FinTech and Transformation of the Financial Services Industry ------ SSE Executive MBA Dr. Robin Teigland Stockholm School of Economics [email protected] www.slideshare.net/eteigland @RobinTeigland January 2016
Apr 21, 2017
FinTech and Transformation of the Financial Services Industry
------SSE Executive MBA
Dr. Robin Teigland Stockholm School of Economics
[email protected]/eteigland
@RobinTeigland
January 2016
Today’s scheduleMorning: Financing Innovation
−9:00 to 10:30 Lecture Michal Gromek, PhD SSE, FundedByMe, Lendico, Rocket
Internet−10:30 to 11:30 Groupwork: Funding your Startup−11:30 to 12:00 Group presentations
Afternoon: FinTech and Industry Transformation?−13:00 to 15:00 Lecture−15:00 to 17:00 Discussion: Disruptor vs Industry
Incumbent Anna Felländer, Digital and Futuring Economist,
Swedbank Henrik Rosvall, CEO and Founder, Dreams
Groupwork: Funding your startup
Prepare a max 5 minute presentation−How much funding do you need to get your idea
off the ground?−Which form(s) of financing will you go after? And
When?−What will you give in return for financing? E.g.,
equity, reward, nothing−How long will it take for you to provide the return
for your “investors”?−What do you need to do to prepare for raising
financing?
If the rate of change on the outside exceeds the rate of
change on the inside, the end is near....
-Jack Welch
What triggers industry transformation?
Johnson & Scholes 1997
Politics and government
Environment Technology
Legal structure
Social and demographic
structure
International/nationaleconomy
Industrystructure
Two dimensions of transformation
Core activities – Recurring actions a company performs that attract and retain suppliers and buyers (profit-making activities)
Core assets – Durable resources, including intangibles, that make a company more efficient at performing core activities
McGahan, HBR, 2004
What is FinTech?
Accenture/CB Insights
Technologies for banking and corporate finance, capital markets, financial data analytics, payments, and personal financial management
Finance TechnologyFinTech
FinTech World
Personal Finance
Payments Bitcoin & Blockchain Currency
Currency Remittance & FX
Lending
Crowdfunding
Robo-investing & Asset Management Tech
Consumer Banking & Saving
The Wharton FinTech Club
What is FinTech?
1950 1960 1970 1980 1990 2000 2010
1959, Bankgirot founded
1985, Swedish financial and credit markets deregulated
1968, World’s first online ATM in Sweden
First wave of electronic trading software companies emerges
2003, First BankID issued in Sweden
1990s, Sweden invests in Internet infrastructure, today country with 3rd highest Internet penetration
2010, iZettle founded
2010, Neonet $160M exit 2014,
iZettle raises $55M
2014, Klarna raises $125M in PE
1967, First ATM installed in Sweden
1984, Optionsmäklarna (OM) opens in Stockholm, Sweden’s first stock option market, electronic trading introduced
2012, TriOptima, $160M exit
2005, Klarna founded
1998, Merger between Stockholm’s Stock Exchange and OM Stockholm
2007, NASDAQ acquires OMX Group
Unicorns such as Skype, King, Spotify and Mojang founded
2014, FinTech Funding in Stockholm Explodes
Long history of “FinTech” in Stockholm
http://www.slideshare.net/eteigland/stockholm-49722748
In just the past few years in Stockholm…
Company Founded BusinessKlarna 2005 E-commerce payment servicesMyLoan 2006 Loan brokerTrustly 2008 Online paymentsiZettle 2010 Mobile paymentsFundedByMe 2011 Crowdfunding, crowd equityKivra 2011 Digital mailboxTink 2012 Personal financeSafello 2013 Cryptocurrency exchangeKnCMiner 2013 Cryptocurrency mining equipmentToborrow 2013 P2P lending for companiesCryex 2014 Cryptocurrency clearing house
Stockholm #2 FinTech city in EU
2010-2014 investment
● $532 Mln
2014 investment● $266 Mln
Top 2014 Investments in
Stockholm FinTech Companies (USD Mln)
Klarna $125
iZettle $55
Trustly 29
Bima Mobile $22
KNC Miner $14
http://www.slideshare.net/eteigland/stockholm-49722748
”Innovative Lending & Investing” emerging
2013 Stockholm FinTech revenue
Cryptocurrency0%
Transfers2% Innovative Lending
5%Wealth Man-age-ment9%
Other FinTech12%
Payments33%
Trading & Banking Tech39%
& Investing
Our report: http://www.slideshare.net/eteigland/stockholm-49722748
But in China alone in 2015…
http://www.crowdfundinsider.com/2016/01/79612-report-china-p2p-lending-topped-150-billion-in-2015/
Four forms of crowdfunding Form Benefits for funders
Donation-based Donation Intangible benefits.
Reward-based
Donation or pre-purchase
Rewards in addition to intangible benefits.
Equity-based Investment
Return on investment if company does well. Rewards sometimes also offered and
intangible benefits may motivate too.
Loan-based LoanRepayment of loan with
interest. Alternatively intangible benefits if loan
given interest-free.
Democratizing innovation and investment?
Women in USA <30% of business
owners <15% of angel
investors <10% of venture
capitalists
Marom, Robb and Sade 2014
Women on Kickstarter
35% of project leaders
44% of investors Women invested in
women project leaders (>40% of projects)
VS
Cryptocurrency mining equipment
http://techcrunch.com/2014/09/04/kncminer-raises-14-million-to-take-bitcoin-mining-to-the-moon/
What is a cryptocurrency?
DigitalDecentralized, peer-to-peer (P2P), i.e., no
central, third party
Uses cryptography to validate/secure transactions
Also uses cryptography to generate currency itself
Non-technical explanation of Bitcoin−https://www.youtube.com/watch?v=t5JGQXCTe3c
Within 6 years: Challenging
the fiat money system?
Bitcoin – An emergent phenomenon• Open source project on SourceForge in Jan 2009 • Original source code by “Satoshi Nakamoto” –
pseudonym?• Developed by self-organizing community of
thousands of strangers across globe• Approx USD 6.5 bln market cap and approx 180,000
daily transaction volume of USD 101 mln• 1 BTC = USD 431 (Jan 14, 2016)
Teigland, Yetis, Larsson 2013 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707
How does Bitcoin work?
Screenclip from: How Bitcoin Works under the hood, by “Curious Inventor”
Blockchain • Shared public
ledger • All transactions
ever made logged• Chronology and
integrity enforced by cryptography
IoT and smart contracts
Ownership attached to asset/property (e.g., real estate, shares) and can be verified
Run on Bitcoin ledger, execute legal rules between two entities: people, organizations, machines
Trustless because no center, no one in middle – the network is the middleman
Example: I run a private weather station using neighbors’ sensors. Smart contracts enable payment to neighbors for data sent from their sensors to my weather station.
But time will tell… uses we cannot imagine today.
https://www.youtube.com/watch?v=JsC4ptn2Aik
From “trusted”, centralized human authorities
to trustless, decentralized networks
IBM Institute for Business Value (PDF)
FinTech World
Personal Finance
Payments Bitcoin & Blockchain Currency
Currency Remittance & FX
Lending
Crowdfunding
Robo-investing & Asset Management Tech
Consumer Banking & Saving
The Wharton FinTech Club
What is FinTech?
FinTech – An increasingly crowded space
• Growing number of entrepreneurs with experience from established finance industry
• Increasing number of FinTech incubators • Collaboration among established banks• Open innovation through open APIs• Other big non-banking entrants
Responses to disruptive strategic innovation
Charitou, C. D., & Markides, C. C. (2012). Responses to disruptive strategic innovation. MIT Sloan Management Review
Incumbents running incubators
Actor Incubator LocationCiti Mobile
Challenge Americas, EMEA, Asia Pacific
DBS & Nest Investment Accelerator Hong KongWells Fargo Startup
AcceleratorUSA
Accenture and Bank of America, Merrill Lynch, Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, UBS
Innovation Lab
NY, London, Hong Kong
“Innovation labs are a sign that banks are taking the FinTech threat seriously as they recognize that we’re coming to eat their lunch.”
-FinTech Entrepreneur
Betting on the Blockchain - Together
Goldman Sachs, JPMorgan, Credit Suisse, Barclays, Commonwealth Bank of
Australia, State Street, RBS, BBVA,
UBS, Nordea, SEB, + ……
+
FinTech challenges
Regulation
Privacy
Security
Untested in periods of high interest rates, increased risk, and reduced investment
Previously…
In the eight-year period between the Netscape IPO and the acquisition of PayPal (one of the winners of this era) by eBay, more than 450 attackers – new digital currencies, wallets, networks, etc. – attempted to challenge incumbents.
Fewer than five of these survive as stand-alone entities today.
McKinsey, 2015
Thomas Jefferson (1816)“Laws and institutions must go hand in hand with the progress of the human
mind.”
The problem is that the human mind itself can’t keep pace with the advances
that computers are enabling.
http://wadhwa.com/2014/04/15/mit-technology-review-laws-and-ethics-cant-keep-pace-with-technology/
Robin [email protected]
www.slideshare.net/[email protected]
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