Reimagining The Future of Finance

Reimagining the
Future of Finance
Global Fintech
2023
Introduction to
fintech industry
The introduction discusses the rise of fintech, a
blend of finance and technology, which has
swiftly transformed the financial landscape over
the last two decades.
Fintech companies excel by recognizing and

resolving traditional banking frustrations,
offering top-notch digital experiences, reaching
underserved markets, and optimizing operational
efficiency. This sets the scene for exploring
fintech's profound influence on global finance.
Key Highlights
Fintechs Have Come of Age
1. In the past five years, the pandemic accelerated the adoption of digital financial
services, making fintech companies mainstream, especially in areas like payments
and transaction banking. Big names such as Stripe, Square, Alipay, PayPal, Nubank,
and PayTM have become widely recognized. Globally, there are around 32,000
fintech companies.
2. Over the last decade, fintechs have attracted over $500 billion in funding, with a
significant increase since 2019, now receiving about 20% of global venture capital.
This funding comes not only from traditional financial sources but also from tech
investors and hedge funds.
3. The crypto sector saw a surge in funding, accounting for over $50 billion between
2021 and 2022, constituting 75% of all crypto funding received by 2022.
4. In 2021, fintechs comprised roughly 9% of global financial services valuations,
reaching a staggering $1.3 trillion in public valuations. This represents a
considerable jump from pre-2018 levels, with public valuations now being 20 times
annual revenue compared to the previous six times. Notably, in 2021, PayPal and
Ant Financial ranked among the top-10 financial services companies worldwide by
market capitalization.
In the past year, fintech has faced a tough
time, with valuations dropping over 60% since
April 2022, while revenue growth continues at
a slower pace. Funding for later-stage
companies has decreased significantly. This is
due to rising interest rates driven by factors
like inflation and geopolitical tensions,
leading fintech CEOs to prioritize profitable
growth. Despite these challenges, we believe
this is a short-term correction, with the
industry's fundamentals remaining strong. It's
essentially a period of adjustment and a
reevaluation of growth-stage companies with
unclear product-market fits.
Funding Levels
In 2022, less than half of public fintechs
were profitable, despite shareholder
pressure. Now, overvaluations are harder
to justify without strong fundamentals
like good unit economics and recurring
revenues. Fintechs are adapting by
focusing on sustainable growth,
prioritizing unit economics, raising debt,
and emphasizing core innovations. This
shift towards fundamental strengths is
expected to make some fintechs stronger
and better positioned for future
leadership in the industry.
Q. What are the top 3 challenges
facing your company in the next 12–
18 months?
1. Economic uncertainty and
market volatility
2. Regulatory compliance and legal
challenges
3. Talent acquisition and retention
Q. What are the top actions your

company is taking to address
challenges over the next 12-18
months?
1. Enhancing risk management
strategies
2. Strengthening compliance
measures and legal frameworks
3. Implementing targeted
recruitment and retention
initiatives
Strength of Fintech Industry Fundamentals
1 .Lucrative Market Potential
Financial services industry generates $12.5 trillion in annual revenue.
$2.3 trillion in annual net profits or additional value.
High average profit margins of 18%.
2 .Customer Experience Focus:
Financial services historically rank low in customer satisfaction.
Incumbents lag significantly behind fintechs in customer experience.
Average Net Promoter Score (NPS) for banking industry: 23 out of 100.
Some US fintechs boast NPS as high as 90.
3.Resilience Through Disruption:

Financial services industry remains fertile ground for disruption.
Turbulent times do not undermine the sturdy fundamentals of the fintech sector.
4.Implication:
Despite challenges, fintech industry poised for continued growth and innovation.
Strong fundamentals reinforce long-term viability and potential for market expansion.
Financial services is one of the most profitable sectors of the global economy, with a net
margin of around 10%.
Banks are the most profitable sub-sector within financial services, with a net margin of
30%.
Customer experience (measured through NPS) is relatively poor for incumbent financial
institutions: This means that traditional banks are scoring lower on Net Promoter Score (NPS), a
metric used to gauge customer satisfaction and loyalty, compared to Fintech companies.
The NPS scores of major U.S. financial institutions range from 4 to 58, with an average of 23.
The NPS scores of major Fintechs with U.S. operations range from 77 to 90, with an average of 83.
Globally, a majority of adults are unbanked or underbanked. The chart shows that only a small percentage of adults have
a bank account in most regions of the world. For instance, the banked population is only 27% in MEA (Middle East and
Africa) and 42% in APAC (Asia-Pacific).
The issue is particularly severe in developing regions. The percentage of unbanked adults is 493 million in MEA and 820
million in APAC, compared to only 15 million in North America.
Cash remains the dominant mode of payment globally, especially in developing regions. The chart indicates that cash
usage is above 50% in all regions except North America (21%). This suggests a significant opportunity for growth in digital
financial services.
There is high potential to increase digital banking adoption, especially in emerging markets. The chart shows that the digital share
of consumer banking is much lower than other categories, like computer software (98%) and event tickets (86%). There's also a
significant gap between developed (80% for North America) and emerging markets (17% for Middle East and Africa) in digital
banking use.
This suggests a significant opportunity for growth in digital banking, particularly in emerging markets. Financial institutions can
target these regions to increase their customer base through digital channels.
Smartphones are likely to be a key driver of digital banking adoption in emerging markets. Since many people in these regions lack
access to computers, mobile banking is likely to be the most convenient way for them to access financial services.
The chart in the exhibit shows that fintech C-suite leaders are more optimistic about the
long-term future of their companies than the short-term future.
This is likely because the fundamentals of the fintech industry remain strong, despite
some short-term challenges.
The chart breaks down the optimism outlook by region (Global, NAMR, LATAM, EUR,
APAC) for both the 12-month and 3-year timeframes.
CONCLUSION: FINTECH INDUSTRY
Lucrative Market: Financial services offer a massive $12.5 trillion market with high-
profit margins (18%).
Customer Focus: Fintechs excel in customer experience, exceeding traditional

finance (NPS).
Disruption Proof: Fintech thrives on innovation, adapting well to changing market

conditions.
Continued Growth: Strong fundamentals position fintech for long-term expansion.
Innovation Potential: The industry is ripe for further disruption and development of
new solutions.
Fintech Are Projected to Grow
Sixfold by 2030
Segment Growth: Payments and deposits emerge as the fastest-growing segments, with APAC and Latin
America leading the expansion.
Fintech Impact: Fintechs poised for significant growth, with annual revenues forecasted to soar to $1.5 trillion
by 2030.
Banking Fintechs: Expected to capture 13% of banking revenue pools by 2030, representing one-fourth of
global banking valuations.
Insuretech Growth: Insuretechs projected to grow from 0.3% to 2% market penetration of insurance revenue
pools by 2030, at a 27% CAGR.
Geographical Dynamics: Growth patterns vary by geography, emphasizing the importance of region-specific
strategies.
Diverse Impact: Different regions and segments will experience varied growth trajectories, necessitating
tailored approaches.
Long-term Perspective: Despite short-term corrections, the industry is primed for substantial growth, driven by
fintech innovation and global market dynamics.
Projection: Asia-Pacific (APAC) to lead fintech market by 2030, surpassing the US
with a 27% annual growth rate.
Drivers: Strong incumbents, expanding revenue pools, and innovative local players
drive APAC's fintech ascent.
Diversity: Emerging markets like China, India, and Indonesia lead the charge, fueled
by large underbanked populations and tech-savvy demographics.
North America:
a. Largest financial services industry ($5 trillion).
b. Leading innovation hub with a 17% CAGR through 2030.
c. Strong B2B2X and B2b businesses driving growth.
Europe:
a. Third-largest market with low fintech penetration.
b. Projected 21% CAGR through 2030, led by payments.
c. Forward-looking regulators supporting open banking and finance initiatives.
Latin America: .
.
Accelerated fintech penetration, especially in Brazil and Mexico.
Projected 29% revenue CAGR with government support for digitalization.
Brazil:
Rapid fintech growth with players like Nubank and Creditas.
Forward-looking regulation spurring innovation and instant-payment systems like PIX.
1. Local Champions:
Arise due to regulatory constraints or capital requirements.
Adapt successful models to local markets, fostering innovation.
Example: ClearScore in the UK.
2. Multinational Fintechs:
Expand globally to capitalize on opportunities.
Examples: Stripe, PayPal, Revolut.
3. Big Tech Entry:
Big tech firms enter fintech leveraging resources and user bases
Examples: Amazon, Google, Apple
Add a Multinational Fintechs:
Few fintechs, like PayPal, have succeeded in building global businesses.
Expansion expected in subsegments like KYC/AML, cross-border payments, and wealthtech.
Challenges encountered in new markets, but similarity in consumer base can ease entry.
Big-Tech Expansion:
Google, Meta, Tencent, Apple, Ant Group, Amazon integrating financial services.
Utilizing vast customer bases and data assets for global fintech offerings.
Potential regulatory scrutiny over antitrust concerns.
l
Thank you
very much!

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Reimagining the

Fintech companies excel by recognizing and

Q. What are the top actions your

3.Resilience Through Disruption:

Customer Focus: Fintechs excel in customer experience, exceeding traditional

Disruption Proof: Fintech thrives on innovation, adapting well to changing market

Continued Growth: Strong fundamentals position fintech for long-term expansion.

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