ablers, that focused on market data, news distribution, risk management, and core processing. Most of these players are now embedded in sell-side and buy-side firms. Market electronification accelerated with the introduction of the Financial Informa- tion eXchange protocol in 1992, and by the late 1990s, electronic venues, such as Electronic Broking Services, had become the primary trading vehicles for interdeal- er foreign-exchange transactions. The second wave took place from 2000 to 2007 and comprised just under 140 fin- techs that focused more on e-trading. These players included business disrupters, such as high-frequency trading, and execution platforms, such as Currenex. Starting in 2008, the post-crisis wave of about 310 fintechs evolved to mostly com- The potential gains prise enablers designed to fix the post-crisis challenges of falling revenues, high are much larger than costs, complex legacy infrastructures, and fragmented liquidity and data. One such those currently being player was the buy-side-to-buy-side venue Luminex. Today, many of these firms are realized. emerging startups with regulation built into their DNA. They use cutting-edge tech- nologies, such as machine learning, which are often delivered as a service. It is worth noting that the latest wave of digitization is being fueled by incumbent banks’ rapid digital transformations and is characterized by paradigm shifts in tech- nology instigated by the proliferation of cloud hosting, artificial intelligence, peer- to-peer computing, and distributed ledger technologies. Regulation has been a key driver of the latest fintech explosion, as CM players have moved toward low-capital- intensive business models that require enhanced technologies. Capital Markets Fintechs Have Received Less Than Their Fair Share of Funding. Of the roughly 8,000 fintech startups that we track globally across all business lines, only 569 are active in the CM space. And of the roughly $96 billion in VC funding that has been raised since the turn of the century, only about $4 billion (or approxi- mately 4%) has gone specifically to CM fintechs. (See Exhibit 2.) Thus, it is clear that the potential gains are much larger than those currently being realized. Indeed, the 2015 CM revenues of $330 billion (excluding those related to asset management) represent 9% of the total financial services revenue pool of $3.67 trillion. Therefore, the CM equity funding ratio, relative to the revenue pool share, is skewed at 1:2, with CM fintechs attracting less than half their fair share. If we use the broader definition of the CM ecosystem, which includes asset management, the ratio is even more pronounced, at 1:3. The vast majority of fintech disruption in the banking industry is happening on the retail and corporate fronts, where technology provides a way for companies to serve large, diverse client bases while still reducing the cost of customer acquisition across a number of distribution channels. The prospect of mass adoption makes equity financing readily available, with numerous VC firms on the lookout for the “Uber moment” of finance. As a result, there is a large imbalance in the amount of VC investment going to retail and corporate banking versus the amount going to CM firms. The handful of CM-focused startups that do exist have not only generat- ed fewer VC funding rounds than their retail- and corporate-focused peers, but they have also attracted significantly less funding per round: roughly $11 million in CM in 2016, compared with about $14 million in retail and corporate banking. The Boston Consulting Group 5