0,1,W H A TI SC BI N S I G H T S ?,CB Insights is a tech market intelligence platform that analyzes millions of data points on venture capital, startups, patents, partnerships and news mentions to help you see tomorrows opportunities, today.,CLICK HERE TO LEARN MORE,T R US T E D B Y T H E W OR L D S L E A DI NGC OM P A NI E S,“We use CB Insights to find emerging trendsand interesting companies that might signal a shift in technology or require us to reallocate resources.”,Beti Cung, Corporate Strategy, Microsoft,2,I N DU S T RY - S C A L E S U M M I T S,CL IE N T - ON L Y E VE N T S,P E E R - TO - P E E R N E T W O R K,The CBI Community Membership Has Benefits events.cbinsights,DEMO DAY,3,4,#FutureFintechss,June 11 - 13, 2019New York, NY,events.cbinsights/future-of-fintech,Fintech mega-rounds continued in Q418, while IPO activity is likely to remain lackluster in 2019: 2018 saw a whopping 52 $100M+ financing deals to VC-backed fintech companies including 14 in Q418 worth $3.8B.,Asia made a run at the US as the top market for fintech with a surge in early-stage and mega-round investments: Asia saw the biggest boost in deals, growing 38% YOY and a record level of funding raising$22.65B across 516 deals. Political and trade war tensions may have caused some of the pull back in H218, but 2019 could see Asia overtake the US.The US remained the top market for deals with 659 investments worth$11.89B funding, both a new annual high: Europe saw a pull back in deals to 367 deals but funding topped $3.53B, an annual record.South America reached a turning point in the eyes of investors in 2018, despite political turmoil across the region: South America saw funding top$540M across 55 deals, both a new annual record. In H218, investors started to pull back in the region as social, political, and monetary conflicts struck the region. Despite strain, Brazil-based NuBank, became South Americas first unicorn and closed out 2018 with a $90M investment from Tencent.Note: Report focuses on all equity rounds to VC-backed fintech companies. This report does not cover companies funded solely by angels, private equity firms, or any debt, secondary, or line of5credit transactions. All data is sourced from CB Insights.,Summary of findings2018 VC-backed fintech deals and funding set an annual record: In 2018, VC-backed fintech companies raised $39.57B across 1,707 deals globally. Deals were up 15% year-over-year while funding surged 120% on the back of 52 mega-rounds ($100M+) worth $24.88B combined.,Fintech is happening on global scale with deals outside of core markets (US, UK, and China) accounting for 39% of deals: Fintech deal hubs are starting to emerge globally. The count of unique fintech startups raising funding topped an annual high of 1,463 companies, and the unique number of investors reached 2,745 boosted by an influx of corporate investors.Early-stage deals, as a percentage, fell to a 5-year low as investors concentrated bets in perceived winners: Global seed and Series A fintech deals grew 5% on an annual basis in 2018, but fell as a percentage of total deals to 57%. US early-stage deals were flat YOY as investors concentrated their bets in established fintech unicorns.There are 39 VC-backed fintech unicorns worth a combined $147.37B: Q4'18 saw five new unicorns births (Plaid, Brex, Monzo, DevotedHealth, and Toss) and two in the first month of Q119 (N26 and Confluent). The cohorts total valuation in 2018 was boosted by a record year for mega- rounds to existing unicorns, including Gusto and Robinhood, among others.,6,Contents,90Appendix:2018 Top VC-Backed Fintech Deals 2018 Most Active Fintech Investors,82018 Financing TrendsAnnual Deals & Dollars Regional Trends Fintech Unicorns212019 Trends To WatchHow we did in 2018What to watch for in 2019Where investors are placing bets in fintech Which markets will see fintech emergence How incumbents will act,7,LENDING,BLOCKCHAIN/ CRYPTO,REGTECH,PERSONAL FINANCE,PAYMENTS/ BILLING,MONEYTRANSFER/ REMITTANCES,WEALTHMANAGEMENT,CAPITAL MARKETS,MORTGAGE/ REAL ESTATE,INSURANCE,2019 FINTECH TRENDS REPORT,Marketplace lending & alternativeunderwriting platforms,Payments processing, card developers, & subscription billing software tools,Tools to manage bills and track personal and/or credit accounts,Audit, risk, and regulatory compliance software,Companies leveraging blockchain technologies for financial services,Companies selling insurance digitally or providing data analytics and software for (re)insurers,Sales & trading, analysis, and infrastructure tools for financial institutions,Investment and wealth management platforms and analytics tools,International money transfer and tracking software,Mortgage lending, digitization, and financing platforms,WHAT THIS REPORT COVERS,8,First, a look at what happened in 2018,Global fintech financing hit a new recordEarly-stage fintech deal activity slowed down16 new fintech unicorns were birthed,9,Global fintech investment tops $39B in 2018,Annual global fintech deals and financing, 2014 2018 ($B)1,7071,4801,2541,153885,F I NT E C HDE A L S A ND F UNDI NGS OA R T O NE W R E C OR DS,$1,728,$1,979,$1,393,$3,236,$2,694,$4,977,$6,351,$2,280,$5,405,$8,455,$2,905,$2,525,$3,204,$5,737,$4,570,$4,501,$5,977,$20,526,$6,039,$7,033,Ant Financials $14B investment accounted for 35% of total funding in 2018,$4,500,$14,000,Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18,10,192,210,237,246,260,292,331,270,337,315,304,298,365,385,366,364,426,441440,400,Q4 1 8 S A W A T H R E E - QUA R T E RL OW F OR G L OB A L VC - B A C K E DF I NT E C HDE A L SVC-backed fintech deals declined in Q418 but remain above 2017 levels,Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18,11,12,$5,923,$9,125,$6,267,$8,673,$12,415,$1,114,$5,028,$6,842,$6,203,$8,648,$1,198,$2,009,$1,377,$2,843,$3,525,$22,$103,$69,$343,$202,$540,2014,2018,North America is no longer powering global fintech funding growth,Global VC-backed fintech funding by continent, 2014 2018, ($M) (*Ant Financial excluded),201520162017*Ant Financials' $14B round in Q218 was excluded from the chart represented on this slide for illustrative purposes,North America43% YOY,South America167% YOYAustralia396% YOYAfrica376% YOYEurope24% YOYAsia265%* YOY,13,Deals grew in every market except Europe in 2018Global VC-backed fintech deals by continent, 2014 2018,553,629,622,643,717,156,256,318,516,144,234,262,373371,367,2016,2017,2018,20142015North America,AsiaEuropeNote: Charts not to scale,7,16,106,21,2317,2725,133,18,24,53,55,2014,2015,2018,Africa,Australia,20162017South America,17%,14,19%,18%,18%,21%,8%,7%,6%,7%,6%,8%,9%,12%,13%,16%,Early-stage fintech deal share falls for the 5th yearAnnual deal share by stage to global VC-backed fintech companies, 2014 2018,Mid-Stage,Early-Stage,Late-Stage,Other,$147.37 BILLION,G L OB A L L Y T H E R EA R E,39 FINTECH UNICORNSV AL U E D , I N AGGR E GAT E ,AT,15,15,16,SWEDEN,EUROPE,$5.3B,$1.6B Valuation,$2.0 - $2.5B,$8B,$1.24B,$1B,$1.2B,SOUTH AMERICA,$4B Valuation,BRAZIL,NORTH AMERICA,$20.3B Valuation,$3.2B,$3B,$4B,$1.8B,$1.9B,$10B,CHINA,ASIA,$1.4B,$38B Valuation,$1B,$1.5B,$1B,$2B,$2.1B (as of Q215),$1B,$1.2 - $1.6B,$1.4B,$1B,$3B,39 fintech unicorns valued at $147.37B,Global VC-backed fintech companies with a private market valuation of $1B+ (1/25/19),UNITED KINGDOM,$1.7B,$1.6B,$1.1B,$1.2BINDIA,$1.1B,$1.8B,$2.7B,$1.27B,SOUTH KOREA,UNITED STATES,GERMANY,$2.7B (as of Q119),$1B,$4.49B (as of Q117),$2.5B (as of Q119),17,16 fintech unicorn births in 2018Global VC-backed fintech companies with a private market valuation of $1B+ (1/25/19),NORTH AMERICAEUROPEASIAGERMANYSWEDEN$38B Valuation$20.3B Valuation$1.6B Valuation$2.7B (as of Q119)$2.0 - $2.5B$8B$5.3B$1.5B$1.8B$4B$1.4B$3.2B$1.2B$1B$2B$2.1B (as of Q215)$1.24B$1BSOUTH AMERICA$1B$4.49B (as of Q117)$1.9B$2.5B (as of Q119)$10B,UNITED STATES,UNITED KINGDOM,$1.7B,$1.27B,CHINA,SOUTH KOREA,$3B,$1B,$1.2 - $1.6B,$1.4B,$1B,$3B,$1.1B,$1.8B,$2.7B,$1.2BINDIA,$1B,$1.6B,$1.1B,$4B Valuation,BRAZIL,18,8,21,25,53,11,10,12,18,7,11,2018,2014North America,2015Asia,Europe,2016South America,2017Australia,18,2018: 52 fintech mega-rounds total $24.88BGlobal number of fintech mega-rounds ($100M+), 2014 2018,G R OW T H I NV E S T I NGI N F I NT E C HH I T A P E A K I N 2 0 1 8,17%,21%,26%,28%,33%,83%,79%,74%,73%,67%,2018,20142015Corp / CVC Participation,20162017Other Investors,A third of global fintech deals include a CVC,NUM B E R OF F I NT E C HI NV E S T OR S DOUB L E S I NC E2 0 1 4,Corporate and CVC participation in fintech saw a new annual high2014 2018,2,3271,9731,7791,349,19,Number of investors in a fintech startup reached a new high in 20182014 20182,745,2014,2015,2016,2017,2018,20,Traditional hubs no longer power fintech growth,F I NT E C HDE A L S S H I F T A W A Y F R OM C H I NA A ND T H E US,Count of fintech startups raising funding hit an annual record in 20182014 2018,745990,1,0771,2471,463,20142015,201620172018,Deals are shifting away from core fintech hubs2014 2018,73%,68%,61%,59%,61%,27%,32%,39%,41%,39%,2018,20142015Deals in China, UK, US,20162017Deals Outside Core Markets,#AhaCBI,2019 Fintech Trends,22,B UT F I R S T H OW DI D W E DO ON OUR 2 0 1 8 F I NT E C HT R E NDS T O W A T C H ?,23,1.The battle for deposits,Fintech firms up focus on regulatory complianceSoutheast Asia sees hotbed of fintech activityThe next Ant Financial & WeChat PayUnbundling the paycheckNew investment platforms and asset classesFintech meets real estateRise of impact fintechLack of fintech M&A by banks continuesNo-go for fintech IPOs,2 0 1 9 TR E N D STO W A T C H,The battle for deposits,# 1 F I NT E C HR E B UNDL I NGG E T S M OR E A G G R E S S I V E,24,24,Fintech firms look for their second actFintech firms are becoming more aggressive in expanding their lines of business beyond their initial use case,B UYI NG,B UI L DI NG,P A R T NE R I NG,+,+,Affirm debating move into savings,accounts next,January 9, 2019,NuBank receives regulatory approval to launch NuCanta bank accountsApril 2018,Revolut hires CTO to head up wealth management and trading divisionJanuary 9, 2019,+,25,S A M E G OA L , DI F F E R E NTE NT R Y P OI NT,FIRST BEACHHEAD,DIGITAL WALLET,ROBO-ADVISOR,MICRO-INVESTING,BROKERAGE,PERSONAL FINANCE,CRYPTO,NEXT PILLAR,BANK ACCOUNTS,REAL ESTATE,COLLEGE SAVINGS,BROKERAGE,LENDING,INSTITUTIONAL INVESTING,CRYPTO,WEALTH MANAGEMENT,BANK ACCOUNTS,CRYPTO,WEALTH MANAGEMENT,LENDING,BANK ACCOUNTS,INDEX INVESTING,MARGIN INVESTING,Fintech moves from mono-line to multi-lineFintech startups are rebundling products and services ahead of their maturing customer base,WEALTH MANAGEMENT,BANK ACCOUNTS,26,Banking-as-a-service platforms facilitate US fintech companies to expand to bank accounts,NOTABLE PARTNERS,NOTABLE PARTNERS,Green Dot uses its own bank, Green Dot Bank, and what it calls its banking-as-a-service platform to offer mobile banking capabilities to third party providers.,In April 2018, StoneCastle Partners and Q2 Holdings announced the launch of Cambr, merging Q2s digital platform CorePro and StoneCastles digital deposit network of 800+ community banks and relationships with banks of record.,27,Abroad, fintech firms are looking to build their own chartered banks,Fintech startups that want to replace the old guard of banking are leveraging regulatory tailwinds and applying for charters and licenses with respective regulators.Regulators globally have been lowering the barriers for tech startups to enter the market as a way to break up banking monopolies and stimulate competition.The FCA was among the earliest to pilot limited licenses like the “e-money license” that enabled tech entrants like Revolut to launch a remittances business through initially partnering with a chartered bank, that decreased the companys time to market. Revolut obtained a charter in 2018 and has been applying the same playbook to expand globally.,28,The battle for distribution will start with deposits,By attaining a customers paycheck, fintech challengers are able to make money on interest, and more importantly, set themselves up for future product innovation. If a customers moneyis already being deposited in an app, introducing new products such as savings and investment accounts can be seamless.Debit cards are often fintechs first cross- over product because the serviceadds another product and revenue stream. Fintechs are also able to receive significantly higher interchange fees than traditional banks as a result of the Durbin Amendment, which limits the fees stores pay banks when customers make purchases with debit cards.,29,# 2 R E G UL A T OR SB E C OM E M OR E E M B OL DE NE D,Fintech firms up focus on regulatory compliance,30,30,Emboldened regulators globally are,2019 RE G U LA T O RYD RI VE RS,C R A C K I NGDOW N ON B A D A CT O RS As startups look to launch new products, it will be essential for fintech challengers (and incumbents) to continue to build inroads with regulators to avoid roadblocks.,C OL L A B OR A T I NGA ND S P R E A DI NGI NNOV A T I ON Regulators globally have been actively promoting innovation and embracing tech to break up local banking monopolies.Regulatory support has lowered the barriers for startups to enter markets.,1,2,31,Regulators are upping oversight on bad actors, issuing massive “unicorn” level finesFines include non-compliance with AML, KYC, and sanctions, and exclude crisis-related settlements, ($M),Final figure pending,Reported final figure,32,Regulators are increasing their scrutiny of high- profile consumer fintech challengers,VS.,12:21PM,9:45AM,Within 24 hours973,233,“Checking & Savings” Now “Cash Management”,1 Day,33,December 13, 2018,1 Week,1 Month,“I disagree with the statement that these funds are protected by SIPC. Had they called us, I would have told them what I just told you in thatI have serious concerns about this. This has gigantic ramifications for the banking industry.”,-Stephen Harbeck President & CEO, SIPC,