8

investments(South East Asia)

Research & Vision

Influelce on the whole infustry trough own blogs fintechranking.com and

semi-anual Fintech research “Money of the Future”

www.www.fintech-research.com .com

Bank-as-a-srevice and open API playAccelerator in Singapore

Taiwan

SME-lending

& FactoringPOS-managment

system &

tablet based

cash-registers

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lending

P2B-lending

Crowndfunding

& Crowndinvesting

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remittances

PFM&PFP

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mPOS-acquiring

Online-lending

for students

First BaaS-platform for Asiais very necessary for the future

fintech development

Life.SREDA is supporting a strategic fintechproject: open API Pan-Asian platform BAASIS

Life.SREDA VC Executive summary

and become the most active strategic partners and potential buyers for FinTech startups

WHY BANKS INVEST IN FINTECH:

They buy (for up-sell\cross-sell)

«Outsource» R&D and new products development

To buy talents and drive internal changes

To buy knowledge and access to new complimentary industries

To buy a for their brands

Jay ReinemannThe head of BBVA ventures

“Invest in insights Banks are interested

For now it looks morelike play and PR, notthe real business

Experience of large banks like Goldman Sachs and BBVA shows huge potential

43%

20%

7%

10%

Startup programs to incubate FinTech companies

Partnering with FinTech companies

Setup venture funds to fund FinTech companies

Launched own FinTech subsidiaries

AcquiredFinTech companies

20%Banks

&FinTech

~30% banksinvested via their ownventure instruments

– VCs, accelerators, incubators

Banks are getting more and more active in FinTechBarclays, Goldman, CITI, Santander and BBVA are leading the show

Major Bank Investments to VC-backed Fintech Companies

-2015 -2016more companiesfunded by banks

in 2016

+61%

Top South-Asian banks are starting to follow Chinese/HK/Japanese/Korean megabanks

with playing active role in FinTech: DBS, OCBC, UOB, Siam Commer-cial Bank, Mandiri, RHB, MayBank, CIMB, KasikornBank and others

laucnehd a bunch of initiatives related to fintech

Leaders are mainly from developed

fintech regions

US, UK, Europe.

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however partnerships in 2016 seemed to be saferand more convenient for banks

Banks’ partnerships with financial technology start-upsare developing,

Enable Citi card members to use their Citi Cards with PayPal online, in-app and in stores

P2P payments, provides making payments via the social networks

Offering investing advice and data-driven recommendations

P2P-lending. Enables local SMEs to borrow short-term business loans

Study and test blockchain technology to enable payment transactions 

Provides direct financing to SMEs

To contribute to the acceleration of the rollout of its digital strategy

Online wealth management platform

Automotive pricing and information website for car buyers and dealers

Offering its clients access to equity crowdfunding opportunities

Use Fincast to advise customers on the types of financial products they need to meet their investment goals

To offer a TD and Westpacbranded spending app

An extensive interest was shown by banks and financial institutions partnering with robo-advisors, digital wealth managers;

In addition, there is a growing tendency by banks to partner with crowdfunding companies (Santander, UOB, Belfius Bank, Alfa Bank, etc);

Asian banks are widely partnering with Fintech accelerators in order to pilot new products with fintechs residents;

Many pilots were initiated in 2016 between blockchain companies and banks worldwide(SG, SCB, Barclays, etc)

Venture/debt investments and acquisitions from banks

Q4 D N/A

Q4 A $8,3M

Q3 A $8,3M

Q3 undisclosed

Q2 A $14M

Q3 $19.67M

Q2 $33MD

Q2 $56M

Q2 D $75M

As mentioned earlier,partnerships and investments are closely linked, however, investments primarily focused on realizing returns;

Investments generally go from venture instruments of banks:VCs, accelerators, debts financing;

Asian banks are getting involvedand investing through the partnerships with accelerators(StartupBootCamp Fintech, Nest, etc.)

Q4 $100M

Overall trend

In order to achieve leading positions on the market banks should shift a strategy from «competitive with Fintech» to «collaborate with Fintech»

Increasing customer requirements for banking services along with growing pressure fromthe Fintech startups will shift bank’s strategy to «if you can’t beat them, join them» approach.

Collaborative Fintech investmentsvs Competitive Fintech investments ($ Bln)

The expectations of clients are higher than ever,and are broadly consistent across various sectors and contexts

Efficient. Users want processes to be streamlined andcohesive, with key functions ‘bundled’ for userconvenience.

Real-time. The trajectory of digitalization has led tonear-instant transactions and up-to-the-second visibilityover cash-flows.

Integrated and flexible. Users expect a one-stop portalwith seamless reconciliation across their user profiles.

Accessible. Users expect channel convergence and accessto services on multiple devices through a user-friendly andinstinctive interface.

Individualized and contextually relevant. Users expectadvisory services, information and suggestions reflectingtheir transaction and activity history and other user-specificdata.

1 2

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29%

2014

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Banks and Fintech. For what reason?

Clearly, not all of today’s banks will survive. The survivors will be those that reimagine relationships with their customers and partners.

Fintech offers banks access to technologies, brings new ideas to market at speed,enables to add value from bank’s data and changes bank’s culture

SuccessfulPartnership

Why banks need FinTech?Acces to ideasAcces to new technologyAcces to agility: speed to marketAcces to expertise around dataExposure to different culture

Acces to customers - trust, inertiaAcces to clearing and Central BanksettlementAcces to in-depth payments expertiseAcces to dataAvoidance of regulation

Why FinTech need banks?

Key areas of development in a traditional retail bank

Mobile and digital

Digital customers are already thereTechnology is accessible to allFocus is to attract new young generation

Services based on customer behavior:Prior to payment transaction (predictive)At the moment of transaction (instant)After payment transaction

Partnering with Big-tech?Partnering with Schemes?Partnering with Fintech?Joint venture with GP

Operational excellence and digitalizationCost reduction and optimizationAreas of synergy

Data-rich solution:Dynamic business steeringBehavior-driven marketingData-rich consumer and applications

Data monetization and analytics

P&L - Internal Processes

Value Added Services (New revenues)

New Business Models

Key Areas for RetailBANKS

Development areas

OperationWho will control and develop?

How to integrate? How to invite foreign projects?

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There are more than 20 verticals in Fintech and more than 20 leaders in each vertical(about 5K Fintechs total)

How to connect?

Banks’ pain: With whom to work?

Strategies for Banks to survive the coming change

How can traditional banks move fromtraditional banking to the digitaldistribution of data in a globalizednetwork?

Do large incumbents have to partner withFinTech or will FinTech companies eat thebanks’ lunch?

Change the technical architecture and theorganisation to become a customer centricdigital platform or launch a new bank withdigital as core. While the majority of bankingexecutives may feel comfort today, this mayrepresent the calm before the storm as somevery tough structural decision will be requiredaround investment in systems, distributionand new innovative products. Being big andstrong may not be enough to win the battle forthe customer in the future. Speed and agilitycount just as much…if not more.

Independent commentator on the financial markets and fintech,author of the bestselling book Digital Bank & ValueWeb, contributorto BBC News, Sky News, CNBC and Bloomberg and was voted one ofthe most influential people in banking.

David is a FinTech Strategist, Speaker, Scholar & Writer, who iscontinually voted as one of the most popular business and FinTechinfluencers. He spends his time these days helping banks, regulators &governments be better. David is CEO of 11:FS and was most recently theGlobal Director of Digital Banking in Gartner.

The most significant trend of 2016 onwards willbe the ‘platformification’ of banking, where bothexisting banks and startups begin a strategicshift towards becoming banking platforms, muchlike how Amazon is a platform in retail. Aplug-and-play business model that allowsmultiple participants (producers and consumers)to connect to it, interact with each other andcreate and exchange value. Banks will use ITcompanies to build a FinTech marketplace andtake care of the partnership model, becausebanks have not been successful in the pastmanaging partnerships.

Chris Ckinner David Brear

India

Sri Lanka

Bangladesh

Myanmar

Malaysia

Philippines

Indonesia

Australia

South

Korea

North

Korea

Thailand

Hong Kong

Laos

Cambodia

Singapore

Taiwan

Japan

Bhutan

SME-lendin

& FactoriPOS-management

systems &

tablet based

cash-registers

Online

acquiri

Online-tra

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Online-

lending

P2B-lending

Crowdlending&

Crowdinvesting

Online-

remittances

PFM&PFP

mPOS-acquiring

Online-lending

for students

It enables banks to evolveand vital for fintechs as a helperin overcoming regulatory barriersas well as optimizes timeand money consumption beforegoing to market.

is very necessary for the futurefintech development

First BaaS-platform for Asia

APACSouth Korea permits for banks to invest in FintechsCurrently financial laws, financial institutions are allowed to buy stakes only from companies in the same business sector. The FSC have included fintech companies in the scope of the financial industry. #banks #2016

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MAS establishesa dedicated Fintech OfficeMAS and the National Research Foundation opened a dedicated FinTech Office to serve as a one-stop virtual entity for all FinTech matters and to promote Singapore as a FinTech hub. #opportunity

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MAS establisheda regulatory sandbox.To allow more flexible application of the regula-tions, while maintaining safeguards to protect consumers and the wider financial system.

Sin

gap

ore Financial Sector Technology

& Innovation schemeMAS committed $225M ($166.48M USD) under the “FSTI” scheme to provide support for the creation of a vibrant ecosystem for innovation. Si

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6 P2P Lending Licenses Granted in MalaysiaSix P2P lending licenses were granted in Malaysia recently, making them the first authorized platforms in the ASEAN region.

#p2p lending #license #2016

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Korea has launcheda platform for banksThe platform allows financial institutions to build services that automatically populate financial information for new customers.#banking #2016 H

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gHong Kong to launchbanking fintech 'sandbox'

Ho

ng

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ngHong Kong establishes

a Facilitation OfficeHK Monetary Authority established the FinTech Facilitation Office to facilitate the healthy develop-ment of the FinTech ecosystem in Hong Kong and to promote Hong Kong as a FinTech hub in Asia.

#opportunity #2016

P2P Firms Regulationin Indonesia The draft regulation proposed that a Fintech company is required to have Rp. 2 billion in working capital and is required to show Rp. 2.5 billion applying for a business license.

To help maintain Hong Kong's competitiveness asa financial hub by supporting the development of fintech in the banking sector

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Malaysia issues the Fintech Regulatory Sandbox To experiment with FinTech solutions in a live controlled environment which is accompanied by the appropriate safeguards

#opportunity

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Establishing an infrastructure

Regulation activities in the APAC and AsiaMost of activities are focused on establishingan early stage infrastructure and development

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Key message

APAC EMEARegulation activities in Europe

Most of activities are focused on controllingand regulation of existing regimes

UK sets out open banking API frameworkAimed for the creation of an open banking standard that makes it easy to share and use financial data, arguing that the move would improve choice for customers, promote competition;#regulation #bank #UK O

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gThe cohort of the regulatory sandbox closed 69 firms from a diverse range of sectors, geogra-phies and sizes have been accepted. 24 applications met the sandbox eligibility criteria and were accepted to develop towards testing#regulation #opportunities #UK

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A specially created“Fintech” licence Plans to encourage crowdfunding and the market testing of new technologies. FinTech firms, with a minimum of $300k in capital, are allowed to accept funds from clients, up to $99m, which remain outside the depositor protection scheme and are not subject to the same regulations, auditing and the capital requirements applied to banks. 

#Implementation #Switzerland #EU #2016

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Standardized mobile andinternet payments (PSD2) in EU

PSD2 enables bank customers, both consumers and businesses, to use third-party providers to manage their finances. In the near future, customers may be using Facebook or Google to pay bills, making P2P transfers and analyse spending, while still having money their safely placed in current bank account.

#Announcement #Payments #Global #2017

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men

ts Solvency II is a programme for insurance regimeIt introduced a new, harmonised EU-wide insurance regulatory regime. The Solvency II programme is divided into three areas, known as pillars: Financial Requirements (Capital Requirement and etc), Governance & Supervision (Own Risk & Solvency Assessment) and Reporting & Disclosure (Insurers required to publish details of the risks facing them).

#Implementation #Insurance #EU #2016

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Controlling & Regulation

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Introducing a European Standard for e-InvoicingThe European Commission announced the e-invoicing directive require all 28 EU member states to use specific e-invoicing standards for all B2G e-invoices by November 27, 2018. Europe’s current e-invoicing adoption rate of 24 percent is expected to rise to 95 percent by 2024 and accrue savings of approximately 64.5 billion euros ($72 billion) per year for businesses.

#Announcement #e-invoicing #EU #2018

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Key message

EMEA USAIn May, the third and final part of the 2012 JOBS Act, Regulation Crowdfunding, went into effectRegulation Crowdfunding allows any American startup or small business to raise up to $1 million from friends, family, and followers on debt and equity crowdfunding platforms registered with the Securities & Exchange Commission (SEC).

During the course of the year:

21 debt and equity crowdfunding platforms were launched and one, Ufunding Portal, shut down by the SEC because it seemed to be missing some of the statutory requirements required of a funding portal.

Investors committed $19 million to the 186 campaigns and transfered $17.9 million to the 79 funded campaigns.

Over 21,000 individual investments were recorded for 2016. The average investment was $833, and the average number of investors in a funded campaign was 331

The average valuation for a funded campaign was $5.3 million.

#crowdinvesting #results #USA #2016

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g Financial technology start-ups to get a licenseto bankThe Office of the Comptroller of the Currency are planning to create a new type of banking license (for example, trust banks and credit card banks) that will allow upstart financial technology companies to expand more quickly across the country. A special purpose national bank must conduct at least one of the following functions: fiduciary activities, receiving deposits or lending money.

The licenses from the Office of the Comptroller of the Currency, which oversees many national banks, will be available to companies like Square and Lending Club that accept deposits, facilitate electronic payments or lend money.

Many technology firms have been pushing for some sort of new regulatory system that would allow them to cut through the patchwork of state and federal laws that govern financial activities and make it hard to expand nationally.

The OCC acknowledged that Fintech companies’ business models vary widely and that therefore each application should be reviewed individually.

#p2p #license #USA #2016

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Shaping certain sectors

Regulation activities in the USMost of activities are focused on shapingcertain sectors within an industry

Source: Fintechranking.com

Key message

Key initiatives in bank-as-a-serviceand open banking areas

BAASIS, launched in 2016 in Singapore,  is an open-API Bank-as-a-Service platform, aimed to connect banks and FinTech startups across Asia Pacific region. Currently is in integration phase with several banks on different markets.

In 1H 2016 was launched solarisBank, banking-as-a-platform startup with a full banking license in Germany. It provides account and transaction services, compli-ance and trust solutions, working capital financing, and online loans for fintech startups.

Bancorp – industry leading US-based largest bank-as-a-service platform, hosting 100+ non-banks with processing volume of $200+ billion USD annually. Different clients of different size, including google wallet, PayPal, T-Mobile, yodlee and others

In 4Q 2016 Citi launched global API Developer Portal aimed to open architec-ture to facilitate collaboration with FinTech companies. APIs includes account management, p2p payments, money transfer, rewards, investment purchases and account authorization.

Otkritie, the biggest privately-owned bank in Russia, through the process of integrat-ing with leading digital bank for SMEs Tochka, developed its own modern API-platform, that was later used to integrate with fintech startups, including mobile bank for retail clients Rocketbank.

In 2H 2016 BBVA launched its API market-place, aimed to offer other companies a way to leverage BBVA’s capabilities to build their services. Fintech startups has an access to such APIs as PayStats, Connect, Accounts and Cards

The UK government in 2016 has set up the Open Banking Working Group (OBWG) in order to create an open banking standard that makes it easy to share and use financial data. It includes development of open API to enable services to be built using bank and customer data

In Q4 2016 the Korean Government launched an open banking platform for financial institutions (16 banks) that will allow them to build services that automatically populate financial information for new customers. The platform will essentially serve as database of consumer financial informa-tion that is accessible via API.

In 4Q 2016 The Monetary Authority of Singapore (MAS) published 12 sets of data from MAS’ Monthly Statistical Bulletin as APIs. MAS is encouraging financial industry players to publish open APIs on their datasets, to allow users to connect information and offer innovative solutions

Startups and tech companies Banks Government initiatives

APIs and Open Banking will start to shift the banking landscape with more traction in Europe and Asia, but we’re likely to start seeing the gap between leaders and laggards widen

William Sullivan, Head of Global Financial Services Intelligence for CapGemini

Open banking and API are all the rage

The hype around banking APIs will increase, even overtaking cryptocurrencies. Major banks will launch public API platforms

APIs are arguably one of the biggest topics in the industry.The business model for profiting as a platform is key here, and many are still struggling with it

Global regulators will embrace fintech competition and regulatory concessions …Africa will embrace APIs … financial inclusion will become a mainstream and actionable topic … and the US will embrace change in the regulatory and political system

2015 was all about blockchain. 2016 saw an explosion of interest in machine learning and artifi-cial intelligence. 2017 will be the year of open marketplaces and platforms.Platforms support the rapid cycle deployment of microservices into a financial marketplace...any bank with old legacy technology will start to look like a dinosaur

Shamir Karkal, Head of Open APIs at BBVA

David Brear, CEO and Founder of 11:FS

Chris Skinner, Author and CEO of The Finanser Ltd

Simon Taylor, Co-Founder of 11:FS

www.fintech-research.com

Thank you

Vladislav SolodkiyManaging Partner @ Life.SREDA VC

vsolodkiy@lifesreda.com

www.slavasolodkiy.me