Published on the 16/03/2016 | Written by Newsdesk
A new PwC survey shows that financial services firms believe almost a quarter of their business is at risk from bullish FinTechs…
The survey, called, Blurred Lines: How FinTech is shaping Financial Services, assessed the rise of new technologies in the financial services sector and their impact on market players. PwC says 83 percent of respondents from traditional financial services firms believe part of their business is at risk of being lost to standalone FinTech companies – and the number was 95 percent in the case of banks.
According to the report two-thirds (67 percent) of financial services companies ranked pressure on profit margins as the top FinTech-related threat thanks to the movement to cloud-based platforms which reduce up-front and operating costs. The second most feared threat is loss of market share (59 percent), with the banking and payments industries feeling the pinch most keenly – 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.
Andy Symons, PwC New Zealand financial services leader, explained: “As with all markets around the world, the emergence of FinTech companies in New Zealand is increasingly redefining customer expectations, with customers now expecting real-time responses, simplicity, increased functionality and usability in ways that can make it difficult for our larger financial services players to respond.
“Ultimately, what we need in New Zealand is a strong financial ecosystem where FinTechs can continue to innovate and do things differently, but equally, financial services companies continue to operate and retain their financial strength and provide market stability and meet the financial needs of millions of individuals and businesses.
He said that to do this, FinTech start-ups should be encouraged to leverage new technologies, provoke and encourage innovation, support new ways of meeting customer needs and role model modern approaches to driving customer satisfaction. At the same time, he said we should acknowledge the big financial services players that are quick to adopt new behaviours, are open to new technologies, are developing new partnering skills and are continuing to evolve their business models.
“Let’s not forget, New Zealand’s big financial services players also innovate and manage scale and operational complexity in a competitive market relatively well,” he said.
That said, the survey showed that over a third of collaborations between FinTechs and traditional financial services companies was in the form of joint partnerships, suggesting that the financial services firms are not ready to go all-in just yet.
Financial services companies said the main challenges they face in dealing with FinTech companies, are ited IT security, regulatory uncertainty and differences in business models, while the FinTechs said it was differences in management and culture, operational processes and regulatory uncertainty.
