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    Overseas Unicorn Series: Historic Opportunities for Fintech Enterprises in the Payment Field | Capital Vision

    2019-03-12 17:02:48

    Research Institute of Listed Companies in the Financial Industry

    Author: Kaifuku Capital Wang Xin

    introduction:

    When it comes to unicorns, in addition to the US companies that are closely related to people's lives, such as Meituan, Ant Financial, and Today's headlines, knowing that SpaceX and WeWork have an international perspective, and those who have heard of Slack, Robinhood, and Waymo, It must be a group with a forward-looking and outward-looking vision in the capital circle. Most Chinese unicorn companies benefit from the demographic dividend. Good technology, models, and services multiplied by the base of hundreds of millions of people tend to push corporate valuations to the extreme. The author has discussed with many domestic capital circle peers the problems of investing in overseas technology companies and domestic technology companies to return yields. Most institutions tend to invest in domestic enterprises. The unexpected answer often leads to the author's thinking - in addition to objective reasons such as foreign exchange control, is the domestic investment circle's patrol also not known about 227 overseas unicorns? To this end, the author will take advantage of being in the financial center of Europe and doing financial work in the European financial center, in the "Overseas Unicorn" column, a choice to introduce the British atypical FinTech (financial technology), on-demand services, e-commerce Unicorns in industries such as semiconductors, medical technology, network security, and AI.

    The British unicorns are mostly from FinTech. Today, I started with the distinguished representatives of FinTech, TransferWise and Revolut, on the impact of the event on the FinTech industry.

    The deadline has an invisible pressure on everyone. On March 29, 2019, Brexit is about to become a foregone conclusion. Is the UK financial technology company most affected by Brexit safe? The crisis will always coexist with opportunities, and in the financial investment in science and technology industry in London, the author has seen more opportunities. Especially in the financial industry, banks, insurance companies and asset management companies need to reassess their business models, and they will need a large number of innovative technology solutions.

    - The future of the Empire Financial Technology Capital is stable

    In 2018, half of the top ten European financial technology transactions took place in the UK. Despite the small number of transactions and the slowdown in the second half of the year, it still hit a record high of 20.7 billion US dollars (16 billion pounds), consolidating the status of the UK's European financial technology capital. According to a financial technology report released by KPMG, the total investment in financial technology in the UK in 2018 is almost four times that of 2017. Nearly half of the transactions came from the payment industry ($12.8 billion in WorldPay), and the financial sector is expected in 2019. The level of technology will remain strong and the horizontal integration of the industry between the companies will be further strengthened. Moreover, the report of industry research institute InnovateFinance also said that in 2018, British VC and private equity firms had a strong willingness to invest, and they went against the trend, investing 3.3 billion US dollars, an increase of 18%.

    In the UK, FinTech is particularly eye-catching for paying for science and technology companies. Like the vision of China's payment industry peers “covering the country”, Western payment companies have no exceptions on the “World Datong” track.

    Add an episode here. More than a decade ago, during my work in Amsterdam, I was very happy to talk to my colleagues about my hometown not far from the capital. From Beijing International Airport to my home, more than 400 kilometers away, I only need to take more than 4 hours of T-head. The train can see the mother-in-law at home. At that time, my colleague said with emotion, China is really geographically vast, and it can travel through the Netherlands from north to south for more than four hours.

    The reason why the author remembers this fragment is because it deeply understands the "divide" and "scatter" of Europe. “Earth” became a “village”, while the currency still stayed at the stage of “local food stamps”. It is precisely this highly fragmented market that has created a never-ending source of profit for banks and has created opportunities and challenges for the European payment industry.

    - Payment industry unicorns rise in the cracks of traditional banks

    Although the traditional banks are strong, the basic savings, loans and business service processes are rigid and inefficient. Many market segments are often ignored by traditional banks due to their high risks. FinTech typically offers a single but efficient solution in a segment of the market, for example, providing loans to customers who do not have a credit rating or a poor credit rating, providing point-to-point (P2P) loan services not covered by traditional banks. Not only that, FinTech is customer-centric everywhere compared to traditional bank lagging customer service. According to PwC's survey of FinTech, only half of the respondents (53%) believe that traditional banks serve customer needs, while more than 80% of respondents believe that FinTech is truly “thinking of customers”. I want to be anxious for customers."

    As the most shining unicorn in FinTech's two payment industries, TransferWise and Revolut are highly regarded. Brexit is likely to lead to an increase in the frequency of cross-border payments and an increase in the demand for these two and other FinTech services, which will create huge opportunities. Through the analysis of the two British FinTech unicorns, TransferWise and Revolut, the author will also talk about the opportunity of the domestic payment company to "go global", hoping to contribute to the domestic payment industry to enter Europe.

     Company: TransferWise

    Company History: TransferWise was inspired by the personal experience of Skype's first employee Taavet Hinrikus and financial consultant Kristo Käärmann. From Estonia, they often travel to and from the country and the United Kingdom, and they personally experienced the pain of high exchange rates and high exchange rates for international remittances. In January 2011, KristoKäärmann and TaavetHinrikus established a UK remittance service company in London and offices in Tallinn, New York and Singapore.

    Customer group: Saves remittance fees and offers preferential exchange rates for overseas workers who send money to other countries, with more than 4 million users.

    Account Opening: Apply for an account online or register with Facebook or Google Account. Lottery payments can be made to up to 1000 payees via FacebookMessenger, which is useful for regular payments from self-employed contractors or freelancers.

    The main products: can support 27 currency remittances to about 50 countries. International remittances are limited to account-to-account (inter-bank) transfers, which are usually the lowest of these money transfer service providers.

    Global footprint: Significantly expands its global reach, with a higher transfer amount than RiaMoneyTransfer, which is comparable to mature companies in industries such as Moneygram and UAEEXCHANGE. In 2018, TransferWise's net profit reached 8 million US dollars, and the monthly remittance was about 4 billion US dollars.

    Fees: There is no fee-free fee, and each international remittance transfer receives interbank exchange rate + handling fee.

    Transfer time: 1-2 business days

    Cumulative financing amount: 481 million US dollars

    Valuation: $16 billion

    Company: Revolut

    Company History: Revolut was founded in July 2015 with the vision of building a fair and uninterrupted platform to eliminate the hidden costs and provide interbank currency exchange rates for the use and management of funds globally. Its CEO is Credit Suisse from Russia and NikolayStoronsky, a former trader at Lehman Brothers.

    Customer group: Provides preferential exchange rate services for travellers when they travel abroad, with more than 3 million users.

    Account Opening: Revolut does not require proof of identity or billing address. By registering for an account online, it can be up and running in seconds. Accounts can be managed through iOS and Android apps. Payments can also be managed via email, SMS and WhatsAPP. Loading funds on the card can be used in just a few minutes.

    Main products: Free forex trading in 25 currencies. In addition, they have a free MasterCard that offers free ATM withdrawals. It allows you to spend in more than 190 countries. They also offer many features through their digital applications, such as the ability to split bills and terminate cards. In addition, it supports the exchange of 25 cryptocurrencies, however, the cryptocurrency remains locked in the application and cannot be transferred to another cryptocurrency wallet.

    Global footprint: Still mainly in the UK, in the growth period, with a net loss of $19.4 million in 2017.

    Fees: 5,000 pounds a month for a free transfer fee (subject to the basic interbank rate), after which a 0.5% commission is charged for each transfer.

    Transfer time: 2 working days. The extra Turbo fee of £5 can be shortened to 1 working day.

    Cumulative financing: $336 million

    Valuation: $17 billion

    - Unicorn's "imperfection" creates opportunities for FinTech industry

    FinTech's science and technology companies have many problems with traditional banks that have been running for hundreds of years, but this will give rise to many other opportunities.

    First of all, FinTech in the payment field has a fatal but the average user does not pay enough attention to whether the user's deposit will benefit from FSCS protection (FinancialServicesCompensationScheme, UK financial services compensation, providing bank depositors with up to £85,000 in savings. protection).

    Although Revolut was originally expected to obtain a European banking license in the first half of 2018, it was delayed until the end of 2018 to obtain a Lithuanian banking license and plans to pass the passport rules (Passportingrules, allowing companies registered in the European Economic Area to be in any other EEA country). Expanding business to other countries in Europe without further authorization from each country. It is clear that Brexit has forced them to reapply for a UK banking license. The delay in development planning is a dominant issue, and its development direction may be constantly changing.

    Most domestic payment companies do not have a UK banking license, and cooperation with local financial companies has almost become a mandatory question. But there is no exception. The author of the British payment of the FinTech company, through the form of EWallet license, to achieve the function of domestic transfer of funds to foreign accounts, successfully avoided this problem.

    Secondly, on the weekend, FinTech’s spot foreign exchange rate in the general payment sector will rise slightly, with major currencies up 0.5%, other currencies adopting 1.0%, and non-current currencies even higher to protect companies from large interest rate fluctuations. Potential loss. Of course, the wool is on the sheep, and these costs will eventually be passed on to the user.

    The reason why the emerging FinTech can compete with traditional bank chambers is that the average remittance fee is 17% of the average bank.

    However, Rome is not a day. For example, TransferWise is an efficient channel model that took $481 million and took eight years to build.

    In theory, any other FinTech company that can increase the volume of transactions and reduce the exchange rate and handling costs is likely to do better than Revolut and TransferWise, so it is also a good choice to cooperate with one of them.

    Finally, current customer complaints about TransferWise and Revolut are focused on authentication. Excessive verification time greatly affects the process of remittance. If there is an urgent large amount of money transfer, it is best to confirm directly with Revolut and TransferWise. Of course, their customer service is said to be serious and does not meet the temperament of the unicorn company. In many cases, the customer cannot find the customer service, and the weekend is even more serious.

    In contrast, there are many small and beautiful data security companies in the UK, such as a Russian science and technology enterprise, which abandons the current popular 3D secure payment, but completes the verification through social accounts, mobile phones, real-time bidding (RTB, RealTimeBidding), etc. The experience has strictly controlled identity authentication. During the World Cup in Russia, they handled millions of transactions per day and also checked Malaysia Airlines' transactions.

    In addition, domestic bank identity software companies can also use data security as a breakthrough to enter the European payment circle in a cooperative way, and easily run through the global network of British FinTech unicorns such as TransferWise, Revolut, MonZo, AtomBank, OakNorth, etc. global.

    2019 will be a year of mixed and not chaotic. Financial technology, whether it is a start-up or a mature company, will usher in a record year of investment. The author expects more integration in the global financial technology industry in 2019, especially in mature areas such as payments and loans. Investment from Challenger Banks and RegTech is also expected to increase, while traditional banks may be working on digital banking. After the European cryptocurrency market experienced turmoil, it also returned to the stage, and Bitcoin has returned to $4,000. JPMorgan Chase also announced that they will enter the cryptocurrency and use it to develop a digital currency to accelerate payments between corporate customers. These are the focus of the domestic payment industry's business penetration into Europe.

     In the field of payment, it can be said that the e-commerce industry has grown up with each other. The next one will talk about the British e-commerce unicorn TheHutGroup, to see how it has grown into the first e-commerce business in the UK and even in Europe through a completely different e-commerce road with Taobao.

    ———————————————————————————

    Description of the column:Faced with the rapid development of domestic enterprises in the industry and capital level, the financial sector launched the "Hello, World" series of plans to help the industry, good companies seize opportunities, better understand and connect industries and capital fluctuations. Through the industry's new stocks, capital vision, corporate research, people's dialogue and other content, it has the advantages of communication, activities, and data, and expands the information exchange "seaport" to promote pragmatic and efficient connections.

    contact us:Yuan.wu@jrj.com.cn

    Hot searchCapital vision unicorn Pay

    Editor in charge: Robot RF13015

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