Chart 76: Biggest risks to investing in a tech-based lending companies 40% 59% 32% 32% 30% 20% 10% te 0% No sustainable Untested credit Fragile funding model Uncertain regulatory competitive advantage model/risk backdrop management Source: BofA Merrill Lynch Global Research = Panelists agreed that flexible funding models that utilized both balance sheet lending and distribution of loans were important for a tech based lender. Additionally, panelists said that risk management is top of mind and tech based lenders are increasingly applying refined analytics that rely on credit variables directly from credit bureaus into their lending and portfolio management decisions The Future of Payments: The Need for Speed ¢ Jonathan Lear, President — North America, Earthport and Bruce Parker, Founder of Modopayments spoke on The Future of Payments panel. In a wide ranging discussion, the panelists discussed the B2B opportunity, the importance of partnering with incumbents and the need to maintain Safety standards. e Audience members identified the lack of a clear value proposition for new players relative to incumbents and concerns about Safety and Security as the largest risks to investing in new Fin Tech payments companies. Chart 77: What is the primary risk to investing in new entrants within the payments landscape? 40% 38% 38% 23% 20% 0% 0% Unclear value Rapid innovation that | Concerns around Intense regulatory proposition of new erodes value safety & security friction entrants relative to proposition incumbents Source: BofA Merrill Lynch Global Research ¢ Panelists generally thought the best way for a new Fin Tech companies to succeed was by partnering with incumbents. This was consistent with the views of audience members, a majority of whom thought the payments industry would continue to be controlled by incumbent institutions partnering with innovative tech companies. 52 2016 Future of Financials Conference | 17 November 2016 aan er a errill Lynch HOUSE_O