Partner of the Singapore venture capital Fund Life.SREDA about the market development of the blockchain and insurtech services. We have already introduced the readers vc.ru brief conclusions of our research in the directions. Money transfers, big data and personal financial planning, online loans for individuals and businesses, online and mobile acquiring, palanki and e-wallets, bank-as-a-service.
2016 (especially its second half) came as a surprise to industry. FINTECH has doubled every year for four years, and then increased by only 16% for the year. And if you drop out of the rut trade at the end of the year round of $4.5 billion in AliPay, if not sank by 6%. However, this does not prevent the industry to remain the second consecutive year the leader among all venture directions.
Almost a third of the volume of borrowed money. While the Asian region in the first half came in first place, ahead of the United States – at year-end the share of investment amounted to 47%. Again with hints. The only driver of growth in the region is China, which is now 39% of all FINTECH investment in the world, and Southeast Asia, for example, fell by 40%, and now investments here make up only half of the African market.
China will continue to grow at a faster pace. AliPay is the year 2017 began to record a rapid expansion at the expense of investment into other FINTECH startups and their purchases. The Chinese government created special funds for $1.5 billion for foreign investment in FINTECH startups to accelerate the growth and expansion of their companies.
Two verticals Finance, which we have not considered previously. Blockchain and insuretech. The first shows the outstanding PR results, but in the case of significant transactions in terms of quantity, volume and market impact is very small. Insurtech, on the contrary, “speak less and do more” is one of the fastest-growing “dark horses” of the industry.
The world of the blockchain is very heavily fragmented. The abundance of possibilities of implementation, technical complexity, and also media hype around the industry are prevented to separate the wheat from the chaff. For a start lets deal with the cryptocurrency, as it is the most “noisy” direction, but least interesting for real innovation. There are more than 150 cryptocurrencies, of which 30 are major ones and 10 of them have the main volumes of transactions.
The main “mining” cryptocurrency comes from China – 60% control pool of four Chinese (outside of China is the largest Georgian-American BitFury). After leaving the market around 50 players is still about 50 existing exchangers, 9 of which are main (the three largest in China). On all the most popular currency pair is not a bitcoin dollar, bitcoin yuan. China has shown a constant ability to create bubbles – take, Stripping the market of online lending, which is forced to deal with the local Central Bank, after a series of failures and frauds. Speculative topic requires the development of speculative instruments to maintain interest.
Rapidly evolving features such as high-frequency and margin trading (“shoulder”), actively produced derivatives and index investment funds. As with any pyramid. You can earn, just do not everyone, but only those, who just “pop up”.
More interesting are e-wallets. Especially those that allow you to bind multiple currencies (and only use cryptocurrencies as a universal base unit to account for) and release a classic Bank card (i.e., allow account to pay offline for real goods and services). For example, the Hong Kong Xapo (attracted in 2016 a new round of $40 million, are actively developing in Argentina and Venezuela) and the British Wirex. An adjacent area for the production of ATMs for cryptocurrency (in 2016, the market consisted of only about a thousand of ATMs worldwide, most of which are produced by three companies) is more of a PR tool than a real necessity.
An interesting innovation in the market is the ICO (initial coin offering) – a mix of IPO (sale of real shares of companies, only for the cryptocurrency), crowdfunding (purchase services or products of the company “on future”) and p2b lending (providing cryptocurrency company in debt). Total for 2016 total such ICO was held on $250 million. The creators of the Protocol, Ethereum launched the DAO software that allows you to technically implement the “social contract” for the creation and management of such companies. The largest ICO had on the company The DAO (is tokenization homes, cars, and other property of the parties for joint use), which attracted a record investment equivalent of $150 million of 11 thousand enthusiasts, $50 million of which was after some time legally “stolen” due to bugs in the code.
The most interesting (and promising) directions in the blockchain are all those that are outside of cryptocurrency. Health and medicine, logistics, land registries, government and corporate documents. Estonia that is a leader in introducing electronic state services, in conjunction with a blockchain startup Guardtime is working to create a unified database of medical records for the population that will be available for the exchange of information clinics and insurance companies. The same goes for a company Prescrypt (together with SNS Bank and Deloitte) in the Netherlands and BitHealth in USA. Swedish officials together with ChromaWay and partner Bank create a single land registry on the blockchain in order to make life easier for buyers and sellers, and banks who want to use them as collateral.
The same pilot in Georgia makes BitFury BitLand – in Ghana (going to scale in Nigeria and Kenya) and Honduras. UAE is going to transfer the entire state document on the blockchain by 2020. The state of Delaware, which was a lot of companies from other States and States, introduces the system of registration of companies, issue of stock, recording of decisions of the boards of Directors of the redistribution of shares in the result of the sale in the blockchain (same functionality implemented in several States, the Singaporean company Otonomos). The British company Everledger offers tracking and prominent for diamonds, objects of art and expensive alcohol.
If you go back to the financial sector, then there are interested in everything that lies beyond payments and transfers. Trade Finance, fixed deposits, the issuance and trade of shares, the document flow between banks and their corporate clients. But the reality is just the greatest activity occur either in the field of remittances, or in the area of setting new standards for the banking sector due to all sorts of associations and consortia. Interesting startup from Singapore – DaoPass – offers to do FINTECH start-UPS, telcos, instant messenger and e-Commerce players complete identification of customers of partner banks in different countries. Two American companies are fighting for the right to become the “new Swift” for banks around the world – a consortium of R3 and Digital Asset Holdings.
First bring together 70 partner banks (however, three famous players left the consortium – Goldman Sachs, Morgan Stanley and Santander), which owns 60% of shares, was going to involve a round of $200 million, but ultimately raised $150 million. The second drew two rounds – of $7.2 million and then $60 million, and involved mostly buying existing blockchain projects. In 2016, Elevance purchased Digital Finance, previously – Blockstack.io Bits of Proof, Hyperledger. Many pilots with banks makes Ethereum, trying to find its niche and creating value for the traditional giants. In the field of remittances someone (such as the American Circle, which attracted a new $60 million in 2016 at a valuation of $428,3 million) more focuses on the provision of services to final retail consumers, while others (like, for example, American Ripple, which attracted a new $55 million at a valuation of $339 million, and canadian Blockstream, which attracted a new $55 million) work more with partner banks to create them faster and cheaper infrastructure to implement the transfers.
Interestingly, in all three companies actively invested Asian investors. Chinas Baidu and CreditEase in Circle, Japanese SBI – Ripple in the Hong Kong-based Horizons Ventures – in Blockstream. First, accordingly, is actively developing the Chinese market, the second in Japan and Southeast Asia, and others not yet seen in the Asian expansion. As mentioned earlier, insurtech or online insurance is one of the fastest growing verticals in vintage.
And, no doubt, within one to two years is highlighted in a separate industry. The main country of development – United States (Lemonade, Oscar, Zebra, Quartet, Metromile, Slice, Stride, PolicyGenius, Bunker) and Germany (FriendSurance, FinanceFox, Clark). Other countries – United Kingdom (Trov, FitSense), France (Alan), Poland (DocPlanner), India (CoverFox), China (PingAn Good Doctor, Huize Insurance) – cant please a lot of new players. The direction attracts the attention of investors.
And we must pay tribute to the insurance company in insurtech much more active than were the banks in vintage. Apparently, a bad experience the last allowed the first to learn about what changes in the world dont need to resist or ignore them. A huge round of $500 million (at a valuation of $3 billion) attracted PingAn Good Doctor, Metromile – $191.5 million, Oscar – $150 million (at a valuation of $3 billion), Quartet – $40 million Lemonade – $34 million (total of $60 million), FinanceFox ($5.5 million and $28 million), Huize Insurance – $30.8 million, Zebra – $17 million (total of $21 million), Trov – $25.5 million, DocPlanner – $20 million (total of $34 million), FriendSurance – $15.3 million, PolicyGenius – $15 million (total of $21 million), Clarck – €13.2 million, Alan – €13 million Slice of $3.9 million, Bunker – $2 million, FitSense – 0.3 million pounds. While the Chinese insurance company (PingAn) and the Hong Kong investors (Horizon Ventures) will give odds to any other players in terms of practical results.
As always, American and Chinese representatives focused only on their own markets (Lemonade and Metromile in 2017 want to cover the whole country), and only European busy scaling issues (FriendSurance and Trov was released on the Australian market, FinanceFox – in Switzerland and Austria, DocPlanner is present in 25 markets). As in any are in the development stage of the industry, in the field of online insurance a large enough market share to take on services that are built as aggregators of products and compare prices or as brokers (Zebra, PolicyGenius, Bunker, FinanceFox, Alan, CoverFox). In this case, as in General vintage, such services will first involve a very large customer audience and then quickly die out as saturation of the market players, who add value to the client and is able to hold it for a long time over a full range of services.
Either for survival and retaining their customers, they will need to quickly migrate to a complementary direction. For example, as Oscar Health, which actively develop e-records to doctors, telemedicine, he opened his own clinic in Brooklyn and are actively working with small employers from the point of view of the target audience. In General, there is active focus on work not with large companies but with small business. A clear trend is noticeable due to the growth of the gig economy (freelancers, employees and customers of the marketplace-intermediaries and on-demand services).
Slice, Stride, Bunker, CoverFox offer their services to the new employees (and their customers) like Uber, which did not exist previously. The approach “by the order” affects the ways of monetization startup Metromile Slice and charge only for usage (pay per use) not selling expensive and “many” insurances in advance. Another very interesting direction, which is also a consequence of a larger overall trend in the economy – p2p-insurance. Services such as Lemonade and FriendSurance, I suggest you create groups of people whose behavior you know and trust, and insure each other by small pools of people.
If the insurance situation does not occur the money is returned to participants (minus the fee). The rapid growth in consumer online lending creates demand for online insurers for electronics, sports equipment or musical instruments (like Trov). Sales of fitness trackers and use of fitness apps, explains the emergence of start-UPS in the aggregation and analysis of such information about physical activity (like FitSense). Innovations in the field of artificial intelligence and chat-bots contribute to voznikonovenii services that do offer products (Clark) or predict critical situation (Quartet).
Rapidly converging between a direction insurtech and healthtech, which was understandable. Insurance giant PingAn launched as a separate company to service the online store to doctors and telemedicine PingAn Good Doctor (the service has 77 million customers and 250 thousand doctors). Quartet allows you to consult with community physicians, as well as to perform automatically by algorithms your symptoms. DocPlanner and Doctoralia also allow you to make an appointment online at the first 8 million customers in 25 countries, the second 9 million in 20.
Services start to become stronger at the expense of the removals to each other – DocPlanner currently attached to Doctoralia, and Metromile bought Mosaic Insurance to improve their practice through the assessment of clients risks. The rapid development of FINTECH start-UPS have generated over the past year boom that host services (Dwolla, Kantox, CurrencyCloud, Braintree, OnDeck, and dozens of others) began to integrate with each other (and other players) via open API (now there are hundreds of them). Really, why do something again if its not your main competitive advantage, but someone else has already implemented this functionality and did so efficiently. On the other hand, the abundance of connections with new services and the obsolescence of their own backends have forced banks (BBVA and others) to move from manual direct integration in each case to automated connections via its external API.
In countries where such open to integrations with findahome banks do not exist (i.e. in most countries) or where startups want to accelerate your own scale by connecting to several banks in several countries started to receive the BaaS platform (bank-as-a-service). The big banks felt that such platforms and FINTECH startups with well-written and open APIs are for them a strategic threat, commoditizes their business and offsetting benefits (in the form of a license, processing center, card issuing, compliance function), and began to promote the idea BaaP (banking-as-a-platform) – when the Bank is not only a technical platform for startups landing, but the final seller to its customers (ABN Amro, Sberbank and others). The main motivation for such large banks is the ability to retain the “last mile” – the final relationship with their own client base.
In China BaaP-ideology professed by FINTECH giants like AliPay and WeChat Pay. The historical homeland of the BaaS – USA. Players such as The Bancorp bank and CBW, historically successfully act as platforms for hosting us finehow. New players like BBVA are competing for this is a promising direction.
The Spanish Bank BBVA with different strategy in different markets where its own core business is small (e.g. in the USA), they work according to the model of BaaS, and where they are the dominant player in the field (e.g. in Spain), they placed more emphasis on BaaP. Of the downsides of American (and Chinese) BaaS platforms until you can call what they do not give way to other markets, and the need is great. In Europe – 50 countries. In Asia, where the largest part of the population and the majority of the poor and not using Bank services – 48. In Africa, 54.
In The Middle East 19. The most actively growing market for BaaS – Europe. Both due to the support of the regulators, who forced banks, insurance and other players in the open access of external players to their platforms by introducing standard PSD2, and due to the emergence of local players that cover this need in the nexus between startups and banks. The largest of them – the German company Wirecard with a capitalization of about €5 billion, are now working in most countries of Europe, recently opened an office in Singapore to develop rapidly in Asia and the middle East.
The goal of the company is to cover the entire world with his presence. In each country the company strives to get his license, but in some markets forced to work in partnership with local Bank (where it actually becomes a BaaP—solution). Despite the fact that the company publishes many well-known startups (N26, Curve, Monzo, TransferTo, Loot, Revolut, and so on), the number and business volumes, it is far from our American colleagues. Therefore, the core business of Wirecard leads with the traditional major players, which are also eyeing the new financial services. Electronic wallets (AliPay), telecoms, retailers.
According to their own statement, this is just the beginning, and the market can easily handle three or four major international player. In Europe there are always new competitors SolarisBank (Germany), IbanFirst (France), UAccount (UK). Interesting business model at SolarisBank. The company is part of the accelerator FinLeap (like RocketInternet, only vintage), which actually aggregates the infrastructure design for all your startups in one place, and distributive their own development to final customers through open APIs in the form of white-label solutions for external services. At the end of 2016, the project received its banking license in Germany.
If we talk about markets in Asia, Africa and the Middle East, there are no examples (except for Singapore companies BAASIS). And if they do not appear that infrastructure was unprepared, which makes the launch of FINTECH startups here very long and expensive process (and the scaling is almost impossible), buried most of the new players, and with them the hopes of Singapore, Hong Kong, Seoul, Tokyo and other to build FINTECH hubs. The business model of the BAASIS, which focuses on building a platform in the Asia-Pacific region, it is interesting that the company is not seeking to obtain their own licenses in the markets and compete with local banks, and selects one partner Bank for each territory. This gives you the ability traditional players to rent their own infrastructure (as Amazon does with its super-successful project, Amazon Web Services) start-UPS.
A number of traditional manufacturers backend (core banking systems) for banks like Swiss Crealogix (CLX) and Silverlake Malaysia also see great potential in not only traditional players but new. And trying to find a niche to work with BaaS platforms. Send columns, corresponding to the requirements of the editorial Board, [email protected]