„Rhein-Main-Neckar ist Deutschlands dynamischste FinTech-Region“

Inhalt

11. Vorbemerkungen

22. Überblick und Analyse zur Entwicklung der deutschen FinTechs

3 Anmerkungen

2 2

Financial System in Perspective (American households, 2013, %)

Unbanked AFS* (used in the last 12 months) All households By familiy 0 8 10 20 25 30 40 income $‘000

<15

15-30

30-50

50-75

75+

*Alternative Financial Services include cheque cashing outlets, money transmitters, car-title lenders, prawnshops and return-to-own stores

3 Source: The Economist 09/2015, FDIC Mindset: banks and fintechs have different starting points

Expectations of customers and public

Quality Discretion Comprehensive range of service Regulation Structures

Processes IT structures Corporate Culture Approach to market Risk aversion Entrepreneurship Silo-based management

Bureaucracy

4 Source: Bankenverband – Fintechs – Developments and Outlook, Sept. 2015 FinTech Business Models

Degree of disruptiveness

1 2 3 Supporters Aggregators Disruptors 4 Innovators

Players which Players who use Players which the Players which support existing existing services or full value chain of a invent services or market participants information for service or parts products outside the or products through aggregation thereof and, in existing value their own services purposes to create, doing, who have a chains and to create, e.g., e.g., market “disruptive” impact generate higher quality or transparency or to on the existing innovation. efficiency. route business to market. core providers. E.g. Blockchain, Typical solutions Such services are Cryptocurrencies include financial Typical change in typically product

software and the front-end of innovations. Depth of value chain disruption chain value of Depth processing services. solutions.

5 5

Snapshot of Germany´s FinTech segments

# FinTech foundations per year Expected trend 10 10 9 FinTechs within this segment enable the exchange of 8 products, services by provision of an agreed value. This Payments includes Payments infrastructure, Virtual Currencies, Online 5 4 and Mobile Payments and E-Money/-Wallets. 2 2 0 2010 2011 2012 2013 2014 2015

15 The Banking & Lending segments includes FinTechs offering 11 11 10 core bank services like lending services & products, short 8 8 8 Banking & term financing and factoring, alternative financing in terms 5 Lending of crowdfinancing for both B2B and B2C as well as P2P, 5 account management (opening, maintaining, switching accounts). 0 2010 2011 2012 2013 2014 2015

Business models of the financial data & analytics market provide significant opportunities for companies to use data Financial Data analysis to e.g. improve the consumer experience, 2 2 Analytics monitoring of business activities or manage credit risk and 1 1 1 as well as data enrichment services to combine various sets 0 of data from several sources. 2010 2011 2012 2013 2014 2015

8 InvestTech covers the scope of trading with traditional 7 trading activities, portfolio management including 6 5 4 investment analytics for decision-making for both 4 3 3 InvestTech businesses and private traders. The segment also comprises 2 business models addressing Trading operations & 1 6 investment accounts on the B2B side. 0 Source: EY analysis 2016 2010 2011 2012 2013 2014 2015

German FinTech landscape: opportunity for Rhein-Main- Neckar Snapshot of Germany´s FinTech segments (cont’d)

# FinTech foundations per year Expected trend

FinTechs within this segment provide a new or Enabling altered financial infrastructure to enable products and processes. In addition, FinTechs offer 4 4 Processes & 4 3 3 solutions to optimize process management or 2 2 Technology financial software supporting processes and 2 functions. 0 2010 2011 2012 2013 2014 2015

15 While eMarketplaces offer the possibility to 12 directly purchase a financial service or product, 10 9 eMarketplaces, Aggregators & Intermediaries levy a fee for a 8 6 service rather than providing the service 5 Aggregators & 5 Intermediaries themselves. Platform markets are online 2 marketplaces that generally provide third-party 0 products (B2B / B2C). 2010 2011 2012 2013 2014 2015

In this business segment are FinTechs offering solutions to financial services organizations to help to comply with regulatory requirements and 4 4 RegTech manage risks. RegTechs also cover the scope of 4 3 user authentication e.g. fingerprint or voice 2 1 1 recognition technology and software as well as 0 security applications. 2010 2011 2012 2013 2014 2015

InsurTechs impact the incumbent insurance business through innovations in (digital) products InsurTech and operations. Examples are data-driven and usage-based insurance or digital claims 1 1 1 processing software. 0 7 Source: EY analysis 2016 2010 2011 2012 2013 2014 2015

German FinTech landscape: opportunity for Rhein-Main- Neckar Most investments still take place in traditional banks

Comparison of Investment by fintechs and banks Global investment by fintechs1 in selected business activities Estimated total Total IT budget of top investment in 3 retail banks in Germany (based on Germany German share of global GDP) ca. 1.000 391

308 81 1.755

975 ca. 160

TOTAL Payment Lending Investment Retail banks‘ transactions Operations Asset Personal Finance by fintechs IT budget2 Management Management 2Minus costs associated with regulation 2012, in USD million; sources: CORETransform, World Bank, KPMG/Association of German Banks / Association of German Public Banks 1Includes only publicly accessible data about the analysed firms 8

Source: Bankenverband – Fintechs – Developments and Outlook, Sept. 2015 Overview international FinTech hubs

Innovative FinTech hub of The Baltics have a lively Europe´s number 1 the Nordics with strong FinTech scene. Skype, hub with strong FinTech niche capabilities Napster and BitTorrent growth through an such as gambling have roots to the Baltics Number 1 global financial excellent environ- center with the highest ment as one of the number of employees two major global (followed by London) working financial centers Stockholm in the FinTech industry Baltics London Berlin Frankfurt Luxembourg Key gateway to the Chinese mainland Zürich which represents significant Silicon Valley opportunities for financial services New York Tel Aviv Highly active and innovative Hong Kong Number 1 location for start-ups globally, technology location Largest hub in Asia with strong with a highly-developed landscape of with almost 300 government support in promoting FinTechs across all segments and venture capital firms; Singapore an innovative FinTech eco-system levels of maturity with excellent access strong penetration in through direct investment, tax to capital seed-stage funding incentives and measures to attract entrepreneurs

9 9 A comparative snapshot of the major global FinTech regions

United Kingdom Germany Characteristics New York Characteristics ► Significant investment in Credit and ► Proximity to global financial hub offering talent “Large but complex” “Proximity to expertise & Lending (c. €402m); growing focus on and expertise. B2B. customers” “All rounder” ► Progressive government and regulatory regime. ► Complex start-up environment; efforts Market FinTech ► Effective network of hubs. underway to integrate Berlin, Frankfurt Market size size Investment staff and Munich. €7.5b Market € 2.4b €524m c.13,000 FinTech Investment size Investment staff €1.9b € 8.9b €707m c.61,000 Hong Kong FinTech staff c.57,000 “Potential”

Characteristics Market size FinTech €0.9b staff ► Proximity to established LTM Investment c.8,000 financial markets. €62m ► Network of first generation Characteristics entrepreneurs. ► Relatively nascent, emerging market. ► Strong presence of incubators, accelerators. ► Emerging community of FinTechs focused on California Capital Markets.

“Increasingly progressive regulatory regime” Singapore

“Increasingly progressive regulatory regime” Australia

Market size FinTech Investment “Up and Comer” €6.3b €4.8b staff

c.74,000 FinTech Market size Investment FinTech staff Market size Investment staff Characteristics €0.8b €267 m c.10,000 €0.9b €50m c.7,000

► Expertise from a relatively mature FinTech Characteristics community. Characteristics ► Emerging FinTech ecosystem with high levels of collaboration and ► Established interconnections within FinTech ► Gateway into Asian market. government interest. ecosystem. ► Ease of doing business, and English ► Recent €0.9b commitment to innovation agenda. ► Concentration of large venture capital funds. 10 language proficiency. ► Dedicated team in the Monetary Authority focused on public and private partnerships. Germany is ranked as follower with strong future potential in the group of the top 8 global regions

► UK leads the ranking of the top global FinTech regions with good scores in all Ecosystem attributes

► There is a significant gap between the three leading Anglo-Saxon FinTech regions and the remainder of the group

► Germany is scored at 5th rank in par with Australia, which correlates with the maturity of the German FinTech Ecosystem

2015 Rank by Ecosystem Attribute Talent

Talent Capital Policy Demand ► California is leading as Total Region provider of top talent, - Regulatory - Consumers Points - Seed regimes - Talent availability - Corporates especially for tech skills. - Growth - Government - Talent pipeline - Financial - Listed programs institutions Capital - Taxation policy ► With Silicon Valley, California UK 2 3 1 3 9 has long been an attractive California 1 1 6 2 10 spot for investors seeking innovative new start-ups. New York 3 2 7 1 13 ► Also the failure culture has Singapore 4 7 2 6 19 been ideal to foster start-up Germany 6 4 5 5 20 activity.

Australia 5 5 3 7 20 Policy ► Compared to Germany’s Hong Kong 7 6 4 4 21 BaFin, the FCA in the UK is Source: EY analysis – HM Treasury Benchmarking Study 2016 extremely open towards In order to catch up with the leading FinTech hubs, Germany will have11 to provide aFinTechs well-tuned and ecosystem actively to attract talent as well as capital and improve the regulatory environmentsupports the development of ne business models.

German FinTech landscape: opportunity for Rhein-Main- Demand Neckar ► Being one of the world’s largest financial capitals and a metropolis, New York offers huge market potential. German FinTech investments are growing disproportional compared to global investments

Global Fundraising in bn € German Fundraising in mn €

25

20 +156% 600 576 Others 500 15 +181% Asia 400 10 300 225 Europe 200 5 100 80 USA 0 0 2013 2014 2015 2010 2011 2012 2013 2014 2015 Source: EY Analysis & CB Insights Source: EY Analysis & CB Insights * Does not include 360T transaction of 750mn US$ • Global investment volume have been increasing • Significant growth of FinTech investments in Germany in the steadily since 2010 last 2 years (from 80mn € in 2013  576mn € in 2015). • 2015 has seen another tremendous increase in Including the 360T transaction, the investment volume would FinTech investments with total investment of  25bn add up to over 1.2bn € in 2015. US$ • Germany is on a good track to close the gap to FinTech • Asia shows globally the strongest investment growth investments in the UK market (UK investments 2015 = in 2015 707mn €) • Availability of capital is seen as good for seed capital but more investors providing Growth Capital are required • Investment (especially seed funding) is expected to continue to grow in 2016

On a European level, Germany is catching up with the UK market in terms12 of absolute FinTech investment but will have to further develop its investor landscape to provide more growth capital The German market has grown significantly to 250 FinTechs in 2015

Key findings Germany’s FinTech Universe by City (2016) 250 ► German FinTech activities and the development of a FinTech 250 28% 70 ecosystem have started later compared to other global 200 14% regions. 34 150 22% 56 ► The German FinTech market has been growing by more than 100 36% 70% since 2013 and consists currently of  250 companies. 50 90 ► The German FinTech market is fragmented but has developed 0 three main hubs: Berlin, Rhein-Main-Neckar region and Other Rhein-Main- Munich Berlin Germany German Neckar Munich, each standing for a distinct characteristic. region Germany’s FinTech Universe: Cluster Breakdown (2016) Source: EY Analysis 2016 Banking & Lending 13% • Banking & Lending has been and still is the most dominant segment. eMarketplaces, Aggregators & • The eMarketplaces, Aggregators & Intermediaries segment including 2% 33 24% Intermediaries FinTechs such as Finanzcheck.de have been continuously growing and is 5% 4 59 12 Enabling Processes and still one of the most popular segments for new FinTech start-ups. 6% Technology 14 Payments • The Payments segment has been receiving increased attention since 2012 with Mobile Payments as well as Virtual Currencies pushing 46 50 RegTech segment growth. 18% 32 20% Financial Data Analytics • Since 2010, the B2B segment has gained attention but is still behind B2C development. 13% InsurTech

Source: EY Analysis 2016 InvestTech

Germany is a fast growing and dynamic market with increasing activity13 in InvestTech in recent years – regional clustering will help to strengthen market proposition Rhein-Main-Neckar region is No. 2 FinTech hub and shows over average growth in 2015

Key findings Frankfurt’s FinTech Universe: Cluster Breakdown (n = 56) ► Rhein-Main-Neckar region comprises the second-largest 25% FinTech hub in Germany, serving as a base for 56 companies Banking & Lending (22%) of the identified universe 14 22% eMarketplaces, Aggregators & ► The Banking & Lending market has grown over the past 12 Intermediaries Enabling Processes and years and is now the dominant segment together with Technology 10 Payments platform markets and processes and technology 18% 3 5% ► With 22% the region has experience a higher growth rate 6 RegTech 8 2 11% than the rest of Germany in 2015 Financial Data Analytics 4% ► Rhein-Main-Neckar region FinTech universe is more mature 15% than that of Germany’s other rival cities New FinTechs in Rhein-Main- New FinTechs in rest of Germany* Source: EY Analysis 2016 Neckar region* +13%

200 193 171 22 Successful Frankfurt FinTechs 150 +22%

100 60 56 46 10 40 50 20 0 0 End of 2015 End of End of 2015 End of 2014 2015 2014 2015 14

* Calculation based on FinTechs with identified year of foundation only Rhein-Main-Neckar has an existing strong base to develop as a leading European FinTech hub

Leverage existing strengths for FinTech activities Consider development opportunities for the region

1. Close distance to headquarters of FS providers 1. Strengthen the local FinTech ecosystem to be perceived as lively 2. Access to FS and regulation-related know-how and start-up location and not as “home of bankers and consultants” capabilities 2. Develop and communicate a regional FinTech proposition ? 3. Excellent regional infrastructure (universities, traffic, internet junction) 3. Support the settlement of an investor landscape in the Rhein- Main-Neckar Region (Business Angels, VCs and PEs) 4. Large pool of academic excellence in FS and IT

Frankfurt has great potential to become the leading German FinTech hub which requires coordination of FinTech activities and a clear proposition considering existing regional strengths

15

German FinTech landscape: opportunity for Rhein-Main-Neckar Rhein-Main-Neckar as Germany’s international FinTech gateway and B2B focused FinTech hub

1 International FinTech gateway in Germany Data Analytics: As technological systems advance and the world transitions to an “Internet of Things” (IoT), the collection, analysis Built up strong collaboration and network with other international and interpretation of data will increasingly become a more important FinTech hubs (e.g. Tel-Aviv, Singapore, South Korea), based on University differentiator for all companies. projects, joint conferences and events and support them in Germany.

2 Focus on B2B business models Personal Finance Management: PFM has the potential to replace Focus on B2B business models, such as infrastructure innovations and online banking in its current form data analytical improvements which combine Technology and Financial and to set new standards in terms of customer relationships. Services expertise.

3 Use of proximity to financial services

Close collaboration of traditional financial services institutions with Infrastructure: Solutions in the space of financial infrastructure are FinTech corporations, based on integrated business models, support of assumed to have a huge growth potential, as basis for required show case projects and direct support and mentoring of Start-ups to efficiency and flexibility in the technological solutions in the Financial contribute to improve the customer journey. Services industry. Blockchain will be one major disruption in the Payments segment.

Rhein-Main-Neckar region has to differentiate itself through a focus on certain segments fit to location attributes (i.e. 16 banking expertise) and develop a reputation for We identified six short term fields of action to execute Rhein- Main-Neckar’s FinTech journey

Local / regional FinTech Center Innovation Labs development Frankfurt / hackathons schemes • Decide on a building • Organize local hackathons with focus on • Set up local / regional development • Offer subsidized office space the target proposition schemes to attract FinTechs in the early stage • Coordinate settling of stakeholders in the • Tie winners of the events to Frankfurt as Center to ease access to e.g., to future location (see xware42 case study ) accelerators, incubators, investors, regulators

Marketing and Market positioning Show-case projects networking events

• Define market proposition with Rhein- • Create show-cases with coordinated • Penetrate message across channels to Main-Neckar FS community (FS players, support of regional financial service FinTechs, stakeholders and multipliers at associations, multipliers, public players (e.g. members of the Financial regional, national and global level institutions) Service Community) to jointly test or • Use Frankfurt-based events to attract • Use defined target proposition in all implement FinTech solutions German and international FinTechs and activities to penetrate show activity message 17

German FinTech landscape: opportunity for Rhein-Main- Neckar