Was recently invited to share my thoughts on fin-tech with the board of a top 5 bank in India. While Indian banks have several challenges, I was impressed by this board's disruption awareness and desire to embrace technological change. It was a good discussion. Here is an edited version of that presentation (removed a few non-public info slides).

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Fin-tech: Global and India perspectives
Bala Srinivasa
April 2016

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What is fin-tech?
4000+ Start-ups | $25B+ in funding
$1T+ Financial services industry
Digital consumer
experience
Technology
Financial
products

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Few industries face this level of attack
Unbundling the
Bank
Source:
Venture Scanner

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Forces driving disruption
Information
connectivity and
access
Rewired consumer
“spillover effect”
Low cost, secure
cloud infrastructure
Advanced tech and
digitization
Why
Now?

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New entrants showing traction
Consumer
Lending
Payments Remittance
SME
Lending
Credit
Scoring
178K Members
$8B+ Loans
15 Min Loan
Disbursal
$1B+ Loans in 2015
100K+ SMEs
6 Min Loan
Approval
$11B+ in Fx
Volumes
70% Cheaper than
Banks
20K+ Data points
scored per application
35 Sec Decision
15 Min Disbursal
500K+ Loans
23 Countries
$20B+ Payments
processed

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Fin-tech disruption formula
Better Faster Cheaper
Reimagine at the product
line level
Data, analytics &
Automation
Self-service digital
experience
Value Creation
10x

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Neo Banks: Glimpse into the future
Germany
United
Kingdom
United
States
China
• Partnership
(Mondo, Simple)
• Full stack
(Atom, Fidor)
• Non-bank platforms
(Alibaba, Tencent)
Types of Models

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How are global banks responding?
Opportunities

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From alarm to strategic action
Board and C-level impetus
Rethinking the digital consumer experience
Heavy investments in data, analytics and
automation
Aggressive participation in fin-tech ecosystem

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Engaging with Disruption
40%
20%
20%
10%
7%
Incubating
Corporate Venture Funds
Partnering
Acquiring
Own Subsidiaries
19 deals in last 2 years for $700M+
through Citi Ventures
9 deals in last 2 years for $500M+
21 seed deals in last 2 years through
Accelerator program
4 deals in last 2 years for $200M+
6 deals through Accelerator program

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A new ecosystem rapidly falling in place
Timothy Draper
Peter Thiel
Angels &
Incubators
Reputed
VC Funds
Large
Banks
Corporate
Investors

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Emerging India landscape

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Regulatory impetus
Payment Banks
Aadhar
IMPS
Jan Dhan Yojana
Digital experiences
Digital footprint accelerating
700M+ Indians online by 2020
Next gen bank customer
800M under age 35
12M join workforce every year
Disruption will be larger in India
Digitization and connectivity unlocking demand

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Mobile is THE platform
AI based
customer
support
Core
banking
Mobile data
credit scoring
Consumer
loans
Verification
eKYC
Payments

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Representative challengers, but it’s early days
Lending
Payments
Brokerage Insurance
Credit
Scoring
Personal
Finance
$600M*
Invested in 2015
80+
deals in 2015
22%
Growth deals >=$10M
*Does not include Paytm`s $575M round by Alibaba

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Indian e-commerce platforms are a wild card
Online Bank
Personal Loans
SME Loans
Credit Scoring Services
B2B & B2C Ecommerce
$370B in GMV for CY14
Payments
500B+ in Annual Transaction Volume
42B+ Transactions till 2015
900M+ AliPay Accounts
Yue Bao
Money Market Fund
AUM $108B
Zhaocai Bao
Lending Marketplace
$50B* in Transaction Value since
launch in Apr 2015
*Kalaari Estimates
Alibaba Ecosystem example

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Yin and Yang for Indian banks
Challenges
• 20% – 40% revenue
exposure?
• Massive digitization and
automation gap
• Cannibalization of
profitable product lines
• Potential loss of a new
generation of consumers
• Cultural resistance to
technology change
Opportunity
• Use disruption to “rethink”
• New technologies can
accelerate customer
acquisition/lower costs
• Start-ups have tech but lack
– Consumer reach
– Brand
– Volumes
• Partner/acquire for mutual
benefit
• Need a Fin-tech strategy to
shape evolution

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Thank You
bala@kalaari.com
Partner, Kalaari Capital
yash@kalaari.com
Analyst, Kalaari Capital