Financial Services Firms Eye FinTech
April 6, 2017
new PwC report,
Redrawing the lines: FinTech’s growing influence
on Financial Services, reveals that 61% of UK financial
services industry leaders believe they could lose as much as 40% of
their revenue to standalone FinTech firms, compared to 51% of financial
services leaders globally.
However, almost half of UK firms (47%) say they plan FinTech
acquisitions over the next 3-5 years. 81% say they plan to initiate
strategic partnerships with FinTechs over the same period, according to
the survey of more than 1,300 financial services industry leaders
Startups, large technology companies and social media/ internet
platforms are expected to be the top FinTech disruptors in the UK
financial services sector over the next five years, with consumer
banking, funds transfer and payments the top three areas of business
likely to be impacted. The key challenges to the sector from FinTechs
are expected to come from increased price competition, loss of market
share and threats to information security and privacy.
The PwC survey finds that UK financial services firms currently dedicate
9% of their annual turnover to FinTech and IT projects - well below the
global average of 15%. UK firms are, however, more realistic in their
expectations of return on investment (ROI) with FinTech, with
respondents saying they expect an annual ROI of 13%, while firms in the
rest of the world expect an average ROI of 20%.
Commenting on the report and its findings, Steve Davies, EMEA FinTech
leader at PwC, said:
“The financial services industry has embraced FinTech to help drive
change and innovation. FinTech collaboration, and innovation more
widely, is not about jumping on the latest bandwagon - it’s about
finding the best, most efficient way to deliver your business strategy
and ultimately better serve your customers.
“The UK’s financial sector seems to have a more realistic understanding
of the long term returns on targeted investments. Managing expectations
around returns is important, particularly for firms facing significant
“Embracing FinTech is as much about different ways of working and
problem solving as it is about deploying new technology. A sustained
focus on innovation is much needed and can only be a good thing for
customers, and the firms themselves.
"Activity in the UK ranges from partnering with FinTechs startups,
financing in-house incubators, and deploying new solutions, to testing
use cases in areas like blockchain. There are few overnight successes
and, unsurprisingly, as much perspiration as inspiration. There is a
tension between the time needed for new ideas to mature and the
expectations of firms seeking to collaborate with FinTech startups.”
Opportunities to engage customers and investment for the future
UK financial firms believe the top three opportunities brought about by
FinTech are expansion of products and services, leveraging existing data
sets and increasing their customer base.
Retaining customers in light of the rise of FinTech is a key priority
and UK firms say the main issues they need to address in order to keep
hold of their customers are intuitive product designs, faster services
and lower costs.
Over three quarters (77%) of UK financial services firms say they plan
to invest in data analytics in the coming year and more than a third
(39%) plan to invest in cyber security.
UK financial services leaders believe many of their customers are
already switching to FinTech in some areas. 92% think consumers use
FinTech to conduct payments, 81% say it is already used for personal
finance and 72% for funds transfers.
applications are the future, but UK firms have work to do
Under a quarter (22%) of UK banks, insurers and asset managers say they
currently interact with their customers using mobile applications,
compared to 28% globally. They clearly believe mobile is the future,
though, as 89% of UK firms expect mobile channels to grow significantly
over the next five years. As a result, 50% of UK firms say they plan to
invest in mobile technology in the coming year.
Blockchain is coming out of the lab
The UK stands ahead of most of the rest of the world in its
understanding of blockchain technology, with over a third (35%) of UK
financial services firms saying they are now ‘very’ or ’extremely’
familiar with the technology compared to 24% of respondents globally.
UK finance firms believe the most useful business use cases for
blockchain will be digital identity management, payment infrastructure
and post trade settlement.