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Presentatie_Bolero_Sarajevo_16.9_20160921
1) Fintech is disrupting the traditional banking model through faster innovation and customer experience from startups. Payments and lending are seen as the most vulnerable areas for incumbent banks. 2) Peer-to-peer lending is growing exponentially due to lower costs and better rates for borrowers and lenders compared to traditional banks. However, regulatory issues in the US pose challenges for the business model. 3) The Lending Club IPO and subsequent events highlight growing pains in the US marketplace lending industry as it faces headwinds around regulations and operational issues.
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Presentatie_Bolero_Sarajevo_16.9_20160921
- 1. Bart Vanhaeren Managing DirectorKBC Securities CEO Bolero Co-Founder Bolero Crowdfunding @BoleroCrowdfund Fintech conference Sarajevo
- 2. Uberization = Disruption Silicon Valley iscoming. There are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking.” Jamie Dimon, CEO of JPMorgan remarked in a letter to shareholders in April 2015.
- 3. Fintech is nothingmystical.” Jamie Dimon seemed less worried about Silicon Valley taking over Wall Street. On for instance P2P lending and other onsite lenders he stated: “Can we do something like that? Of course we can.” The real threat is in the payments transactions area. “If you ask me, the biggest risk will be in the payment systems.” In march 2016 Jamie Dimon said on fintech:
- 4. Before Music Trading RetailAdvertising After Global Music Market $28B in 2000 $9B NASDAQ trading floor revenues in 2000 US Newspaper Print Ad Market $65.5B in 2000 $15B in 2014 $2.5B in 2014 5.8% in 2013 but 75%* of growth is coming online $17.3B in 2013 Percentage of US Retail sales through E-commerce .09% in 2000 * Source: Oracle 2015 Financial impact of disruption
- 5. Financial institutions riskbeing squeezed between fintech startups and Apple/Google/Alibaba
- 6. Our main advantageis speed, the speed at which we integrate new things and adapt to them... and the speed at which we deliver the customer experience. In a downturn we’ll be adapting faster than others. We operate in Russia and we adjusted our model to the recession there.” Alexander Graubner-Müller, Co-Founder and CEO, Kreditech (interview Crowdfund Insider, March 2016) “
- 7. F 53% 70% 33% Thinktheir bank is no different to other banks Think the way we pay for things will be totally different in 5 years Think they won’t need a bank at all in 5 years Source: Viacom 2015
- 8. “Expectations of banksare rapidly changing, and we understand that we must adapt. The reality is customers demand faster and simpeler access to their banking services, when and how they want.” says Richard Davies, chief operating officer for UK commercial banking at HSBC in an interview with the FT
- 10. The “selfie” willbe matched with a photo from a passport or driving license. “We also expect the convenience and speed of a selfie to become the verification method of choice for our customers who no longer needto visit a branch to complete the process,” said HSBC’s global propositions head, Richard Davies in a statement released Monday. The bank has roughly 45 million retail customers, and is already using voice and fingerprint recognition software. “
- 11. 2015 2017 20202023 1.1% 5% 10% 17% $1.200 billion$1.050 billion$870 billion$850 billion Total banking consumer revenue Revenue impact from digital disruption Source: Citi Digital Strategy
- 12. Investment in PrivateFintech Companies Increased x10 in the past 5 years Private Investment in Global FinTech $1.8 billion $2.1 billion $2.4 billion $4.0 billion $12 billion $19 billion Source: Citi and CB Insights 2010 2011 2012 2013 2014 2015 Last year 19 billion dollar was invested in Fintech start-ups
- 13. Source: Sirris Deals over$1M Fintech 51 Adtech 34 18 14 12 12 12 Security LoT HRtech Health care Number of deals per industry (QI 2016)
- 14. Source: Sirris als over$1M 0 300 600 900 1.200 1.500 Healthcare Adtech Travel Fintech Musictech €140M €149M €188M €518M €1.3B Amount raised per industry (QI 2016)
- 15. 0 5 1015 20 25 2 3 10 9 14 6 12 25 2 4 13 1 Segments’ share of global banking revenues Large corporate4 Commercial Retail Large corporate4 Commercial Retail <5% 5%-7.5% 7.5%-10% >10% Large corporate4 Commercial Retail Large corporate4 Commercial Retail Customer segments Products/ capabilities Account management5 Lending and financing Payments Financial assets and capital markets6 Fintech is going after most profitable banking areas
- 16. Payments and lendingmost important areas
- 17. …as well asin the institutional banking domain TRODUCTION
- 18. China: $66.9 bn US:$16.6 bn UK: $5.4 bn China is past the tipping point with FinTech companies having similar number of clients as the major banks
- 19.
- 20. Alipay payment volume Rmb bn ICBC credit card transaction CMB creditcard transaction 0 1,000 2,000 3,000 4,000 5,000 4,825 1,869 1,331 * Alipay payment volumes for 12mos to June 2014 / Source: Company Reports, Citi Research Current disruption in the payments sector in China
- 25. $92.2M $67.3M $22M $128M Atom Bank Online-only bank SeriesB $29.6M RateSetter Peer-to-peer lending service Unattributed-II $58M TransferWise Online money transfer Series C $83M Ebury Partners FX/currency services for businesses Private Equity $100M WorldRemit Oline money transfer Series B $150M Funding Circle Peer-topeer lending service Series E $34.4M Pret d’Union Online credit marketplace Series D $22M Raisin Marketplace for term deposits Series B $128M $92.2M Kreditech Online lender Series C $67.3M iZettle Mobile payments company Series D $34.4M $29,6M $58M $83M $100M $150M
- 27. 2012 2013 20142015 Series C – II $200M$4M $4M $7M $15M $40M $92.2M $11M Total Funding $372.7M 1 day since last funding Klarna’s funding history
- 28. Europe’s leading Flintechhubs During our research we also tracked the headquarters of the TOP 200 early-stage fintech companies that were founded between 2015 and 2016. On that basis we created a ranking with Europe’s leading fintech hubs. The word “leading’ reffers to number of promising early-stage fintech startup, not funding numbers, company valuations or other metrics. It was no surprise to us that London is the clear leader in Europe’s financial technology space. But recent political developments like the Brexit are probably going to impact the further development of the fintech hub London and it’s European couterparts. 1. London (UK) 6. Frankfurt (Germany) 11. Limassol (Cyprus) 2. Berlin (Germany) 7. Oslo (Norway) 12. Brussels (Belgium) 3. Paris (France) 8. Copenhagen (Denmark) 13. Helsinki (Finland) 4. Amsterdam (Netherlands) 9. Luxembourg (Luxembourg) 14. Madrid (Spain) 5. Dublin (Ireland) 10. Vienna (Austria) 15. Zurich (Switzerland)
- 31. P2P lending inGoogle Search
- 32. The alternative lendingmarket conceptualised
- 34.
- 35. Source: Company information;UK data from Bank of England statistics 1 Average UK unsecured lending, fixed rate, 1 to 5Y fixed loan as of December 2015 (source: Bank of England statistics) 2 Average UK bank fixed rate deposits from households as of December 2015 (source: Bank of England statistics) … as superior technology-driven platforms cut out inefficiencies of traditional lenders… Traditional Lender Capital requirements Branch infrastructure Customer acquisition Underwriting Servicing Capital requirements Underwriting Servicing Customer acquisition P2P Lender 0.0% 2.5% 5.0% 7.5% 10.0% Cheaper loans Better returns Traditional bank loan rate 4.48% 7.98% P2Pspread Bankspread 1.71%2 8.37%1 Traditional bank deposit rate P2P player’s lower cost business model drives value… ...to both lenders and borrowers PEER-TO-PEERLENDING P2P Lender 9
- 36. … resulting inthe exponential growth witnessed in the P2P lending sector Source: Company information; Positive Planet research, “New Insights Into An Evolving P2P Lending Industry”, August 2015 1 Data as of May 20, 2015 from AltFi.com 2 US cumulative lending based on latest available figures for top 3 players including Lending Club, Prosper and SoFi 201420132011201020092008200720062005 20152012 Nascent Period Subprime Crisis Credit Tight Environment Rapid Growth UK US £6.8bn in cumulative lending in the UK1 c. £23bn in cumulative lending in the US2 New SEC regulation for US P2P platforms UK government places funds on P2P platforms A-rated securitisation $870mm IPO 1st P2P securitisation by UK announced P2P ISA wrapper announces its plans to launch London-listed fund and to raise £150mm – UK related events – US related events 2016 PEER-TO-PEERLENDING 10 announces the first securitisation in the Euro P2P space
- 37. The underlying P2Pbusiness model is meant to be straightforward and transparent, directly connecting borrowers and lenders… P2P platform Underwriting Scoring Servicing Collection Lender Borrower Funding – Origination feeFunding Repayments + Interest + Servicing fee Repayments + Interest PEER-TO-PEERLENDING 11
- 38. …but the puremodel only exists in the UK… Conducive regulatory environment Supportive government initiatives Dedicated P2P regulatory regime FCA regulated (since April 2014) Direct connection of lenders and borrowers without financial intermediary Self-regulating industry body – P2P Finance Association ISA (tax free savings accounts) eligibility Bad debt losses offsettable against interest income for tax purposes Tax exemption on up to $1,000 of annual earnings from P2P lending interest Government deployed its own funds through P2P platforms¹ Source: FCA; Broker research 1 Through British Business Bank P2P lender Borrowers Application 1 Cash Monthly repayment + Interest Origination + Servicing fee 3 UK model Borrowers Application Commitment Cash Loan note Origination feeCashLoan note Loan note Loan proceeds, net of origination fee 1 2 867 4 3 5 9 US model Lenders 4 2 P2P lender Lenders 12 Partner bank PEER-TO-PEERLENDING
- 39. Lending Club’s shareprice evolution is an indicator of the headwinds being faced by the industry, especially in the US Source: Lending Club press releases, FactSet as of May 20, 2016 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 Dec-14 Mar-15 Jul-15 Oct-15 Feb-16 May-16 Performance since May-16 Lending Club share price $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 02-May-16 11-May-16 20-May-16 Share price evolution of Lending Club 11-Dec-14 LendingClub rose 56% on its IPO, on a list price of €15.0 4-Mar-16 Class action lawsuit filed alleging LendingClub sold loans at usurious rates 14-Aug-15 US Court of Appeals refused to reconsider its decision to restrict marketplace lenders from bypassing state usury laws (Madden vs. Midland Funding) 09-May-16 CEO resigned after an internal sales review over faulty loans 25-Feb-15 Announced a loss of $9mm in Q4’14, even as revenue doubled Recent developments In March and April 2016, $22mm of subprime non-conforming sales were made to a single unaccredited investor A few Lending Club employees were aware that this sale did not meet the investor’s criteria In early April 2016, Lending Club repurchased these loans at par and subsequently resold them at par to another investor The board hired an outside expert firm to review all other loans facilitated in the first quarter of 2016 The review began with discovery of a change in the application dates for $3.0mm of the loans described above On 6th May 2016, Renaud Laplanche, the CEO and Chairman of Lending Club resigned over loan sale issues As part of the review, the Board also discovered that the CEO held an undisclosed economic interest in a 3rd party fund that Lending Club was considering to buy Lending Club also announced that Investors who contributed a significant amount of funding for loans have suspended purchases PEER-TO-PEERLENDING 19 (73.4%) (49.7%) Lending Club S&P 500 Since CEO resigns (43.8%) (0.2%) 3m (55.1%) 7.0% 6m (68.4%) (1.8%) 12m (77.4%) (3.5%) Since IPO (73.4%) 1.3%
- 40. VS Asia PacificEuropa Total % Equity 598.050.000 1.012.390.000 600.155.902 2.210.595.902 1,6% Lending 33.720.000.000 92.751.730.000 4.008.072.842 130.479.802.842 96,8% P2B 4.890.000.000 81.459.000 1,398249426 47.334.951.554 35,1% P2P 28.830.000.000 66.417.000 4,41904934 83.144.851.288 61,7% Reward 658.370.000 65.081.276 54,24034157 1.737.102.761 1,3% Donation 215.560.000 166.310.000 33.736.199 415.606.199 0,3% Total 35.191.980.000 94.841.170.000 4.809.957.704 134.843.107.704 100% % 26,1% 70,3% 3,6% 100% Bronnen: Cambridge University. Douw&Koren, The current state of crowdfunding Crowdfundingmarkt 2015 … wereldwijd (USD)
- 42. The lending clubhas made a significant inroad in the lending business and is considered the posterchild of alternative lending but
- 43. Maybe but whatabout funding loan loss ratios and marketing costs?
- 44. IPO Public Market 1st 2nd Secondary Offerings Breakeven 3rd Mezzanine Angels FFF Early Stage Later Stage VCs, Acquisitions/Mergers & Strategic Alliances Seed Capital Valley of Death Crowdfunding Time Revenue
- 45. The chinese peerto peer market is basically a scam says Guangchang and the president of Ping an insurance calls P2P “fake” More than 40 people arrested and put in jail 66 billion dollar
- 46. Crowdfunding in Belgiëen buurlanden in 2015 (in miljoen euro) 0,9 7,5 1,4 4,4 54,2 10,2 België 128,1 Nederland 113,9 Duitsland 293,5 Frankrijk 3,530 Verenigd Koninkrijk per inhabitant per inhabitant per inhabitant per inhabitant per inhabitant Bron: Eurostat, Douw&Koren
- 47. Challenges Are High Marketplacelending or P2P lending offers online platforms to match borrowers and lenders with the aim of lowering the borrowing cost for borrowers and increasing returns for lenders. Marketplace lending has been around for over a decade but has only seen a take-off in growth over the last few years. Zopa, founded in 2005 in London, is the world’s first P2P lending platform. Figure 70. Marketplace Lending Source: Citi Research We are still at an early stage of development for marketplace lending. Total loans lent by the P2P platforms are less than 1% of total loans outstanding. Nevertheless, the market has been growing exponentially, especially in the last three years. In the US, P2P lending is dominated by two players Lending Club and Prosper, which together account for over 90% of cumulative lending. The UK has the largest P2P lending market in Europe and China has the largest P2P market in the world. China’s cumulative lending of RMB440 billion ($67bn) is close to 4x that of US and China US Europe Despite marketplace lending being around for over a decade, it has only really taken off in the last few years Total loans lent by P2P platforms are less than 1% of total loans outstanding but the market has been growing exponentially
- 48. Een overzicht vancrowdfunding-exits wereldwijd (EUR)
- 49. Gemiddeld werd 200kopgehaald door online crowdfunding versus 500k via traditionele financieringsvormen Source: Copenhagen Business School 2014. Master’s Thesis For Cand.soc.sc. Organizational Innovation And Entrepreneurship In 2012, around 79 per cent of all crowdinvesting rounds were of a total volume smaller than USD 250 thousand, with funding volume of successful campaigns averaging at USD 190 thousand. Compared to this the average value of BA or BA syndicate deals at the seed stage averaged USD 590 thousand during 2013. Equity USD 190.000 Lending USD 4.700 Reward USD 2.300 Donation USD 1.400
- 50.
- 53. Successfully funded Aandelen Totaal opgehaald:€580.000 €480.000 Min. €50.000 Negotiatie met CV’s 4-8 weken Binding term sheet with CV’s Max. €100.000 3 VC’s Crowdfunding 184
- 54. Successfully funded Obligaties Opgehaald: €230.000 Min.€150.000 2 weken Interest: 4% + bier Looptijd: 4 jaar 302
- 55.