THE FINTECH for BANKS Fintech Infrastructure Helps Startups and Banks

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5 JUNE 19 – 21, 2018 I NYC, NY

The Future of Fintech is an exclusive gathering of the world's largest financial institutions, top fintech startups, and most active venture investors.

6 ABOUT THE ANALYST Matthew Wong

Lead Intelligence Analyst, CB Insights @mlcwong | [email protected]

Matthew Wong is a lead intelligence analyst at CB Insights, where he manages a team of research analysts covering startup and venture capital trends in financial services and real estate. He currently manages CB Insights Insurance Tech newsletter, which reaches 22K+ insurance executives, investors and professionals. Matt's published industry research and analysis have been featured in The New York Times, The Wall Street Journal, Bloomberg, CNBC and The Financial Times and he has appeared on Bloomberg TV and Business News Network. Matthew is a magna cum laude graduate of Northwestern University.

7 Contents

10 2017 Year-in-review 27 2018 Trends to Watch: Annual Deals & Dollars What to watch for in 2018 Regional Trends Where investors are placing bets in fintech Fintech unicorns Which markets will see fintech emergence 2017 Top VC-Backed Fintech Deals How incumbents will act 2017 Most Active Fintech Investors Fintech Exits: IPO & M&A

8 WHAT FINTECH COVERS

Payments processing, card developers, Alternative underwriting, claims, & subscription billing software tools distribution, and/or brokerage platforms

Tools to manage bills and track Sales & trading, analysis, and infrastructure personal and/or credit accounts tools for financial institutions PAYMENTS/ INSURANCE BILLING PERSONAL CAPITAL FINANCE MARKETS Audit, risk, and regulatory Investment and wealth management compliance software platforms and analytics tools WEALTH REGTECH MANAGEMENT

Companies leveraging blockchain MONEY International money transfer technologies for financial services BLOCKCHAIN/ TRANSFER/ and tracking software CRYPTO REMITTANCES

MORTGAGE/ LENDING REAL ESTATE Peer-to-peer lending & alternative Mortgage lending, digitization, and financing platforms underwriting platforms 2018 FINTECH TRENDS REPORT

9 First, a look at what happened in 2017…

1. Global fintech financing hit a new record 2. Europe saw the biggest fintech funding jump 3. US early-stage fintech deals fell as investors made more concentrated bets

10 FINTECH DEALS AND FUNDING HIT NEW HIGHS 2017 was a record year for VC-backed fintech Annual global fintech deals and financing, 2013 – 2017 ($B) 1128 1023 951

788

594

$3.8 $8.0 $14.3 $13.8 $16.6

2013 2014 2015 2016 2017

11 Q4’17 SAW A FOUR - QUARTER LOW FOR GLOBAL VC- BACKED FINTECH DEALS Despite the annual rise, global VC-backed fintech deals fell for second straight quarter in Q4’17

294 289 277 288 254 258 260 270 225 241 233 224 214 204 187 166 169 173 134 136 123 103

12 Europe fintech funding grew over 120% in 2017… Global VC-backed fintech funding share by continent 2013 – 2017 ($M)

+121% YoY $2,676 $1,765 $1,210

-10% YoY $4,127 $5,794 $1,262 $6,438 $1,065

$801 $377

$2,583 $5,570 $8,281 $5,891 $7,837

2013 2014 2015 2016 2017 North America Asia Europe Africa Australia South America

13 …while Asia funding fell for the first time in 4 years Annual funding to VC-backed fintech companies, 2013 – 2017 ($M)

$8,281 North $7,837 America

$6,438 $5,570 $5,794 Asia $5,891

$4,127 -10% YoY

$2,583 $2,676 Europe

$1,765 $1,262 $1,210 $801 $1,065 $377

2013 2014 2015 2016 2017

14 Early-stage fintech deal share drops to 5-year low Annual deal share by stage to global VC-backed fintech companies, 2013 – 2017

9% 8% 10% 11% 13% Other 8% 8% 8% 7% 9% Late-Stage

16% 19% 21% 20% Mid-Stage 20%

Early-Stage

67% 65% 61% 61% 58%

2013 2014 2015 2016 2017

15 EARLY - STAGE FINTECH ACTIVITY STILL STRONG IN ASIA & EUROPE US early-stage fintech deals hit a 5-year low Annual Seed and Series A deals to VC-backed fintech startups, 2013 – 2017

- 23% YoY

314 302 310

256 North 243 America

190 Europe

142 171 Asia 127 137 95 121 69 93

2013 2014 2015 2016 2017

16 2017: 35 FINTECH MEGA - ROUNDS TOTAL $7.76B Investors made more concentrated fintech bets Global number of fintech mega-rounds ($100M+), 2013 – 2017

9 8 8

5 4 3 3 2 1 1 0 0

2013 2014 2015 2016 2017 North America Asia Europe 17 Top 10 global fintech deals in 2017 SoftBank led or participated in three of the top 10 deals to VC-backed fintech companies in 2017

Deal Date // Total Disclosed Company Amount Funding (M) Select Investors Description

May’17 // $1.4B $2.7B SoftBank Group Mobile payments and commerce platform ($7B Valuation)

Feb’17 // $500M $2.2B SoftBank Group, GPI Online lending platform ($4.49B Valuation) Capital, Silver Lake Partners

Jun’17 // $300M $574M MasterCard Worldwide, Billing, expense management, and accounting software ($1.24B Valuation) Temasek Holdings provider

May’17 // $292M $347M China Minsheng Peer-to-peer (P2P) lending platform ($1.46B Valuation) Investment, Yisheng Innovation Nov’17 // $280M $396M Andreessen Horowitz, Index Digital P2P money transfer platform ($1.6B Valuation) Ventures, Valar Ventures

18 Top 10 global fintech deals in 2017 (continued) Alternative lending companies made up 7 of the top 10 deals in 2017

Deal Date // Total Disclosed Company Amount Funding (M) Select Investors Description

Aug’17 // $250M $2.45B SoftBank Group, BlueRun Digital small and medium sized business (SMB) lender Ventures, Thomvest Ventures

Aug’17 // $220M $439M China Minsheng Peer-to-peer (P2P) loan and financial services platform Investment, Simone for small and medium enterprises in China Investment Managers

Nov’17 // $220M $425M Alibaba Entrepreneurs Mobile lending platform serving customers in Asia with Fund, International Finance a focus on China and Singapore Corporation, China Construction Bank, Dec’17 // $200M $725M Founders Fund, Khosla Alternative lending platform for point-of-sale financing Ventures, Lightspeed Venture Partners, Ribbit Capital, Spark Capital Dec’17 // $200M $610M QED Investors, Roark Consumer finance marketplace, specializing in the ($1.78B Valuation) Capital Group, TPG Capital home improvement, retail, and healthcare industries

19 25 fintech unicorns valued at $75.9B Global VC-backed fintech companies with a private market valuation of $1B+ EUROPE

UNITED KINGDOM SWEDEN NETHERLANDS NORTH AMERICA

UNITED STATES $1.1B Valuation $1B $2.5B $2.3B

$1.79B Valuation $1.3B ASIA

CHINA $1.56B $1B

$1.4B $1.46B $1.2B

$1B $2.7B $9.2B

$1B Valuation $1B $4.5B $18.5B

$1B $2B (as of Q2’15) INDIA

$7B $3.5B $3.6B

$2.4B (as of Q4’14) $1.9B

20 2017 Sees 8 Fintech Unicorn Births Global VC-backed fintech companies that notched a private market valuation of $1B+ in 2017 EUROPE

UNITED KINGDOM SWEDEN NETHERLANDS NORTH AMERICA

UNITED STATES $1.1B Valuation $1B $2.5B $2.3B

$1.79B Valuation $1.3B ASIA

CHINA $1.56B $1B

$1.4B $1.46B $1.2B

$1B $2.7B $9.2B

$1B Valuation $1B $4.5B $18.5B

$1B $2B (as of Q2’15) INDIA

$7B $3.5B $3.6B

$2.4B (as of Q4’14) $1.9B

21 Chinese firms drive fintech IPOs in 2017 Largest investor-backed fintech IPOs in 2017

Total Disclosed Funding (M) Company Exit Type Deal Date // Valuation Valuation Pre-Exit Select Investors

IPO Q3’17 // $11B $931M Alibaba Group, Tencent, Ping An Insurance, CDH (6060.HK) ($8B Valuation) Investments, Morgan Stanley, CICC, Keywise Capital, SAIF Partners

IPO Q3’17 // $7.9B $954.7M Ant Financial Services Group, Beijing Phoenix (NYSE: QD) ($1.22B Valuation) Wealth Holding Group, Hangzhou Liaison Interactive and Kunlun Worldwide

IPO Q4’17 // $3.9B $101.3M Sequoia Capital China, Alibaba Group, Lightspeed (NYSE: PPDF) China Partners, Legend Capital, SIG Asia Investments

IPO Q4’17 // $1.95B $345M Matrix Partners China, JD.com, DST Global, China (NASDAQ: LX) Renaissance Capital, K2 Ventures, Huasheng Capital, Bertelsmann Asia Investments

IPO Q4’17 // $1.3B $186M KPCB China, Zero2IPO Capital, Lightspeed China (NYSE: JT) ($808M Valuation) Partners, Sequoia Capital China, Temasek Holdings, Sailing Capital, Yunfeng Capital 22 No billion-dollar fintech M&A in 2017 Notable investor-backed fintech acquisitions in 2017

Total Disclosed Company Deal Date // Valuation Funding (M) Acquirer Description

Q3’17 // $850M $174.8M Cloud financial management software

Q4’17 // $220M - 400M $74.2M Integrated payments provider for SaaS and crowdfunding platforms

Q4’17 // $275M $40M Cyber risk modelling and analytics

Q1’17 // $100M N/A Offline-to-online payments

Q1’17 // $100M N/A Mobile banking services

23 The most active fintech VCs in 2017 By unique fintech company investments (new or follow-on)

Rank Investor Select 2017 Fintech Investments

24 The most active fintech VCs in 2017 (continued) By unique fintech company investments (new or follow-on)

Rank Investor Select 2017 Fintech Investments

25 LOOKING AHEAD 2018 FINTECH TRENDS TO WATCH

26 #1 FINTECH REBUNDLING

Unbundling leads to rebundling

27 Before: Unbundling the bank Over the last ten years, fintech startups have targeted single underserved financial products with better UI, digital marketing, and branding

28 Now: Fintechs build, buy, and partner to grow

1 2 3

MONO - PRODUCT TO LEVERAGING TECH FOR OPEN NEW INVESTING MULTI - PRODUCT PRODUCT INNOVATION CHANNELS Startups move beyond a one-product Startups focused on personalization Startups are creating next-gen model and are launching new services create new methodologies to deliver investment platforms for new asset to expand customer’s digital footprint services more efficiently and holistically classes ahead of bank offerings

29 Now: Fintechs build, buy, and partner to grow

1 2 3

30 Next-gen fintech Fintechs are becoming more aggressive in expanding their lines of business beyond their initial use case

BUILDING BUYING PARTNERING

Wealthfront now offers portfolio lines of credit + April 19, 2017

Stash is expanding into personal + banking with the planned launch of Stash bank accounts October 3, 2017

+ MoneyLion, the part lending, part savings, and part wealth management app launches MoneyLion Plus November 6, 2017

31 MOVING BEYOND AN AGGREGATOR

EXPANDING INTO TAX

Total Funding Select Investors $368.5M Ribbit Capital, QED Investors, CapitalG ~1 million Users filed tax returned with the IRS through Credit Credit Karma provides free credit Karma’s free tax software in 2017 scores and monitoring for 75M+ members. In 2016, the company did over $500M in revenue by aggregating financial products and offering them to its members. In January 2018, Credit Karma partnered with MetaBank to offer online refund advances up to Competitors $1,000. Users of the no-interest loan receive the advance via an American Express prepaid card. $82.5M $105M

32 ROBINHOOD TOPS 3M+ USERS Robinhood planning desktop app — are wealth management services next?

INVESTORS LOOKING FOR A DIY SOLUTION NEXT UP: A DESKTOP TO HELP CAN TURN TO ROBINHOOD FOR $0 ETF’S ATTRACT MATURE INVESTORS

33 Now: Fintechs build, buy, and partner to grow

1 2 3

34 “Continued rebundling will give birth to at least one major consumer product innovation.”

Renaud Laplanche Co-founder and CEO, Upgrade

35 From POS to lending, is crowdfunding next? Square patent grant highlights how data and technology can lead to product innovation

The recently granted patent details how a merchant might make the request through the Square point-of-sale terminal, include specific terms (e.g. return on investment), and be evaluated based on its processed transactions history.

Patent: CB Insights Analysis 36 Now: Fintechs build, buy, and partner to grow

1 2 3

37 FINTECHS EXPAND INTO NEW ASSET CLASSES AHEAD OF BANKS

Total Funding Select Investors Balderton Capital, Index $85.98M Ventures, Ribbit Capital Revolut is a personal finance app for customers to buy, hold, and exchange currencies at a reduced fee. In addition to applying for a banking license, Revolut added fintech partnerships & added cryptocurrencies to the platform in 2017. Competitors

$52.6M $138.2M $14.6M

38 Square Cash rolls out bitcoin Square’s Cash App is the #1 app in the ‘Finance’ category of the App Store. In late 2017, Cash App quietly added the ability to send bitcoin to friends.

Source: TechCrunch 39 # 2 CHALLENGER BANKS ARE COMING TO AMERICA

European fintechs will expand their global footprint

40 EARLY EXAMPLE OF FINTECH EXPANSION Prior to IPO, Funding Circle expands US foothold

$373.2M $1B Valuation + Select Investors Accel Partners, Ribbit Capital, Rocket Funding Circle Announces Strategic Partnership with Internet, Union Square Ventures Kansas INTRUST Bank to Support Growth of US Funding Circle is a direct lending Small Businesses platform for SMB business loans. January 04, 2018 | In 2018, the company is launching new partnerships, announced crossing new lending Funding Circle Reported Stats (as of 12/7/17) records, and has renewed Global lending $5B Across 40,000 businesses rumors of a potential IPO. US lending $1B Across 6,700 US businesses Best Month $260M In November 2017

41 EARLY EXAMPLE OF FINTECH EXPANSION Klarna takes on US online point-of-sale financing

$369.4M $2.5B Valuation

Select Investors Sequoia Capital, Permira, DST Global

Klarna is Sweden-based alternative payments platform that aims to provide a frictionless buying experience to buyers and sellers. Klarna was a granted a European Klarna has grown to 500 US online retail banking license in June 2017. partners since launching its first credit product stateside in October 2016

42 More to come in 2018? In 2018, European banks from the UK and Germany may look to challenge US fintech for market share and tech talent PUTTING DOWN LAUNCHING IN THE US GLOBAL ROOTS

TransferWise is launching its new borderless account and debit card that can hold 28 currencies in one account January 18, 2018 |

43 #3 BANKS INCREASE FINTECH PRODUCT CREATION

Banks forgo partnering in favor of fighting fintech with fintech

44 Banks are active in fintech investing Most active US banks investing in fintech Over the last few years, banks including Citigroup, Goldman Sachs, and JPMorgan have actively invested in fintech startups across data analytics, infrastructure, alternative lending, personal finance management, and more.

45 Now, more are talking up their own digital capabilities Mentions of “technology” and “digital” on bulge bracket bank earnings calls have jumped in 2017.

46 Goldman’s Marcus Marcus reached $1B faster than earlier fintechs is the fastest lender Marcus by Goldman Sachs vs. select lending platforms to reach $1B issued Marcus stands out from other alternative lending platforms by offering no-fee loans with flexible payback and installment terms set by the consumer. The online lender hit $2B in originations in November 2017, just a year and one month after its launch.

CB Insights Goldman Sachs Strategy Teardown 47 Early incumbents backed wealth tech startups Q1’12 – Q4’17 (11/14/17)

Lines represent equity investment rounds 48 Now, incumbents prefer to launch their own robo-advisor instead of white labeling

WHITE-LABEL 2017 LAUNCHED

2017 UNDER DEVELOPMENT

49 Morgan Stanley launches Access Investing and seeks fintech talent to build out new products

Management Fees

VS. 0.25%; first $10,000 0.25% to 0.40%, is managed free depending on plan

Minimum Investment $500 $0

50 #4 THE LATEST BATTLEGROUND IN CHINA FINTECH IS WEALTH MANAGEMENT

Wealth management will become the hottest fintech sector in China

51 The opportunity: Total individual investable assets in China grew to $26 trillion in 2016

$4T $6T $10T $13T $17T $26T

2006 2008 2010 2012 2014 2016

Source: Bain and China Merchants Bank, China Private Wealth Report 52 INTERNET GIANTS ARE ALREADY MOVING IN In 2017, Ant Financial’s Yu’e Bao became the largest money market fund in the world…

$140B AUM $233B AUM

JPMorgan US Government Money Market Fund Yu'e Bao

Data as of December 14, 2017 53 Tencent has gradually expanded into wealth management

Tencent leads $146M to Chinese stock- trading app June 13, 2017 |

54 But wealth tech in China is still a nascent category when it comes to venture investment

$3,031M

$1,993M Annual funding to Chinese alternative lending startups

$1,024M Annual funding to Chinese wealth $664M tech startups

$155M $146M $67M $46M

2014 2015 2016 2017

55 Startups are allowing Chinese investors to access overseas securities

FUTU SECURITIES TIGER BROKERS The Tencent-backed startup has raised over $215M to allow The online stock brokerage startup provides a platform for mainland Chinese users to use its smartphone app to trade Hong Chinese-speaking investors to access cross-border investment Kong and US stocks. portfolios globally. Interactive Brokers, the largest US electronic broker by trades, is a strategic investor.

Source: 36kr 56 Startups are engineering new models of engaging with consumers in China about their wealth

J A N E 7 TALICAI The Shanghai-based startup counts 300,000 WeChat users who The startup manages a female-focused wealth management access its educational video content about wealth management community with more than 1 million registered users, along with and investing. tools and wealth management products.

Source: 36kr 57 Startups are enabling third-party wealth managers with technology

While China’s wealth management industry is still underdeveloped, some startups like NewBanker are hoping to provide technology products for independent wealth management agencies to help with acquisition costs, regulatory rules, and product development.

Source: 36kr 58 AS CHINA’S WEALTH MANAGEMENT INDUSTRY UNDERGOES A PARADIGM SHIFT, IT WILL NEED MORE COMPREHENSIVE SOLUTIONS

“We are seeing the Chinese wealth management industry go through profound changes. It is moving from fixed-income investments to equity investment, from short-term speculation to long-term investment, from China-focused investment to global opportunities, from investing into single products, single opportunity to comprehensive risk management and comprehensive asset allocation, from managing this generation’s wealth to thinking about succession planning and inheritance.”

Ning Tang Founder and CEO, CreditEase

59 #5 EMERGING MARKETS TAKE GREATER SHARE OF EARLY - STAGE FINTECH AC TIVITY

Latin America and Southeast Asia will see strong fintech growth

60 THE OPPORTUNITY FOR FINTECH Addressing gaps in the traditional banking model

BRAZIL BY THE NUMBERS: SOUTHEAST ASIA BY THE NUMBERS: 85% 120% 84% 480M 90% 30M Brazilians that Typical personal Total loans held Internet users by Internet users on SMEs underserved live in cities loan APR by top five banks 2020 their smartphones by financial system 40% 71% <5% 266M Brazilians excluded from Total retail banking branches Credit card penetration “Financially traditional banking systems controlled by top five banks in Indonesia excluded” people

Source: Goldman Sachs, Itaú Unibanco, Google/Temasek, McKinsey Global Institute 61 South America is outpacing other markets for fintech deals

38 South America

21 21 Australia

17 15 19 14 Africa

10 13 9 7 7 6 4 5

2013 2014 2015 2016 2017

62 Fintechs startups crop up in Latin Fintech startups in Latin America go after more verticals America 2017 saw deals go to Latin American startups focused on the unbanked and underbanked demographics. Venture-backed Latin American fintech startups have cropped up, focusing on everything from lending and payments to wealth management and enterprise finance.

63 NUBANK IS EXPANDING INTO RETAIL BANKING WITH CURRENT SAVINGS ACCOUNT

Nubank launches into digital $455M Disclosed accounts with NuCanta savings accounts Select Investors: Goldman Sachs, DST Global, Founders January 18, 2018 | Fund, QED Investors, Ribbit Capital, Sequoia Capital, Tiger Global Management

Brazil-based Nubank is a mobile- only neobank focused on the 60M unbanked and underbanked people in LatAm. Nubank recently announced that it is expanding from credit cards into personal banking.

In 2017, Nubank reported having *NuCanta projected interest for 12 months approximately 3M customers and 850 employees.

64 Southeast Asia sees record funding in 2017 Funding to VC-backed fintech companies in Southeast Asia grew 151% on a year-over-year basis while deals rose grew 5% year-over-year ($M) 46 44

$34 $20 $170 $87 $218

2013 2014 2015 2016 2017 65 Alternative lending deals highlight shift of Asia fintech activity to Southeast Asia Asia alternative lending deal share breakdown, 2014 – 2017

9% 7% 10% Other 16% 9% 16% Southeast 17% 12% Asia

India 29% 37% 41%

China

82% 43% 39% 32%

2014 2015 2016 2017 66 Blurring lines between fintech and commerce will enable new innovation in Lat Am & Southeast Asia

Total Funding: Total Funding: $1.8 billion $193 million

Select investors: Select investors: Sequoia Capital, Sequoia Capital, Tencent, Google, Andreessen Temasek, DST Horowitz, Global, Warburg Floodgate, Pincus, KKR, Foundation Capital, Meituan-Dianping Y Combinator

50% of Go-Jek’s 16M – 18M active users use Rappi, a restaurant and grocery delivery app Go-Jek’s payment gateway, Go-Pay, for operating in Mexico, Colombia, and Brazil, allows transactions 3 – 4 times a day. users to pay for transactions using RappiCredits. 67 #6 SPECULATION OUTPACES ADOPTION IN BLOCKCHAIN

More companies will look to sell pickaxes amid cryptoasset speculation

68 Run-up in crypto prices brings more Ethereum price run-up boosts investor interest in ICOs January 2016 – December 2017 investors, startups As the total value of cryptocurrencies — like Bitcoin and Ethereum — hit new highs in 2017, new blockchain projects launched through initial coin offerings (ICOs) brought a crop of new investors.

Sources: CB Insights, TokenData, EtherScan 69 Exchanges see massive growth in Coinbase attracts speculators in meteoric year Number of users, January 2013 – November 2017 popularity

Cryptoasset exchange Coinbase reportedly crossed $1B in revenue in 2017. Coinbase’s mobile app hit the top spot in Apple’s Apple Store in December, and at one point in November, the company was adding 100,000 users per day.

Sources: Coinbase, Alistair Milne 70 Now: Coinbase plans on catering to larger investors

$217.4M Disclosed

Select Investors: Battery Ventures, USV, Andreessen Horowitz, USAA Coinbase is launching Custody, whose mission is “to make digital currency investment accessible to every financial institution and hedge fund in the world.” Critics argue that this contrasts with Coinbase’s overarching mission to create an “open financial system.”

71 Wallets also surge in popularity in current market

$83.5M Disclosed

Select Investors: Libertus Capital, FirstMark Capital, GDTRE Ledger sells hardware wallets that allows users to store cryptoassets. In 2017, Ledger reportedly grew revenue to €46M, up from €600K euros the year prior.

72 As winners emerge, more blockchain Blockchain equity funding pales in comparison to ICOs Quarterly equity and ICO financings ($B), Q1’16 – Q4’17 startups will change their tune

Over $2.6B has been invested in equity financings to blockchain startups, despite many failing to attract a critical mass of users. As crypto speculation continues, more companies will look beyond their initial use cases to enable and expand investment and trading.

Sources: CB Insights, TokenData 73 Abra pivots to cryptocurrency investing

January 2018 $30M Disclosed

Select Investors: Boost VC, RRE Ventures, First Round Capital, Ignia Fund September 2017 Abra once touted itself as a means of sending payments around the globe, but has recently shifted its position toward investing.

74 Circle focuses on OTC trading, not money transfer

$136M Disclosed

Select Investors: Baidu, IDG Capital, General Catalyst, Goldman Sachs

Circle initially advertised itself primarily as a mobile blockchain remittance and payments platform. The company has found more success with its OTC trading business, and trades over $2B per month in cryptoassets.

75 #7 FINTECH GOES UNDER THE HOOD TO BUILD A NEW FINANCE ENGINE Capital markets fintech infrastructure becomes a focus area for investment

76 THE FINTECH FOR BANKS Fintech infrastructure helps startups and banks

1 2 3

REPLACING LEGACY CENTRALIZE DISPARATE CREATING AN OPEN INFRASTRUCTURE CUSTOMER DATA BANKING PLATFORM Startups help firms leverage the cloud Startups are taking a picks-and-shovel Startups leveraging APIs help to reduce the costs of delivering approach to offer developers tools to help developers increase their time to market financial services and tools to both banks and fintechs to centralize with new financial products and customers customer data and services services and reduce development costs

77 Legacy technology systems stifle market Legacy capital markets technology innovation Legacy technologies are pivotal in the functioning of the capital markets ecosystem, yet on average are ~38 years old and have remained static. Further, incumbent players have been slow to innovate if at all.

78 Fintechs are going under-the-hood to Fintech are going B2B with capital markets tech jumpstart markets The back office is often overlooked in favor of revenue- generating groups in the front office. As legacy systems start to sunset, startups working on capital markets infrastructure companies will be pivotal to overhauling legacy technologies by leveraging cloud computing and newer programing languages.

79 DRIVING THE BANKING AS A PLATFORM MOVEMENT

Last Funding $44M Series B // Q2’16 Plaid's suite of API tools allows developers to integrate with bank infrastructure and access and authorize user bank accounts at a reported 9,600 financial institutions Select Investors American Express Ventures, BoxGroup, Citi Ventures, Goldman Sachs, New Enterprise Associates, Spark Capital 1 2 3 User logs in to their Plaid connects with Plaid Stays connected SELECT CUSTOMERS favorite financial underlying bank and to the bank to seamless tracking application pulls truncation history connected usage

80 OVERHAULING 125,000 DESKTOPS COVERING 35 GLOBAL BANKS AND FIRMS

Last Funding $15M Series B // Q1’17 Openfin is an HTML5 container that powers B2B desktop applications for financial services applications.

Select Investors Bain Capital Ventures, DRW Venture Partners, Euclid Opportunities, J.P. Morgan VS. Chase & Co., Nyca Partners

SELECT CUSTOMERS

81 CENTRALIZING CUSTOMERS DISSIPATE FINANCIAL DATA WITH OPEN API’S

Last Funding $10M Series B-II // Q2’17 Quovo is a data platform that leverages a robust suite of APIs & modular applications to aggregate financial data across 13,000+ financial institutions Select Investors F-Prime Capital, FinTech Collective, Long Light Capital, Napier Park Global Capital

SELECT CUSTOMERS

82 MORE FINTECH INFRASTRUCTURE TO COME “The products being built…demonstrate that improving the infrastructure layer is the key to driving further financial progress.”

Rick Yang Partner, NEA

83 # 8 REGTECH SEES BROADER ADOPTION

Banks deepen partnerships and investments in regtech

84 VC- BACKED REGTECH IN FINTECH EQUITY FUNDING SINCE 2013: $1.8 BILLION

ACROSS 176 DEALS

85 REGULATION IS A GROWING CONCERN AS COMPLIANCE DEADLINES APPROACH Concern over pending regulation increasing

CB Insights Trends mines a KEY REGULATORY IMPLEMENTATION DATES massive corpus of media articles to enable a data- • 3 January 2018: Markets in Financial Instruments Directive II (MiFID II) driven, real-time method to • 3 January 2018: The Markets in Financial Instruments Regulation (MIFIR) discover, predict, and plot the • 12 January 2018: Revised Payment Services Directive (PSD2) arc of rising expectations and • 25 May 2018: General Data Protection Regulation (GDPR) excitement around emerging technologies.

86 Revised Payment Services Directive (PSD2) open-acess article is an open door for fintechs

BEFORE AFTER

87 Fintech are taking dynamic approaches to compliance

Focus: Token is an open banking platform on the Focus: TrueLayer is an API platform for Focus: Railsbank is an open banking and blockchain leveraging smart contracts to developers to access bank data they need to compliance platform targeting both monetize access for banks from TPPs build new apps and services developers and banks

Disclosed Funding: $18.5M (Series A) Disclosed Funding: $4.3M (Series A) Disclosed Funding: $1.2M (Seed)

Select Investors: EQT Ventures, Octopus Select Investors: Anthemis Group, Connect Select Investors: Firestartr Ventures, OP Financial Group, Plug and Play Ventures Ventures

Upcoming Deadline: January 2018 European Union member states transpose PSD2 as law 88 Banks’ investment in Banks are actively making investments in regtech regtech is still in 2012 – 2017 early stages Banks such as Santander, Barclays, and Goldman Sachs are some of the earliest to invest in regtech startups. Banks have made investments in products & services that range from identification and background checking software to blockchain and trade monitoring.

89 Investors back compliance solutions they need Banks co-invested to meet research unbundling requirements of MiFID II & MIFIR

INVESTORS

ACQUIRED

$38M Series B // Q1’18 $68M Total

90 …and banks are their primary customers Banks co-invested to meet research unbundling requirements of MiFID II & MIFIR

INVESTORS USERS

Disclosed Funding: $16M Series A

Deadline: January 2018 MiFID II and MiFIR apply within Member States 91 There’s no shortage of pending regulation

2016 REGULATORY HIGHLIGHTS GLOBAL REGULATORY INITIATIVES 2015 – 2019

2017 REGULATORY HIGHLIGHTS

• Markets in Financial • Fiduciary Rule United States Instruments Directive II (MiFID • Dodd-Frank Act II) • Consolidated Audit Trail • The Markets in Financial (CAT) Instruments Regulation (MIFIR) • Revised Payment Services Directive (PSD2) • General Data Protection Regulation (GDPR)

Source: Moody’s Analytics 92 EUROPE IS A HOTBED FOR REGTECH STARTUPS FOCUSED ON FINANCIAL SER VICES 60+ European regtechs in financial services

93 AS REGTECH DIGITIZES COMPLIANCE FOR FIRMS, REGULATORS WILL NEED TO UPDATE THEIR OWN TECH STACK TO KEEP PACE

“Regtech poses significant opportunities for both participants and regulators. I suspect we are in the ‘early innings’ of this space, but believe that it is imperative for all involved stakeholders to do their part in understanding emerging technologies and think creatively about incorporating such technologies.”

J. Christopher Giancarlo CFTC Chair

94 #9 STARTUP BOOM IN INSURANCE DISTRIBUTION ABATES

Insurance tech investment moves to back-end

95 Insurance tech: Over $8B invested since 2012 Insurance tech startups continued to be a hot area for fintech investment in 2017. Global insurance tech deals rose 16% year-over-year in 2017. ($M)

$3,000 250

$2,500 202 200 174

$2,000

150 124 $1,500 94 100

$1,000 65 46 50 $500

$348 $271 $868 $2,688 $1,682 $2,212 $- 0 2012 2013 2014 2015 2016 2017

96 The largest deals in 2017 went to companies providing insurance…

UK-based digital life insurance Consumer-driven health insurer Medicare Advantage PPO Digital home insurance carrier Online insurance comparison in provider Amount: $160M Amount: $130M Amount: $120M India Amount: $230M Investors: NEA, Greycroft Partners, Investors: Greenoaks Capital Investors: Softbank Group, Amount: $77M Investors: Leadenhall Capital, Cross Creek Advisors, Bessemer Management, GV, Western Thrive Capital, GV, General Investors: Wellington Punter Southall Group Venture Partners, Flare Capital Technology Investment Catalyst Management, True North, Info Edge, IDG Ventures India

Medicare Advantage startup Digital general insurance HR benefits platform for small Online insurance comparison HR software provider and Amount: $62M carrier in India businesses Amount: $50M benefits brokerage Investors: Venrock Amount: $60M Amount: $60M Investors: IFC, Alibaba Group, Amount: $50M Investors: Fairfax Financial Investors: Two Sigma Private Goldman Sachs, SBI Group, Investors: Altimeter Capital, Holdings Investments, EPIC Insurance H&Q Asia Pacific, Nova Four Rivers Group, Brokers Founders Capital Greenspring Associates, Sequoia Capital

97 …but distribution-focused startups will run into a funding crunch as winners emerge

90 Early-stage activity remains high in insurance… 80

50 …But mid-stage activity has stayed consistent over time Deals 40

0 2012 2013 2014 2015 2016 2017

Seed/Angel Series A Series B Series C Series D Series E+ Other

98 M&A not likely to help much Only 12% of (re)insurance and investment professionals with knowledge of their company’s innovation strategy believe acquisitions are their organization’s primary outlet for innovation.

Partner 40%

Build 48%

Buy 12%

CB Insights / Willis Towers Watson Insurance Incumbent InsurTech Strategy Survey 99 Back-end startups are finding more ways into insurers REDUCING IT INVOLVEMENT PARTNERING WITH BROKERS, REINSURERS “[In our diligence process, most Cyence customers] described it having very modest or Aon partners with Clara to no IT involvement involved in the selection deliver claims tools to workers and contracting process. We see that as an comp insurers intriguing go-to-market motion that could October 12, 2017 | complement our general need to build institutional consensus, including IT, before a company moves forward with us.”

Guidewire CEO Marcus Ryu on $275M acquisition of Cyence in October 2017

100 Close to 1/3rd of Q4’17 deals focused on back-end

$40M Disclosed

Select Investors: Accel, General Catalyst, Elaia Partners, Iris Capital Paris-based Shift Technology provides SaaS for detecting potential insurance fraud. The company has reportedly grown to 45 clients and processed more than 100M insurance claims. Other select Q4’17 back-end deals:

Source: Shift Technology; Willis Towers Watson Quarterly Insurance Tech Briefing 101 #10 BANK OF AMAZON ?

Amazon gets more aggressive in fintech — outside of the US

102 AMAZON CAN UNDERCUT ON PRICES; WHY NOT BANK FEES? “Amazon is the most formidable. If Amazon can get you lower-debt payments or give you a bank account, you’ll buy more stuff on Amazon.”

Alex Rampell General Partner, Andreessen Horowitz

103 In the US, Amazon has already developed key beachheads into financial services…

PAYMENTS SMALL BUSINESS LOANS

33M+ users of Amazon Payments $3B lent to small businesses on Amazon since 2011

CASH DEPOSITS MEMBER REWARDS

104 But Amazon’s US efforts are a far cry from Tencent and Ant Financial’s global fintech forays in China TENCENT & ANT’S FINTECH INVESTMENT & M&A ANT FINANCIAL BY THE NUMBERS 520M Annual active users >330M Cumulative users 392M Annual active users 257M Activated Investment users M&A

Source: Alibaba Group Investor Day Presentation 105 In Europe, Amazon runs product insurance white label Amazon Protect

“We have ambitious plans to significantly grow operations in our current markets and create new, innovative products that will provide excellent customer experience and satisfaction.”

— September 2017 job posting for Amazon Protect product manager position

106 Amazon is going deeper into payments in growth markets

INDIA MEXICO

In India, Amazon is rolling out doorstep cash pickup to allow In Mexico, Amazon launched a cash payment service to attract users to load money into its digital payment wallet Amazon Pay. customers online and give shoppers an alternative to credit and The service allows users to top up their balance using cash for debit cards. digital services including food delivery, bill payment, and mobile recharges.

107 In India, Amazon is on the prowl for fintech startups. What’s next? AMAZONS’ FINTECH INVESTMENT & M&A AMAZON IN THE NEWS

India

Investment M&A

108 WHERE IS ALL THIS DATA FROM? The CB Insights platform has the underlying data included in this report

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109 Questions? Twitter: @mlcwong [email protected]

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