Digital transformation

Frank Schwab, January 2017

German banking industry

Year 2000

2002 2015

ING*DiBa benefits from 1st digital wave

Customers

1.8 millions

8.5 millionsProfits

-4 millions EUR

1,115 millions EUREmployees

914

3.749

FrankSchwabSpeaks.com Source: annual reports ING*DiBa

ING*DiBa – 10x business volume

2002 2015

Deposits in billion EUR

19.2

121.1

Loans in billion EUR

4.6

98.0

2002 2015FrankSchwabSpeaks.com Source: annual reports ING*DiBa

PayPal 2x Deutsche BankMarket cap, Nov 2016 [in billion EUR]

17

Deutsche Bank

44

PayPal

Deutsche Bank PayPal

Customers 25,000,000 169,000,000

APIs 0 > 25

Employees 100,000 8,000

1st Welle

But

No

Business model

2017

IBM Mainframe

Sun Server

Intel blade

Thin clients

Fat clients

AIX Server Server Farm

Investmentneeds

No interest rate business

Profits

RolandBergerFinTech Study,March2016

Alipay

2015

289millionsmobileuser/month

8.5millionsmerchants

52 ordersperuserperyear

24,000employees

> 400 FinTechs

Crowd

1 million EUR in 9 minutes and 23 seconds

Fidor: Facebook Like Interest Rate

Peer to peer

Crypto

642 currencies

703 exchanges

10 %-8

Blockchain

Blockchain

time

Public register

Transaction blocks

Smart ContractsPublic register Transaction block with

conditions

Condition

Example

Shares: dividend payment

Smart Contracts – Example car finance

AI^

Amelia, Source: IPSoft

IT Service Desk Agent

SEB Bank

3 weeks

700 employees

4,000 calls

Roboadvisory

Over rated

Gartner Hype Cycle

Over rated

Under rated

Gartner Hype Cycle

Mobile

Proceses

100% STP

< 60 seconds

Cloud

API

Plattform

All just hype?

36

BPO; 396 Insurance; 1.515

FinHCIT; 2.087

FinMgmtSol; 4.173

IB / Wealth; 4.702

Banking/Lending; 9.296

Payments/Ecommerce; 13.543

36 billions USD in FinTech investments in 2016

[in million USD]

1.525 transactions

337

432

293

186

14110531

FrankSchwabSpeaks.com Source: Financial Technology Partners

D.A.CH FinTech scene overtook the UK - with over $1,3B investments (VC + venture debt) in 2015

2.50%

13.9%

150%

Bank

ing%

9.40%20% 0,7% 5.5%2%

Lend

ing%

358% 1% 0.5%

10% 20% 14.20% 5% 230%

49.8% 0.5%

Insurance%

1% 3.5% 7%

Investmen

t%

5.5% 10% 0.27% 2% 4%

0.6% 1.6%Blockchain%/%Other%

*%Source:%%TechFluence%

Paym

ent%

150%

Chart shows funding in € mn. Estimates based on disclosed deals only- no liability for errors.

Customer

paymentsSecurities

Loans

Deposits

PayPal further develops its business step by step

2000 2006 2010 2015

Online payments

P2P

Account

CardsLoans

POSCash

FrankSchwabSpeaks.com Source: annual reports PayPal

IT defines retail banking of the future

= new KPIs

IT costs per user per year in USD200

Tier 1/2 Bank eBay

7,4

Facebook

3,8

Google

3,4

FinTech

10

FrankSchwabSpeaks.com Source: annual reports

Customer acquisition costs in EUR50 - 200

Traditional banks FinTech

5 - 25

What do German banks

do?

CommerzbankStartup-Garage

Comdirect

Venture Capital

CommerzVentures

Main Incubator

Commerzbank

UniCredit / HVB

45 millions EUR invested in 2016

DZ Bank / German union banks: Hackathon, March 2016

Source: https://twitter.com/dzbank/status/705424223838146560/photo/1?ref_src=twsrc%5Etfw

Quo vadis?

2030

Loans

Assets

Payments

Banking Services

R I P

New banking products build on new technologies

Crowd P2P Crypto

Cloud API

^

AI MobileBlockchain Plattform

FrankSchwabSpeaks.com

Diffusion of innovation

Longer than we think

Fasterthan we

think

time

diffusion

Banking disruptedNew

Traditional

Ban

king

Ser

vice

NewTechnologyLegacy

Niche

Financial infrastructure provider

ErSuccessfuldisruptors

FrankSchwabSpeaks.com

German retail banking 2030

2015 2030

Saving banksPrivate banks Union banks FinTechs Non Banks

FrankSchwabSpeaks.com

Frank@FrankSchwab.de