PricewaterhouseCoopers Report Reveals Banks Fears About Losing Revenues To Fintech Firms
88% percent of banks globally are becoming increasingly concerned about losing business revenues to Fintech challenger firms, whilst 82% would like to partner more with them over the next three to five years, reveals a new report, Global Fintech Report 2017, released by PricewaterhouseCoopers.
The areas that concern the big banks the most are sectors such as payments, the transfer of funds, and the personal finance sector.
Technology has put an increasing amount of power into consumer’s hands, and Fintech firms have capitalised on the demand for more personalised, non-traditional services, the report indicates.
Early adopters are also more likely to use alternative financial service providers for their needs, which include payment and money transfer services, and the next big wave of disruption is likely to hit personal finance, with mobile only “Challenger” banks, for example, beginning to gain market share against traditional high street banks.
Although big banks are keen to seek partnerships with their disruptive rivals, PwC’s survey found that in terms of management and culture, the two types of institution remain poles apart.
Not only that, but the changing regulatory landscape is more threatening to the big banks, who are less agile and responsive to change because of the extent of their “legacy” operations, which could take decades to reform, whilst modern fintech firms are built to be adaptable and in line with today’s technologies.
In other words, change can happen fast at fintech firms, but checks and balances, and the sheer scale of global banks means they will struggle to respond to changing consumer, as well as regulatory, demands.
As blockchain technology moves from “hype to reality”, funding in the sector in the UK increased 79% year on year, to $450 million, in 2016.
Blockchain is beginning to penetrate industries such as energy, telecoms and pharma, but according to the report only 19% of large financial institutions believe the sector to be the most relevant one to invest into, against 50% of large Fintech firms. 77% of all survey respondents planned to adopt blockchain services by 2020, however, says cryptocoinsnews.
The Fintech ecosystem has exploded in recent years and now encompasses e-retailers, social media and internet platforms, startups, financial infrastructure companies and ICT and large tech companies, says the report.
In global terms, Latin America (93% of large financial firms) and Europe (89%), are most concerned about the impact of Fintech on their businesses, whilst in Africa, concern has decreased to 88% of firms from 95% in 2016, perhaps reflecting how banks in Africa have begun to embrace services such as mobile banking, overseas money transfer apps and online, connected services.
The opportunities around FinTech innovation are massive, the report concludes, and bigger firms must invest and learn if they want to be at forefront of change, rather than falling behind the curve.
Amongst PwC’s recommendation for the big banks are to properly evaluate emerging technologies, take a partnership perspective, integrate to innovate, concentrate on the customer’s voice and shift thinking to outside in, and foster a company culture that supports talent and innovation.
The Money Cloud View
It’s not surprising that Fintech firms are emerging as serious challengers to the big banks, or that banks are seeking to partner with smaller and more agile firms. When you look at the fact that a disruptor like Transferwise can offer money transfer fees that are 80% cheaper than your high-street bank, it’s clear than the major banks need to up their game.
Inputting a quick request to send money using our comparison engine will show you immediately how far behind they have fallen in terms of competing on fees, or rates.