30. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 30 Key Challenges Faced by Banks (US)
3. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 3 Synopsis A
37. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 37 Takeaways G
13. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 13 The Emerging Technology and Market Forces Constellation C
17. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 17 Snapshot of 2017 D
32. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 32 Game Theory F A Game Theory View of Winners and the Residual Forces of Cooperation
26. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 26 Incumbents and Startups E Opportunities & Challenges
1. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited presents & FinTech Outlook for 2017 Trends, Opportunities & Challenges
5. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 5 Current State of the FS Industry and Key Segments: Payments, Remittance and Leading Drivers (e.g. Blockchain) Primer B
40. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited Thank you. LET’S TALK PAYMENTS, LLC PO Box 473944 Charlotte, NC 28247, USA Phone: +1 (202) 552 - 5998 email@example.com OPUS CONSULTING SOLUTIONS INC. 1300 E Woodfield Rd, Suite 308 Schaumburg, IL 60173, USA Phone: +1 (630 ) 635 - 2933 firstname.lastname@example.org
8. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 8 Current State of Real - Time Payments – 2016 • There are currently 18 countries ‘live’ with RTP systems, 12 countries that are ‘exploring/planning/building,’ and an additional block of 17 countries that are ‘exploring’ through a pan - Eurozone initiative. • ISO 20022 is seen as a way to improve payments efficiency, to create a common, level playing field. • In the United States, the Federal Reserve Board has called for the implementation of “a safe, ubiquitous, faster payments capability” and The Clearing House has announced that it will create a national RTP system.
38. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 38 • We are seeing almost a perfect storm for technology - and experience - driven consolidation and/or atrophy over the next decade, as opposed to macro - economic/financials - driven structural changes. • Over the next 5 – 10 years, the financial services delivery will not remain with the incumbents and FinTech players of today. Enabled by open APIs, commerce players, brands and others would be able to accept payments and disburse loans using bank APIs directly. Takeaways... Takeaways
2. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 2 Objectives of the Report Synopsis A 3 A Primer: The Current State of the FS Industry and Key Segments Which Constellation?: The Emerging Technology and Market Forces Snapshot of 2017 Incumbents and Startups: Opportunities & Challenges A Game Theory View of Winners and the Residual Forces of Cooperation Takeaways B 5 C 13 D 17 F 32 G 37 E 26
34. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 34 Internal Incubator Strategic alliances with FinTech players: The goal is to explore new business opportunities, technologies and to share knowledge. Designing, developing and applying internal initiatives with the collaboration of 'intern' entrepreneurs or developing projects in conjunction with strategic partners. A few banks have reinforced their capacities and expertise in design, big data and user experience through the acquisition of innovative business models such as Simple, Atom, Holvi or SpringStudio. Strategic Alliances Digital M&A and Direct Investments What are the ways for Co - operation
33. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 33 Many banks are realizing that they need to act and are planning their future actions to partner or compete with startups. Innovation is at the top of the strategic agenda. Winners (and WAR) or Coopetition (and Cooperation) • A clear intent to innovate will be important. The sooner banks start working on improving experiences and the farther they are ready to go, the winners and losers will be separated. • Open Innovation and Open APIs are the underlying drivers for the next phase of growth that banks are set to explore. This is seen as a natural step forward to embrace the growing need for co - development, reusability and agile/rapid application development requirements. • The rhetoric around FinTech disrupting the banks is tapering down and giving way to discussion around cooperation and partnerships. Banks and FinTechs are working together now. Consumer Behavior and Technology Drivers are forcing banks to innovate and close the gaps. The FinTech threat is very real. The most profitable services for banks such as lending/loans are being targeted and mainstream customers are opting for new experiences.
27. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 27 Key Opportunities for Startups More than 20% of FS business is at risk to FinTechs by 2020. FinTechs are succeeding where banks have failed. Disintermediation: FinTech’s most powerful weapon Key Drivers: Radical shifts to client demographics, behaviors and expectations. Expectations: State - of - the - art customer experience, speed and convenience will further accelerate the adoption of FinTech solutions. Funding of FinTech startups more than doubled in 2015 reaching $12.2bn, up from $5.6bn in 2014. Consumer banking and payments, already on the disruption radar, will be the most exposed in the near future, followed by insurance and asset management. Customer centricity is fueling disruption: FinTech is riding the waves of disruption with solutions that can better address customer needs by offering enhanced accessibility, convenience and tailored products. 20%
16. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 16 The threat of disintermediation in the payments industry is both real and imminent • The world of payments remains in constant flux, reflecting an ongoing rebalancing of power among incumbent banks, digital giants, financial technology (FinTech) startups, card networks, and of course, consumers and merchants. • Driven by rapid advances and investments in digital payments offerings and capabilities, the global payments landscape is undergoing a profound transformation. By 2017, alternative payments will account for 59% of all transaction methods. New payment players defining frictionless user experience. Shift would have big impact on sources of revenues across market. Two markets emerge: Developed: Customer convenience and front - end innovation. Emerging: Financial inclusion and way to reach customer innovation. New Methods New Players Rev Impact Markets Retail Payments/Remittance Future – Market Forces at Work
10. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 10 Current State of Remittance – 2016 Highly fragmented, with market growth attracting additional participants . The incumbents... ...niche players... ...and innovators. • Big cash - to - cash players wary of cannibalization • Look to retain end - to - end control of the service • Cherry - picking specific corridors • Leveraging ethnic market loyalty • Market share increasing rapidly • Generating the biggest flows towards mobile money services Annual Remittance Market 2015: $582 Billion Remittance Companies Powered by Blockchain Technology ~ 85% Cash ~ 12% Bank < 3% Other (mobile wallets, cards, etc.)
23. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 23 The growth rate of remittance flows to developing countries is projected... Cross - border remittance revenue... The non - banks using proprietary networks.... High penetration of mobile banking and last mile connectivity has led to surge of firms... Remittances to developing countries are expected ... How Would 2017 Look Like for Cross - Border Remittances? to RISE to RISE will INCREASE have CAPTURED offering LOW VALUE Cross - Border Remittances Significant Market Share In All Regions 4% a Year in 2016 - 17 4% a Year in 2016 - 17
21. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 21 How Would 2017 Look Like for Blockchain? • About 15% of banks and 14% of financial market institutions intend to implement full - scale, commercial blockchain solutions in 2017. • Faster than expect adoption of blockchain by banks. We will likely see a number of real - life applications of blockchain applied to payments, beyond digital currencies, in the next five years. Private permissioned blockchain - based systems will gain significant transaction volumes. Digital currency will evolve and be more accepted in the mainstream. Most of the countries would start looking at having a digital currency of their own. IoT and digital payments will ensure a more automated and seamless retail customer experience. Transition to a blockchain - dominant payment system will depend mainly on interoperability. Direct payment flow between two end points would be a reality.
25. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 25 How Would 2017 Look Like for Real - Time Payments? SWIFT announced a global initiative designed to use its existing global network of correspondent banks to enable same - day payments between businesses anywhere in the world. • The emergence of innovative real - time payment services is having a transformational impact on the underlying payment systems. • Interoperability and efficiency gains are key aspects for both FIs and regulators. • Adoption of ISO 20022 would be a trigger point for faster adoption of real - time payments. • Standardization and innovation is the key. • Focus on speed and making it better. • Non - bank network players such as Dwolla and Pop Money. United States Big banks in the US have a “growing sense of urgency” that they are getting left behind. Testing for real - time payments should go live toward late 2017. US real - time payments initiatives are ambitious and focused on ubiquitous payments, with the top 24 US banks accounting for 60% of the industry. Of course, the real challenge is reaching the entire financial ecosystem, which encompasses 14,000 financial institutions in the US. Europe The real - time payments services in the Single Euro Payments Area that was created by the European Payments Council has goals to be in place on that timeframe.
29. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 29 Key Opportunities for Incumbents (Banks) Customer Relationship 1 | Banks have been the backbone of modern economies since their inception and will continue to be so well into the future. FinTech Need Banks 2 | Banks have gone through legal and regulatory compliance for years. FinTech would definitely to collaborate with banks. Data and Trust 3 | Scale 4 | Banks have big data — really big data. The new technologies would enable banks to reduce the cost of operations and innovate. Banks’ sales force and customer service infrastructure are huge.
35. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 35 Game Theory Approach for Banks & FinTech Startups — Win for All • Innovation loss • Longer GTM timelines • Legacy overrule • Siloed efforts • More investments • Innovation loss • No result competition Compete • Service accessorization • Industry innovation • Win - Win model • Legacy & innovation alignment • Shorter GTM • One sided innovation model • Un - sustainable • Industry distrust • Distress industry consolidation Collaborate Banks FinTech Startups Compete Collaborate
15. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 15 What's Next From a FinTech Perspective? • API - based financial services are on the rise. In fact, APIs are the main reason that startups are able to build their products f aster. • Open APIs enable developers to build customized applications that cater to users across the board. • As FinTech startups continue to benefit from open APIs, banks are also waking up to the fact that offering an open API is the wa y to engage and retain their digital customers. API Based • The demand for wearables such as smartwatches and smart fitness wristbands has escalated substantially over the last few year s. • In fact, many financial institutions have displayed a deep interest in wearable technology. • About 82% of financial professionals believe that smartwatches will facilitate financial transactions in the future! What’s m ore , 72% of these professionals have wearable applications on their three - year road. Wearables • Twitter has proven to guide and help predict the stock market. Some examples of how tweets can move stock prices include 20% plummeting of Twitter’s stock after disappointing quarterly earnings were tweeted ahead of their expected release. On the oth er hand, Tesla’s shares jumped four percent when Elon Musk tweeted about a new product line. • With around 85% of US equity trades being executed by algorithms, the trend of predictive analysis through social media is on ly going to grow in 2016. • Apart from equity trading, rising social media usage has led to better behaviour profiling of customers, personalization of o ffe rs, security features based on users location, customer service management and other services being adapted by financial institut ion s. Social Media • Banks have recently begun to leverage technology to improve processes, customer experience and security. • There has been a convergence of banking and FinTech, especially since both are evaluated on the same metrics by regulators, i nve stors and consumers. • This trend will continue in 2016 as the difference between traditional banking and FinTech disruptors gets blurred.
12. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 12 Current State of Blockchain – 2016 DLT Activity Global Interest Bank Experimentation Research Venture Capital Consortium Efforts Pilots 80% of banks predicted to initiate DLT projects by 2017 Over US$ 1.4 Billion in investments over the past 3 years. VC investment in blockchain startups exceeds bitcoin startup investment for first time 2,500+ patents filed over the last 3 years 24+ countries currently investing in DLT R3 completes “biggest - ever” trial of blockchain solutions with 40 banks Microsoft’s Azure Blockchain - as - a - Service (BaaS) adds 21 new partners Hyperledger Project grows to 40 members
24. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 24 How Would 2017 Look Like for Cross - Border Remittances? • Existing business model under pressure from newer business model. • Decrease in remittance fee. • Global average fee is expected to reduce to 7.52%. • Uptick in overall remittance growth. • In 2015 – 16, the remittance growth slowed down owning to weak economies and weaker currencies. • This trend is likely to reverse due to US recovery. • Exploring social media for money transfer. • According to the World Bank, 90% of money transfers happens between friends and families. $$ The titans (WU, Moneygram , likes) of the “cross - border money transfer” market, with a ~15% worldwide market share, are being challenged by multiple well - capitalized upstart companies targeting the $582 - billion remittance market.
20. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 20 Emerging Markets Payments: 2017 Outlook North America • Credit cards continue to generate bulk of revenue. • Issuers to focus on digital channels. • Focus on m - wallets to ensure engagement. Europe • Payment revenue under pressure due to regulatory framework. • Focus on pricing models as transaction fees are squeezed and interest income on accounts has shrunk due to low interest rates. Asia Pacific • Clear winner. • High margin cards source of strong transaction revenue. • Digital channels are key as markets are value - conscious. • Strong growth from emerging markets. • Transaction revenues are a source of growth. • Strong government and industry initiatives to move towards e - payments. Developed Market • Stable slow growth. • Integrated payment applications are augmenting customer and merchant experience. • In - app payments where the payment mechanism is embedded in the mobile app.
18. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 18 Share of Global Revenues in % Terms Is Going to Change Quite a Bit by 2024 28% 28% 28% 27% 24% 20% 21% 22% 22% 27% 16% 15% 14% 13% 11% 13% 14% 14% 14% 15% 10% 9% 9% 9% 8% 8% 9% 9% 9% 8% 3% 3% 3% 3% 4% 2% 2% 2% 2% 3% 2014 2015 2016 2017 2024 N. America APAC W. Europe Latin America Asia Pacific E Europe Middle East & Africa RoW 2014 - 2017 World Wide 100%
39. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 39 Almost every FinTech startup wants to disrupt the big banks, but the problem is that it isn’t a fair fight. The US banking sector (and globally) is so entrenched and protected that challenging it from the outside is an exercise in futility. The smart startups know this and will use it to their advantage. In this coming of FinTech 3.0 , FinTech startups will partner. FinTech 2.0 based innovation starts when incumbent players in the market were trying to leverage their considerable resources to remain competitive amongst startups. Everyone from American Express to Bank of America now have “innovation centers” where they try to foster the startup mentality while leveraging their established brands and infrastructure. The challenge, of course, is that no matter how hard they try, incumbents can never match the agility and risk appetite of startups. Corporate politics, changing strategies, and an overwhelming desire to protect the brand serve as hindrances to innovation. At the end of 2008 financial crisis, new regulations and changing consumer demands began to emerge as the world tried to pick up the pieces of the “great recession.” These changes made certain lines of business significantly less profitable for banks and other financial institutions, creating an opening for tech - enabled startups and brought up FinTech 1.0 to step in and fill the void. This coupled with the changing demands of consumers and the democratization of big data, led to a FinTech renaissance of sorts. 1.0 FinTech 2.0 FinTech 3.0 FinTech FinTech 1.0 to 3.0 ..
9. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 9 Current State of Remittance – 2016 • In 2015, worldwide remittance flows are estimated to have exceeded $601 billion. Of that amount, developing countries are estimated to receive about $441 billion, nearly three times the amount of official development assistance. The true size of remittances, including unrecorded flows through formal and informal channels, is believed to be significantly larger. • High - income countries are the main source of remittances. The United States is by far the largest, with an estimated $56.3 billion in recorded outflows in 2014. Saudi Arabia ranks as the second largest, followed by the Russia, Switzerland, Germany, the United Arab Emirates and Kuwait. The six Gulf Cooperation Council countries accounted for $98 billion in outward remittance flows in 2014. Remittances • New online players have emerged and have raised the bar in terms of customer experience (digital/mobile channel) and costs of remittance. • Almost all major players successfully raised new funding rounds in the past six months: WorldRemit – $45M (total – $192,7M), TransferWise – $26M (total – $117M), Remitly – $38.5M (total – $61M), Azimo – $15M (previous round – $20M). • High scope for mergers as customer acquisition is quite expensive. • Social remittances hasn’t picked up except WeChat. Online Remittances
28. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 28 Key Opportunities for Startups Region Segment Total Market FinTech Addressable Potential Examples Global Payments & Remittance $1.1 trillion (revenue) $110 billion (revenue) • Stripe has processed an estimated $20 billion in payments volume in 2015. • Adyen & Braintree both processed $50 billion each, (payments volume in 2015). • TransferWise: An estimated $6.6 billion transferred in 2015. United States Consumer Payments Consumer Remittance $91.5 billion (revenue) $3.8 billion (revenue) $15.5 billion (revenue) $950 million (revenue) Global Asset/Wealth/ Investment Management $76 trillion (AUM) $2.5 trillion (AUM) • Betterment $3.9 billion AUM • Wealthfront $3 billion AUM United States $30.1 trillion (AUM) $1 trillion (AUM) Global Lending $4.7 trillion (loan origination) $1.6 trillion • Lending Club $15.9 billion • OnDeck $1.9 billion
7. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 7 • Innovation in open loop, closed loop and integrated payment apps are augmenting customer and merchant experience. • Payment processing transformation acting as a key to meet the next - generation payment methods. • Emerging economies are witnessing disruptive growth in financial services. • Growth of RTP across the globe is providing FIs with the functionality and features to innovate for the future. • Digitization of payments lies at the top of agenda for all market players. End - to - end customer experience that maximizes securit y, reduces complexity and provides a compelling value add would be the winner. Developments in the Payments Space • The Apple, Android and Samsung Pay eligible/user populations are becoming more mainstream. • Merchants are realizing that mobile pay acceptance is a driver to merchant selection whether users are shopping in - store, in - app or on the web. • Contactless spending is expected to continue to increase in a number of markets. • Contactless ticketing adoption in 2016 will be driven by the following key markets; Asia (including Japan, China, Hong Kong and Taiwan), Russia, France, Spain, the Netherlands and Italy. • This is expected to give NFC ticketing a similar boost to that of the retail sector. • Emerging as threat to the traditional issuers. • Consumers adopt mobile commerce experiences, not just another payment type. • Visa and Mastercard are creating easy on - ramps for issuer wallets. Alternate Payments Mobile Wallets Contactless Payments on the Rise
11. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 11 Current State of Blockchain – 2016 • Expected to be the future of financial infrastructure and could lead to rewiring. • Awareness of Distributed Ledger Technology (DLT) has grown rapidly, but significant hurdles remain in large - scale implementation. • Digital identity is a critical enabler to broaden applications to new verticals; digital fiat (legal tender) has the ability to amplify benefits. • Applications of DLT will differ by use case, each leveraging technology in different ways. Blockchain Implementation of the blockchain technology as real business is curbed by the very benefit that if offers. The technology is developed for mass adoption (with all stakeholders involved) and has no use without it. • Most projects (a range of wallets and money transfers has appeared over the last half - year) are in their experimental and product adjustment stage and have a long way to go to influence the market. There are a few projects (such as Everledger) which could show scale but there is a need of many such projects. • Rising of Etherium “The digital currency ether has been generating substantial visibility, a development that could draw attention – and trading activity – away from bitcoin.” • R3 completes “biggest - ever” trial of blockchain solutions with 40 banks. • Debate emerges over speed of blockchain adoption – will major changes take place soon (e.g. within two years) or 5 – 10 years away? Areas of Focus Corporate Bonds Repos Swaps Insurance System Interoperability Payments Settlement Trade Finance
6. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 6 Current State of Payments – 2016 • Year 2016 is a special one in the payments world where credit card payments have overtaken the cash payments for the first time. • And we all know that global non - cash transaction volumes have been growing at 8% to 9% every year. • In 2015, global payments revenue was $1.16 trillion , representing 29% of banking revenues . The growth engines are transaction - related revenue (around 40%) and account - related (around 34%). • Key drivers for the revenue are movement from cash to e - payments and broader financial Inclusion. Mature and Emerging economies are moving at faster rates fueled by the regulatory environment, economic and population growth, migration from cash to non - cash and rise in financial inclusion. With growing non - cash transaction, alternative payments are estimated to account for 59% of all transaction methods by 2017. Alipay and PayPal continue to dominate globally as the most prevalent e - wallet types. Emergence of specialized mobile payment solutions are growing with technology advances and rising smartphone penetration. The value of mobile transactions are expected to reach $117 billion by 2017. Within 10 years, the revenue from APAC (Emerging) will surpass North America. Western Europe is expected to fall while Latin America will gain. $$
36. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 36 Working Together Co - Exist Compete Finding Niche Startups like Lending Club and Square are growing into billion - dollar businesses overnight, and they have the potential to become mini - banks in their specialized areas within the next five years. These new companies are attempting to scale their core businesses with other diversified offerings. Venmo, for example, is a free digital wallet that has opened the door for merchants to use their credit facilities. Creating Capabilities BNY Mellon and several other banks are working with the digital payments company Early Warning® to automate business - to - consumer (B2C) payments without requiring their business customers to store and maintain consumer banking information (e.g., transit routing and account numbers). Banks can offer this solution to their business clients who need to make payments to consumers who hold US bank accounts. London - based TransferWise , the money transfer firm valued at $1 billion, has integrated its service into the smartphone app for LVH, Estonia's largest bank. BBVA Compass teamed up with the online investment company FutureAdvisor, with the hopes of reaching a new segment of customers with an appetite for lower - cost automated advice. Again, this kind of tiered offering – robo - algorithms, supplemented with personali z ed human guidance at a higher price depending on customer requirements – is intended to expand and enhance, rather than replace, banks’ current services. Collaborate Examples
31. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 31 Key Challenges Faced by Startups While FinTechs have been quick to move ahead on the technology innovation and customer relationship, they have huge disadvantages in terms of retail presence (channels) and regulation/compliances . The other key handicap would be brand/trust and data which is critical for scaling up . Bank/FI Profile Retail Presence Organizational Knowledge of Money Movement Infrastructure Loyalty/ Customer Relationships Regulatory Infrastructure including Legislative Influence & Compliance Brand Operational Infrastructure Technology /UX/UI Top 10 BofA, Wells, Citi Regional Banks Suntrust, BB&T Credit Unions/ Community Banks Online/ mobile only Banks CBW, MetaBank, Ally Bank, Synchrony FinTech ? ?
22. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 22 How Would 2017 Look Like for Cross - Border Remittances? Estimate and Projection for Remittance Flow to Developing Countries ($ Billions) 0 100 200 300 400 500 600 700 2015E 2016F 2017F 2018F Regions 2015E 2016F 2017F 2018F World 581.6 603.2 626.4 651.3 Developing Countries 431.6 447.9 465.7 484.7 East Asia and Pacific 127.0 131.0 135.5 140.3 Europe and Central Asia 34.6 36.3 38.3 40.3 Latin America and Caribbean 66.7 69.3 71.9 74.6 Middle East and North Africa 50.3 51.6 53.0 54.5 South Asia 117.9 123.3 129.3 135.8 Sub - Saharan Africa 35.2 36.4 37.7 39.1 Regions 2015E 2016F 2017F 2018F World - 1.7% 3.7% 3.8% 4.0% Developing Countries 0.4% 3.8% 4.0% 4.1% East Asia and Pacific 4.2% 3.2% 3.4% 3.6% Europe and Central Asia - 20.3% 5.1% 5.4% 5.2% Latin America and Caribbean 4.8% 3.9% 3.8% 3.8% Middle East and North Africa - 0.9% 2.6% 2.7% 2.8% South Asia 2.0% 4.6% 4.9% 5.1% Sub - Saharan Africa 1.0% 3.4% 3.7% 3.7% In $ Billions -25% -20% -15% -10% -5% 0% 5% 10% 2015E 2016F 2017F 2018F In % Growth Rate
19. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 19 Volume, Value and Total Revenue 145 153 163 173 273 307 320 337 354 478 2014 2015 2016 2017 2024 46 49 52 56 92 145 161 169 179 295 2014 2015 2016 2017 2024 32 34 36 38 58 87 98 104 112 168 2014 2015 2016 2017 2024 99 98 101 105 137 172 167 169 170 215 2014 2015 2016 2017 2024 40 45 50 55 109 221 236 262 291 543 2014 2015 2016 2017 2024 8 9 10 11 25 29 30 34 39 77 2014 2015 2016 2017 2024 432 453 481 512 811 1090 1145 1215 1293 1989 2014 2015 2016 2017 2024 9 10 11 12 22 23 26 28 31 57 2014 2015 2016 2017 2024 North America Eastern Europe Western Europe Latin America Middle East & Africa Asia Pacific World Wide Rest of the World Value ($ Bn) Total Revenue ($ Bn) Volume (Bn)
4. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 4 This paper is intended for readers who want to better understand the dramatic changes that have begun to take place — and that are accelerating — in the global FinTech landscape . The payments industry which is one of the focus areas of this report has never been more exciting . The pace of innovation has shaken the banks (although not dramatically as some media claims), but they have realized that they need to keep the customer at the center as they go forward and meet her/his needs first . This would also mean that the infrastructure supporting the payments industry — which has never been touched upon — has to be transformed . FinTech players have also given an opportunity to banks to venture where it was prohibitively costly to venture . With the trust of customers and data available, the banks can take advantage of FinTech disruption and convert it to an opportunity either through collaboration and/or through becoming very customer - focused or recalibrating their business models . • Payments The payments industry would be in a transformational state in 2017. The ongoing war with alternate payment channels will intensify and challenges in emerging markets would force the incumbents to take drastic measures. Some key drivers would be: – Real - Time Payments: RTP represents a new phase of evolution within the payments industry, with several key features that differentiate them from current payment methods, specifically speed, value - added messaging capabilities and immediate availability of transaction status. RTP will provide FIs with the functionality/features to innovate and meet customer demand . – Blockchain: Blockchain has the potential to completely change the financial transaction processing cost model amongst its various applications. It also enables all processing to be done over a distributed system network or in the cloud avoiding th e usage of costly datacenters or mainframes. • Remittances Cross - border payments have become a critical part of millions of lives as we have become a more globalized world. As cross - border payments have become more common, customers of remittance products/solutions are looking for the most convenient, cost - efficient and transparent options. Digital and mobile - based solutions, new cost - efficient models in the back - end and even the use of virtual currencies is being tried out by providers. FinTech Outlook Report – Focus on Payments, Remittance and Blockchain
14. © Let’s Talk Payments, LLC | Copying or distribution without written permission from Let’s Talk Payments is prohibited 14 Cloud FinTech are major adopters of the cloud services . Apart from scalability and cost benefits, cloud service providers also help FinTech startups build compliant IT Infrastructures . Omnichannel Banks are looking to integrate their multiple digital channels into an omnichannel customer experience and leverage their existing customer relationships and scale . APIs The incorporation of application program interfaces (APIs) enables third parties to develop value - added solutions and features that can easily be integrated with bank platforms . Big data, AI & Cognitive The growth of digital universe across industries has led to the Big Data revolution . Some of the areas in financial services that are seeing major overhaul include credit scoring, customer acquisition and retention, risk management, investment management . Another growth segment has been cognitive sciences . The explosion of data availability and lowering data storage costs has led to better customer behavior models built utilizing machine learning, artificial intelligence and natural language processing techniques . IoT The IoT focus for financial institutions has been on products . The most important business process improvement is tailoring their products and services for customers . From recognizing customers who step into a branch, to customers who favor drive - through banking to pay for products at places like restaurants and gas stations while in their car, have all been possible with IoT technologies . Omni Channel APIs Big data, AI & Cognitive IoT Cloud Technologies Key Technologies Shaping FinTech
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