PwC LLP. published a report recently on the impact of FinTech on financial services organisations in terms of innovation, disruption and opportunity. ‘Redrawing the lines: FinTech’s growing influence on Financial Services’ surveyed 1,308 financial executives to investigate their opinions on the technology and what they planned to do about it.
The vast majority – almost 90% - of executives surveyed responded to say they were concerned that innovative new start-ups will negatively impact on their revenue. They also reported efforts to address this issue, with more than three quarters putting more effort into internally innovating, whereas four out of five will be looking to increase partnerships with FinTech companies in the next few years.
This move may come as reaction to research showing that over a third of consumers are planning to make greater use of non-traditional financial services, and less than 40% have the intention of using traditional banks exclusively. Change by the larger companies is already being seen, with a rise in the number who are purchasing FinTech services from other companies of 9% compared to 2016. This was highlighted last week with the acquisition of French FinTech company Compte-Nickel by BNP Paribas in for reported 200 million euros (approx. £170 million).
One survey respondent, the Head of Innovation of an Asian Insurance company, commented: “We learn from innovative FinTech firms, partner with them, and give them projects to deliver for us. It is a symbiotic relationship.”
Of the new technological developments, blockchain was seen as the most promising, with 77% of financial executives noting that they expect to incorporate the technology into their production systems or processes by 2020. Alongside this, three in ten reported that they were investigating the potential benefits of using AI in their business. Despite this, there was a concern voiced by just over half of respondents that issues such as data storage, privacy and protection would be a regulatory barrier to development with such new fields.
As the financial sector was the initial focus for technology such as blockchain it is perhaps unsurprising that banks and other financial services are the first to feel the threat of innovations from these new developments. However, as they make increasingly more inroads into other sectors, different markets should look to the disruption of the financial services as an indicator at what lies ahead for them. The gambling industry is already seeing a wealth of start-ups leveraging new technology, with AI and blockchain developments innovating different processes, models and systems. It is unlikely to be long before companies find themselves in the same position as financial services and have to innovate internal systems or partner with start-ups to remain competitive and provide the level of service customers will come to expect. As financial executives would no doubt advise, it would be best to be proactive and get involved with the new opportunities, before they become threats.