A recent report from PwC has joined the list of publications concluding that the potential of financial technology is a threat to established businesses. ‘Redrawing the lines: FinTech’s growing influence on financial services’ studied the opinions and insights from Indian firms on the impact of FinTech in their industry. This was in line with global research conducted by PwC earlier this year on the same topic.
In this research, PwC revealed that over two thirds of financial institutions in India are feeling threatened by FinTech. Banking, payments and funds transfers were identified as already experiencing disruption, with areas such as lending and wealth management on the horizon for change. Whist start-ups were noted as the biggest area for competition, other possibilities such as social media platforms and e-tailers were also mentioned.
Although lower compared to the global response where 88% of businesses surveyed felt at risk, the number is still significant and the difference can perhaps be chalked up to countries such as the UK and USA being early adopters of blockchain and AI and as such being further along in the respective FinTech development stages in comparison.
With a whole host of benefits, developments such as blockchain and AI are being leveraged by companies and start-ups which are moving rapidly into spaces once occupied solely by large institutions; the efficiencies, directness and effectiveness of the new technology allowing them to carve out a niche in remarkably short times.
In response to these potential threats to business, the surveyed companies also discussed their plans to deal with the competition. Almost all of the businesses believe that FinTech partnerships are key to bringing necessary innovation. This could take the form of harnessing the smaller operations to provide specific services or products, or it could involve the provision of vital information to keep incumbents ahead of the curve in technological developments.
Specifically regarding to blockchain and AI, over half of the respondents expressed their intent to incorporate blockchain into their business within the next five years; the areas in which it was expected to be utilised were mainly for payments/funds transfer infrastructure, digital identity management and post-trade settlements. AI was additionally ear-marked by 36% of companies as an area for investment.
Despite the report focussing on financial institutions, there are parallels that can be drawn to gambling and just about every other sector. Being initially targeted to disrupt financial services, the blockchain technology behind bitcoin has since been found to have benefits that span industries. Any area with the transfer of money or information stand to gain from the implementation of blockchain technology. Similarly, new developments on top of this such as smart contracts and DAOs have the potential to automate many time consuming and costly processes. This is in addition to the transparency and security benefits that blockchain brings.
An initial focus on financial services has led to FinTech becoming the byword for innovation and attracting start-ups which leverage the potential of blockchain to provide similar services to traditional banks but with added benefits. Following the initial frenzy around finance, other sectors are beginning to see the same developments and disruption. Even areas such as insurance – one traditionally resistant to new technology – are coming round to the huge draw of blockchain and AI. The message is coming from many sources, including reports, statements from CIOs, talks and discussions from industry leaders and conferences around the world: innovation is the basis of progress and cutting-edge technology such as blockchain is the way forward.