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VF2018: Fintech and blockchain developments in asia - all roads lead to banking (Paul Schulte, Founder and Managing Editor, Schulte Research)

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Schulte Research is an independent research service provided by IND-X Advisors Limited. Paul Schulte has 27 years of experience as an analyst. He has experience in economic policy, sell side research, buy side, and academia. His research integrates analysis of banks and liquidity with corporate credit to get a clear and robust view of equity markets. For more information, visit the company's website at www.schulte-research.com.

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VF2018: Fintech and blockchain developments in asia - all roads lead to banking (Paul Schulte, Founder and Managing Editor, Schulte Research)

  1. 1. Paul Schulte, MA, MALD Paul@schulte-research.com www.schulte-research.com (+852) 9705 0777 Developments in Fin Tech and Blockchain in Asia: Payments, e-commerce, Blockchain & Rideshare: All roads lead to banking.
  2. 2. 2 SchulteResearch Paytm Ant Flipkart Credit Karma N 26 Kabbage Alibaba X X Tencent X X Tiger Global X X X Softbank X X X X Temasek X Turning payments into banking. Softbank and Alibaba dominate here. A land grab in Asia!! All roads lead to banking. Will US and German players enter? Source: Schulte Research Payments -> Banking
  3. 3. 3 SchulteResearch Walmart Tokopedia Lazada Alibaba X X Tencent X Tiger Global X Softbank X Temasek X Indo-Pacific Players – Turning Retail into Banking. Alibaba dominates here. All roads lead to banking. Alibaba dominates in SE Asia. Source: Schulte Research Retail -> Banking
  4. 4. 4 SchulteResearch Ola Grab GO-JEK Didi Alibaba X (Didi) X Tencent X X (Didi) X X Tiger Global X X Softbank X X Temasek X X Indo-Pacific Players – Turning Ride Shares into Bank Shares. Tencent dominates here. Watch Grab move into financial services very quickly. Source: Schulte Research Rideshare -> Banking
  5. 5. 5 SchulteResearch Amazon has created enviable operations in India & will reverse engineer this to Asia. Are Asian banks ready? Source: EconomicTimes, Schulte Research • Amazon has invested the following SMEs in India to drive more marketplace sales and facilitate Amazon’s financial services. Online Payment Lending Financing Insurance (May 2018) (May 2018) (2015) (2016) (Apr 2018) (2015)
  6. 6. 6 SchulteResearch Niche subsidiaries. PRC & US. Get a separate digital unit! The banks are fighting back. Is this enough? Company Niche subsidiary Specialization Millennials Personal loans Personal loans/SME Personal loans/SME Wealth Management/P2P Source: Money Live, Infosys, Schulte Research USChina
  7. 7. 7 SchulteResearch Tokopedia and Paytm digital offerings in banking: Clones of Alibaba. Millennials. All roads lead to banking. Source: xxxx, Schulte Research Tokopedia Paytm Capital Loan Gold Online LoansLoan Payment Vouchers Electrical Bill Levy Insurance Gift Card Tax Credit Card Loan Gold Hot Deals Shopping Foreign Exchange Electrical Bill Toll Insurance Gift Card Tax Credit Card SE Asia India AliCloud
  8. 8. 8 SchulteResearch What can banks do? Digitize now. Get in the middle & see your biz as O2O. Data is the center.Can You Change? Source: Schulte Research Estimates Will Fin Tech swallow the MBA, CFA, CPA, FSA? 3. Understand Blockchain– PBOC TRADE FINANCE PLATFORM 2. Get Data Centers ANT/ ALIBABA 4. W/C, warehouse funding - AMAZON 5. HUAWEI/ALIBABA V. GOOGLE/APPLE? 1. DIGITIZE NOW: Marcus, Finn, Mybank
  9. 9. 9 SchulteResearch The evolution: Why should banks get involved in lifestyle, utilities, coupons, voice command, tickets? Of course banks should have been involved in this. They know more about their customer but never bother to collect the data. Firm Adver- tising Food Delivery Tickets/ lifestyle Streaming Music Content Utilities Coupons Wallet Voice Shopping Groceries BABA X X X X X X X X X AMZN X X X X X X X X X WMT X X X X X X X X HSBC STAN C
  10. 10. 10 SchulteResearch Blockchain issues: Watch what China is doing
  11. 11. 11 SchulteResearch Tradable for all assets Verifiable Time stamp Accountants beware Bankers beware Middlemen beware Insurance beware How Blockchain cuts through entrenched cartels: Turn your physical world into a digital reality ASAP.Millennial Independence from cartels EFFICIENT LIVING AUDIT OPEN SYSTEM INNOVATIVE Low cost Automated Decentralized Crowd sourced IOT-connected O2O hospital/ Doctor/ payment Triple entry ledger Standard- setting Live traceable audit Immutable Source: ‘Blockchain Revolution’, Schulte Research Provenance, Safety, Integrity, Ledger
  12. 12. BPOC BLOCKCHAIN CHINA: GREATER BAY AREA TRADE FINANCE PLATFORM-TFP Buyer Seller SME Individual Legal InsureRating Factoring Treasury Loans Accounting Guarantees Storage Logistics Customs Regulators Tax Arbitration AssociationTech Data 1.1st blockchain platform by PBOC in Sept. W/ BOC, CCB, CMB, Ping An, Stan C, BYD. 2. Help SMEs, serve real economy, reduce financing costs using blockchain. 3. Open, compliant, secure community. Trading, registration, custody of assets. Phase 1: Created regulatory body & blockchain platform. Supply chain, A/R, financing, factoring. Phase 2: Explore more cross- border trade finance scenarios
  13. 13. POSITIONING OF THE PLATFORM ‣1. "Link data." Ports, quarantine, logistics, warehousing, associations, data firms. ‣2. "Connect users." A natural ID system that integrates data sources & brings together applications & users. ‣ 3. “Communicate Policy”. Trade finance blockchain can communicate & coordinate w/ regulators AND Innovate. ‣4. “Construct Technical platform." Openness & cooperation w/ banks, 3rd party tech firms, & universities.
  14. 14. 14 SchulteResearch Two issues we need to think about
  15. 15. 15 SchulteResearch PRC:do we need 2 of everything? US: Is the Cold War ‘State Actor’ back? HuaweiState Council MSS CDB Alibaba Tencent ANT (800 mn) WeChat (1 bn) DoD CIA NSA IN-Q-Tel Palantir (Thiel) Greylock. Sequoia, Blackstone Accel FlipKart SEA OLA GoJek Global Blue Singpost Lazada Tokopedia PayTM Qualcomm Apple Facebook (2.2 bn) Google (2 bn) Amazon (300 mn) AWS Finance Ecommerce O2O NSC ATT/Verizon Tencent CloudAliCloud * Numbers are users O2O Finance Ecommerce CCB, ICBC JPM. Citi,VISA
  16. 16. Quantum Computing digital equivalent of splitting the atom? US, PRC spending BILLIONS. QC will crack any code in 1 day. 1st mover? Quantum Future • Quantum Computer can break 1024 – bit RSA Encryption in 1 day • Emerging “Quantum Encoding” market now. Quantum Key Distribution (QKD) • Cybersecurity firm ID Quantique (Korea), startup using QKD to protect data ($65 mn by SK Telecom) • Cybersecurity marketspace expected to be worth $25 billion in 2025 Example • RSA Encryption is gold-standard • Uses two large prime numbers and their product as key • 1024-bit RSA Encryption: fastest computer would take 8 ∗ 1030 years to crack. Current Security protocols are measured by the time it takes to “break in” 16 Source: Market Research Mediam

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