Fintech…October 2015

Relevant Banking revenues at risk

Banking Revenues at Risk from Attacks by Digital Disruptors

Deposits &

Current

Account

Online banking, alternative

deposit products and mobile

money accounts compete

for market share and

compress margins

Lending

Asset

management

Payments &

Credit Cards

Shift of payments’ market share

to alternative providers and

merchants, with issuance

fee reduction

Competition from direct/peer

to peer mortgage providers

and asset owners

Direct competition due to price

comparison portals and fee

reduction from direct trades

-17%

-6%

-5%

-3%

Growing investments in FinTech

Global investment in FinTech ventures tripled to $12.21 billion in 2014 ($4.05 billion in 2013)

In the broader context of financial services, there is a

cacophony of FinTech innovations and players

What is the FinTech Landscape?

Not Exhaustive

Accenture and FinTechNYC, London, Dublin, Hong Kong

FinTech

Programmes across

the Globe

4

Participating Banks

32

Applications

600+

Pitches

180

Finalists

59Applicants have on average 11 staff,

$500k revenue and are 3 ½ years old

Capital raised post FinTech

$200m+

New Jobs Created

234

Major exits (>$175m)

2

Banks Start-ups Successful Innovation

Fintech startups are redefining customer expectations and

large digital leaders are redefining industry boundaries

Large Digital Players

Fintech

Start-

ups

Large

Digital

Leaders

Investment management

Data-drivencredit-rating

SOPHISTICATED

DATA ANALYTICS

MOBILE

COMMUNI-

CATION

SOCIAL

MEDIA

Mobilepoints-of-sale

Personalfinancemanagement

MobilePayments& e-wallets

Mobilebanking

Mobileinsurance

P2P payments

P2P lending

Dynamic pricing

Comparison engines

“Ecosystem

Effect”

“Piranha

Effect”

AMP’s lending solution offers end-to-end credit services to

underserved small businesses

The design and

development of AMP’s

platform was informed

by principles and

techniques of

payment processing

and microfinance.

The platform

leverages

sophisticated data

analytics and dynamic

loan management

functionality in order

to assess

creditworthiness and

manage repayment in

near-real-time.

WeCash – Internet based credit scoring in China

• 200m Bank Account holders

• 500m smartphone users• Addressable market of 300m…

• Algorithms based on online, behavioural

and and social data

• 3 minute credit score assessment

• ~100RMB

• More than 8 million users as of Jan 2015

Alibaba bring the banking proposition in the context of a

larger ecosystem

Payment

Transactions

Change cycles are accelerating and the FS industry needs to

adjust

Incumbents

Disruptors

Everybody Else

Trial Users

• Co-creation

• Crowdsourcingplatforms

• …

Innovators

(2.5%)

Early

Adopters

(13.5%)

Early Majority

(34%)

Late Majority

(34%)

Laggards

(16%)

How to respond?

Micro-segmentation drives all predictive models on recommendations, NBA, cross- & upsell, churn, pricing, etc.

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… and is the way to structure Big Data information about customers

1. Affluent Seniors 2. Mass Seniors 3. Mass Med Value 4. Yong people 5. High Value Adults 6. Intense, low yield

• 80k customers

• €350 value

• …

• 800k customers

• €150 value

• …

• 400k customers

• €60 value

• …

• 130k customers

• €20 value

• …

• 50k customers

• €300 value

• …

• 50k customers

• -€70 value

• …

SANITIZED CLIENT DATA

Digital micro-segments Where do they live and

work?

Social network analysis to

find opinion leaders

(13.000 Alpha’s)

Facebook 124k profiles

Vkontakte 2,5m profiles

Foursquare 19k profiles

Demographics

(name, date of birth)

Contacts (mobile, email)

1.7m

clients

1.2m

contacts

Combine social data with internal to find digital segments:Who are they, where do they live, how do they behave digitally and who are the influencers

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Digital Business Vision

A “2 Speed” agenda is recommended

• Metabanks

• D-wallet &

ecosystem

• Crowd-everything

• Robot advisory

• Life need platforms

• Digital attacker

• Social platforms

• Big Data factory

• Omnichannel

• Online selling

• Remote advisory

• Smart working & Digital collaboration

• Real time

• Process digitization

Strategic alignment by capability

DigitalMarketing

CustomerExperience Design

Omni-deviceIntegration

Dynamic Offering

Real-timeAnalytics

EcosystemManagement

Digital Security & Biometrics Identification

Digital Native Process

IT Digital Architecture

IT DigitalOriented Approach

IT Digital Governance

Digital Content Management

Customer Experience Design

Device Management

Customer Segmentation

Machinelearning

Ecosystem sourcing

Identification & Access Mng

Customer APP Catalogue

Enterprise Architecture

AgileDevelopment

Strategic Planning

ATL MarketingCustomer Experience Delivery

OmnichannelManagement

Real Time Processing

Data lake management

Ecosystem multi-engineintegration

Customer Documentation Vault

Digital Documentation Repository

API Management

IT Planning & Coordination

TransformationExcellence

Create

Options

Innovate the “core”

ILLUSTRATIVE

+

Different vehicles can help to create options

Venture

Fund

Internal

Innovation

group

Lab / IncubatorAccelerator

R&D

unit

Strategic

Investment

Innovation

vehicles

+

+

BBVA is rapidly creating future options whilst scaling digital

adoption across their core capabilities

BBVA Open

Innovation

BBVA

Ventures

Internal

Ventures

Direct

Investments

…………

• Digital channels (e.g. mobile, remote advisory)

• Omnichannel customer experience

• New digital products

• Knowledge Banking (Big Data projects)

• Technology platform

• Branch network optimizationInnovate the “core”

Create

Options

ConnectedMoney

BBVALola

The essence is the cultural acceptance of change

Capability Architecture

Create

Options

Innovate the

“core”

Governance IT ArchitectureDigitized

Operations

People

and Culture

Ecosystem

Digital Business Vision/Target Customer Experience

Q & A

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