A PwC survey, which assesses the rise of new technologies in the financial services sector, reveals that respondents from traditional banks believe large parts of their business is at risk of being lost to standalone Fintech companies.
Fintech companies are even more bullish, believing they could capture at least a third of the incumbents’ business.
The report, «Blurred Lines: How FinTech is shaping Financial Services,» features the responses of 544 CEOs, Heads of Innovation, CIOs and top management involved in digital and technological transformation across the Financial Services (FS) industry in 46 countries.
Incumbents believe 23 percent of their business could be at risk due to further development of FinTech. What’s more, FinTech companies themselves anticipate they could capture 33 percent of the incumbents’ business.
Banking and Payments feel Fintech Heat
The survey shows the banking and payments industries are feeling the most pressure from Fintech companies. Respondents from the fund transfer and payments industry anticipate that in the next five years, they could lose up to 28 percent of their market share to them, while bankers estimate they are likely to lose 24 percent. This compares to around 22 percent in the case of asset management & wealth management and 21 percent in insurance.
Blockchain Untapped and Underestimated
Blockchain, a distributed ledger technology, represents the next evolutionary jump in business process optimisation technology. According to PwC, it could result in a radically different competitive future in the FS industry, where current profit pools are disrupted and redistributed towards the owners of new, highly efficient blockchain platforms. Not only could there be huge cost savings but also large gains in transparency. Yet it ranks low on the agendas of participants.
«When faced with disruptive technologies, the world's leading companies succeed by rapidly weaving them into their DNA, as part of their ‘business as usual’ process,» said Haskell Garfinkell, US FinTech co-leader, at PwC.
The Challenges
PwC say that Fintech is changing the FS industry from the outside. PwC also estimates within the next 3-5 years, cumulative investment in Fintech globally could well exceed $150bn, and financial institutions and tech companies are a stepping over one another for a chance to get into the game.
As the lines between traditional finance, technology firms and telecom companies are blurring, many innovative solutions are emerging and there is clearly no straightforward solution to navigate this Fintech world.
FinTech is shifting the paradigm of traditional intermediary roles by making them obsolete. While FS organisations have acted as intermediaries in the financial system by providing an invaluable service to clients, their functions are being usurped by new technology-driven business models.
