Investing in the New Reality

INVESTING IN THE NEW REALITY THE ROLE OF EMERGING TECH IN A POST-COVID-19 WORLD

POWERED BY BDO

EMERGING TECHNOLOGIES | BDO LLP

INTRODUCTION

CONTENTS

This eBook looks at the role of emerging technologies as they are being applied in a range of key verticals: FinTech, HealthTech, BioTech, RegTech and SportsTech. Nowadays, of course, every industry and market is being transformed in one way or another by smart technological solutions, albeit at different rates of change and under different conditions and drivers, so this is by no means an exhaustive list. But we’ve chosen these verticals because in the view of our experts they represent some of the most interesting opportunities for tech investors in the New Reality of the post- COVID-19 world that is slowly starting to emerge. With each sector, we begin by looking at some of the drivers and trends that have contributed to its development. We look at some of the most interesting companies and characteristic areas of

EMERGING TECHNOLOGIES ARTIFICIAL INTELLIGENCE AI: What’s in a name? Case study: Fligoo ROBOTIC PROCESS AUTOMATION (RPA) BUSINESS INTELLIGENCE | DATA ANALYTICS INTELLIGENT AUTOMATION (IA) VIRTUAL REALITY | AUGMENTED REALITY 01 02 04 06 08 1 1 12 14

healthy, to run smarter businesses, to be better employers and more productive employees, to stay on the right side of the laws that protect citizens and customers – and even, in these unprecedented times, to save the lives of our loved ones.

activity in each field. And we conclude each time with a look at how the sector has fared during the pandemic, and what its prospects are for the future. So that’s the vertical view. But there is also, of course, a horizontal view. The huge variety of applied solutions are powered by a handful of core emerging technologies, and we begin with a review of some of these. Some investors focus on a specific market or use case, while others are interested in a pure technology. Just as with our verticals, our list of ‘horizontals’ is a cherry-picked selection rather than an exhaustive litany, compiled with an eye to investment potential and commercial opportunity. We hope you find this eBook useful, and that it prompts some valuable reflections on the tech investment landscape after COVID-19. For me, it adds up to a compelling account of the power of tech to transform so many areas of our lives for the better: helping us to stay fit and

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VERTICAL TECHNOLOGIES FINTECH Case study: Citizen.is HEALTHTECH Case study: GDPQ

BIOTECH REGTECH Case study: Rainbird.ai SPORTSTECH Investment horizons

TONY SPILLETT National Head of Tech & Media, BDO

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EMERGING TECHNOLOGIES

ARTIFICIAL INTELLIGENCE

People often use the phrase AI in the context of any tech solution that is able to make inferences based on previous inputs, generating new actions and outputs that go beyond its initial programming brief. Some of the other technologies under discussion here might be very approximately referred to as ‘AI’ too. Facial recognition, deep learning, machine learning and cloud computing may all come under the AI banner too. AI is familiar to everyone from domestic applications such as Apple’s Siri, the popular assistant that can be used to retrieve information, send messages, make calls and all the rest. Siri uses machine-learning technology to develop its understanding of natural-language, and to learn to anticipate its users’ requirements.

The sectors that we feature later in this eBook are largely powered by a handful of core technologies, often combining in different ways. Together these technologies have transformed or disrupted markets and industries, following a trajectory of innovation that has been long expected but which in recent months has accelerated at an unprecedented rate. Ways of working and delivering services, often involving distance or automation, that were once exclusively the province of early adopters have suddenly become mainstream, and businesses have increasingly turned to tech to help them keep abreast of a rapidly changing world and accelerate the digital transformation of their operations. Here we look at some of those key technologies, and assess the investment potential for tech in the post- COVID-19 period.

Artificial intelligence (AI) is a very broad and rather fuzzy term (see AI: What’s in a name? ) that broadly refers to the ability of a computer program or a machine to think and learn. Smart computers use AI to help them work on their own without needing to be encoded with commands. In a definition developed by Deloitte and the World Economic Forum , artificial intelligence is ‘a suite of technologies, enabled by adaptive predictive power and exhibiting some degree of autonomous learning, that dramatically advance our ability to recognise patterns; anticipate future events; create good rules; make good decisions; and communicate with other people’.

THE GLOBAL AI MARKET IS EXPECTED TO GROW TO $202.6 BILLION BY 2026, UP FROM $20.7 BILLION IN 2018 , ACCORDING TO FORTUNE BUSINESS INSIGHTS.

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Vegas. It uses artificial intelligence to learn the behaviour of every user, device and application within an organisation, then builds a picture of a normally operating system so that it can quickly detect unusual activity that could indicate a malicious attack. The global AI market is expected to grow to $202.6 billion by 2026, up from $20.7 billion in 2018, according to Fortune Business Insights Last year, 956 deals valued at $13.5 billion took place through the third quarter, putting AI deal activity on pace for ‘another record year’, according to PitchBook-NVCA Venture Monitor. Apple, Facebook, Google, Microsoft, IBM and Amazon are all heavily invested in AI: wherever tech takes us next, AI is likely to be at the heart of it.

videos, stop them being uploaded and reduce the potential for lone-wolf attacks on UK streets. It has a distinct philosophy of working towards the public good and has launched a fellowship programme, teaching bright science graduates to combine academic excellence with commercial objectives. Featurespace, at #25 on the same list, develops intelligent software that identifies suspicious online behaviour to stop fraud attacks as they happen. Its platform monitors customer data from clients including Danske Bank, Worldpay and ClearBank, and learns to think in the same way as customers would, so allowing it to more accurately detect ever-more sophisticated fraudulent behaviour. Cyber-security developer Darktrace, at #54, provides software to detect and counter cyber-security threats for customers as diverse as T-Mobile, the Church of England and the City of Las

AI is a slippery word for a broad church of technologies, and lots of things get wrapped up within that label. When a lot of people hear the term AI, their mind turns to machine learning and big data. Machine Learning is certainly a form of AI but that doesn’t mean all AI is machine learning. There is this other classification of AI which has been an unstoppable train for centuries, which we might just label automation . Some would call that AI, and some wouldn’t. Robotic process automation is a good example of a technology that is decades old, that sat fleetingly under the AI bracket, but wouldn’t now be considered AI by most people. If we might agree that AI is a machine doing something that we thought was intrinsically human, ie a kind of artificial intelligence, it was once right at the frontier. But the very moment a technology like this works and delivers

There are AI elements in the predictive capabilities of Netflix, which uses an algorithm to make intelligent suggestions for your next watch, and Nest, an AI start- up acquired by Google in 2014 for $3.2 billion. Nest’s Learning Thermostat uses behavioural algorithms to help you save energy based on your use patterns and schedule. AI is widely used in business already, of course: in chatbots, ecommerce, workplace comms, HR operations management, healthcare, cybersecurity, logistics, betting, manufacturing and many other applications. From agriculture to automotive to architecture, AI reaches everywhere. Security, compliance and monitoring are key areas where AI can make a huge difference. London-based Faculty, #22 on the 2019 Tech Track 100, is an AI software developer that has built an artificial intelligence model to help the Home Office identify terrorist propaganda

AI: WHAT’S IN A NAME? Rainbird CEO James Duez looks at the evolution of the meaning of ‘artificial intelligence’ – and the sweet spot where horizontal capability meets vertical need

value, we no longer regard it to be doing something that’s uniquely human. It reveals itself to be what it always was - the next generation of computer science. And so to some, AI has almost becomes a label for everything that’s at that fringe and maybe doesn’t quite work yet. In the last ten or so years, there’s been a resurgence of interest in AI amongst the minds of many. But as an umbrella term, it’s singularly unhelpful. We can talk about artificial general intelligence , the building of a machine which is as intelligent as us at a broad range of tasks. This is where a lot of the popular science fiction stuff comes from, but it has little relevance to business. It’s interesting reading, but it won’t help you bring efficiency to your operations or new digital services to your clients. So then we come to where AI solutions really adds value, which is always in narrow circumstances, hence the term artificial narrow intelligence . There are

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CASE STUDY: FLIGOO Fligoo is a big data AI company, developed in collaboration with MIT, that helps large financial institutions, FMCG brands and healthcare companies to develop predictive AI algorithms that improve channel optimisation, product recommendation and offer personalisation. ‘We handle everything from data extraction, cleansing, normalisation, visualisation, to creating and running hundreds or thousands of models, all the way to creating offers and live testing with consumers,’ says Joey Suquet, Fligoo’s EVP of Strategy and a major investor. ‘The logic behind our solution does a couple of things. One, it analyses data that our customers have on their customers to understand what products and services they’re going to need at every moment in their life cycle. Then two, we make predictions – and we can also execute – on things like

The AI family of technologies are horizontal capabilities, which can transcend vertical markets and sectors. So we can talk about RegTech, FinTech, HealthTech and all the rest, but ultimately these are pillars of value that can be delivered in particular markets, and may use a whole collection of different technologies to do that. People get very excited about new technologies, but they don’t buy into them for their newness. What they do is find utility in a particular use r case that’s inherently vertical and has some boundaries on it. The scope becomes narrower. It’s about taking a piece of technology, a very specific domain expertise, and building out a solution that takes a slice of that in both dimensions – so that you end up with a bright point of value where the horizontal technology meets the vertical need.

the best time to make outreach, the best marketing channel, and the best personalised sales speech to use for each individual customer. In an FS context, that might mean analysing all the loan and mortgage customers of a bank, and trying to identify and predict which ones are going to be a great fit for the other products and services. ‘When we talk to legacy banks, they often feel threatened by the neobanks and FinTechs. But we remind them that they are sitting on the data of millions of customers, and with a little AI at scale making offers that make sense, they could outstrip these challenger banks overnight. Sometimes the legacy banks have to learn how to get out of their own way and innovate more quickly. In one case, Fligoo assisted a Top 10 bank in North America that was looking to increase credit card penetration in its 20 million-plus customer base. Hitting ROI in 90 days, Fligoo delivered a 48% lift

lots of examples of that, from algorithms trained to trade stocks to tools that look for fraud in financial services. Its not always a computer system either. The ABS in your car, which brak e s on the ice better than you could, is also an example of ANI. So when emerging technologies really add value, they become recognised in their own right and cease to be labelled as AI any more. I think RPA, and the new category of intelligent automation tools, are good examples of this. But the recognition happens at different rates around the world. As trends sweep the globe, you can actually catch this technology being used in different categories in different places, depending on where people are on in their AI journey.

WHEN EMERGING TECHNOLOGIES REALLY ADD VALUE , THEY BECOME RECOGNISED IN THEIR OWN RIGHT AND CEASE TO BE LABELLED AS AI ANY MORE. I THINK RPA,

...ANY SAAS COMPANY WITH A PATH TO

PROFITABILITY AND A FOCUS

AND THE NEW CATEGORY OF INTELLIGENT

ON SUSTAINABLE GROWTH IS GOING TO BE INCREASINGLY ATTRACTIVE AND SOUGHT AFTER.

AUTOMATION TOOLS, ARE GOOD EXAMPLES OF THIS.

JOEY SUQUET EVP OF STRATEGY & MAJOR INVESTOR, FLIGOO

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ROBOTIC PROCESS AUTOMATION (RPA)

‘But while some sectors have been hit really badly by the pandemic, areas like enterprise software continue to perform really well. I think any SaaS company with a path to profitability and a focus on sustainable growth is going to be increasingly attractive and sought after. I’m a huge fan of enterprise software with just a focus on selling to financial institutions. AI companies that help large organisations to sell more or reduce their costs are going to be mission-critical. ‘I also think that wealth management and financial advisory is undergoing its own transformation right now. We see consumers getting to new types of investment for the first time, especially in countries like Brazil, and you have Gen Z-ers experimenting with robo-advisers and day trading. So any tool that can give financial advisors an edge and help them sell new investment products to younger millennials could be worth looking at.’

to help us improve those business lines – and effectively help some of these retailers almost become FinTechs! It’s been a pretty interesting few months, to say the least. ‘In terms of the appetite for investment in tech, I think some investors are still going to continue to look at moonshots, especially in key categories such as blockchain, 3D printing and robotics. But right now, a lot of these tech investors are being a little more pragmatic. ‘They’re looking at product-market fit. They’re looking at stickiness of revenue. They’re looking at profitability, or at least path to profitability. Some are leaning more on the debt side of things versus making equity investments. They’re asking for maybe more onerous terms and are really having a level set on valuation.

RPA software is at work in pretty much every industry, but big adopters include banks, insurance companies, other FS institutions, telecom businesses and utilities – especially where organisations have cumbersome legacy systems and are keen to accelerate towards digital transformation. Healthcare is another key area: some 50% of US healthcare providers are planning to invest in RPA over the next three years, according to a 2020 Gartner survey . The market for RPA was worth an estimated $1.1 billion in 2019, expected to grow at around 34% over the period 2020-27, and estimated to reach $7.2 billion by 2025, according to Grand View Research . But a July 2020 report by Pod Group , an IoT company, suggests that this growth could accelerate still faster, with almost three-quarters of business leaders in the UK expecting to see a new wave of automation in the workplace. According to the most recent Deloitte RPA survey,

in response rate for premium cards over the bank baseline, and an 18% lift in credit card sales conversion rates. ‘A key development in the wake of COVID-19 is that there’s going to be a record-setting level of customers all over the world defaulting on their credit or loan obligations. What we’re doing with customers right now is analysing and making a prediction on which one of those consumers is at a high-risk classification of defaulting, and trying to take actions to prevent that from happening. We’re doing that at scale with millions of customers, which previously would have been impossible. ‘The other thing I’m seeing with AI in the wake of COVID-19 is that a lot of the large retailers who have virtually shut down their physical stores are now having to focus on these separate non-core businesses where they sell credit, loan and insurance products. We’ve been getting an increasing number of requests

RPA typically covers software that is programmed to automate repetitive manual tasks that would otherwise need to be carried out by employees, so freeing them up to focus on more strategic or creative aspects of their work. As Gartner defines it, ‘RPA is a combination of user interface recognition technologies and workflow execution that mimics the mouse-clicks and keystrokes of a human to drive applications and execute system-based work.’ RPA might be used to carry out repeated tasks such as data entry; performing multiple tasks across interconnected systems, for instance in processing transactions or compiling reports; transferring data between different systems without the need for new infrastructure; migrating data; updating financial statements; and mining and cross-validating data between different sets and systems. It supports faster delivery, execution and scaling of operations.

THE MARKET FOR RPA WAS WORTH AN ESTIMATED $1.1 BILLION IN 2019 , EXPECTED TO GROW AT AROUND 34% OVER THE PERIOD 2020-27, AND ESTIMATED TO REACH $7.2 BILLION BY 2025 .

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lockdown. ‘RPA is designed to reduce the burden of repetitive tasks on employees. But rather than eliminating jobs, it’s actually more likely to enhance the work of employees,’ says Foxall. ‘There’s a massive potential for this, and I think it’s going to grow even more in a post- COVID-19, digital-first economy, when there are going to be so many people working remotely. You can use RPA for the remote onboarding of employees and/or customers. You can use it for customer maintenance, payroll, price monitoring, order process, shipment scheduling. With lots of areas that would be rather mundane for employees, with a very high risk of errors, it’s much better if you can actually deploy RPA to enable the employees to have a more interesting role, which inturn improves their productivity and boosts their job satisfaction.’ While RPA does the heavy lifting, people are still required to do the analysis and

some 53% of organisations have begun their RPA journey, with near-universal adoption expected within five years. This move up the corporate agenda seems to have been confirmed by IBM’s prompt acquisition of WDG Automation, a Brazilian RPA specialist. IBM says it will embed RPA throughout its portfolio, using it to support client’s digital transformation activities, analytics, and AI workloads. RPA is sometimes seen as a danger to people’s jobs, but this is to misunderstand its true value, says Frank Foxall, entrepreneurial investor and director at Camwood, which has incubated and spun out a number of successful tech start-ups such as AppDNA, Rimo3 and Infinity. Foxall is also an investor and non- excutive board director at HeadBox, an event technology scale-up. Camwood’s latest spin-off, an RPA business called NexBotix, was launched earlier on this year and secured backing from a US investor while the UK was in

fine decision-making when it comes to edge cases and escalations. He cites the example of an investment bank which uses a number of bots to undertake specific tasks. ‘Because of what they do, each of those bots has an email address. But there is a great deal of human monitoring, as you can imagine, for compliance purposes too.’ Where RPA has traditionally found favour with larger enterprise customers, Foxall is now seeing wider adoption, for example with insurance providers and local councils, and more generally with mid-market organisations with <5000 users. ‘A lot of those companies are trying to understand now what they need to do to be on the survival track as they exit COVID-19. They’re undertaking really rigorous reviews of their processes, trying to understand what their new marketplace will look like. So I think RPA has got a part to play for those organisations, especially

if it is more scalable, cost-effective and more straightforward to implement than perhaps it has been before.’ Technologies like RPA play well into the current mood of pragmatism among buyers and investors alike, says James Duez, CEO of Rainbird. ‘As an investor right now, I’d be backing the technologies that enable organisations to restructure and adapt – which means RPA, as well as IA and AI,’ he says. ‘Most buyers currently lack the visibility and resources to engage in the speculative building of bespoke solutions and instead are looking for a faster ROI. Where before they could think globally, now they are thinking more locally.’

RPA IS SOMETIMES SEEN AS A DANGER TO PEOPLE’S JOBS, BUT THIS IS TO MISUNDERSTAND ITS TRUE VALUE.

AS AN INVESTOR RIGHT NOW, I’D BE BACKING THE TECHNOLOGIES THAT ENABLE ORGANISATIONS TO RESTRUCTURE AND ADAPT – WHICH MEANS RPA...

FRANK FOXALL ENTREPRENEURIAL INVESTOR & DIRECTOR, CAMWOOD

JAMES DUEZ CEO OF RAINBIRD

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BUSINESS INTELLIGENCE | DATA ANALYTICS

INTELLIGENT AUTOMATION (IA)

While often treated as broadly interchangeable terms, business intelligence can be seen as past-facing, analysing historic data for insights, while data analytics is more future-focused, using data science to make inferences about future outcomes. Globally, the big data market has been forecast to grow to $103 billion by 2027 , over double its 2018 size. Software is likely to account for almost half of that figure. In of a survey of late 2018, some 45% of market research professionals reported using big data analytics in their work.

for analysis. According to Dening, an optical character recognition (OCR) engine struggles to get more than 50% to 60% accuracy across a typical invoice data set from multiple suppliers. However, an AI-driven system such as Automation Anywhere IQ Bot uses both supervised and unsupervised learning to get past 90% to 95% precision. As Dening says, ‘The more data it processes, the better it gets.’ As with all these emerging technologies, the potential applications are myriad, among them improving back-end operations, optimising customer experience, de-risking regulated processes, driving product innovation, and improving workplace productivity. Here again, quick wins and strong business cases are the order of the day: ‘On paper the world needs more intelligent automation, but right now there has to be a very clear need and a short-term ROI,’ says James Duez, citing

Rapidly developing technologies like AI and IoT, along with cloud and mobile traffic, are all contributing to the complexity of the data that businesses have at their disposal. While big data is of course a valuable asset for businesses, it is of course only as good as the quality of the insights you can derive from it. Business intelligence software tools help organisations to extract value from big data, for example via data warehouses, data discovery tools and cloud data services. Data analysis tools similarly mine raw data for actionable conclusions to help a business optimise its performance, for example for supply chain efficiency, product innovation, risk management, service personalisation, and customer retention and acquisition.

Intelligent Automation (IA) sits at the intersection between the automation of software (RPA) and artificial intelligence (AI), to deliver end-to-end business process automation and accelerate digital transformation. Where RPA can help automate rule-based, process-led tasks, intelligent automation can harness AI to start to recognise semi-structured and unstructured data – and do so, crucially, at scale. ‘That combination [of RPA with AI], driven by advances in machine learning (ML) techniques, computational power, and more advanced cognitive engines, is starting to be applied to a wide range of business problems,’ writes James Dening . ‘Voice recognition, natural language processing, document analysis, and classification — these are everyday, real-world applications.’ Businesses are capturing more and more data, but much of it is unstructured or inconsistent. This ‘dark data’ – which lives

AS WITH ALL THESE EMERGING TECHNOLOGIES, THE POTENTIAL APPLICATIONS ARE MYRIAD , AMONG THEM IMPROVING BACK- END OPERATIONS , OPTIMISING CUSTOMER EXPERIENCE, DE- RISKING REGULATED PROCESSES ...

in emails, voicemail, video, dockets and invoices in multiple formats, PDFs and the rest – is useless if it can’t be processed

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VIRTUAL REALITY | AUGMENTED REALITY

Markets to reach $13.75 billion by 2023, at a growth rate of almost 13%. As a result of the pandemic, adoption of IA has been accelerated in some areas for COVID- 19-specific challenges, for example in healthcare and in travel, where airlines and other providers have had to process huge volumes of refund requests. In one example cited by Automation Anywhere, a medical technology company deployed IA ‘to track surgical instruments across the entire patient care continuum. Collecting data from more than 156 hospitals, staff members were able to perform predictive analytics on contamination risks, enable better asset utilization, and make data-driven policy and resource decisions’. Another trend to watch is the consolidation of different IA technologies, says James Duez. ‘IA takes task automation to the next level, enabling it to reason and make human-like decisions. But there’s a whole collection

use cases in finance, regulation and healthcare. ‘Organisations are unwilling to make any discretionary or long-term investments but are favouring clearly articulated pay-as-you-go or pay-for- reward models.’ Financial services is a key area. A 2018 Cap Gemini report predicted up to $512 billion for the FS industry in new global revenues thanks to intelligent automation. The survey of 1500 senior executives in 750 global organisations suggested that 10-25% in cost savings already achieved by RPA could rise to 30-50% with the injection of AI-powered automation. But along with cost-cutting and business efficiency, FS leaders also saw IA as a revenue generator, with 35% of firms seeing a 2-5% increase in top-line growth from automation thanks especially to faster time to market and improved cross- selling. Valued at $6.25 billion in 2017, the IA market was projected by Markets and

of intelligent automation technologies out there, and many of the big players are now trying to build ecosystems of bolt- ons, which we might call an intelligent automation layer, in order that those technologies – and those companies – remain relevant. It’s a very interesting space and the ability to layer automated human-like decisioning on to existing robotic automation is at the core.’

Virtual Reality (VR) and Augmented Reality (AR) are immersive technologies that integrate virtual and real-world elements into an interactive format. While closely related, the outputs created by VR and AR technologies are very different. Coined in 1989, ‘virtual reality’ refers to a computer-generated, three-dimensional environment that can be explored and interacted with as though it were a physical space. When it comes to executing VR simulation, there are a growing number of technologies that can be used to stimulate the necessary senses, including headsets, omni- directional treadmills and gloves fitted with sensors. Put simply, VR implies complete immersion – creating an experience that shuts out the physical world.

By contrast, ‘augmented reality’ projects digital elements onto the real world. So rather than providing a fully immersive experience, augmented reality enhances or manipulates our image of the world around us, adding virtual information, text or images via devices such as headsets, smartphones, tablets or smart lenses. The primary use of AR today is in entertainment, as with Pokémon GO , the popular mobile game developed and published by Niantic from 2016. AR is also used by retailers such as IKEA , whose augmented reality app helps shoppers visualise what items would look like in their home by projecting virtual versions onto live images of their living spaces. Dulux has a similar concept, allowing customers to virtually transform the colours of their walls using its Visualiser app.

GLOBALLY, EDTECH COMPANIES SAW VC INVESTMENT GROW BY 22% IN Q1 2020 – A RATE THAT IS EXPECTED TO HAVE GROWN EVEN MORE IN Q2 .

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And, as life sciences manufacturers ramp up their capital investment in new production equipment and facilities to start producing COVID-19-related treatments, ‘the need to increase local manufacturing capacity to mitigate pandemic-related logistics disruptions will drive an increased need to properly test and configure new equipment in new facilities.’ Factory acceptance testing of such kit, once done on- site at the manufacturer by customer specialists, now needs to be done remotely: ‘With today’s travel restrictions, manufacturers are moving to virtual factory acceptance tests using video links, virtual documentation, and even AR & VR technologies. These virtual factory acceptance tests will need to provide not only for rapid, seamless execution of the tests, but also for the associated workflows, audit, and verification procedures that ultimately assure regulatory compliance.’

Q2. And since 2014, EdTech companies in the UK have raised a total of $857m in venture funding, comprising 41% of all European EdTech investment in 2019. Emerging ways of working post- COVID- 19will throw up many new use cases for VR/AR. Two such opportunities in the pharma space are remote production support and remote acceptance testing, write Pari Sanghavi and Jim Lehane . With some manufacturers reducing on- site support staff by as much as 75%, the authors write, ‘properly configuring and managing equipment, as well as verifying correct manufacturing processes, with only critical workers on-site, requires increased use of video conferencing, as well as artificial reality and virtual reality (AR & VR). Critical workers such as hands- on technical staff, are being trained to undertake verification and data gathering tasks differently to allow strictly clerical employees to work remotely.’

technology is in staff training of all kinds, for example in the fields of military, retail, aviation, logistics, manufacturing and medicine . ‘Companies such as Walmart, Boeing, UPS, and others are using AR VR for training purposes, which has been driving the demand for VR AR content creation in recent years,’ reports MarketWatch . It cites Boeing, which reported a reduction in operational time of 25% by using AR headsets, with associated gains in productivity by reducing errors in maintenance. Meanwhile Agco, the US agriculture manufacturer, reported a reduction of 30% in inspection times through the use of AR in training programs. Immersive technologies are a growing area of EdTech, which is a hot area for investors right now, with some promising funding and exit opportunities. Globally, EdTech companies saw VC investment grow by 22% in Q1 2020 – a rate that is expected to have grown even more in

VR also lends itself to entertainment and is already well-known in the gaming sphere for enabling truly immersive, first-person perspectives throughout gameplay. In sports, 360-degree cameras can be used to capture and stream sporting events so that fans experience the game as though they were in the stadium. NextVR, one of the early VR broadcasting start-ups, which provided VR coverage for sporting events as early as 2015, has now been acquired by Apple . The global VR/AR ecosystem was valued at $385.5 million in 2018, and is expected to grow at 18.5% over the next few years with increasing demand post- COVID-19, according to MarketWatch . The demand for AR/VR goes hand in hand with an increase in headset manufacturers such as Google, HTC and Oculus, and the growing availability of content to download via users’ smartphones. But the key application of AR/VR

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VERTICAL TECHNOLOGIES

FINTECH

SCOPE AND DEFINITION Perhaps the perhaps best-known of all the verticals that harness emerging tech, FinTech focuses on the automation and optimisation of processes in banking and financial services. ‘At its core,’ as Investopedia puts it , ‘FinTech is utilised to help companies, business owners and consumers better manage their financial operations, processes, and lives by utilising specialised software and algorithms.’ Apps, processes and products are deployed by FS businesses to automate insurance, trading, banking services and risk management as web- based end-to-end solutions. FinTechs are often divided by observers into two broad categories, the ‘techs’ and the ‘fins’. ‘Fins’ are more b2c-focused, and include peer-to-peer marketplaces and online lenders, historically the beneficiaries of the biggest slice of the funding pie. The FinTech ‘techs’,

meanwhile, focus on the technology that underwrites banking operations, and are more b2b in character. These are the players that are likely to do best in the coming period. One of the key historic areas of FinTech advantage has been in digital payments. FinTech apps and tools have helped make the payments of goods and service quicker, easier and more cost-effective for consumers. The introduction of Open Banking has added a new dimension of opportunity here. PSD2 (Revised Payment Service Directive), which regulates the market for financial technology in the EU, required the big banks to open up to allow smaller nimbler FinTech players to build third-party tools and services around them. (See Case study: Citizen.is. ) Another trend of note is the gradual uptake in blockchain technology, which has the potential to further speed up payment processes, improve trade

accuracy and reduce risk. According to PwC research , over three-quarters of financial organisations – and 90% of payment companies – were planning to integrate block chain into their operations by 2020. FINTECH APPS AND TOOLS HAVE HELPED MAKE THE PAYMENTS OF GOODS AND SERVICE QUICKER, EASIER AND MORE COST-EFFECTIVE FOR CONSUMERS.

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US-based SoFi , ‘a new kind of finance company’, offers a non-traditional approach to lending and wealth management. As well as offering student loan re-financing, mortgage loans, personal loans, wealth management and life insurance, in 2019 the company launched Stock Bits, which consumers can use to buy and sell fractional shares of 50 popular stocks for as little as $1. The business is now worth over $4.8 billion . The #1 ranking in 2019’s TechTrack 100 went to FinTech darling Revolut, boasting 6million customers, a $1.7 billion valuation and a European banking licence. An idea born from co-founder Nikolay Storonsky’s frustration at the transfer fees incurred by sending money home to his native Russia, Revolut offers a versatile debit card, allowing people to spend money abroad in 150 currencies; convert pounds or euros into cryptocurrencies such as bitcoin; and transfer money in 29 currencies at the interbank exchange rate.

NAMES AND NUMBERS The world’s biggest top FinTech companies include Ant Financial , a China-based company that was spun out of the Alibaba group in 2014 and valued at $150 billion in 2018 . As well as Alipay, one of the world’s biggest payment platforms, Ant Financial’s other offerings cover services in wealth management, credit reporting, private banking and cloud computing. Netherlands-based Adyen , established in 2006 and valued at $22 billion in 2019 , provides an all-in-one payment platform to businesses like Facebook, Uber, Netflix, Spotify and Microsoft. Qudian , a China-based micro-loan firm founded in 2019, targets Chinese consumers who do not own credit cards. And Xero , founded in New Zealand in 2006 and now one of the world’s fastest-growing SaaS businesses, offers easy-to-use online accounting software for small businesses. With over 1.8 million subscribers at the close of 2019, it reported an annual revenue of $718.2 million in March 2020.

CORONAVIRUS AND BEYOND Globally the FinTech market was valued at $127.66 billion in 2019 , and expected to grow to almost $310 billion at an annual growth rate of almost 25% through 2022. In the US alone, investment in FinTech rose to US$54.5 billion in 2018, a significant increase on the US$29 billion in 2017. In Europe, FinTech investment saw record growth in 2018, with US$34.2 billion invested in 536 deals. These projections will need to be adjusted for Coronavirus, but while the FinTech sector has seen dips in revenue and some notable casualties, there are signs that the sector may weather the pandemic better than others. In a time of high infectivity, the benefits of contactless payments and branchless banking became self-evident, with the additional benefits of accessibility to people in remote areas, cost-efficiencies and an appeal to younger generations.

Operationally, too, many FinTech businesses are already set up to work remotely so business continuity has been relatively straightforward. While Coronavirus brought the world’s longest-ever bull market to a crashing end and market uncertainty saw FinTech deals fall in early 2020, the stock markets revived on the prospect of Government stimulus packages, and overall in H1 2020 funds investing in the FinTech trend largely outperformed a market returning to positive territory . Writing in Forbes magazine , Ron Shevlin argues that the post- COVID-19 world is ushering in a new period of ‘FinTech realism’, focused more on delivery rather than experimentation. ‘The prospect for FinTech startups has never been better— especially for those looking for banks as customers,’ he writes. Where banks were once obsessed with FinTech partnerships as a way of convincing themselves that they were

IN A TIME OF HIGH INFECTIVITY , THE BENEFITS OF CONTACTLESS PAYMENTS AND BRANCHLESS BANKING BECAME SELF-EVIDENT , WITH THE ADDITIONAL BENEFITS OF ACCESSIBILITY TO PEOPLE IN REMOTE AREAS, COST- EFFICIENCIES AND AN APPEAL TO YOUNGER GENERATIONS.

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‘The current world of payments, in the West at least, is very much card- dominated. Cards are a pull payment: you provide your card details to a payment gateway/acquirer, they take that card information, contact the banks, and move the funds from one account to another.’ ‘On the other hand, account-to-account payments are cardless, push payments initiated by a consumer. We connect the merchant to the consumer, in order to create a payment which the consumer just needs to securely authorise. It’s a better-than-card experience, with customers never needing to type a password or a PIN, funds settling into the merchant’s account within 10 seconds rather than waiting a couple of days for a payment gateway to settle back to you. Fraud & chargebacks are significantly reduced because there are no cards or numbers to lose, and the payment is authorised with SCA (Strong Customer Authentication).’

For James Duez, CEO of Rainbird, FinTech’s focus on expedient solutions with a clear path to ROI will help them weather the current storm. ‘Senior people in enterprise are focused on restructuring around the same uncertain future that tech organisations are facing, and reducing costs wherever possible,’ he says. ‘It’s worth reflecting that according to Beauhurst 40% of jobs are at risk across early-stage tech firms – but only 22% of UK FinTech jobs are at risk, signifying a relatively low impact on the sector compared to the rest of its technology peers. This resiliency is because B2B FinTechs primarily provide mission-critical services to their customers.’

In 2017, he set out to find a way to make it easier to identify and pay online that reduces both fraud and friction to the two parties, while reducing the cost of making those payments. As an FCA-authorised payment institution, Citizen can transact both card and cardless payments for consumers and businesses. Neville sees the real opportunity for growth and innovation in the mainstream adoption of cardless account-to-account real-time payments. ‘We’ve predominantly operated in the regulated spaces, so anywhere where there’s a need to identify the customer on the end of the payment transactions, such as trading assets online, FX remittance, prepay, gaming and so on. But I feel very blessed that our business is digital identification and payments, because if anything’s going to thrive horizontally in a remote economy, this is it.’

innovating or transforming digitally, when in fact many of these partnerships were little more than vendor arrangements bolted onto existing creaking infrastructure, the New Reality will see a greater focus on metrics around operational efficiency and monetisation. ‘Banks will need to accelerate their investments in FinTech to achieve both the top-line increases and expense reductions needed to maintain margins and profitability,’ writes Shriven. He quotes the Centre of Excellence on Emerging Development Perspectives : ‘The potential of digital financial services in providing secure, low-cost, and contactless financial tools has become even more apparent during the crisis. But there’s a catch, the reliance is on the “convenience” that digital finance provides and not necessarily on the unicorn startups that have driven the rise of FinTech.’

CASE STUDY: CITIZEN.IS James Neville, CEO and founder of Citizen, has worked in the ecommerce and payments space for 20 years. A former CTO of WorldPay, he founded Citizen to solve a key payment puzzle. ‘The one thing that I always found challenging in the merchant space was the fraud-friction trade-off: The more you tried to make things easier for consumers, the more you reduced the friction; but at the same time, the more the fraud goes up.’

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HEALTHTECH

SCOPE AND DEFINITION HealthTech refers broadly to the use of tech solutions to support the delivery of healthcare services, for example by boosting hospital productivity, facilitating diagnostics, supporting remote treatment, provide new insights into medicines and treatments, and improving levels of care. As evidenced by the Journal of mHealth’s Global Digital Health 100 , the healthcare setting is being transformed by a wide range of emerging technologies, including Internet of Things (IoT), Blockchain, AI, wearable devices and mHealth apps, 3D printing and robotics. Solutions and applications are extraordinarily broad – from a machine- learning algorithm that can detect the likelihood of early death in heart patients, to language processing software that can infer a potential suicide risk from analysis of an individual’s Instagram posts, to the decision engine built by automated intelligence firm Rainbird that enables NHS venues to prioritise staff testing, and identify infection risks and PPE priorities.

‘From both an innovation and regulatory point of view, looking ahead I can see both a fair amount of rejection of traditional card-based methods as push methods start to become more viable. The protection is higher, the speed is better. What we’re doing over here is based on the banks’ PSD2 world, but other geographies have modelled this already.’ ‘iDEAL in the Netherlands, managed by a consortium of banks, is more widely accepted than cards because the fees are very low and consumer protection is covered by the banks. You have SOFORT in Germany, and BankID in the Nordics, which allows you to identify and pay with a single app. And so the innovation is an opportunity for businesses like ours to make identification and payment across multiple banking rails as ubiquitous as BankID has been in the Nordics, and that’s certainly one of my goals.’

‘That’s a very different way of looking at payments, and in the UK, it’s been facilitated by Open Banking and PSD2 (Payment Services Directive 2). We’re now starting to see the implementation of the requirements in PSD2 for the banks to open up and provide the endpoints that allow businesses like ours to place those payment initiations with the banks. Most of the banks across Europe are now compliant. The UK, which is further ahead, has welcomed us with open arms.’ ‘In the UK (and soon in the EU), we can improve customer experience with app to app redirection, which enables us to redirect customers to their mobile banking experience, rather than going through a traditional web banking experience. That means consumers can use all the tools available to them in the mobile domain, such as Face ID, Touch ID and device biometrics to identify themselves and make payments, massively reducing the friction, and reducing fraud.’

Driven by factors such as an ageing population and diseases like diabetes and obesity, the healthcare sector will invest an estimated $410 billion in IoT devices, software, and services in 2022, according to EQT Ventures . And analysts IDC predicts vendors will ship a total of 125.5 million wearable devices in 2020, a 20.4% increase from the 104.3 million units shipped last year.

WE’VE PREDOMINANTLY OPERATED IN THE REGULATED SPACES , SO ANYWHERE WHERE THERE’S A NEED TO IDENTIFY THE CUSTOMER ON THE END OF THE PAYMENT TRANSACTIONS, SUCH AS TRADING ASSETS ONLINE, FX REMITTANCE, PREPAY, GAMING ...

...THE HEALTHCARE SECTOR WILL INVEST AN ESTIMATED $410 BILLION IN IOT DEVICES, SOFTWARE, AND SERVICES IN 2022 , ACCORDING TO EQT VENTURES...

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products to create tools suitable for treating coronavirus patients. ‘For a long time we have been talking about the potential for digital delivery of care and tools to support frontline clinicians. Now we are using these on a mass scale […] From helping with critical care in our leading hospitals, to providing tools to help NHS workers take care of their own mental health, the range of companies and services that has been deployed in the last month is truly impressive.’ To give a few examples, accuRx, a tool used by GPs to send text messages to patients, built a video consultation product in a weekend that was soon being used in 35,000 consultations a day. Telemedicine and virtual consulting took a big leap forward in development and adoption, with services such as Babylon, Push Doctor and Doctor Care Anywhere providing platforms for GPs to consult remotely with patients via smartphones.

Another example from Scotland is the COVID-19 tracker app developed by a team of volunteers in a collaboration between the University of St Andrews and data scientists Blue Hat Associates, to further medical research and understanding about the spread of COVID -19 within the community. How COVID-19 spreads within the community and individual households remains uncertain as current data is based on people who receive medical care, so the app allows people to share data on the members of their household including symptoms. This research, one of three research projects awarded to St Andrews as part of the Scottish Government’s COVID-19 Rapid Research programme, aims to extract key information from households’ reports of COVID-19 and link these with medical records to get a better idea of the true number of people with the disease. It will look to see if people

Even before the pandemic, HealthTech was going great guns, with funding of $47.5 billion globally in 2019 . The size of investment deals in healthcare devices and supplies jumped 148% in 2018 as new technologies brought innovation to the sector across Europe, according to a Pitchbook report on European venture capital .

NAMES AND NUMBERS According to the Association of British HealthTech Industries , the UK HealthTech sector is now the largest employer within the wider Life Sciences industry, employing 127,400 people in 3,860 companies, with a combined turnover of £24 billion. HealthTech is the second biggest sub-set of the UK tech sector, after FinTech, with more than 100 healthtech companies valued between £200m and £800m with the potential to become $1 billion businesses. Only FinTech produces more early-stage tech companies. Of the 2.9 million people who work in tech in the UK, more than 127,400 are employed in HealthTech, a number which continues to rise.

CORONAVIRUS AND BEYOND In the current climate innovation has been massively accelerated by necessity, and the piloting and mainstreaming of services has taken place in days where once it might have taken months. As people become more comfortable with using HealthTech services in response to the pandemic, there is likely to be a surge in telemedicine, remote monitoring, and home testing in the coming period. Experts are also predicting a spike in digital therapeutics and mental health tech in the second half of this year. Caroline Dinenage , UK’s Minister for Digital, describes how COVID -19 has expedited the sector’s integration into mainstream healthcare. ‘Our £36 billion HealthTech sector, which includes firms from startups to global tech players, has rallied to support those on the frontline, whether through donating technology, equipment and services for free or by working around the clock to adapt their

THERE’S AN UNPRECEDENTED DEMAND FOR MENTAL HEALTHCARE SERVICES AND SUPPORT. MENTAL HEALTH DATABASE HUB OF HOPE, WHICH SIGNPOSTS PEOPLE TO LOCAL SERVICES AND SUPPORT, REPORTS A 300% INCREASE IN PEOPLE LOOKING FOR HELP.

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