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The Fintech 2.0 Paper:
rebooting
financial services
Why a paper for Fintech 2.0?
This paper for Fintech 2.0 has been created by Santander
InnoVentures, in collaboration with its partners Oliver Wyman and
Anthemis Group.
The purpose of Santander InnoVentures is to help Santander
deliver better services to our customers through innovation, and to
support a new generation of fintech start-ups on their growth
journey. We believe these goals are inextricably intertwined.
Oliver Wyman’s Innovation Platform has been established to
advise both its traditional client base and fast growth fintech firms
on the transformational change that is currently underway in the
financial services industry.
Many fintechs have succeeded but today they are still operating only at
the edges of banking. To help engineer more fundamental
improvements to the banking industry, they must now be invited inside,
to contribute to reinventing our industry’s core infrastructure and
processes. That can succeed only as a collaborative endeavour, with
banks and fintechs working together as partners.
This paper highlights the benefits of collaboration and identifies some of
the opportunities for profitable change in realising Fintech 2.0. We hope
the whole industry – both banks and fintechs – recognise the value of
this approach and join us in this collaborative journey to Fintech 2.0.
2
Mariano Belinky,
Managing Principal, Santander InnoVentures
Emmet Rennick,
Head of Innovation, Oliver Wyman
Andrew Veitch,
Director, Anthemis
3	
4	
6		
8		
1. Fintech 2.0
2. Applications for the Internet of Things
2.1. Cutting costs in trade finance
2.2. Improving valuation accuracy of real assets
in leasing and asset financing 10
3.	 Being smarter with smart data 12
4.	 Embedding distributed ledger technology 14
5.	 Creating frictionless processes and products 16	
5.1.	 Opportunities to reduce friction in the mortgage process 16	
5.2.	 Frictionless saving and investment 18
6.	 Conclusion: achieving Fintech 2.0 together 19
Contents
4
Over the last decade, however, a new source of innovation in financial
services has emerged from financial technology start-ups (“fintechs”) and
technology companies (“techos”). These new firms have been quicker than
banks to take advantage of advances in digital technology, developing
banking products that are more user-friendly, cost less to deliver and are
optimised for digital channels.
This relative success is unsurprising. These new players are less burdened by
the demands of regulatory compliance which banks are subject to. They are
unencumbered by complex and costly to maintain legacy systems. They
can focus on creating single-purpose solutions, designed to offer an
improved experience within just one product or service. They are more in
tune with the peer-to-peer (P2P) culture engendered by the explosion of
social media. And they are smaller organisations, designed for the purpose
of innovation.
Capital has flowed into the fintech sector: $23.5 billion1
of venture capital
investment in 2013/14. Of this investment, 27% has been in consumer
lending, 23% in payments and 16% in business lending. Fintechs have
two unique selling points: better use of data and frictionless customer
experience. But to date these have been limited to relatively simple
propositions such as e-wallets and P2P lending.
The impact of fintechs to date
After a slow start, fintechs are now capturing a growing market share
in these areas. Yet their overall effect on the banking market has been
minor. Banks have not crumbled in the face of this new competition. We
characterise this first phase of fintech as Fintech 1.0.
Yet the conditions for significant change are present: policy shifts towards
open data and APIs2
, the emergence of enhanced technologies such as
cloud computing, changing customer dynamics and intense pressure to cut
costs in banking.
We believe that by extending the use of data and frictionless processes
Fintechs can and will expand well beyond the confines of payments and
consumer credit. It will move deeper into middle and back office processes
providing new, richer propositions for end customers.
Fintech 2.0 is just around the corner. It will deliver fundamental changes
to the infrastructure and processes at the core of the financial services
industry. In this report we consider some important banking innovations
based on the “Internet of Things” (IoT), smart data, distributed ledgers and
frictionless processes beyond payments and consumer credit.
1. Fintech 2.0
Banks can boast of some important innovations. ATMs, credit cards, securitisation,
swaps and mobile banking are now taken for granted, but each was ground-breaking
when first launched.
1 Source: Oliver Wyman analysis.
2 Application Programming Interfaces.
5
Fintech 2.0 will cause a major disruption of the banking market,
as digital technology has in other markets, such as travel and
entertainment. Pre-digital business models and processes will be
rendered obsolete, and billions of dollars of value will shift to “new
model” suppliers.
Banks are aware of these changes and the opportunities they present. Many
have decided they need to participate in this disruptive trend by actively
supporting fintechs – the list includes Citi, Santander, UBS, BBVA, Barclays,
NAB and Capital One, among others. They have launched incubation and
acceleration initiatives, and created investment vehicles to harness, foster
and scale up innovation.
While banks have disadvantages relative to start-ups, they also have
advantages. Being regulated is a burden in many ways, but it creates
consumer confidence. A long history brings legacy systems with it, but it
also builds trusted brands (albeit tested by the global financial crisis) and
provides rich historic data, not to mention a banking licence and a sizable
head start in compliance initiatives. And, of course, banks understand
banking; especially the risks involved, which new entrants often do not.
Collaboration is the key
The strengths and weaknesses of both banks and fintechs mean that
both will often do better by cooperating rather than by competing.
New digital businesses must either grow quickly or die. Banks can offer
fintechs immediate scale and critical mass through access to demand.
While some fintechs are today focused on the race to build standalone
“Unicorns” (a company with a $1 billion valuation), we believe
Fintech 2.0 represents a far broader opportunity to re-engineer the
infrastructure and processes of the global financial services industry, in
which the top 300 banks command a revenue pool worth $3.8 trillion3
.
This is the central premise of this report: that, to realise the
opportunity of Fintech 2.0, banks and fintechs will need to collaborate,
each providing the other with what it now lacks, be that data, brand,
distribution or technical and regulatory expertise.
Only by collaborating will the opportunity of Fintech 2.0 be realised.
3 Sources: Forbes, 2015; Oliver Wyman analysis.
6
The number of objects able to record and transmit data to other objects
is continually rising. 50 billion objects are expected to be linked to the
internet by 2020.4
This network of connected devices creates continuous
streams of data which can increase efficiency across a wide range of
business practices.
Many applications already exist: in transport, tracking when a bus
will arrive; in pharmaceuticals, monitoring temperature-sensitive
products; and in insurance, monitoring the driving style of car owners to
preferentially price premiums for safer drivers. As the cost of sensors and
data transmission continues to reduce, we are reaching a tipping point
where commercial use of the IoT will take off.
In financial services, compelling uses have not yet emerged into the
marketplace. But the IoT could have many valuable applications (see
Figure 1), including:
n	Product design: Asset financing, for example, could be based
on parameters such as kilometres driven or load carried rather
than simply the period of time for which the asset is leased, as with
traditional models.
n	Risk management and pricing: Collateral management is a key element
of risk management. Better data on the quality and condition of collateral
provides more accurate assessment and pricing of risk.
n	Understanding customer needs: Tracking a business’s activity could
indicate when it may have additional growth financing needs, for
example, by revealing when leased machinery is working at full capacity.
n	Streamlining contractual processes: IoT devices will be able to capture
data and feed it into digital platforms that govern and verify “smart
contracts” (computer protocols that verify or enforce contracts). The
collation of real-time data on these platforms can facilitate efficient
covenant monitoring, automatic disbursement of assets and automatic
release of liens or goods.
2. Applications for the Internet
of Things
The “Internet of Things” (IoT) describes the widespread embedding of sensory and
wireless technology within objects, giving them the ability to transmit data about
themselves: their identity, condition and environment.
4 Source: Cisco.
1Monitoring  data
transmission 2 Data collection 
management 4Value
creation
Financial product
development
Risk management 
pricing of finance
Identifying additional
business needs
Streamlining
contractual processes
3Strategic
analytics
kg
Platformtomanagedataanddistribution
7
Figure 1: Application of the Internet of Things in Financial Services
8
2.1 Cutting costs in trade finance
Global trade finance is a complex process. A dizzying number of manual checks
must be carried out to verify the legitimacy of a client, its trading partners and the
goods that change hands. Most checks require the physical presence of a person,
and the administrative work conducted by bank middle offices is overwhelmingly
paper-based. The high cost of this process restricts access to trade finance for
smaller businesses and especially those in developing economies whose
credit-worthiness is difficult to establish (see Figure 2A).
We expect the IoT, combined with the distributed ledger and smart
contracts, to dramatically reduce these costs. Specifically, we expect the
IoT to streamline the trade finance process as follows:
n	 IoT technology will provide banks with real-time access to trade data,
eliminating the need for manual checks and paper documentation such
as bills of lading. For example, GPS data would automatically alert the
issuing bank once a shipment arrives at a port, and sensory technology
would provide information on the condition of delivered objects. The
IoT could give sellers and their banks access to real-time information
they need regarding goods in transit.
n	 Access to real-time trade details would enable digitised smart contracts
to be verified instantaneously, assuming pre-defined conditions are met.
This would allow a letter of credit to be issued more efficiently than in
today’s trade finance process.
n	 By providing accurate, real-time data on trade flows, trade relationships
and performance, the IoT can provide information required to
underwrite trade finance. This transparency will make trade finance
available to SMEs that would otherwise find it difficult to obtain
credit approval. Storing this information on a platform will assist
in due diligence of new customers. Such platforms will also help
smaller suppliers of trade finance identify opportunities where they
enjoy a competitive advantage, such as local knowledge or a better
understanding of specific risks.
This is illustrated in Figure 2B.
International trade is expected to grow by 8% per annum until 2020, with
associated trade finance revenues growing to $70 billion.5
This represents
a massive opportunity for both banks and fintech start-ups to partner and
streamline trade finance processes in the ways described. In doing so, they
will achieve more than cut operating costs. Improved data and analysis of
exposures will also reduce losses and, by increasing the scope of potential
clients, increase revenues.
Manual
pre-screening
Letter of credit Manual checks Contracts manually
completed
Shipping
arranged
Paper-based verification
to be completed
Manual KYC and due
diligence is time consuming.
Limited access to data
means many SMEs cannot
access finance.
Lack of transparency
over exact condition
of goods in transit.
Process of manual
checks is costly and
creates a higher
turn-around time.
Unavailability of
authorised signatories
to sign the
paper requests.
Pain points
A: Pre-IoT trade finance
Real time capturing
of trade data
Letter
of credit
Real time
monitoring
Small contract
auto filled
Shipping
arranged
Real time verification
and digital submission
Better underwriting and
credit decisions.
Authorisors can approve
requests remotely.
Better knowledge of the
condition of goods. End
customers can track their
goods improving trust.
Verification of goods
is more reliable and
in real time.
Elimination of
documentation
speeds process
and reduces costs.
Advantages
B: Post-IoT trade finance
One online platform
Multiple platforms
9
Figure 2: Diagram of pre- and post-IoT trade finance highlighting advantages of the IoT
5 Source: SWIFT, 2013.
10
IoT technologies can help banks overcome this problem, allowing them
to monitor the condition, environment and location of collateral assets
without needing to send someone to assess them. They can provide
something close to the accuracy of an in-person assessment at a fraction
of the cost. Such technology could be applied across a wide range of
collateral as illustrated in Figure 3.
Inefficiencies in the global collateral management market are
estimated to cost banks up to $4 billion annually.6
Adopting IoT
technology could significantly reduce this figure as real-time
monitoring technology will improve valuation accuracy and render
more assets eligible for collateral financing.
2.2 Improving valuation accuracy of real assets in
leasing and asset financing
Monitoring and valuing collateral leased or financed by banks is made inefficient by
the cost of getting detailed information about the asset concerned.
11
6 Source: Collateral Management – Unlocking the Potential in Collateral, Accenture and Clearstream, 2011.
Real Estate (mortgage)
Commodities
Fleet vehicle leasing
Flag when vehicles require
maintenance and also allow financers
to have a better understanding of a
vehicle’s present value
Provides information on the current
condition of the house for valuation
and insurance purposes
Monitoring the condition of
commodities during transit allows
financers to know if the condition
of goods delivered meets
contractual specifications
n	 Hours in operation
n	 Distance covered
n	 Engine diagnostics
n	 Driving behaviour
n	 Weight of load
n	 Terrain driven on
n	 Environmental factors –
pollution, temperature, flooding,
general weather patterns
n	 Water damage/ damp
n	 Interior decay
n	 Local economic trends,
observable, for example, in
local transport usage and
shopping patterns
n	 Temperature and
moisture level exposure
n	 Weight
n	 Vibrations
n	 Exposure to chemicals
n	 Location
n	 Speed of travel
Asset Data Capture Application in financing
Figure 3: Applications of IoT technology in asset financing
12
3. Being smarter with smart data
Digitaltechnologyhasgreatlyincreasedthevolumeofdataavailable.However,thebanks
havefounditdifficulttousethisnewdatatocreatevaluefortheircustomersandthemselves.
Incontrast,onlineretailersandsocialmediafirmshavefoundwaystocreatevaluefromdata.
7 Source: Oliver Wyman analysis.
Some of the ways in which online retailers create value from data:
n	 Customer transaction behaviour is used to inform product
suggestions, increasing sales and customer loyalty.
n	 Viewingandlisteningbehaviourismonitoredtogiveappropriateadvice
aboutnewproductsandservices,ortoservethird-partyadvertisements.
n	 Real-time or contextual satisfaction surveying is used to flag
when a customer is dissatisfied and to inform appropriate actions
to retain them.
n	 Location data is used for security and fraud checks or to offer
suggestions, advertisements and offers that depend on the
customer’s location.
Despite substantial investment in data management, financial institutions
lag behind firms in other industries. It is not unusual for large banks to
spend upwards of $500 million7
on programmes to address the challenges
related to data, yet it is widely acknowledged that these investments have
not been translated to increased profits. Banks are not nearly creative or
enterprising enough in their attempts to use data to offer better products
or cut operating costs.
The sheer variety of problems which data can address calls for specialised
capabilities which banks often lack. Banks could take advantage of the
specialised expertise at fintech companies by engaging these firms to
perform the required work or by acquiring them. Partnerships between banks
and fintechs would create a powerful combination of information, supplied
by the bank, and innovative analytical tools, supplied by the fintech. The kind
of problems that might be addressed are illustrated in figure 4.
Identifying problems that can be solved by data is the first step to
its smarter use. Assuming banks make their data readily accessible
to those who need it, specialised teams can be assigned to problems
such as these and create algorithms that uncover trends, patterns and
anomalies. Then banks will be able to extract value from their ever-
increasing supply of data.
13
“Right time and
channel to contact”
A blend of transactional, locational, communications and social media data can indicate times when customers
are likely to be available. This has applications in marketing, customer engagement and collections.
Fraud and market
manipulation
Some fintechs, such as Red Owl Analytics and Pentaho have developed software that helps banks to visually track
who has influenced content in their data networks. This allows banks to “connect the dots” across a wide variety of
data sources such as transactions, communications, physical access and digital data, and flags any unusual patterns
between them. Understanding patterns that might constitute fraudulent behaviour and combining this with post-
incident analysis helps banks to uncover fraud. Similarly, “know your customer” (KYC) checks could be helped by
verifying the link between income and spending habits, location and stated occupation.
SME Credit
By utilising customer spending behaviour and supplier performance data, banks could help SMEs manage their
cashflow and credit line requirements. Access to regular trade data, via the Internet of Things and point-of-sale
systems, could help banks with credit scoring for growth capital and working capital needs. This would allow them to
pre-empt SME financing requests so that they can provide real-time credit to match their clients’ needs.
Budgeting
Historical account data can give banks a granular view of customer spending and income patterns. By coupling these
observed patterns with customer saving goals and aspiration, banks could offer budgeting advice. This would also
help consumers and business clients understand the long-term budgeting implications of potential decisions. Fitechs
such as Personetic and Geezo now use banks’ data and external sources to provide a more holistic and personal
experience to customers.
Figure 4: Applications of smart data
14
Clearing
House
Centralised Ledger Distributed Ledger
In contrast to today’s transaction networks, distributed ledgers
eliminate the need for central authorities to certify ownership and clear
transactions. Distributed ledgers can be open, verifying anonymous actors
in the network, or they can be closed and require actors in the network
to be already identified. The best known existing use for the distributed
ledger is the cryptocurrency Bitcoin.
Distributed ledger technology has several attractive features:
n	 Transactions can be made to be irrevocable, and clearing and
settlement can be programmed to be near-instantaneous,
allowing distributed ledger operators to increase the accuracy of
trade data and reduce settlement risk.
n	 Systems operate on a peer-to-peer basis and transactions are
near-certain to be correctly executed, allowing distributed ledger
operators to eliminate supervision and IT infrastructure, and their
associated costs.
n	 Each transaction in the ledger is openly verified by a community
of networked users rather than by a central authority, making
the distributed ledger tamper-resistant; and each transaction is
automatically administered in such a way as to render the transaction
history difficult to reverse.
n	 Almost any intangible document or asset can be expressed in code
which can be programmed into or referenced by a distributed ledger.
n	 A publicly accessible historical record of all transactions is created,
enabling effective monitoring and auditing by participants,
supervisors and regulators.
Commercial banks, central banks, stock exchanges and major
technology providers, such as IBM and Samsung, are all exploring the
potential uses of distributed ledgers. Fintechs, such as Ripple, Ethereum,
Eris Industries10
and HyperLedger, are also developing new ways to
exchange data and assets enabled by the technology. It is only a matter
of time before distributed ledgers become a trusted alternative for
managing large volumes of transactions.
4. Embedding distributed
ledger technology
A distributed ledger is a network that records ownership through a shared registry
(see Figure 5).
Figure 5: Centralised and distributed ledger approaches
15
CustodySettlement
Collateral
managemet
and valuation
Life cycle
management
ClearingMatching
Post trade life cycle
Scope for
distributed
ledger
technology
■ Smart contracts can
enable automated
clearing upon
trade completion
■ Real time updates
on security title and
interests updating
■ Allowing access to
multiple users for
robust monitoring
■ Increased transparency
as information
asymmetries
are eliminated
■ Real time updates on
the positions of the
underlying collateral
with consistent
valuation methodologies
■ Securely,
transparently move
securities and assets
in seconds or minutes
■ Enables point-to-point
settlement, lowering
the cost and risk
of transactions
■ Smart contracts can
facilitate robust
custodian services on
decentralised platforms
eliminating intermediaries.
The first major application is being seen in payments, especially across
borders. International payments remain slow and expensive and
significant savings can be made by banks and end-users bypassing
existing international payment networks.
In time, distributed ledgers will support “smart contracts” – computer
protocols that verify or enforce contracts. This will lead to a wide
variety of potential uses in securities, syndicated lending, trade finance,
swaps, derivatives or wherever counterparty risk arises. For example,
smart contracts could automate pay-outs by the counterparties to
swap contracts. Figure 6 examines how securities settlement could be
transformed by distributed ledgers.
Cutting operational costs is not the only benefit in securities trading.
Distributed ledgers can increase investor confidence in products whose
underlying assets are now opaque (such as securitisations) or where
property rights are made uncertain by the role of central authorities.
Our analysis suggests that distributed ledger technology could reduce
banks’ infrastructure costs attributable to cross-border payments,
securities trading and regulatory compliance by between $15-20 billion8
per annum by 2022.
8 Sources: World Bank remittance data; World Federation of Exchanges; Oxera; Financial Times; Oliver Wyman analysis.
Streamlining securities settlement
The post-trade, settlement process can be expensive and slow, commonly taking two days, and sometimes longer, to process through a
number of intermediaries. Distributed ledger technology has the potential to overcome frictions in current post-trade processes, providing an
alternative technology for clearing and settlement.
Figure 6: Scope for distributed ledger technology in the post trade settlement process
16
Banking is no exception. Not only can customers now shop for banking
products online but the products themselves are being digitised. It is now
possible to manage accounts and make payments to third parties without
visiting branches, writing letters or signing and posting cheques. Digitisation
is taking much of the pain out of banking.
This progress, however, has been limited mainly to transaction accounts and
consumer lending. Mortgages and long-term savings products still involve
processes that are expensive, time consuming and a source of customer
dissatisfaction. Removing the “friction” from these products is where the
greatest opportunity now lies.
5. Creating frictionless
processes and products
Digital technology has taken the hassle out of shopping. Customers can now
compare options, choose, pay and often receive the goods, such as an e-book or
airline ticket, on any device with access to the internet. What might have taken hours
of walking or driving around and talking to sales people can be done in minutes or
even seconds without leaving home.
9 Source: Oliver Wyman analysis.
This provides opportunities to digitise the process, removing much of its
current friction. We envisage a simple yet robust home purchase process
based on an improved data environment. See Figure 7 for a description of
the Danish house purchasing process where much of the friction that exists
in other markets has been removed.
5.1 Opportunities to reduce friction in the
mortgage process
With over $25 trillion9
in new mortgages issued annually across the globe the
mortgage sector is a very big market. However, most mortgage markets still rely
on a number of intermediaries to manage a predominantly paper-based process.
17
Buyer
Seller
Customer affordability information
Online home search
Lists property
e-signature
from both the
buyer and
seller, to
execute
transaction
Prepares draft
Property Data
Final checks to
release funds
Property Data
Transaction Details
Mortgage providor
Seller’s bank
Electronic Purchase
Agreement
Real Estate
Platform
Electronic Land
Registry
Figure 7: Danish house purchase process
Buying a house in Denmark
n	 As a house becomes available for sale, a prospectus of the house
is published on a real estate portal. The prospectus provides
the public valuation, ownership, and financing details, energy
rating, environmental issues and technical survey details. This
collateral information will be available to prospective buyers and
to all banks (through the electronic land registry) who can then
immediately assess the value and the condition of the collateral.
n	 A prospective buyer searches for a house on the real estate
portal and contacts the agent appointed by the seller. In a
parallel process, the buyer engages a mortgage bank and gives
them permission to access their financial records, including
salary details that show that the borrower can afford to service
the mortgage. Combined with the collateral valuation, this
allows the bank to approve a mortgage.
n	 After contacting the agent and viewing the property (perhaps
online), the buyer agrees a price with the seller. The buyer and
seller electronically sign a standardised Purchase Agreement
using their electronic ID.
n	 An authorisation is sent to the buyer’s bank to transfer funds to
the seller’s bank. The funds are released to the seller once all final
conditions are met on the agreed closing day.
n	 Once the funds have been transferred to the seller, the electronic
land registry is updated to reflect the new owner’s details, and
the transaction details are made available as an input to property
pricing in the local area.
18
For example, new technology monitors customers’ spending habits,
allowing them to manage their money better (e.g. Mint, Yodlee,
Blueleaf10
). And algorithm-driven tools or “robo-advisors” provide
investment recommendations based on stated investment goals
(e.g. SigFig, FutureAdvisor, Betterment10
).
This has helped reduce friction within some saving and investment
activities, but we believe there are further opportunities:
n	 Personal financial management (PFM) solutions typically help
customers make better decisions about their spending habits but
not about their savings and investments. New applications could
unify investment, savings and current accounts, allocating funds
according to user-defined triggers (e.g. a particular savings goal). This
information could be linked to external data such as merchant offers.
For example, a customer who wanted to buy a new phone could add
the phone to a wish-list as part of their budgeting and savings goals.
n	 Algorithm-driven investment platforms typically focus on just a few
variables, such as asset diversification and risk tolerance, without
taking account of other important variables, such as the customer’s
current investments, especially where these are not tradable
securities. These platforms will be better able to compete with
traditional financial advisory offerings if they take a comprehensive
view of all the assets a client might invest in or already has, both real
and financial.
n	 Fintech players could automate several basic PFM services, such as
estate planning (e.g. setting up trusts), life insurance and basic tax
planning. Current robo-advisors can extend their offering up the
wealth spectrum, for example, to include people worth $1 million, who
are now served face-to-face at a cost that is often not commensurate
with the upside.
5.2 Frictionless saving and investment
Many people seek help managing their personal finances and making investment
decisions. This has traditionally been an area dominated by expensive face-to-face
interactions with financial advisors. However, fintech alternatives have now emerged.
10 Anthemis portfolio company.
After origination, mortgages have typically remained on bank balance
sheets or been transferred to investors via securitisations. While investors
are showing an appetite for direct exposure to whole-loan mortgages, the
majority of equity stays in banks.
For institutional investors, whether they are looking for whole loans or
participation via securitisation, gathering and providing the growing amount
of granular information that is becoming available through seamless
real-time reporting will be highly valuable. A mortgage platform providing
regularly updated data on the condition and value of collateral and on the
financial situation of the mortgagee will allow investors to manage their
portfolios with far more precision (see Figure 8). The information available
would include demographics (e.g. age), location, income and affordability
profile, financing type (e.g. mortgage rate, duration, payment profile), risk
profile (e.g. borrower’s credit rating, behavioural information) and detailed
collateral information (e.g. type of property, age of property, condition).
Data and Analytics LayerOriginating Strategy Investor Asset Selection
Rich layer of granular data
and analytics
Front to Back Customer Management
Figure 8: Key features of an end-to-end mortgage platform
19
Conclusion: achieving
Fintech 2.0 together
Fintech 1.0 has brought only minor disruptions to the banking market, mainly
in the areas of payments, credit and personal financial advice. But changes
in customer preferences, advances in technology and growing investment in
fintech set the scene for more radical change.
Fintech 2.0 could mean a “seamless specialisation” across core elements of
the value chain whereby a variety of providers combine to deliver cheaper and
easier-to-use propositions to end customers.
Banks must continue on their journeys of digitisation. But they need not
travel alone. They should be clear about where their market advantages and
institutional strengths lie. Where they fall short they should look to work with
the start-ups who can provide what they need.
The same goes for the new fintechs. They may be entrepreneurial and
ambitious but there is more required to achieve Fintech 2.0. Wisdom, market
expertise, trusted brands and not least a banking licence may also be required.
The message to banks and to fintechs is the same: if you can’t beat them, you
should join them to achieve Fintech 2.0.
Copyright©
2015OliverWyman,AnthemisGroupandSantanderInnoventures.Allrightsreserved.Thisreportmaynotbereproducedorredistributed,inwholeorinpart,withoutthewrittenpermission
of Oliver Wyman, Anthemis Group and Santander Innoventures and they accept no liability whatsoever for the actions of third parties in this respect.
This report is not a substitute for tailored professional advice on how a specific financial institution should execute its strategy. This report is not investment advice and should not be relied on for
such advice or as a substitute for consultation with professional accountants, tax, legal or financial advisers. Oliver Wyman, Anthemis Group and Santander Innoventures has made every effort to
use reliable, up-to-date and comprehensive information and analysis, but all information is provided without warranty of any kind, express or implied.Some of the information used in preparing these
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Fintech 2.0 - Rebooting Financial Services - Blockchain Clearing

  • 1. The Fintech 2.0 Paper: rebooting financial services
  • 2. Why a paper for Fintech 2.0? This paper for Fintech 2.0 has been created by Santander InnoVentures, in collaboration with its partners Oliver Wyman and Anthemis Group. The purpose of Santander InnoVentures is to help Santander deliver better services to our customers through innovation, and to support a new generation of fintech start-ups on their growth journey. We believe these goals are inextricably intertwined. Oliver Wyman’s Innovation Platform has been established to advise both its traditional client base and fast growth fintech firms on the transformational change that is currently underway in the financial services industry. Many fintechs have succeeded but today they are still operating only at the edges of banking. To help engineer more fundamental improvements to the banking industry, they must now be invited inside, to contribute to reinventing our industry’s core infrastructure and processes. That can succeed only as a collaborative endeavour, with banks and fintechs working together as partners. This paper highlights the benefits of collaboration and identifies some of the opportunities for profitable change in realising Fintech 2.0. We hope the whole industry – both banks and fintechs – recognise the value of this approach and join us in this collaborative journey to Fintech 2.0. 2 Mariano Belinky, Managing Principal, Santander InnoVentures Emmet Rennick, Head of Innovation, Oliver Wyman Andrew Veitch, Director, Anthemis
  • 3. 3 4 6 8 1. Fintech 2.0 2. Applications for the Internet of Things 2.1. Cutting costs in trade finance 2.2. Improving valuation accuracy of real assets in leasing and asset financing 10 3. Being smarter with smart data 12 4. Embedding distributed ledger technology 14 5. Creating frictionless processes and products 16 5.1. Opportunities to reduce friction in the mortgage process 16 5.2. Frictionless saving and investment 18 6. Conclusion: achieving Fintech 2.0 together 19 Contents
  • 4. 4 Over the last decade, however, a new source of innovation in financial services has emerged from financial technology start-ups (“fintechs”) and technology companies (“techos”). These new firms have been quicker than banks to take advantage of advances in digital technology, developing banking products that are more user-friendly, cost less to deliver and are optimised for digital channels. This relative success is unsurprising. These new players are less burdened by the demands of regulatory compliance which banks are subject to. They are unencumbered by complex and costly to maintain legacy systems. They can focus on creating single-purpose solutions, designed to offer an improved experience within just one product or service. They are more in tune with the peer-to-peer (P2P) culture engendered by the explosion of social media. And they are smaller organisations, designed for the purpose of innovation. Capital has flowed into the fintech sector: $23.5 billion1 of venture capital investment in 2013/14. Of this investment, 27% has been in consumer lending, 23% in payments and 16% in business lending. Fintechs have two unique selling points: better use of data and frictionless customer experience. But to date these have been limited to relatively simple propositions such as e-wallets and P2P lending. The impact of fintechs to date After a slow start, fintechs are now capturing a growing market share in these areas. Yet their overall effect on the banking market has been minor. Banks have not crumbled in the face of this new competition. We characterise this first phase of fintech as Fintech 1.0. Yet the conditions for significant change are present: policy shifts towards open data and APIs2 , the emergence of enhanced technologies such as cloud computing, changing customer dynamics and intense pressure to cut costs in banking. We believe that by extending the use of data and frictionless processes Fintechs can and will expand well beyond the confines of payments and consumer credit. It will move deeper into middle and back office processes providing new, richer propositions for end customers. Fintech 2.0 is just around the corner. It will deliver fundamental changes to the infrastructure and processes at the core of the financial services industry. In this report we consider some important banking innovations based on the “Internet of Things” (IoT), smart data, distributed ledgers and frictionless processes beyond payments and consumer credit. 1. Fintech 2.0 Banks can boast of some important innovations. ATMs, credit cards, securitisation, swaps and mobile banking are now taken for granted, but each was ground-breaking when first launched. 1 Source: Oliver Wyman analysis. 2 Application Programming Interfaces.
  • 5. 5 Fintech 2.0 will cause a major disruption of the banking market, as digital technology has in other markets, such as travel and entertainment. Pre-digital business models and processes will be rendered obsolete, and billions of dollars of value will shift to “new model” suppliers. Banks are aware of these changes and the opportunities they present. Many have decided they need to participate in this disruptive trend by actively supporting fintechs – the list includes Citi, Santander, UBS, BBVA, Barclays, NAB and Capital One, among others. They have launched incubation and acceleration initiatives, and created investment vehicles to harness, foster and scale up innovation. While banks have disadvantages relative to start-ups, they also have advantages. Being regulated is a burden in many ways, but it creates consumer confidence. A long history brings legacy systems with it, but it also builds trusted brands (albeit tested by the global financial crisis) and provides rich historic data, not to mention a banking licence and a sizable head start in compliance initiatives. And, of course, banks understand banking; especially the risks involved, which new entrants often do not. Collaboration is the key The strengths and weaknesses of both banks and fintechs mean that both will often do better by cooperating rather than by competing. New digital businesses must either grow quickly or die. Banks can offer fintechs immediate scale and critical mass through access to demand. While some fintechs are today focused on the race to build standalone “Unicorns” (a company with a $1 billion valuation), we believe Fintech 2.0 represents a far broader opportunity to re-engineer the infrastructure and processes of the global financial services industry, in which the top 300 banks command a revenue pool worth $3.8 trillion3 . This is the central premise of this report: that, to realise the opportunity of Fintech 2.0, banks and fintechs will need to collaborate, each providing the other with what it now lacks, be that data, brand, distribution or technical and regulatory expertise. Only by collaborating will the opportunity of Fintech 2.0 be realised. 3 Sources: Forbes, 2015; Oliver Wyman analysis.
  • 6. 6 The number of objects able to record and transmit data to other objects is continually rising. 50 billion objects are expected to be linked to the internet by 2020.4 This network of connected devices creates continuous streams of data which can increase efficiency across a wide range of business practices. Many applications already exist: in transport, tracking when a bus will arrive; in pharmaceuticals, monitoring temperature-sensitive products; and in insurance, monitoring the driving style of car owners to preferentially price premiums for safer drivers. As the cost of sensors and data transmission continues to reduce, we are reaching a tipping point where commercial use of the IoT will take off. In financial services, compelling uses have not yet emerged into the marketplace. But the IoT could have many valuable applications (see Figure 1), including: n Product design: Asset financing, for example, could be based on parameters such as kilometres driven or load carried rather than simply the period of time for which the asset is leased, as with traditional models. n Risk management and pricing: Collateral management is a key element of risk management. Better data on the quality and condition of collateral provides more accurate assessment and pricing of risk. n Understanding customer needs: Tracking a business’s activity could indicate when it may have additional growth financing needs, for example, by revealing when leased machinery is working at full capacity. n Streamlining contractual processes: IoT devices will be able to capture data and feed it into digital platforms that govern and verify “smart contracts” (computer protocols that verify or enforce contracts). The collation of real-time data on these platforms can facilitate efficient covenant monitoring, automatic disbursement of assets and automatic release of liens or goods. 2. Applications for the Internet of Things The “Internet of Things” (IoT) describes the widespread embedding of sensory and wireless technology within objects, giving them the ability to transmit data about themselves: their identity, condition and environment. 4 Source: Cisco.
  • 7. 1Monitoring data transmission 2 Data collection management 4Value creation Financial product development Risk management pricing of finance Identifying additional business needs Streamlining contractual processes 3Strategic analytics kg Platformtomanagedataanddistribution 7 Figure 1: Application of the Internet of Things in Financial Services
  • 8. 8 2.1 Cutting costs in trade finance Global trade finance is a complex process. A dizzying number of manual checks must be carried out to verify the legitimacy of a client, its trading partners and the goods that change hands. Most checks require the physical presence of a person, and the administrative work conducted by bank middle offices is overwhelmingly paper-based. The high cost of this process restricts access to trade finance for smaller businesses and especially those in developing economies whose credit-worthiness is difficult to establish (see Figure 2A). We expect the IoT, combined with the distributed ledger and smart contracts, to dramatically reduce these costs. Specifically, we expect the IoT to streamline the trade finance process as follows: n IoT technology will provide banks with real-time access to trade data, eliminating the need for manual checks and paper documentation such as bills of lading. For example, GPS data would automatically alert the issuing bank once a shipment arrives at a port, and sensory technology would provide information on the condition of delivered objects. The IoT could give sellers and their banks access to real-time information they need regarding goods in transit. n Access to real-time trade details would enable digitised smart contracts to be verified instantaneously, assuming pre-defined conditions are met. This would allow a letter of credit to be issued more efficiently than in today’s trade finance process. n By providing accurate, real-time data on trade flows, trade relationships and performance, the IoT can provide information required to underwrite trade finance. This transparency will make trade finance available to SMEs that would otherwise find it difficult to obtain credit approval. Storing this information on a platform will assist in due diligence of new customers. Such platforms will also help smaller suppliers of trade finance identify opportunities where they enjoy a competitive advantage, such as local knowledge or a better understanding of specific risks. This is illustrated in Figure 2B. International trade is expected to grow by 8% per annum until 2020, with associated trade finance revenues growing to $70 billion.5 This represents a massive opportunity for both banks and fintech start-ups to partner and streamline trade finance processes in the ways described. In doing so, they will achieve more than cut operating costs. Improved data and analysis of exposures will also reduce losses and, by increasing the scope of potential clients, increase revenues.
  • 9. Manual pre-screening Letter of credit Manual checks Contracts manually completed Shipping arranged Paper-based verification to be completed Manual KYC and due diligence is time consuming. Limited access to data means many SMEs cannot access finance. Lack of transparency over exact condition of goods in transit. Process of manual checks is costly and creates a higher turn-around time. Unavailability of authorised signatories to sign the paper requests. Pain points A: Pre-IoT trade finance Real time capturing of trade data Letter of credit Real time monitoring Small contract auto filled Shipping arranged Real time verification and digital submission Better underwriting and credit decisions. Authorisors can approve requests remotely. Better knowledge of the condition of goods. End customers can track their goods improving trust. Verification of goods is more reliable and in real time. Elimination of documentation speeds process and reduces costs. Advantages B: Post-IoT trade finance One online platform Multiple platforms 9 Figure 2: Diagram of pre- and post-IoT trade finance highlighting advantages of the IoT 5 Source: SWIFT, 2013.
  • 10. 10 IoT technologies can help banks overcome this problem, allowing them to monitor the condition, environment and location of collateral assets without needing to send someone to assess them. They can provide something close to the accuracy of an in-person assessment at a fraction of the cost. Such technology could be applied across a wide range of collateral as illustrated in Figure 3. Inefficiencies in the global collateral management market are estimated to cost banks up to $4 billion annually.6 Adopting IoT technology could significantly reduce this figure as real-time monitoring technology will improve valuation accuracy and render more assets eligible for collateral financing. 2.2 Improving valuation accuracy of real assets in leasing and asset financing Monitoring and valuing collateral leased or financed by banks is made inefficient by the cost of getting detailed information about the asset concerned.
  • 11. 11 6 Source: Collateral Management – Unlocking the Potential in Collateral, Accenture and Clearstream, 2011. Real Estate (mortgage) Commodities Fleet vehicle leasing Flag when vehicles require maintenance and also allow financers to have a better understanding of a vehicle’s present value Provides information on the current condition of the house for valuation and insurance purposes Monitoring the condition of commodities during transit allows financers to know if the condition of goods delivered meets contractual specifications n Hours in operation n Distance covered n Engine diagnostics n Driving behaviour n Weight of load n Terrain driven on n Environmental factors – pollution, temperature, flooding, general weather patterns n Water damage/ damp n Interior decay n Local economic trends, observable, for example, in local transport usage and shopping patterns n Temperature and moisture level exposure n Weight n Vibrations n Exposure to chemicals n Location n Speed of travel Asset Data Capture Application in financing Figure 3: Applications of IoT technology in asset financing
  • 12. 12 3. Being smarter with smart data Digitaltechnologyhasgreatlyincreasedthevolumeofdataavailable.However,thebanks havefounditdifficulttousethisnewdatatocreatevaluefortheircustomersandthemselves. Incontrast,onlineretailersandsocialmediafirmshavefoundwaystocreatevaluefromdata. 7 Source: Oliver Wyman analysis. Some of the ways in which online retailers create value from data: n Customer transaction behaviour is used to inform product suggestions, increasing sales and customer loyalty. n Viewingandlisteningbehaviourismonitoredtogiveappropriateadvice aboutnewproductsandservices,ortoservethird-partyadvertisements. n Real-time or contextual satisfaction surveying is used to flag when a customer is dissatisfied and to inform appropriate actions to retain them. n Location data is used for security and fraud checks or to offer suggestions, advertisements and offers that depend on the customer’s location. Despite substantial investment in data management, financial institutions lag behind firms in other industries. It is not unusual for large banks to spend upwards of $500 million7 on programmes to address the challenges related to data, yet it is widely acknowledged that these investments have not been translated to increased profits. Banks are not nearly creative or enterprising enough in their attempts to use data to offer better products or cut operating costs. The sheer variety of problems which data can address calls for specialised capabilities which banks often lack. Banks could take advantage of the specialised expertise at fintech companies by engaging these firms to perform the required work or by acquiring them. Partnerships between banks and fintechs would create a powerful combination of information, supplied by the bank, and innovative analytical tools, supplied by the fintech. The kind of problems that might be addressed are illustrated in figure 4. Identifying problems that can be solved by data is the first step to its smarter use. Assuming banks make their data readily accessible to those who need it, specialised teams can be assigned to problems such as these and create algorithms that uncover trends, patterns and anomalies. Then banks will be able to extract value from their ever- increasing supply of data.
  • 13. 13 “Right time and channel to contact” A blend of transactional, locational, communications and social media data can indicate times when customers are likely to be available. This has applications in marketing, customer engagement and collections. Fraud and market manipulation Some fintechs, such as Red Owl Analytics and Pentaho have developed software that helps banks to visually track who has influenced content in their data networks. This allows banks to “connect the dots” across a wide variety of data sources such as transactions, communications, physical access and digital data, and flags any unusual patterns between them. Understanding patterns that might constitute fraudulent behaviour and combining this with post- incident analysis helps banks to uncover fraud. Similarly, “know your customer” (KYC) checks could be helped by verifying the link between income and spending habits, location and stated occupation. SME Credit By utilising customer spending behaviour and supplier performance data, banks could help SMEs manage their cashflow and credit line requirements. Access to regular trade data, via the Internet of Things and point-of-sale systems, could help banks with credit scoring for growth capital and working capital needs. This would allow them to pre-empt SME financing requests so that they can provide real-time credit to match their clients’ needs. Budgeting Historical account data can give banks a granular view of customer spending and income patterns. By coupling these observed patterns with customer saving goals and aspiration, banks could offer budgeting advice. This would also help consumers and business clients understand the long-term budgeting implications of potential decisions. Fitechs such as Personetic and Geezo now use banks’ data and external sources to provide a more holistic and personal experience to customers. Figure 4: Applications of smart data
  • 14. 14 Clearing House Centralised Ledger Distributed Ledger In contrast to today’s transaction networks, distributed ledgers eliminate the need for central authorities to certify ownership and clear transactions. Distributed ledgers can be open, verifying anonymous actors in the network, or they can be closed and require actors in the network to be already identified. The best known existing use for the distributed ledger is the cryptocurrency Bitcoin. Distributed ledger technology has several attractive features: n Transactions can be made to be irrevocable, and clearing and settlement can be programmed to be near-instantaneous, allowing distributed ledger operators to increase the accuracy of trade data and reduce settlement risk. n Systems operate on a peer-to-peer basis and transactions are near-certain to be correctly executed, allowing distributed ledger operators to eliminate supervision and IT infrastructure, and their associated costs. n Each transaction in the ledger is openly verified by a community of networked users rather than by a central authority, making the distributed ledger tamper-resistant; and each transaction is automatically administered in such a way as to render the transaction history difficult to reverse. n Almost any intangible document or asset can be expressed in code which can be programmed into or referenced by a distributed ledger. n A publicly accessible historical record of all transactions is created, enabling effective monitoring and auditing by participants, supervisors and regulators. Commercial banks, central banks, stock exchanges and major technology providers, such as IBM and Samsung, are all exploring the potential uses of distributed ledgers. Fintechs, such as Ripple, Ethereum, Eris Industries10 and HyperLedger, are also developing new ways to exchange data and assets enabled by the technology. It is only a matter of time before distributed ledgers become a trusted alternative for managing large volumes of transactions. 4. Embedding distributed ledger technology A distributed ledger is a network that records ownership through a shared registry (see Figure 5). Figure 5: Centralised and distributed ledger approaches
  • 15. 15 CustodySettlement Collateral managemet and valuation Life cycle management ClearingMatching Post trade life cycle Scope for distributed ledger technology ■ Smart contracts can enable automated clearing upon trade completion ■ Real time updates on security title and interests updating ■ Allowing access to multiple users for robust monitoring ■ Increased transparency as information asymmetries are eliminated ■ Real time updates on the positions of the underlying collateral with consistent valuation methodologies ■ Securely, transparently move securities and assets in seconds or minutes ■ Enables point-to-point settlement, lowering the cost and risk of transactions ■ Smart contracts can facilitate robust custodian services on decentralised platforms eliminating intermediaries. The first major application is being seen in payments, especially across borders. International payments remain slow and expensive and significant savings can be made by banks and end-users bypassing existing international payment networks. In time, distributed ledgers will support “smart contracts” – computer protocols that verify or enforce contracts. This will lead to a wide variety of potential uses in securities, syndicated lending, trade finance, swaps, derivatives or wherever counterparty risk arises. For example, smart contracts could automate pay-outs by the counterparties to swap contracts. Figure 6 examines how securities settlement could be transformed by distributed ledgers. Cutting operational costs is not the only benefit in securities trading. Distributed ledgers can increase investor confidence in products whose underlying assets are now opaque (such as securitisations) or where property rights are made uncertain by the role of central authorities. Our analysis suggests that distributed ledger technology could reduce banks’ infrastructure costs attributable to cross-border payments, securities trading and regulatory compliance by between $15-20 billion8 per annum by 2022. 8 Sources: World Bank remittance data; World Federation of Exchanges; Oxera; Financial Times; Oliver Wyman analysis. Streamlining securities settlement The post-trade, settlement process can be expensive and slow, commonly taking two days, and sometimes longer, to process through a number of intermediaries. Distributed ledger technology has the potential to overcome frictions in current post-trade processes, providing an alternative technology for clearing and settlement. Figure 6: Scope for distributed ledger technology in the post trade settlement process
  • 16. 16 Banking is no exception. Not only can customers now shop for banking products online but the products themselves are being digitised. It is now possible to manage accounts and make payments to third parties without visiting branches, writing letters or signing and posting cheques. Digitisation is taking much of the pain out of banking. This progress, however, has been limited mainly to transaction accounts and consumer lending. Mortgages and long-term savings products still involve processes that are expensive, time consuming and a source of customer dissatisfaction. Removing the “friction” from these products is where the greatest opportunity now lies. 5. Creating frictionless processes and products Digital technology has taken the hassle out of shopping. Customers can now compare options, choose, pay and often receive the goods, such as an e-book or airline ticket, on any device with access to the internet. What might have taken hours of walking or driving around and talking to sales people can be done in minutes or even seconds without leaving home. 9 Source: Oliver Wyman analysis. This provides opportunities to digitise the process, removing much of its current friction. We envisage a simple yet robust home purchase process based on an improved data environment. See Figure 7 for a description of the Danish house purchasing process where much of the friction that exists in other markets has been removed. 5.1 Opportunities to reduce friction in the mortgage process With over $25 trillion9 in new mortgages issued annually across the globe the mortgage sector is a very big market. However, most mortgage markets still rely on a number of intermediaries to manage a predominantly paper-based process.
  • 17. 17 Buyer Seller Customer affordability information Online home search Lists property e-signature from both the buyer and seller, to execute transaction Prepares draft Property Data Final checks to release funds Property Data Transaction Details Mortgage providor Seller’s bank Electronic Purchase Agreement Real Estate Platform Electronic Land Registry Figure 7: Danish house purchase process Buying a house in Denmark n As a house becomes available for sale, a prospectus of the house is published on a real estate portal. The prospectus provides the public valuation, ownership, and financing details, energy rating, environmental issues and technical survey details. This collateral information will be available to prospective buyers and to all banks (through the electronic land registry) who can then immediately assess the value and the condition of the collateral. n A prospective buyer searches for a house on the real estate portal and contacts the agent appointed by the seller. In a parallel process, the buyer engages a mortgage bank and gives them permission to access their financial records, including salary details that show that the borrower can afford to service the mortgage. Combined with the collateral valuation, this allows the bank to approve a mortgage. n After contacting the agent and viewing the property (perhaps online), the buyer agrees a price with the seller. The buyer and seller electronically sign a standardised Purchase Agreement using their electronic ID. n An authorisation is sent to the buyer’s bank to transfer funds to the seller’s bank. The funds are released to the seller once all final conditions are met on the agreed closing day. n Once the funds have been transferred to the seller, the electronic land registry is updated to reflect the new owner’s details, and the transaction details are made available as an input to property pricing in the local area.
  • 18. 18 For example, new technology monitors customers’ spending habits, allowing them to manage their money better (e.g. Mint, Yodlee, Blueleaf10 ). And algorithm-driven tools or “robo-advisors” provide investment recommendations based on stated investment goals (e.g. SigFig, FutureAdvisor, Betterment10 ). This has helped reduce friction within some saving and investment activities, but we believe there are further opportunities: n Personal financial management (PFM) solutions typically help customers make better decisions about their spending habits but not about their savings and investments. New applications could unify investment, savings and current accounts, allocating funds according to user-defined triggers (e.g. a particular savings goal). This information could be linked to external data such as merchant offers. For example, a customer who wanted to buy a new phone could add the phone to a wish-list as part of their budgeting and savings goals. n Algorithm-driven investment platforms typically focus on just a few variables, such as asset diversification and risk tolerance, without taking account of other important variables, such as the customer’s current investments, especially where these are not tradable securities. These platforms will be better able to compete with traditional financial advisory offerings if they take a comprehensive view of all the assets a client might invest in or already has, both real and financial. n Fintech players could automate several basic PFM services, such as estate planning (e.g. setting up trusts), life insurance and basic tax planning. Current robo-advisors can extend their offering up the wealth spectrum, for example, to include people worth $1 million, who are now served face-to-face at a cost that is often not commensurate with the upside. 5.2 Frictionless saving and investment Many people seek help managing their personal finances and making investment decisions. This has traditionally been an area dominated by expensive face-to-face interactions with financial advisors. However, fintech alternatives have now emerged. 10 Anthemis portfolio company. After origination, mortgages have typically remained on bank balance sheets or been transferred to investors via securitisations. While investors are showing an appetite for direct exposure to whole-loan mortgages, the majority of equity stays in banks. For institutional investors, whether they are looking for whole loans or participation via securitisation, gathering and providing the growing amount of granular information that is becoming available through seamless real-time reporting will be highly valuable. A mortgage platform providing regularly updated data on the condition and value of collateral and on the financial situation of the mortgagee will allow investors to manage their portfolios with far more precision (see Figure 8). The information available would include demographics (e.g. age), location, income and affordability profile, financing type (e.g. mortgage rate, duration, payment profile), risk profile (e.g. borrower’s credit rating, behavioural information) and detailed collateral information (e.g. type of property, age of property, condition). Data and Analytics LayerOriginating Strategy Investor Asset Selection Rich layer of granular data and analytics Front to Back Customer Management Figure 8: Key features of an end-to-end mortgage platform
  • 19. 19 Conclusion: achieving Fintech 2.0 together Fintech 1.0 has brought only minor disruptions to the banking market, mainly in the areas of payments, credit and personal financial advice. But changes in customer preferences, advances in technology and growing investment in fintech set the scene for more radical change. Fintech 2.0 could mean a “seamless specialisation” across core elements of the value chain whereby a variety of providers combine to deliver cheaper and easier-to-use propositions to end customers. Banks must continue on their journeys of digitisation. But they need not travel alone. They should be clear about where their market advantages and institutional strengths lie. Where they fall short they should look to work with the start-ups who can provide what they need. The same goes for the new fintechs. They may be entrepreneurial and ambitious but there is more required to achieve Fintech 2.0. Wisdom, market expertise, trusted brands and not least a banking licence may also be required. The message to banks and to fintechs is the same: if you can’t beat them, you should join them to achieve Fintech 2.0. Copyright© 2015OliverWyman,AnthemisGroupandSantanderInnoventures.Allrightsreserved.Thisreportmaynotbereproducedorredistributed,inwholeorinpart,withoutthewrittenpermission of Oliver Wyman, Anthemis Group and Santander Innoventures and they accept no liability whatsoever for the actions of third parties in this respect. This report is not a substitute for tailored professional advice on how a specific financial institution should execute its strategy. This report is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accountants, tax, legal or financial advisers. Oliver Wyman, Anthemis Group and Santander Innoventures has made every effort to use reliable, up-to-date and comprehensive information and analysis, but all information is provided without warranty of any kind, express or implied.Some of the information used in preparing these materials was obtained from third party and or public sources. Oliver Wyman, Anthemis Group and Santander Innoventures assume no responsibility for independent verification of such information and Oliver Wyman, Anthemis Group and Santander Innoventures have relied on such information being complete and accurate in all material respects. Oliver Wyman, Anthemis Group and Santander Innoventures disclaims any responsibility to update the information or conclusions in this report. Oliver Wyman, Anthemis Group and Santander Innoventures accepts no liability to you or any third party for any loss arising from any action taken or refrained from, or any reliance placed on, or use of, the information herein by you or any third party, howsoever arising, as a result of information contained in this report or any reports or sources of information referred to herein, or for any consequential, special or similar damages even if advised of the possibility of such damages. This report may not be sold without the written consent of Oliver Wyman, Anthemis Group and Santander Innoventures. Santander Corporate Commercial is a brand name of Santander UK plc, Abbey National Treasury Services plc (which also uses the brand name Santander Global Banking and Markets) and Santander Asset Finance plc, all (with the exception of Santander Asset Finance plc) authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Our Financial Services Register numbers are 106054 and 146003 respectively. You can check this on the Financial Services Register by visiting the FCA’s website www.fca.org.uk/ register or by contacting the FCA on 0800 111 6768. Credit cards are provided by Santander UK plc. In Jersey, Santander UK plc is regulated by the Jersey Financial Services Commission to carry on deposit-taking business under the Banking Business (Jersey) Law 1991. Registered office: 2 Triton Square, Regent’s Place, London NW1 3AN. Company numbers: 2294747, 2338548 and 1533123 respectively. Registered in England. Santander and the flame logo are registered trademarks. Santander UK plc is a participant in the Jersey Bank Depositors Compensation Scheme. The Scheme offers protection for eligible deposits of up to £50,000. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Full details of the Scheme and banking groups covered are available on the States of Jersey website (www.gov.je/dcs) or on request.
  • 20. Contact us Anthemis Group is the venture investment and advisory firm at the centre of a vibrant ecosystem of startups and financial institutions dedicated to reinventing financial services for the digital world. info@anthemis.com www.anthemis.com +44 (0)20 3653 0100 Oliver Wyman is a global leader in management consulting that combines deep industry knowledge with specialised expertise in strategy, operations, risk management, and organisation transformation. info-FS@oliverwyman.com www.oliverwyman.com EMEA AMERICAS +44 20 7333 8333 +1 212 541 8100 ASIA PACIFIC +65 6510 9700 The Santander InnoVentures Fund provides fintech companies with much needed finance, as well as supporting the digital revolution, to ensure Santander’s customers worldwide benefit from the latest know-how and innovations. info@santanderinnoventures.com www.santanderinnoventures.com +44 (0)20 3818 3272 CORP 0009 JUN 15 H