PwC recently published their Global FinTech Report 2017 titled Redrawing the Lines: FinTech’s Growing Influence on Financial Services. They surveyed over 1300 participants from 71 countries representing the financial services, technology and management sectors. Read the PwC 2017 Fintech Report for all the juicy details and stats, but check out my summary notes below.
1. FinTech Companies and Financial Services are Starting to Collaborate
PwC reveal the various forces at work:
- Fintech companies have moved on from trying to do battle with incumbent financial institutions and recognise the need to be part of a ecosystem
- Incumbent financial institutions understand the need to be move innovative
- Innovation is overwhelmingly happening within companies (various sectors) outside of traditional financial services, and innovation is something that financial institutions need to start focusing on
- PwC go further and suggest that incumbent organisations will have to “revisit long standing assumptions“
- Fintech companies need capital and customers, both of which traditional financial institutions have plenty of
- Consumers meanwhile are increasingly turning to non-traditional financial services providers
2. FinTech Isn’t Just About Tech
FinTech is an all encompassing term for financial services that of course refers to technology, but also (and just as important as tech) are:
- Organisational culture, one that embraces innovation, is able to adapt to change and cut bureaucracy
- New methodologies that rethink the way of working, problem solving, customer engagement
- Fresh leadership ideas
3. Incumbent Institutions WANT Disruption
Traditional financial institutions are wanting to disrupt themselves so they can be more responsive to innovation and their customers. PwC indicate that customer retention was important to incumbent institutions and as such their focus would be to:
- Creating an intuitive design
- Ensuring ease of use
- Enabling 24/7 access
4. Emerging Technologies are Enabling Collaboration
The key point raised by the PwC Fintech Report is that “Fintech companies are driving market changes by focusing on emergent technologies that will provide a renewed experience for their customers“. As a result, incumbent financial institutions are having to:
- Take note of the changing environment
- Update their legacy systems – PwC indicate the incumbents are currently focusing on data analytics and mobile
- Understand the emerging technologies
- Adapt
- Move closer to the Fintech world
- Utilise the emerging technology while recognising the changing market and regulatory conditions
- Improve their existing customer experience
5. FinTech and Incumbent Differences in Tech investments over the next 12 Months
PwC show the following technologies are where large fintech companies are targeting their investments in the next 12 months:
- Data analytics
- Mobile
- Artificial intelligence
Meanwhile large financial institutions are focusing their tech investments on:
- Cyber-security
- Robotics process automation
- Biometrics and identity management
- Distributed ledger technology – blockchain!
6. FinTech and Incumbent Differences in Emerging Technologies over the next 12 Months
Large fintech companies opted for:
- Blockchain
- Artificial intelligence
- Biometrics and identity management
Large financial institutions went for:
- Artificial intelligence
- Biometrics and identity management
- Blockchain
7. Blockchain – From Hype to Reality…?
When it comes to blockchain PwC share that:
- “Blockchain is moving out of the lab“
- Business use cases are becoming more common and investment is increasing – with funding in blockchain rising to US$450 in 2016
- 77% of respondents are planning to adopt a production blockchain system or process by 2020
- Blockchain is being pursued by various industries as they look to leverage the technology to reduce costs, remove delays, improve straight through processing rates
- Regulators are interested in blockchain because the technology will allow flows to be validated in real time, rather than retrospectively by intermediaries
8. The Ying Yang of Regulation
Interesting section this, with PwC describing how:
- Historically complex regulatory environment has prevented new and smaller entrants moving into Financial Services
- Now, Regulators are wanting to encourage innovation by introducing technology companies and innovative new players into Financial Services
- Financial institutions have been stifled by regulation due to the complex requirements which have resulted in expensive and complicated, often manual, processes
- The Regulatory demands are unlikely to reduce with initiatives such as Basel, Dodd Frank, Comprehensive Capital Analysis and Review (CCAR), General Data Protection Regulation (GDPR), Markets in Financial Instruments Directive (MiFID), Revised Payment Service Directive (PSD2)
- But now technology may be able to help….
- The mindset is changing and there is a belief that technology may be able to both aid financial institutions/FinTech companies and the Regulators – step forward RegTech
9. Regulatory Barriers to FinTech Innovation:
In the FinTech Report, PwC list the following barriers to innovation:
- Data storage, privacy and protection
- Digital identity authentication
- Anti-money laundering (AML) / Know Your Customer (KYC)
- New business models (peer to peer lending, crowdfunding), Crytocurrencies
10. Six Point Plan to Cultivate Innovation
I’m not sure i agree with all of these, but PwC propose the following 6 factors to bolster innovation:
- Monitor new technologies
- Consider a partnership
- Integrate new technologies into your existing architecture
- Foster an IT innovation culture
- Listen to your customer across a number of channels
- Support in-house innovation
PwC Fintech Report 2017 – Only Mentions Collaboration Once!
What i found most interesting is that for me the underlying and recurring theme in the PwC 2017 Fintech Report is Collaboration. Yet, the word “collaboration” is only mentioned once, and even that was “just” quoting one of their US based partners. I thought that was interesting. Anyway, the fintech report is a good read – let me know what you think in the comments below.