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i would like to introducetoday's speakers. larry lagerstrom, who you'll behearing from later in this session, is the acting director ofacademic programs responsible for graduate education offerings. today's featured presentersare bruce wallace and

Citi Simplicity Credit Card Login, reetika grewal from silicon valley bank. bruce wallace is the chief digital officerof silicon valley bank financial group. he is responsible forclient digital banking experience and channel delivery services alongwith the sales, development, and

delivery for fee-based productsincluding payments, cash management, cards, merchant services, foreignexchange, and global treasury services. previously, bruce was silicon valleybank's chief operations officer, responsible for global operations and it. prior to joining silicon valley bank,bruce spent more than 20 years in a variety of management positionswith wells fargo and company. reetika grewal is the head of payment,strategy, and solutions at silicon valley bank. she joined the company in 2012 to leadthe payment, strategy, and solutions team.

this team focuses on internalpayment strategy and development, as well as working collaborativelywith silicon valley bank clients and partners to help deliver paymentsolutions to the market. she leads silicon valley bank'spartnership with mastercard to run commerce.innovated, an acceleratorprogram focused on helping early stage companies innovatingacross the commerce space. prior to silicon valley bank,reetika was at jpmorgan chase. reetika was recently awarded as one ofthe most influential women in payments. actually, she won this honor forthe last two years.

at this time, i'd like to turnthe floor over to bruce and reetika. >> good morning, everyone, this is bruce. and we are excited to be here this morningto talk about what's happening with the fintech revolution. so, we're going to have some slides thatwe're going to walk through as beth had mentioned. we'll be more than happy toanswer questions throughout the course of the presentation, and actually would recommend that youprovide questions throughout the course.

so i'm going to turn it over to reetika, who's going to start steppingthrough the presentation. reetika? >> great, good morning everyone. so i'm going to start first witha slide that we've received -- some data from cb insights,which is an analysts firm. -- and what is going on in thisslide is really to help illustrate the fintech innovation in here. what they did was use the wells fargohomepage as an example of the top half

is the consumer home page, and the bottomhalf is the small business home page, and really describe all of the differentcompanies that are innovating and attacking every single segmentof banking from lending, to banking services themselves,to investing. there are a slew of companiesthat are going after and truly disrupting bankingas you know it today. on the consumer side, there's somenames that i'm sure you've heard of in the market, right, on the lendingside, companies like sofi and others. as well as on the banking side,some of the banking startups that

are trying to disrupt the way thatconsumers receive just the basic services that come along with a bankaccount, companies like moven. there's a slew of companies focusedon the savings side: savings, wealth management, companies like digitthat help to automate your savings. companies like betterment,wealthfront, etc., that are focused on thatwealth management space. and then finally there's a whole worldof companies that are focused on sort of the payments aspect froma consumer perspective as well. companies like bill.com thathelp make bill payments easier,

cleaner, andwith a beautiful ui in front of it. on the small business sidethere's even more pronounced disruption that's happening from,again, same thing, where pretty much everytab of that display from the wells fargo examplehere is being disrupted. you can look at, again,banking, lending and credit, and i'm sorry, merchant services,insurance, all of those things are all being disrupted againby a wide variety of services. some of the more well-knownservices because they've ipoed or

are out in the market really aggressively,companies like square that have truly disrupted the way merchantservices are being delivered. giving small businesses, extending the aperture of small businessesthat are able to accept card payments as well as changing the waypeople accept card payments. and then on the lending sidecompanies like kabbage and ondeck helping small businesses getaccess to capital in unique ways. is there anything else thatyou would add on this slide? >> just one thing i would add at the macrolevel is, i think what's happened

over the past, i would say, three to fiveyears, with a lot of these companies is, every single one on thereis a pure digital solution. so i think what's happening is,there's a lot of disruption specifically around companies coming into the financialservices space without the traditional infrastructure required, with a purelydigital or mobile based experience. >> okay, yeah, and we're going to talka little bit about some of the main disruption, or some of the main driversthat's causing this inflow of disruption. and we will talk a little bit moreabout how digital comes into play here. so the next slide is to sort of seethe parallel that's happening in the uk.

it's a very similar trend where again,consumer banking, business banking is being disruptedby a whole slew of startups. obviously the brexit news isfresh in everyone's mind, so it'll be interestingto see how this evolves. but given that svb hasan office in london, we get a good front row seat intoseeing a lot of this as well. and it's, again, very similar in nature to the destructionthat's happening on the us side. and attacking pretty much everyaspect of banking, lending,

investing, etc, that consumers andbusinesses are focused on. >> yeah, so there were a couple questionsthat i think were pretty interesting that came up related to the first two slides. the first one was, where is blockchain? so in terms of what's happeningwith the percentage of startups that are in blockchain ordigital currencies, and in terms of overall venture investing,there's been approximately a billion dollars that havegone into blockchain startups. and in terms of where it stacks againstall of the other startups that reetika had

been referencing earlier, it's probablyabout the sixth or seventh largest sector in terms of where a lot of theinvestment dollars are going right now. it' s primarily goinginto the lending space. it's going into the payment space. and it's also going into kind ofa combination of individual finance, consumer finance, and then also intodifferent types of individual investing, in consumer investing, ori'm sorry, business investing. but if you look at the trajectoryaround investments in blockchain technology,it is on a very high trajectory.

and in terms of what's happened sofar in the first half of this year, there has been no tampering of investmentsgoing on in bitcoin and blockchain. and the second question was relatedto emerging markets such as africa, latin america, asia. i would say, again,in terms of investment dollars, probably about 75 to 80% of the overallventure investment dollars for fintech are primarily going innorth america in the uk and eu. i think in terms of some of the emergingcountries because they still have a very high unbanked or underbanked population,a lot of these startups that are in those

specific spaces are really tacklingmuch more simplified financial services. i'm just trying to get basicconsumer products such as mobile payments into the hands ofmillion of consumers that are unbanked. >> yeah, and the other thing i'll sayabout that is in reference to some of the other markets is the us andthe uk are very similar in terms of people leveraging credit cards andmerchant services and things like that. and in those markets, that basicinfrastructure isn't even there. right, so if you go to brazil,for example, the maturation of credit cards isnowhere near as deep as it is here.

so it's similar to what you were saying interms of leveraging alternative ways of moving money. >> while reetika goes to the next slide,we're getting a lot of great questions. i'm doing my best to kind of synthesizethem together because there's some common questions, so just to let everyone know. and a few of them, we're going to specificallyaddress on some future slides. so i am watching everyone's questions,just wanted to let you know that. >> [laugh]>> yeah, and the next slide really is

meant to focus on why is the financialservices under attack so aggressively by all these startups? and i think it's becausefinancial services represent 20% of the s&p 500 index. and if you just look at the names of thecompanies that are in the middle of this target, they are household namesthat have been in the business of banking and providing payment foryears and years, hundreds of years in many cases. and i have a colleague who's from texas,and he always talks about texas tea.

and the banking global financialinstitution market is in the trillions, 8.5 trillion, so again, reiteratingthe prize at the end of the disruption. and this is sort of an interesting factfrom accenture that they are estimating that full service banks, meaning the banksthat offer sort of consumer banking and payments and things like that similarto like a bank of america, jp morgan, wells fargo, etc, could lose 35% of theirmarket share globally to digitally and oriented disrupters. and sort of to bruce's point earlier, it is digitally that these guysare bringing their solutions to market.

>> i would say the two other factorsthat are primarily involved that we see, with respect to a lot ofthe fintech disruption, is one is, i think a lot of these solutionsare offering speed and simplicity. and i think that almost everybody on thecall probably has a personal experience of dealing with a traditional financialinstitution that in terms of how long it took to finally get a product delivered orto get your mortgage refinanced or whatever it is. many times it's kind of a longcumbersome process to go through that. and so a lot of the business modelsthat we see that are being successful in

getting traction,they really focus on speed and simplicity in terms ofdelivering the product. and the second one, which reetikareferenced a little bit earlier, but i'd just like to highlighta little bit more, and that is,it's really around the user experience. i think that a lot of the fintechdisruptors are very focused on starting with an experience that the consumerof the business expects to get. that's maybe a little bit more alignedwith what they would get from another software company or another technologycompany, as opposed to trying to kind

of just provide a betterfinancial services product. many times it's not focused on the productbecause, as i think everyone would agree, many financial services productsare very commodity based products. there's not a lot of differentiationaround a checking account or a debit card. however, there can be massivedifferentiation in the user experience in using the products. and so, speed, simplicity in the userexperience are kind of the real key areas that the innovators are focusedon in trying to get market share. >> yeah and that's a great transition tosort of the macro level themes that we see

really the trends shapingthe fintech landscape. and so we talked a little bit aboutsome of the technology that's fueling the disruption, right. the barriers to entry for entering in andbringing a startup to market are significantly lower than theyhave been in previous years. thanks to wonderful thingslike the mobile devices and the itunes marketplace, i'm sorry,the app store, where you can just get your product in front ofmillions of eyeballs pretty quickly. as well as things like being able tohost your service in the cloud without

having to invest a whole bunch of money in infrastructure to bringyour solution to market. and then lastly, leveraging the networks,the social networks and the other kinds of networks todistribute your solution to market. so leveraging services like twitter andfacebook and medium and all those other channels to reallydistribute marketing at a very, very low cost have made the barriersto entry significantly lower. and it really helps tofuel the innovation. there's also a big trendaround trying to remove paper.

and this is sort of along the linesof removing friction from processes, and shifting from paper to electronic. the idea that checks willleave our ecosystem is a reality that i reallyhope happens one day. but in the interim, the technology around remote depositcapture has made accepting checks easier. and people moving to a more cashlessto a card filled society is really, is happening significantlyacross business and consumer. businesses like electronicpayments because of the richness

of data that goes along withtransactions and reconciling data. and removing humans from being in theposition to constantly move paper through processes is something that businesseshave been looking for for a long time. so this shift from paper toelectronic is pretty significant. >> so one other comment i would make,i'll try to synthesize four or five questions with a common theme. and i think the common theme isaround people understanding the value proposition around ease of use andsimplicity and speed, but talking a little bitabout how this works in

terms of the current products thatyou use on a day-to-day basis. and i think on a day-to-day basis, what we're seeing with a lotof fintech disruptors. again, that's a common trend is,they're embedding the payment experience directly into how you docommerce on a day-to-day basis. and, i know uber is a very overusedexample in the innovation economy. but, they are kind of a perfect examplehow they have embedded a financial product, which the payment experiencedirectly into how they use their product. and there are many other examples withamazon and apple, and many others.

where again, i think that what wesee happening with a lot of this, the disrupters is they're actually pushingpayments more into the background. it's less around making the payment. it's more around makingthe payment digitalized and embedded in with the commerce experience. so the payment is much more ofa utility as opposed to a produce. and really again, going back towhat we talked about earlier. it's about the user experience, and many of the models thatare doing a great job of, again,

elegantly embedding the financial productinto the experience that you're doing. so you don't actually even have tothink about making the payment or executing on the financial product. like another example is,in the small business lending. what we have seen is some fintechdisruptors that are doing a great job of, you actually never apply for a loan. they just look at everythingin your accounting system. they look at your accounts receivable. they go ahead and qualify whichones they will advance credit on.

and then, it's literally as simpleas pressing one button to say. yes, i would like to getan advance on my receivables. so again, what they're doing is takenthe financial product itself and taken so much of the friction out of what youdo to kind of apply and qualify. and use it and embed it in to kind ofyour day-to-day working experience, or your social experience. >> yeah, and for the last bigtrend that's really helping to shape the fintech landscape isthe regulatory environment. so, one thing that we've been talkingabout is when the great recession

happened. banks sort of took a step back and started to divert resources awayfrom driving innovation, and driving new products and services,and focus more on compliance. making sure that they, safety and soundness was sort ofthe big mantra of the time. and, it always is in the worldof banks [laugh] but that left open a big gap interms of innovation, right? so it was a big gap that allowed forall of the disruptors to come in is

that when banks stopped thinkingabout how do we innovate. and bruce will say that banks are notreally good at innovating in general. but when they completelystopped thinking about that, that's really when the wholeworld of innovation came out. just the general dissatisfaction withbanks that came out of that, that crisis. as well as the focus onregulatory compliance, and the world of regulation is noteasy by any chance, right? so, the emergence of the cfpbhappened that during that time where there's a very strong champion outthere for consumer protection.

and then there's,in the world of payments. so you think about things like moneytransmitter rules and regulations. it's a very complex ecosystem, and the financial institutionsare sort of the gate in and out of the payments network. so, the disruption that's happening, andthe successful disruption that's happening is in many ways in partnership with bankshelping to innovate around the front-end experiences and the back-end experienceswhile leveraging that infrastructure. >> yeah, so a question that justcame up very similar to what you

were talking about, rotica is. what are the disrupters doingto actually streamline and innovate the regulatory process? >> well, i don't know if they canstreamline the regulatory process. but the way that we've seenthe disrupters work around, or within the regulatory framework isfocusing on the front-end pieces, right? so if you think about the infrastructureof payments and ordering. i can't help butnot think about it that way. [laugh] but if you think aboutthe infrastructure of payments, there's

ways to get into that infrastructure,and it typically goes through a bank. and so the innovators that are beingsuccessful at it are partnering with banks to get access to that wholeworld of payment's infrastructure. and looking at their services asthinking through compliance and regulations and monitoring, and all those things makes them a verysolid stable player in the ecosystem. >> yeah, one other thing i would addthat has been interesting to watch. and it's related to a few otherquestions folks have in here around, kind of cost to switching.

and it sounds great to move overto some of these other solutions. but how frequently do i now haveto re-enroll and do all of that? and again, i think what we see happeninghere is just leveraging digital and leveraging data that you already possess, is a far more efficientway to do those things. so to rotica's point onthe regulatory side. there is a specific sub-sector called regtech of companies that are actually trying to streamline andautomate some of the processes. and it's really about when youthink about it from a consumer and

a business perspective. a lot of the data that banks,or financial services ask for, you already have that data. but they don't make it easy for you to make that data portable to justgo ahead and give them what you need. so, everyone probably has a lot ofsore fingers from having to key so much into various online sites andvarious mobile devices to provide data that actually is alreadydigitalized somewhere. probably in your mobile device,or in your digital wallet.

and again, i think whetherit's in the reg tech space, or actually just some of the modelsthat we were talking about earlier. i think they're doing a very effectivejob of minimizing the frequency in which you have to provide them datathat they can get through another way. through your consent, or through yourpermission to allow you to go ahead and provide data. and i think that, that has a huge impactin terms of the cost of switching. i think that there'sa direct correlation that the more information you have toprovide around buying a product.

your abandonment rate, i mean there'sa lot of statistics around abandonment rate with e-commerce shopping carts. that, the more data and information you have to enter the morefrequently you're going to abandon that. i think what a lot of thesefintech disrupters are doing are minimizing the amount ofdata that you have to provide. so that you can quickly get to a buy and move your business over to theirproduct or their platform. >> yeah, and i think that getting your,from a switching perspective, and

a management perspective. getting your data moved over, or gettingyour sort of enrollment process is one thing, and being able to manage multipledifferent services that you've got. so, you're piecing togethersort of a banking solution, is something else that haschanged dramatically with some of the advances that we were talkingabout in terms of technology. so before, people would want toconcentrate all of their banking and their financial servicesneed with one entity. because the overhead of managing allthese different relationships and

entry points was so high. now, you've got an app forall your services. there's notifications that come out. so there's not the needto have everything so concentrated with onefinancial institution. you can have solutions that youmanage through one interface which is your mobile phone. that's making that switch easier andsustainable. so, i think a few questionsaround how are banks

responding to all ofthe disruption that's happening. and i think that there's a wide variety ofthings that are going on in the market. but one of the things that we see a lotof is just some of the banks setting up their own fintech venture capital fundsto make sure that they're looking and partnering and making investments incompanies that they can either learn from, be strategic partners with, etc. so you can see here the backfrom 2/1 of 2015 to 2016 there's been a wide variety of banks thathave participated in this strategy. either by setting up separate funds or

just within their balancesheet lending as well. and fintech investments, last yearwas an all time high of 11.4 billion. and despite some of the easingthat's happening in funding this year across the entiretechnology sector, fintech is continuing to seethe levels of investment. and it is expected tobe even higher in 2016, primarily fueled by laterstaged rounds in companies. and we'll talk about some of thosecompanies in a minute that are seeing some of those this bigger rounds comingthrough to help sort of grow and

accelerate their businesses. is there anything else you'd add? >> some of the questions thatcame in were related to what you spoke on the last slide we take about. so what are the incumbents doing? they see a lot of new startupscoming into the space. they're trying to basicallyoffer competitive products. in addition to the investing that roticaspoke about a little bit earlier, i think one of the fundamental challengesbanks are going to have to deal with right

now is how they think about theirbrand in the market in the future. and so the reality is, fintech hasactually existed for a long time. because financial services buy a lot oftechnology from software companies and from hardware companies. there's actually been a sector that's beenin existence for a long time of companies to specifically build products andsell them to financial services companies. however the motto and the path is alwaysbeen we sell it to the financial services company and then they white label it orthey rebrand it with their brand and then they put it out in the market.

what's been the real fundamentalshift over the past three or four years are fintech companies thatare going directly to consumers and directly to businesses. and i think a lot offinancial services providers, going back to the last slide rotica spoketo, recognize that there's a need for them to properly partner differentlywith some of the fintech disruptors. but i think that this key question ofare they going to allow their brand to coexist? or are they actually going to allowtheir brand to maybe be pushed into

the background and to allow one of the disruptor's brandsto be in front of the client is a key decision point that a lot of financialinstitutions are grappling with. >> yeah, and they're looking at itfrom a demographic-by-demographic perspective as well, right? so what's that number again? 70% of millennials would rather goto the dentist than go to the bank. so [laugh] there may bea different strategy that you take with certain demographicsaround putting a startup brand more

in the forefront versus somebody ina later stage of their life that is more comfortable with the bank'sbrand being in front. so we were talking about a lot of moneygoing into the financial services or financial fintech ecosystem. and the one thing that we want to justtalk a little bit about is that most of the value has yet to be realized. there, obviously last year,were some exits by ondeck, square, lendingclub ipoing and we'll talk a littlebit about lendingclub in a little bit. i think i've seen a fewquestions come through on that.

but then there's this whole world of othercompanies, some would call them unicorns. in the fintech space that were the exits, there's not been exits and there'sa significant value to be realized. >> yeah, so one of the questionsthat just came up that i think is a good question related to everything wetalked about is kind of the demographics of fintech clients,whether it's consumers or businesses. and again, most of the industrydata that we look at, as much as there's a lot of hype about it'sreally the millennials and the digital natives that are driving a lot ofthe adoption, actually we see it across.

i think that the reality is,i'm personally a gen-xer, i'm not a millennial, butit doesn't matter to me. a really good digital experience isa really good digital experience. and if somebody can provide a product orsolution that is going to take 90% of the friction in the time i have to spendenrolling or utilizing that product. it's appealing to me and i don't think that that's very differentacross the different demographics. so in terms of whatthe adoption rate has been and what the penetration rate has been.

on the average, it is higher withmillennials, but it's probably not as big a chasm as people would thinkwith respect to gen-x or baby boomers. they're adopting a lot of the digitalproducts just as quickly as anyone. and i think probably lessaround financial services. but i think the real greatuse case of this is facebook. i think probably six or seven yearsago if you asked people who would be using facebook froma demographic perspective, everyone would think,well, it's young children. actually, what you see is, it's gottremendous adoption with the baby boomers.

so, i don't think financial servicestech is going to be much different. i think as long as they can providea great digital experience and remove a lot of the friction. probably the last comment iwould make with respect to point on most of the value has yetto be realized. i think that we're stillin what i would call an early stage of seeing how thesecompanies are going to be able to scale to become very largesustained operating models. and it's not because noneof them have done that yet,

some of them have done that really well. but most of these companies have justformed over the last five to seven years, so it's going to take some time tosee how they actually scale and how they become very largesustainable organizations. >> yeah, the other point i would makeabout sort of the demographics is that several of these companies on here,like coupa for example, is a b to b solution, right? so as the world of businessprofessionals are seeing the technology solutions sort of disrupting andtransforming the way that

they're able to do their work orsave time and money, etc. then it's going to trickle throughto the consumer side as well. so there is also that because it'snot just a consumer only disruption. it is on the business that there is, it has the potential toreach the broader populous. the one thing, and i've seen a few comments up there aswell on this is that the ones that have exited sort of the ondecks werethe lending clubs of the world. it's hard to ignore the factthat they struggled

a bit amongst the currentmarket condition. and i think that there's a variety ofreasons for some of the struggles, there's just general marketinstability that's been going on. as well as just some ofthe things that have happened with some of thesecompanies in particular. >> yeah, again, i think it's very,very, it's very early still. i think this chart will be interesting tolook at over the next three to five years. and again, i would say, if you go back andlook at other areas around innovation. you look at the early days ofwhen apple became public, or

even when facebookbecame public initially. some of the challenges ofgoing from being a private organization to a public organization. so i think that there's not enoughdata points right now to come to a conclusive position on this. but i do think that because of this,and there's a broader macro thing going on right now,there's just less ipos going on right now. there's less companiesthat are going public. so i think in terms of understandingthe long-term sustainability and

market value proposition ofmany of these business models. it's probably going to take anotherfive to seven years before we truly understand that. >> right, and so because of this,because of the some early innovations that are going on withthe companies that have ipos. it is trickling downto the private market. given the position that we havein the ecosystem, we have. seeing some companies sortof pull back a little, or have down rounds relativeto the recent fundraising

that they're doing becauseof the early indication. on these companies, that's bruce's point, right, it's still early dayshowever we are seeing it. >> one of the other things i thinkis unique about this sector, and i know there's been a lot ofquestions about regulatory type questions around these companies. i think that first and foremost,if you just take a step back and look at the venture backed start up community,the reality is companies will fail. [laugh] that's part of the innovationecosystem is the reality

that many start ups will notbe able to get traction. will not be able to movetheir business model forward. i think what's a little bit different inthe sector is because there's regulatory element because it involvesfinancial transactions, there's a different type of scrutiny aroundfailure in this particular industry. i've personally spent quite a bitof time regulators over the past year talking a little bit abouthow they are going to approach regulating the fintech communitydifferently than banks. because the reality is the maingoal of a regulator for

a bank is to ensure they don't fail, andthe reality is within not only fintech. but within the venture back start-upcommunity that there will be failures. i mean that is part of the innovationecosystem that happened. and in many cases actually it'scelebrated to a certain extent that fact that failure will absolutelydrive more innovation. if you're not seeing failure you'reprobably not taking enough risk and you're not innovating. so i do think that's a particular areaagain, the regulators are going to have to really figure out, probably a differenttype of model for this sector.

because trying to justoverlay the bank model, where the bank model is heavily predicatedupon, you will actually never fail. if they overlay that modelonto to the fintech companies, they probably will suppressa lot on innovation. at least in the limited conversationsi've had with some regulators and some government officials. they fully recognize the needto have a modified regulatory model around these companiesbecause they are not banks. and they shouldn't hold them to a, nota similar standard, but they shouldn't try

to overlay the exact same regulatory modelor probably will suppress innovation. >> yeah, oops wrong button. however, given some of the challengesthat some of the disruptors are seeing in the fintech ecosystem. fintech will persevere and the bestcompanies will continue to disrupt. i think that,with this flight is sort of going through is there's companies thatare sort of in their early days. and are sort of presentingsignificantly new, unique value propositions to the model andare starting to gain traction.

the next traunch is where they've gottensort of significant traction in their particular markets. and then finally, with the top share or category is really interesting andare gaining significant strides. one of the trends that we'reseeing which is really sort of prevalent amongst this top tier orthis top share category is they have entered the marketin one particular segment. say sofi, for example, they startedtheir model with lending to mbas, students from the top 25institutions in the country.

and then have taken a broad approach to product development acrossmore of financial services. so the first slide we startedwith banks becoming unbundled, and point solutions addressingevery single aspect of banking. now, we're seeing disruptors that startedwith that approach of let me unbundle, let me do that one thing better,faster, more seamlessly. and there's coming back andrebundling some things together in order to have a more holisticsolution to offer to the market. so we see that pretty much in all of thesecompanies, that they are going back and

trying to rebundle more things togetherin order to continue to drive the market. >> yeah,i would say the other point to that the most of these companiesare doing it again. it's very consistent withwhat you would see across the innovation start up community. and that is they try to get someproduct in market as fast as possible to ideate and learn. and again, i think that where one ofthe challenges the incumbents have, is if you think about the modeltoday around product design,

product development,introducing something into the market. it's a very long cycle for a traditionalfinancial institution to do that. a lot of them are thinkingabout accelerating that cycle, including in our organization. but i think the model of developing,finding a pain point, like ratika said, or finding a point of friction, quickly getting a product into the marketand then doing rapid ideation on that. and then doing horizontalproduct expansion off of that gives them an opportunity to quicklyrespond to changes in the market,

quickly respond to client expectations. and again, most of these companies on here will be releasing product ona weekly basis, if not on a daily basis. which is very unusual for a financialservices organization to do releases that quickly of enhancements andnew features. and i think that's a clearpoint of differentiation and advantage that they havein the market right now. >> so i think that's it in termsof what we've got from a prepared material perspective but i knowthere's a bunch of questions [laugh].

>> a pretty intriguing question is, will there be a point wherebanks are no longer needed? and it's something that we'vespent a lot time talking about, less around whether ornot banks will be no longer needed. but what could potentiallybe the future role of traditional financial institutions. i'll start andthen i'll let reetika weigh in here. so how we think that this potentially isgoing to evolve is, so first and foremost, financial institutions have a lot ofincredible assets and infrastructure.

they have trillions of dollarsof federally insured deposits, which are basically the oil forthe engine. >> [laugh]>> to do lending and to do payments, and to provide liquidity services. so they have an incredible asset withrespect to their balance sheets, their infrastructure. the fact that they are regulated, theyare trusted, they have access to a lot of the payment clearing and settlementsystems, which are incredibly valuable. so what we think about is kindof the distinction between

all of the great infrastructureservices that a bank can provide and then kind of the consumer facing products. and, not the best analogy, butone of the things we think about all the time is kind of howapple has evolved their model. and it's really interesting, and apple,either the largest or second largest, i haven't looked today on theirmarket cap versus google's, but in terms of what they provide interms of an operating platform. and i think people, they think abouttheir apple device but the reality is, they're using so many other productsthat are built off of the hardware and

the operating system,off of the apple device. and so i think that what we couldsee evolving with some financial institutions is them being maybe moreof an operating platform provider. allowing a lot of other software orclient facing technologies that, again, can leverage their infrastructure,can leverage their assets in a way that they can still monetize that,provide some very valuable services. but get the network effect, and i'mstealing a little of reetika's thunder, because the network effect is somethingshe talks about all the time. of actually having other companies thatare out there originating business for

you off of your platform oroff of your infrastructure. so we see kind of, possibly not for everysingle traditional financial institution, but for some kind of an evolutionto a model like that. but in terms of the broader question,will banks need to be in existence? some form of an entity that can managefederally insured deposits on behalf of consumers and can provide some ofthe major infrastructure services, we think will be a necessity. >> yeah,no, i mean, i think that you've pretty much summarizedwhat i was going to say as well.

but i did kind of allude to itearlier is that companies today, the startups today thatare successfully innovating and successfully disrupting in the backendare actually partnering with many banks. and we are, that we'll work witha start up and help them gain access to the infrastructure that helps power theecosystem while they spend the time and energy focusing onthe front-end experience. and gaining that networkeffect of reaching a broad customer base withtheir particular solutions. so, yeah i'm very much inagreement that i think that that

infrastructure is still going tobe very important in the future. >> and there have been a lotof questions about whether or not this has been recorded and whether ornot the materials will be available. and yes they will be available. correct? okay, the recording will be available. the slides will not be available. so another question that just came in, which is pretty interesting,is trying to summarize this.

this is kind of a long question. but in terms of what we have foundthrough our own experiences is the most valuable ways to improvethe user experience or ui. since a lot of this comesdown to the experience. well, i'll let you start with that one,reetika, just in terms of what we've seen in terms of working within tech companiesand venture backed companies on how they approach that maybe a little bitdifferently than the incumbents. >> yeah, i mean,i think that one thing that we see, and i mentioned that i run the acceleratorprogram in conjunction with mastercard,

called commerce innovated. so we some very, very early stagecompanies that come with their ideas, and their businesses andhow to bring to market. and one thing that we see predominantlyamong those companies is, they're all trying to solve a particular painpoint that they've experienced themselves, from frustration thatthey've got with the ui or ux that they've been struggling with. so they bring that sort ofpersonal experience and that personal perspective tothe solutions that they bring to market.

the other thing is,they're taking influences from technology companies instead of banks,so it's the, how do i vote things up anddown in facebook versus how do i express preferences inthe world of banking, right? so, they're taking cues from the ecosystemof technology providers that they like and pulling those together andsort of driving unique experiences. >> yeah, and i would just say the lastthing is a little redundant from what i said earlier is, they start withcustomer or business expectations first. and really, kind of the design processstarts with the experience with

the customer with the business, as opposedto the design starting with a product. and that's kind of a profound differencein user experience development is really starting with the overall end-to-endexperience that you're trying to deliver. and to reetika's point, most of the timesit's around solving a pain point or eliminating friction from the process. and then the product iskind of built from there. the other thing that i thinkthat they do very well. the ones that do this very well havea recognition of the necessity for backwards compatibility.

and what i mean by that is,a lot of these things, a lot of these models are builton other infrastructure. or they have to have access toexisting clearing networks or existing payment networks. and creating that level of backwardscompatibility is very important. so again, i think they start with tryingto design a user experience first and then insuring that there's backwardscompatibility about how that then is engineered andconfigured to work within the existing. so again, many times it's just aboutbuilding a complete abstraction layer

between the consumer and all of the kind of friction thatcan be created around the product. another interesting questionthat came up was around paypal, in terms of their role aroundthe fintech revolution. and i would say that they'reone of the pioneers [laugh]. so i think paypal is unquestionablyone of the first fintech companies that did have a consumer direct productand a small business direct product. and again, if you go back, and it's been awhile, but they weresolving something very, very specific.

what was very challenging, and that was,how could individuals exchange value between each other if they weren'tphysically with each other? [laugh] and as much as we take that forgranted today, the ease in which,that didn't exist back then. so the idea of,if i was in one physical location and reetika was in another physical location,and we wanted to conduct commerce,it was really difficult to do that. and again combined with kind ofthe birth of ebay and the idea that there could be a digital marketplace thatpeople could go to to conduct commerce.

i think that absolutely was a keyaspect of helping paypal get launched. but they solved something that was reallybig and that was how to create a digital experience where stored value could beexchanged between two individuals, that not only are not physically in the sameplace, but don't even know each other. they created a trusted network wherethey could between two individuals who wanted to conduct commerce andreally kind of facilitated a way to do it digitally that reallydidn't exist prior to that. so, they were really incredible pioneers,and they're obviously an unbelievable success story just in terms of, goingback to what we talked about earlier,

about can these companies buildsustainable, growing organizations. i think paypal has absolutelyproven to do that. >> yep. >> one or two other questions? >> there's a question in here about,stage do you recommend a fintech startup to approach a venturecapital of ec to raise money? and there's a few differentanswers to that question, and i'm sure bruce has gotsome opinions as well. but i think that today,venture capitalists tend to look for

specific factors when theyare investing in a brand new company, early, early, earliest stage. and i think today there are so manydifferent ways to raise capital outside of the traditional vc model based onthe level of experience that you've got, bringing new ideas to market, some of those alternative methods mightbe a good way to get started, right. there's angel investing,there's crowd funding. we talked a little bit,kickstarter was on one of our slides. there's angellist, etc.

so, there may be a point where someof those alternative methods of getting some seed funding in placemight be a better strategy than trying to go straight to a vc firm to raisemoney to get your product off the ground. and then bringing in somebodyof a more strategic nature, like a venture capitalist, to help youwhen you're at an inflection point is more of what we're seeing in the market. for bringing new founders,for repeat entrepreneurs, going directly to the vcis still happening. >> yeah, the last comment i would makesince we are at the top of the hour is,

i think for fintech companies interms of getting venture funding. two things that they probably have todo that's a little different than other venture backed tech companies is one is,i think they have to show and demonstrate that they've got a robustcompliance risk management and security. and i would understrike security, because again you're now dealing withsome element of financial transactions. and i know there were a few questionsearlier about cyber security and i think cyber security is importantin almost any industry, but in this particular industryit is at the absolute top.

and the last comment i would make is, ithink that you really need to demonstrate that you have a client acquisition andmore importantly a client retention model. one of the things around fintech thatagain is slightly different than some of other tech models,is it can't be a transactional model. it has to be a relationship modelwhere you're going to get sustained continuous transactions fromthe individual on your platform. and showing that you can not do justa single transaction with a consumer, but you can actually havea model that you can continue to sell to that consumer is very important.

i think we're at the top of the hour. >> i think so.so again thank you reetika and bruce. very informative and enlightening andthank you all for attending. i hope you will come back again soon andattend one of our other webinars. so have a great day, wherever youmight be in the world at this point.

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