FinTe

ch
WealthTech & InsurTech

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InsurTe
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 Classification by Milken Institute
Milken Institute, “InsurTech Rising: A Profile of the InsurTech Landscape,” December
2018.

• Segmentation of Insurtech Firms

• A “traditional” view: Full-stack / Agents / Brokers
• A nuanced view of sub-segments: Carriers / Enablers / Distributors
• Full-stack Insurers: Platforms that underwrite policies, assume the risk,and, in most cases,
manage the process from beginning to end
• Agents: Platforms that act on behalf of a carrier, essentially acting as an extension of an incumbent
carrier
• Brokers: Platforms that provide customers with a variety of policies offered by both incumbent
carriers and insurgent InsurTech platforms

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Capgemini World InsurTech Report
2018
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 Impact
Investing
WealthTe
ch
 Key categories of
WealthTech
• PERSONAL FINANCE MANAGEMENT applications
• Investing tools
• Digital Brokers
• Investment Platforms
• Robo advisors
Key Trends in
WealthTech
 Robo
Advisors
• Technically, a robo-adviser works in the same way like financial
advisors do - recording customer goals/time horizon, assessing risk
profile, suggesting and executing investment strategies and reporting
portfolios.
• Examples: Betterment, Wealthfront (both U.S.) and Nutmeg (the
U.K.)
• robo-advice providers offer asset allocation strategies, executing
through index/passive (mostly ETFs), tax harvesting to optimise
tax - all with a focus on long-term goal-based wealth creation.
 WealthTech in
India
• While some players offer ‘direct’ mutual funds (with no embedded
trail commissions), they still prefer selecting active mutual funds over
passive ETFs; we assume they intend to charge the clients a fee at
some point
• Some players offer ‘goal planning’ helping users to calculate the cost
of goals and how much they need to invest and ‘goal tracking’
showing if users are on track to meet their goals
• Very few offer full financial planning, rebalancing, tax harvesting etc

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License - mutual fund distribution (MFD) vs registered
investment adviser (RIA)
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 Zero Commission
Trading
• The rise of zero-commission trading was spawned by modern
FinTech companies
• In the past, full-service stock brokers made over half their revenues
from trading commissions, e.g. 1% of the total cost of the trade
• Discount brokers came into prominence in the 1990s and 2000s as
commissions fell to $19.95 to $4.95 per trade.

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Sources of Stock Broker
Revenue
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 Who Pays For Order Flow And
Why?
• Wholesalers are electronic trading BDs utilizing high frequency
trading, algorithmic and low latency trading programs to carry out
order executions.
• Market makers compete with each other for optimal executions for
clients. They are responsible for using firm capital to take the risk
on both sides of the spread and profiting from the spread.
3rd Party Profits: bundle retail orders
and front run them
Arbitrage the
spreads
 How do Zero Commission Stock Brokers
Make Money?
• The method behind zero-commission trading is the use of order flow
arrangements with third part liquidity providers.
• Zero-commission brokers would have agreements to direct their
customer trade orders to specific providers in exchange for a
commission/fee based on volume.
• platforms can be simplified to onboard mainstream and beginner
investors
• easy-to-use nature and minimalist interface was less threatening
than more complicated trading platforms.
 Other Startups /
companies
• Upstox
• Angel Broking
• IIFL or India Infoline