Why a paper for Fintech 2.0 This paper for Fintech 2.0 has been created by SantanderInnoVentures, in collaboration with its partners Oliver Wyman andAnthemis Group.The purpose of Santander InnoVentures is to help Santanderdeliver better services to our customers through innovation, and tosupport a new generation of fintech start-ups on their growthjourney. We believe these goals are inextricably intertwined. Oliver Wyman’s Innovation Platform has been established toadvise both its traditional client base and fast growth fintech firmson the transformational change that is currently underway in thefinancial services industry.Many fintechs have succeeded but today they are still operating only atthe edges of banking. To help engineer more fundamentalimprovements to the banking industry, they must now be invited inside,to contribute to reinventing our industry’s core infrastructure andprocesses. That can succeed only as a collaborative endeavour, withbanks and fintechs working together as partners. This paper highlights the benefits of collaboration and identifies some ofthe opportunities for profitable change in realising Fintech 2.0. We hopethe whole industry – both banks and fintechs – recognise the value ofthis approach andjoin us in this collaborative journey to Fintech 2.0. 2 Mariano Belinky, Managing Principal, Santander InnoVentures Emmet Rennick, Head of Innovation, Oliver Wyman Andrew Veitch,Director, Anthemis 3 4 6 8 1.Fintech 2.0 2.Applications for the Internet of Things 2.1.Cutting costs in trade finance 2.2.Improving valuation accuracy of real assetsin leasing and asset financing 10 3.Being smarter with smart data12 4.Embedding distributed ledger technology14 5.Creating frictionless processes and products16 5.1. Opportunities to reduce friction in the mortgage process16 5.2. Frictionless saving and investment18 6.Conclusion: achieving Fintech 2.0 together19 Contents 4 Over the last decade, however, a new source of innovation in financialservices has emerged from financial technology start-ups (“fintechs”) andtechnology companies (“techos”). These new firms have been quicker thanbanks to take advantage of advances in digital technology, developingbanking products that are more user-friendly, cost less to deliver and areoptimised for digital channels. This relative success is unsurprising. These new players are less burdened bythe demands of regulatory compliance which banks are subject to. They areunencumbered by complex and costly to maintain legacy systems. Theycan focus on creating single-purpose solutions, designed to offer animproved experience within just one product or service. They are more intune with the peer-to-peer (P2P) culture engendered by the explosion ofsocial media. And they are smaller organisations, designed for the purposeof innovation.Capital has flowed into the fintech sector: $23.5 billion1 of venture capitalinvestment in 2013/14. Of this investment, 27% has been in consumerlending, 23% in payments and 16% in business lending. Fintechs havetwo unique selling points: better use of data and frictionless customerexperience. But to date these have been limited to relatively simplepropositions such as e-wallets and P2P lending.The impact of fintechs to date After a slow start, fintechs are now capturing a growing market sharein these areas. Yet their overall effect on the banking market has beenminor. Banks have not crumbled in the face of this new competition. Wecharacterise this first phase of fintech as Fintech 1.0. Yet the conditions for significant change are present: policy shifts towardsopen data and APIs2, the emergence of enhanced technologies such ascloud computing, changing customer dynamics and intense pressure to cutcosts in banking. We believe that by extending the use of data and frictionless processesFintechs can and will expand well beyond the confines of payments andconsumer credit. It will move deeper into middle and back office processesproviding new, richer propositions for end customers. Fintech 2.0 is just around the corner. It will deliver fundamental changesto the infrastructure and processes at the core of the financial servicesindustry. In this report we consider some important banking innovationsbased on the “Internet of Things” (IoT), smart data, distributed ledgers andfrictionless processes beyond payments and consumer credit.1. Fintech 2.0 Banks can boast of some important innovations. ATMs, credit cards, securitisation,swaps and mobile banking are now taken for granted, but each was ground-breakingwhen first launched. 1 Source: Oliver Wyman analysis. 2 Application Programming Interfaces. 。。。。。。