With TD Shepherd we are at the forefront of the developments in Fintech. We have, over the previous years, been involved in a number of successful transactions (ranging from venture capital, to growth financing to Management Buy-Outs, to trade-sales) and built up deep knowledge of both local (European) and global markets, the market dynamics, the new business models employed and the technology upon which these models are launched.
TD Shepherd is one of the few corporate finance boutiques in the Benelux with in-depth experience and focus on Fintech.
Francis van den Bosch is leading our efforts in Fintech. Francis is the former CEO for Maestro/Cirrus and was in senior executive positions at Citibank, CitiCorp and MasterCard/EuroPay. Francis has deep knowledge and understanding of FinTech, payment processing and associated areas, such as risk, fraud and identity management and has been involved with US and EU based fintech investors.
TD Shepherd has been involved in a number of Fintech transactions, with market leaders, such as:
- Global Collect Buy-Out of TNT
- Successful Series B and C financing and shareholders restructuring of Anachron
- McKinsey acquires Risk Dynamics
- Growth Capital and partial Buy-Out of UnifiedPost
Financial Services and Technology
While the last three decades of financial innovation have already led to massive changes in financial services, we believe that a new wave of innovation will continue to transform the industry. The “Financial Services” sector does not escape from the major global trends, which include technology as a driver and enabler, collaboration and sharing, content, and data (big, small and smart). These trends triggered an exponential growth of FinTech companies, in size and number, across the globe.
“FinTech” can be described as an industry composed of companies with the general objective to make financial services more efficient through the use of technology, new service-offerings and new business models. To illustrate the growth of this industry: in 2008 new and “young” FinTech companies attracted $ 1 bln of investments. In 2014 this number grew to $ 13 bln and continued to grow to over $ 20 bln. In 2015.
The Fintech market can be divided in a number of key areas where changes and disruption are most likely to happen or already happening in full force.
- Payments and payment processing
- Block chain
- Lending, Deposits and Crowdfunding
- Investment Management / Wealth Management
Payments and payment processing
New consumer functionalities are being built on existing payment systems and will result in meaningful changes in customer behaviour and great opportunities for merchants and payment processors. Examples are:
- A shift towards “mobile” and “digital wallets”, with the next generation security based on “biometrics”,
- In-app integrated billing and payments offering a seamless on-line and mobile shopping experience to the consumer,
- Payments will increasingly be considered as a major source of valuable data (omni-channel), with a logical extension to marketing and loyalty programs.
While blockchain is, today, still an immature technology, it holds the potential to unleash a
wave of innovation across multiple industries – including financial services. Blockchains may radically streamline business processes and the transfer of value and therefor have a huge impact on financial institutions. Substantial parts of financial markets are designed to solve for problems of trust and asymmetry in the financial transactions through the risk management infrastructure.
- Substantial costs in the financial infrastructure are designed for identity checking, transaction authenticating, reliably and accurately transacting, supporting records, and securely storing records. These activities solve for trust, fraud and error.
- Substantial capital and collateral gets locked in the financial system to buffer against lack of trust and confidence in certainty and predictability of outcomes.
- The cost burden of the risk infrastructure makes the economics of small size transactions expensive and unaffordable, and therefore inaccessible to low income members of society.
Blockchain solves for problems in trust, asymmetry of information and economics of small transactions without burdensome risk infrastructure and central intermediaries.
Lending, deposits and crowdfunding
Following the financial crisis, retail banks have lowered their appetite for risk il banks have significantly limited access to traditional bank intermediated or bank provided lending.
Over the same period of time alternative lending platforms leveraging P2P models have experienced rapid growth. These platforms use alternative adjudication methods and lean, automated processes to offer loans to a broader base of customers and a new class of investment opportunities to savers
- Alternative lending institutions have emerged to fill gaps in the traditional lending model. New industry players are emerging across the globe, showcasing a myriad of value propositions and strategies that are challenging traditional business models
- Online and P2P (P2P) lending platforms provide customers low-cost, fast, flexible, and more customer-oriented alternatives to mainstream retail banking that traditional financial institutions once dominated
- While the business models of alternative lenders often differ from one another, most providers directly link borrowers and lenders, employ advanced adjudication methods and streamline processes
- “Marketplace Lending” activities, with a focus on a specific type of credit (e.g. short term consumer loans; mortgages; SME Lending, factoring, reverse factoring) are rapidly emerging,
- These are not only new forms of loan origination but also tap into new sources of funding (from individuals, companies or institutions),
- “Crowdfunding” as an alternative for traditional financing value chain tion security beinger value chain) on ark-up of the draft SPA, ecember 1, 2016. g of the transaction is anticipay is still relatively small but growing rapidly and becoming more mature.
Investment management/Wealth management
Investment management / wealth managemThe wealth managemntmers and com and structures, k and, as a consequence, have significantly limited access of consumers and comThe wealth managemntmers and com and structures, k and, as a consequence, have significantly limited access of consumers and coment has suffered from the loss of customer trust since the financial crisis. This trust has been slow to recover in the face of continued economic uncertainties. In this environment, a number of disruptors, from automated wealth management services to social trading platforms, have emerged to provide low-cost, sophisticated alternatives to traditional wealth managers. These solutions cater to a broader customer base and empower customers to have more control of their wealth management. Some characteristics of these disruptors are: The wealth managemntmers and com and structures, k and, as a consequence, have significantly limited access of consumers and comThe wealth managemntmers and com and structures, k and, as a consequence, have significantly limited access of consumers and com
- Cheaper and faster online tools and automated services, that originally catered to underserved customers, are taking share from traditional wealth managers in the mass affluent market. These are pushing traditional managers to switch their focus to more personalized, relationship-based segments.
- Alternatively, automated investment management platforms are commoditizing traditional high-value services and reduce the value delivered by wealth managers across all customer segments. These platforms enable traditional wealth managers to focus on providing more personalized services to a much broader customer base
- Empowered with intuitive and affordable tools, some individual investors may also gain sufficient level of sophistication to act as investment experts, selling and sharing their investment expertise via social trading platforms that erode the value of traditional wealth management professionals
Fintech and InsureTech
Although the insurance industry has been one of the slowest in financial services to innovate, we now see a number of emerging forces which will lead to pressure on this industry across the value chain:
- e-Aggregators: online aggregators that allow customers to compare prices and purchase insurance products online. e-Aggregators have an impact on the traditional distribution channels,
- Entry of tech players: technology providers with higher brand recognition and trust will surpass financial institutions and may enter the insurance distribution market, leveraging their extensive data and distribution capability. These are companies like Google, Amazon, etc.,
- Securitization: insurance linked securities are introducing new pools of capital providing fully collateralised coverage to insurers, outside of traditional re-insurance and insurance pools,
- Self-driving cars: Fully or partially self-driving cars are emerging and are leveraging smart sensors, connectivity and machine-to-machine communications. This will considerably reduce the risks associated with driving and may shift the principal of insurance from drivers to manufacturers,
- Internet of Things: the combination of machine-to-machine communication, smart sensors and connectivity leads to improved risk profiles, having an impact on insurance and personalized insurance programs,
- Sharing economy As sharing economies emerge from pay-as-you-go rentals to shared vehicles and houses, the concept of ownership may radically change, challenging traditional insurance models developed based on one-to-one ownership structure,
- Entry of hedge funds Driven by a low interest rate environment and access to premiums, hedge funds and alternative sources of capital are moving closer to the insurance value chain Whilst “FinTech” is in its early stages in this sector, it is relatively safe to predict that online “MarketPlaces” will emerge soon.
- Big Data: Big Data will have a huge impact on risk calculation and allow for tailored / personalized insurance propositions.