Where is the Receivables Finance

Industry going?

Ubiquitous distribution Unique expertise (such as credit underwriting) Regulated institutions that supply credit Largely responsible for the lifeblood of

economic growth Sovereign insurance for deposits Gateways to the world’s largest payment

systems Consumers are reluctant to change, established

and enduring brands are bulwarks of stability

Banks are robust businesses

Last time was driven by the advent of a commercial internet and resulted in the dot.com boom (and bust)

8 years between Netscape IPO (1995) and PayPal acquisition by Ebay

450 launches of whom only 5 survive (as stand-alone entities) today

PayPal is the exception that proves the rule It is tough to disrupt banks!

A time of significant technological disruption

The number of FinTech start ups today globally is 2000+

In April 2015 this number was 800 Globally $23B of venture capital and growth equity

has been provided to FinTechs over the past 5 years $12B in 2014 alone They select a niche element of the transaction

process and then create an alternative that is more efficient and automated than traditional products offering convenience, smoother processes and potentially lower costs

FinTechs are growing exponentially!

Post financial crisis had a negative impact on banks Mobile devices as distribution channels Smartphones enabled payment as well as

personalised customer service Massive increase in widely accessible, globally

transparent data (so called “Big Data”) Blockchain technology Significant decrease in the cost of computing power McKinsey estimates that banks earn an attractive

22% ROE from origination to sales, but the provision of credit generates only 6% ROE

Disintermediation opportunities!

Some things have changed in the market

Products exist/are being developed:

Account management Consumer finance Mortgages SME lending and financing Payments Wealth management

These areas alone account for 40-60% of bank revenues!

The FinTech threat to traditional banking products

Banks realise that: Stiffening competition for some years Innovation is required to continue being market

leaders B2B space is relatively green-field, but with

great potential Now is the time to get involved if they are to

influence market developments and set industry standards

BUT it will probably be impossible for them to cater to all their customer’s needs

Are the market disruptors competitors to traditional banking models?

It will continue to be an increasingly competitive market

Small players will struggle with a single, niche offering

Distribution channels are key: Ebay reduced PayPal’s customer acquisition costs by 80%

Market consolidation will occur Long term success will require a combination

of market insight and experience that Fintechs are unable to provide alone

Can the FinTechs survive?

Use data driven insights holistically: banks have unique insight here but “big data” is now available and banks no longer have a monopoly on information

Create a well designed, segmented, and integrated customer experience, rather than “one size fits all”, for distribution.

Build digital marketing capabilities that are equal to e-commerce offers. Keep people informed (declines only exist in the world of credit)

Reduce costs through digitally enabled operations Keep abreast of, leverage and deploy the next generation of

technologies Rethink legacy organisational structures to support a digital

environment

And the answer is: Form partnerships!

The opportunity

For banks: Reduction in physical distribution costs Innovative use of data - many will fail but

some will improve decisioning Segment specific propositions Leveraging existing infrastructure in

different forms of “co-opetition” Managing risks and regulatory stakeholders

What could happen?

For FinTechs: Payment market expertise Regulatory experience Distribution channels – access to client base

and the ability to scale up Access to existing payments infrastucture Public trust and confidence in new products

What could happen?

E invoicing will enable a high capture rate EDI solutions are improving Tax collection has a real interest in

efficiently and accurately gathering tax dues in real time

Discounts can be offered on all approved invoices with discounts calculated

No longer the “whole turnover” model beloved in the UK – picking and choosing – of invoices and suppliers

One thing I can guarantee - dynamic payables discounting