PwC, a multinational professional services network, has recently released a report ‘Blurred Lines: How FinTech is shaping Financial Services’ that assesses the rise of new technologies in the financial services sector and their impact on market players.
The report features the responses of 544 CEOs, Heads of Innovation, CIOs and top management involved in digital and technological transformation across the financial services industry in 46 countries. Officials believe 23% of their business could be at risk due to further development of FinTech. What is more, FinTech companies themselves anticipate they could capture 33% of the officials’ business.
“FinTech is changing the FS [financial services] industry from the outside. PwC 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,” said Steve Davies, EMEA FinTech Leader at PwC.
67% of financial services companies ranked pressure on profit margins as the top FinTech-related threat, followed by loss of market share – 59%. One of the key ways in which FinTech industry supports the margin pressure point through innovation is step function improvements in operating costs. For instance, the movement to cloud-based platforms not only decreases up-front costs, but also reduces ongoing infrastructure costs.
According to PwC survey, the banking and payments industries are feeling the most pressure from FinTech companies. Respondents from the fund transfer & payments industry anticipate that in the next five years, they could lose up to 28% of their market share to them, while bankers estimate they are likely to lose 24%. This compares to around 22% in the case of asset management & wealth management and 21% in insurance.
“FinTech is shifting the paradigm of traditional intermediary roles by making them obsolete. While FS [financial services] organizations 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. Given how fast technology is developing, incumbents cannot afford to ignore FinTech. Nevertheless, our survey has shown that a non-negligible 25% of firms do not deal with FinTech companies at all. With the pace of change now occurring at increasingly faster intervals, no FS business can rest on its laurels,” commented Manoj Kashyap, PwC Global Financial Services FinTech Leader.