PwC has released its 2016 Global FinTech Report to examine how financial technology (“FinTech”) disruptors will impact banking, including the opportunities that FinTech presents for driving customer-focused banking solutions.
Specifically, the report surveyed 544 respondents from 46 countries worldwide to examine the emergence of FinTech, its implications, and how the growth of the sector is impacting banking, the insurance industry, and asset and wealth management more broadly.
What’s ripe for FinTech disruption?
According to the report’s findings, there are three areas where the FinTech disruption will be most keenly felt:
- Consumer banking: Survey participants highlighted the emergence of online platforms in allowing individuals and businesses to lend to and between each other. Additionally, alternative credit models combined with powerful data analytics is transforming lending innovation.
- Fund transfers: Financial institutions that are slow to adapt to change will lose market share to companies that have a critical mass of users and the network connectivity to boost payment experiences. End users are increasingly demanding a consistent omni-channel experience, making digital wallets key to streamlining the user experience. As a result, banking solutions must enable the safe, secure, private, and real-time transfer of funds globally in order to stay relevant.
- Payments and wealth management: The surge of new technology-driven payments processes including new digital applications that facilitate easier payments, alternative processing networks and the increased use of electronic devices to transfer money between accounts leaves the payments and wealth management sectors ripe for disruption.
Additionally, there is a second wave of disruption making its market in the asset management and insurance sectors. The pace of change in the global insurance industry is accelerating rapidly as a result of changing customer behaviour, new technologies, and a variety of new distribution and business models.
But it’s not all smooth-sailing
The introduction of new technologies into existing systems continues to be a challenge for incumbents, especially in light of IT security needs. Refining old methods can be especially challenging when dealing with rigid and inflexible core systems. Furthermore, the ability to measure the benefit of investing in FinTech solutions takes time – an often challenging proposition for most banks to consider, especially as layoffs and restructuring plans are announced almost weekly.
FinTech companies are able to adapt more easily and quickly to challenges compared to incumbents. Forward-thinking banks are acknowledging the importance of working with these disruptors and leveraging their trusted relationships with customers as well as their extensive access to client data in order to innovate. The focus for the future is on customer-centric products and services whereby clients are able to acquire advice and interact with their financial institutions as partners. In doing so, financial institutions are better able to make the most of their position, brand recognition, knowledge of the regulatory environment, and access to data to drive growth.
Key Findings of the 2016 PwC Global FinTech Report
- 95 per cent of bankers believe at least some of their business will be given up to FinTech players in the coming years
- 67 per cent of respondents believe FinTechs will put pressure on margins
- 59 per cent of respondents are concerned about losing market share
- 53 per cent of those surveyed fear higher levels of customer churn
- 75 per cent of respondents said the most important impact Fintech will have is an increased focus on the customer
- 56 percent of respondents recognize the importance of distributed ledger technology (i.e., “blockchain”) but 57 per cent are unsure how to respond