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Why Fintech?


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Fintech is a hot sector among investors, but why?

As a fintech focused VC, take a look at our perspective on why financial services is on the cusp of change.

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Why Fintech?

  1. 1. Why Fintech?
  2. 2. We’re in a golden age of technological transformation Source: Visual Capitalist
  3. 3. An example of technology disrupting a traditional industry Amazon is a prime example of how technology can transform an industry. Through offering a better customer experience and reducing overhead costs, Amazon has grown to the point where it’s market capitalization is larger than those all the publically-traded department stores added together. Source: Visual Capitalist
  4. 4. Financial services stands out in terms of potential value creation $6.8 $6.5 $4.4 $4.4 $3.7 $3.6 $3.4 $1.8 $1.8 $1.1 $1.1 Market Cap ($T) Source: Fidelity Investments As one of the largest sectors in the economy, financial services is a clear target for disruption.
  5. 5. Factors opening the way for new financial service providers Market Timing and Regulation Technology Unmet Demand Customer Expectations` • Low NPS scores for many leading providers in financial services • Shift in the way people interact with services including financial services (mobile and online capabilities expected, ability to connect data sources increasingly common) • Banks running on legacy systems due to the complexity, cost, and risks in migrating to newer system • Dropping costs of technology development and spread of online sources of data has made it much easier for startups to enter the market • The credit crisis of 2008 and the resulting regulation has impeded innovation as banks dedicated more resources to compliance and risk management programs • 17M adults in the US are unbanked and 43M are estimated to be underserved • New data sources and data science enable companies to provide services that might have been economically viable before
  6. 6. Leading fintech entrants have shown that they can produce returns 1 2 3 4 Clear monetization strategy Proven and measurable customer demand Reduced cost structure Highly scalable business models 5 Exit multiples on par in some instances with internet and software companies
  7. 7. Venture dollars have flooded into fintech… US venture deal count and capital invested has increased dramatically in the last 2 years. $405M $783M $639M $607M $685M $1B $2B $2B $5B $9B $10B 58 95 102 116 153 230 333 461 629 705 589 0 100 200 300 400 500 600 700 800 $0M $2B $4B $6B $8B $10B $12B 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total Capital Invested Deal Count Source: Pitchbook
  8. 8. ...spurring innovation across the various subsectors of financial services Source: Venture Scanner
  9. 9. Numerous fintech startups have come to scale Source: CB Insights
  10. 10. And we expect the trend to continue We're just at the beginning of this renaissance in alternative lending--and I look forward to the day it's not called alternative. - Rob Frohwein, Kabbage