Confidential & Proprietary – KoreFusion LLC ACG FinTech Panel San Francisco Panel S lides For 4 April 2017
Confidential & Proprietary – KoreFusion LLC THE ONGOING EVOLUTION OF FINTECH FinTech 1.0 FinTech 3.0 FinTech 2.0 • Consolidation within FinTech industry verticals, primarily driven by: • Startup cannibalization • Rapid identification and seeking volume growth • Banks buying innovation exploitation of opportunities to leverage technology to • Global consumer technology disintermediate traditional financial services companies entering the financial services space • Primary focus on technology with mixed results proof-of-concepts and • The introduction of undisciplined consumer acquisition models. proprietary bank owned payment networks • Primary focus on business model development and rationalizing consumer acquisition costs Source: KoreFusion Analysis 2
Confidential & Proprietary – KoreFusion LLC FINTECH 1.0: FINTECH COMP ANIES UNBUNDLED & DISINTERMEDIATED TRADITIONAL FINANCIAL SERVICES BY ADDRESSING REAL P AIN POINTS ILLUSTRATIVE Consumer & SMB Personal Finance Payments & Analytics Lending Retail Investment Rewards/ Loyalty Inst. Investments Remittances Equity Financial Business Crowd Consumer Banking Financing Research Tools Funding Banking Infra. Source: Vent ure Scanner, CB Insights, News Clippings, KoreFusion Analysis 3
Confidential & Proprietary – KoreFusion LLC FINTECH 2.0 : 1) CONSOLIDATION WITHIN FINTECH VERTICALS, 2) THE ENTRANCE OF TECHNOLOGY PLAYERS, AND 3) BANK OWNED NETWORKS ILLUSTRATIVE 1 Acquirers Strategic Acquisitions and Investments (Select Examples) American Express MasterCard Citi Ventures Alibaba / Ant Financial PayPal 2 3 Company Payment Tool Acquisitions Focus Area(s) Bank Payment Network NFC Consumer purchases In-app Purchases Part nership Focused P2P Payments Consumer Purchases eWallet Consumer purchases NFC, QR and Magnetic Strip Analytics S ources: News Clippings; KoreFusion Analysis
Confidential & Proprietary – KoreFusion LLC FINTECH 2.0: TECHNOLOGY & DISTRIBUTION P ARTNERSHIPS ARE THE PRIMAR Y DRIVERS OF GROWTH AMONG MATURE PLAYERS Distribution Network Partnerships Technology Platform Partnerships Technology companies are developing/expanding financial Established FinTech players, especially in the mobile wallet, solutions as part of their broader technology platforms, eCommerce, and SMB financing spaces, are seeking out leveraging their embedded consumer base to attract distribution partnerships to help them broaden their footprint merchants and/or financial institutions to generate and leverage new customer acquisition channels valuable transaction data 5 Source: News Clippings, KoreFusion analysis
Confidential & Proprietary – KoreFusion LLC FINTECH 3.0: LOOKING FOR WARD, AN INCREASING PORTION OF FINTECH DEALS WILL BE INFLUENCED BY OVERSEAS TRENDS U.S . and European market s are becoming increasingly sat urat ed wit h FinTech solut ions, whereas AS EAN and LA TAM are poised for explosive growt h due t o st rong macroeconomic drivers impact ing t heir FinTech sect ors Western Europe Second highest region for deal flow, but the financial services regulatory environment flattens margins, dampens India & China U.S.A ROI rates, and minimized natural barriers While the scale of these two Region with largest deal flow but markets are undeniable, investment The uncertainty generated by Brexit over investor saturation has created high opportunities are complicated due the coming years adds an unnecessary valuations and very limited to regulations, bureaucracy, and layer of volatility to FinTech investments defensible first mover opportunities limitations on repatriation of profits in the UK and EU ASEAN Growth Regions Currently the third largest region for deal flow with multiple dislocation opportunities driven by strong e-commerce, mobile phone Macro-level Pressures penetration, a large alternative banking Latin America ecosystem, and a strong desire for formal Limited/ Opportunistic Buoyed by secular drivers and an capital. The region is forecast to be the second acute opportunity to take largest source of deal flow in the next five advantage of weak currencies 6 years. and temporarily low valuations S ources: KoreFusion analysis
Confidential & Proprietary – KoreFusion LLC FINTECH 3.0: RECENT EVENTS SUPPORT A HYPOTHESIS OF INCREASED CROSS-VERTICAL STRATEGIC CONSOLIDATION Consolidat ion will occur across FinTech vert icals as acquisit ion rat ionale becomes increasingly driven by st rat egic posit ioning, not financial rat ionale; New fut ure exit opt ions will impact t oday’s growt h st rat egies ILLUSTRATIVE Example: An Expanded Horizon of Exit Options for a Mid-Sized Money Transfer Company Potential MTO Acquirers 7 S ources: KoreFusion analysis
8 Confidential & Proprietary – KoreFusion LLC
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