2. Finance Sector Challenges
• Finance crisis in 2008 started a chain reaction that has
impacted regulation, credibility and business models of banks
• More regulation and more requirements for capital have
limited banks’ capability to lend to business customers
• Crowdfunding and p2p lending are emerging, and Goldman
Sachs has estimated their addressable market is $3.3 Trillion
• Digital currencies and especially the underlining technology,
like block chain, enable new ways to process transactions
without payment processors and banks
• People and companies are more critical towards finance
institutions and how much they are ready to pay for services,
e.g. in fund raising, wealth management and asset
management
3.
4. Fragmented Emerging Market
• Hundreds of platforms, especially for startup crowdfunding and
p2p lending
• Most services have their own platforms and in principle they
are quite similar, although some specific differences in assets
and investment models
• Most platforms need more volume to offer more value but also
conduct real business
• Other new things, like digital currencies and their technology,
have several different models and no standards
• Regulation and requirements in different countries are different
• Hard to get data to make investment analyses, decisions and
finance products for the new markets
5. Many Forces Drive Disruption
Digital Finance
Disruption
Digital currencies &
tech: enable new kind of
transactions
Online investing and
lending services:
transparency & direct tx
Regulation:
more for
banks &
enable
digital
finance
Globalizati
on: more
int’nal
finance
services
6. General Trends
• More services for different verticals (e.g. based on asset class,
investment instrument, special data)
• More horizontal services (e.g. asset, portfolio and wealth
management)
• But less services for each individual vertical and horizontal
position (e.g. not thousands of real estate or startup
crowdfunding services)
• All services come more international
• Each service must offer real unique value-added in its position
• Some services, like back offices and data services are links
between all services
• Digital currency and their technology can make solutions more
de-centralized, but there are still many uncertainties in this
development e.g. due to regulation and reliability of the
services
7. Development Projection
Digital Back Office Services:
• Authentications, transaction processing, user accounts, transaction history,
reporting
• Assets and their securities, ownership ‘tables’, finance instrument models
• Interfaces to 3rd party components, databases, ‘blockchain ledger’ processing
Payment
processing
Credit Rating
ID
verification
3rd party
services
Blockchain
‘type’
services
…
Investing
Service A
Investing
Service B
P2P Lending
Service A
Users: Private & Institutionals
MarketDataServices
Wealth
Management
A
Secondary
Market
Service A
Asset
Management
A
Syndicate
Service A
Digital Fund
Service A
RiskManagementand
insuranceservices
8. Next Wave
1. Consolidation of crowdfunding, investing and lending
platforms
2. New value added services like wealth management,
portfolio management tools, data services and risk
management products
3. More digital finance instruments, e.g. data-managed
fund services
4. Mixing of private and public markets in portfolio and
wealth management
5. Combination of data science and artificial intelligence
create totally new era for finance products (and complex
questions for regulators)
9. Seven Theses for Incumbents
1. Digital services make services more effective and decrease the
need for middle-men ! smaller fees to fewer parties
2. More data oriented approach for many services and products with
better transparency ! harder to make business only based on the
right contacts and information
3. Decreasing entry barriers (until regulators create new ones) !
more competition
4. Technology enables direct transactions between parties ! less
need for ‘centralized accounts and transaction services’, i.e. banks
5. Private and public markets are more similar and linked to each
other ! many digital services are linked to both markets
6. Mandatory to find own unique positions in the new ecosystem !
hard decisions to abandon something
7. Technology and data competences are important ! need to
change people
10. Summary
• We are just in the beginning of digital finance services
• At moment have very fragmented small services for a
potential huge $3.3 Trillion market
• We will see basically similar services and products in
this digital private market we have seen traditionally in
the public market, but most of those products are digital,
based on online services, data analytics and
transparency
• The big finance institutions start to be interested in this
market too, but it is also hard for an incumbent to make
the transition for a new era
• Digital finance will be one of the biggest industry
disruptions during the next 10 years