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Trends in Fintech

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Gartner Analyst Rajesh Kandaswamy @rajeshkan lists out some interesting points about IT use in non-banks, in P2P, Bitcoins, etc. November 2014

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Trends in Fintech

  1. 1. © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. While you are waiting for our webinar to begin, you might be interested in the downloads on the Attachment tab: Have a question for our analyst? Click the Question tab. Q&A will be at the end of today’s presentation. If you have any difficulties, please email gartnerwebinars@gartner.com. A copy of today’s presentation Information on how to dial in if you are unable to attend via VoIP
  2. 2. 1,000 Analysts 9,100 Distinct Client Organizations 215,000+ Client Interactions Vertical Coverage in Nine Industries 5,500 Benchmarks 850 Media Inquiries per month World's Largest Community of CIOs 70+ Conferences 73% of Global 500 3,200 Consulting Engagements Clients in 85 Countries 70% of Fortune 1000 500 Consultants Gartner at a Glance
  3. 3. CONFIDENTIAL AND PROPRIETARY This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other intended recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Rajesh Kandaswamy Research Director, Gartner Twitter: @rajeshkan Trends in Fintech – Observations From Money20/20 25 November 2014
  4. 4. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. T-Mobile offers Debit card 3 Bitcoins PayPal to be spun-off PayPal buys Braintree Paym Launched in UK Square Cash + Snapchat 9000+ attendees at Money20/20
  5. 5. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. T-Mobile offers Debit card 4 Bitcoins PayPal to be spun-off PayPal buys Braintree Paym Launched in UK Square Cash + Snapchat 9000+ attendees at Money20/20 In The Past 12 Months.... Public Company With The Largest Market Capitalization In The World Has Entered Payments World’s Largest Retailer Has Announced That It Will Offer Banking And Payments
  6. 6. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Presentation Outline Forces Impacting Banking and Payments Key Trends 1.Banking And Retail Are More Interlinked Than Ever Before 2.Technology To Transform Branches & ATMs Are Ready, But Adoption Lags In Mature Markets 3.Security Solutions Extend To Make Better Use Of Outside Technologies And Data 4.Bimodal Thinking By Clients Provides Entry Points for New Technology Providers 5.Mobile Payment Companies Acknowledge Apple Pay, But Impact Analysis Does Not Go Far Enough 6.Non-Banks Are Growing With Complementary And Substitute Products 7.Governments Look At Mobile to Improve Financial Inclusion 8.Understanding of Bitcoins Remains Low, Even Among Payment Companies Recommendations Suggested Reading Q & A 5
  7. 7. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Banking & Payments Are Impacted By Large Forces 6 Consumer Other Countries Banking & Payments Investors Non-banks Social Media, Mobile, Sharing Economy SEPA, AliPay Revenue vs. Risk T-mobile, Walmart
  8. 8. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Banking And Retail Are More Interlinked Than Ever Before 7 Banking & Payments Retail & Other Merchants Payments Credit Disputes Security Offers Mobile Analytics Big Data Cloud Bio-metrics Bitcoin Loyalty How well are your external offerings and internal operations aligned to take advantage of this growing overlap? Our future is in Payments, Commerce and Lifestyle Services – Kenneth Chenault, CEO, American Express at Money2020
  9. 9. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Poll #1: Usage Of Bank Branches In the last 6 months, I have visited a bank branch (not for ATM)…. 8 1.Never 2.Less than 3 times 3.Less than 6 times 4.More than 6 times
  10. 10. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Technologies Technology To Transform Branches & ATMs Are Ready, But Adoption Lags In Mature Markets 9 Are your solutions working with consumer trends or are they working against them? Do digital channels create an ‘Adverse Selection’ issue for banks? –Jane Fraser, CEO, Citi US Consumer & Commercial Banking at Money2020 Customers are migrating to mobile and online channels Banks are not successful in selling products on digital BRING THE CUSTOMER BACK - ATMs, Branches and POS FOLLOW THE CUSTOMER – Home and Outside ?
  11. 11. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Bio-metrics Channels Security Solutions Extend To Make Better Use Of Outside Technologies And Data 10 Data Richer Use of Telecom And Network Data Richer Data From Banks and Retail Security Increased use of mobile, cloud and digitization will drive demand for security solutions Payment Retail Card
  12. 12. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Bimodal Thinking Provides Entry Points for New Technology Providers 11 What are such bi-modal opportunities at your clients? How can you best serve them? Mode 2 is exploratory, emphasizing agility and speed. Having two modes of IT, each designed to develop and deliver information information- and technology-intensive services in its own way. Mode 1 is traditional, emphasizing safety and accuracy. Mode 1 Product Mode 1 Product Mode 1 Product Mode 2 Product Price/ Unit (r) Total Units (n) Increase in volume might not justify reduced price New product – less volume, simpler service needs Areas where new technology providers have emerged: Card Processing Core bank Processing
  13. 13. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Poll #2: Mobile Payments Will I use my mobile phone to pay for purchases instead of cash or a plastic card (retail store, restaurants, vending machines, parking, etc etc.)? 12 1.I already use it and expect to use more in the future 2.I have not used it, but expect to use in the future 3.I do not plan to use mobile for payments at all
  14. 14. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Mobile Payment Companies Acknowledge Apple Pay, But Impact Analysis Does Not Go Far Enough 13 If you are in mobile payments, which of your assumptions need to be revisited? Changing Narrative Since Apple Pay • • More Understanding of Security Aspects of Mobile Payments More Expectations on Retailers to Support Mobile Payments 1. Silver Lining Mentality – ‘Apple Pay leaves 60% of the market open’ 2. Not Factoring In New Information - ‘Mobile Payments cannot succeed without Loyalty, Coupons and Offers’ Old Belief - Loyalty & Offers New Information - Usability & Security 3. Not Revalidating Earlier Assumptions – ‘We are focused only on payments at the retail store since that market is much larger’
  15. 15. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. How Millenials And The Unbanked Impact Banking and Payments Banks Are Struggling to Increase Revenue, But Risk-Averse Under-banked and Unbanked Remain Growing Millennials / Gen Y Population Technology Has Changed Consumer Lives Minnennials / Gen Y adopt technology at a higher rate Both do not use banking products, do not visit branches and have less discretionary income Technology enables reaching consumers anytime and anywhere at less cost.
  16. 16. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Non-Banks Are Growing With Complementary And Substitute Products 15 High-Tech Retail Alternative Fin. Services Bank Substitutes Other Payments, Consumer Lending, Small Business Lending, Money Transfer, Bill Payment, PFM, Student Loans Check Cashing, Payday Loans, P2P Payments, Money Transfer Small Business Lending, Debit & Prepaid Cards, Mobile Money Check Money, Debit Cashing, Small Business Lending, Consumer Lending, Mobile & Prepaid Cards Debit Cards, PFM, Bill Payment, ATM Access Is your strategy to serve non-banks Accidental or Intentional?
  17. 17. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Governments Look At Mobile to Improve Financial Inclusion 16 COUNTRIES       Brazil – Payment Institution India – Cash-out provisions for non- banks Pakistan – Reduced limits for accounts China – Large presence of non-banks Nigeria, Indonesia – Bank-centric mobile money US – retail-led (nearly 70 million unbanked/underbanked) M-Pesa Succeeds in Kenya Awareness of Mobile’s Potential Moderate Success Elsewhere Realization of Need for Additional Support TRENDS   out provisions,  Larger role for Mobile Network Operators Success is mostly in remittances, followed by payments Legislative push– cash-payment banks, cost of cash Inhibitors Telecom and banking structure Lack of credit information Lack of suitable products Need low-value payment systems Do you operate in any of the geographies where mobile money will have a large impact? How you do you plan to serve the mobile money operators?
  18. 18. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Understanding of Bitcoins Remains Low, Even Among Payment Companies 17 Awareness has Improved, But Little Understanding of…. Key Aspects of How it Works Areas of Applicability Regulatory Direction is Evolving Among Agencies. Challenges in Balancing Consumer Protection and Encouraging Innovation If you are in payments, have you done an assessment on how Bitcoins can impact your clients and your products? 1. Dies or Fades Away 2. Some Adoption 3. Large-scale Adoption 4. Technologies Get Adopted Regulation Speculation Perception Some areas: Remittances, Non- returnable goods Tech-savvy customer Online payments P2p transfers & remittances Bank Support Favorable legislation Block chain technology Federated transaction validations
  19. 19. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Recommendations 18 Look which segments of emerging non-banks could be of interest 2.to you. Assess if your go-to-market approach is suitable to serve these clients. Ensure that your innovation investments uncover both new business value and provide technology innovation. Do not settle for 3.incremental value-only offerings or technology-only offerings that do not link to business value. Monitor Fintech companies in functional and technology areas 1.that are relevant to you. They are a source of ideas, potential partnerships and could be emerging clients.
  20. 20. CONFIDENTIAL AND PROPRIETARY © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Suggested Reading Market Insight: A Banking Industry Primer, 2014, G00261044 Market Trends: Banking, Worldwide, 2014, G00258490 Market Trends: Emerging U.S. Nonbanking Consumer Financial Services Providers, 2013, G00258599 Cool Vendors in Consumer Financial Services, 2014, G00262583 Competitive Landscape: Business Service Providers, Banking and Securities, North America, 2014, G00269231 Competitive Landscape: Business Service Providers, Banking and Securities, Western Europe, 2014, G00269319 Market Trends: The Rising Importance of the Business Buyer — Fact or Fiction?, G00258700 Marketing Essentials: How to Develop and Assess a Vertical Market Strategy, G00171151 Bimodal IT: How to Be Digitally Agile Without Making a Mess, G00268866 Are Mobile Biometrics Ready for the Enterprise?, G00259859 19
  21. 21. © 2014 Gartner, Inc. and/or its affiliates. All rights reserved. 20 Simple steps for increasing the value of today's webinar experience Today's presentation is available to download on the Attachment tab of our webinar portal and on our webinar page. Visit gartner.com/webinars Check out the schedule of upcoming Gartner webinars (plus on-demand webinars) and don‘t forget to share these resources with your colleagues. Contact your Gartner account executive with any additional questions, comments or for a complimentary copy of today's presentation.

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