FinTech is having a growing influence on the financial services market. Its long-term potential is even greater
With new business models emerging, the pace of change in financial services seems only to be increasing.
In the future, customers are expected to make financial decisions based on a combination of greater automation, less human intervention and new payment options.
Following the first PwC FinTech study in 2016, our latest report aims to assess the FinTech revolution and how the financial services industry globally and in Ireland is getting to grips with innovation in the sector.
The financial services industry continues to be driven by FinTech’s influence. The perception of business being at risk is growing, and along with it the concern of potentially lost revenues.
The fact that consumers are increasingly doing business with these non-traditional players will do little to calm uncertainty in the FS industry.
As a reaction, incumbents are attempting to converge with FinTech; to leverage the ecosystem it creates, turn innovation to their advantage and alleviate concerns around their business being at risk.
Many financial services institutions are looking to FinTech as a means of embracing innovation. But it is not just about the technology, it’s about culture, ways of working and customer engagement.
Addressing customer retention in the context of new ‘FinTech competition’ for financial institutions will mean greater focus on product and platform design, cost, better customer services and 24/7 accessibility.
Irish organisations are more inclined to see disruption as part of their corporate strategy than their global counterparts.
FinTech companies are driving market changes by focusing on emerging technologies that provide fresh experiences for their customers.
As current FS players adapt to the market and begin to concentrate on these technologies, they will be able to move closer to FinTechs. They need to be able to make use of the technologies to swiftly adjust to the fast-changing environment, regulations, and ultimately provide a better consumer experience.
“Embracing FinTech is as much about different ways of working and problem-solving as it is about deploying new technology.”
At the end of 2016, a large European bank completed instantaneous payments between two of its clients on a cross-border basis using blockchain technology. This highlights the benefits of using the technology that can eliminate unforeseen charges, delays and processing mistakes.
In Ireland, however, only 14% of respondents confirmed that they are either very or extremely familiar with blockchain, compared to 24% globally. The survey suggests that 45% of Irish respondents say blockchain is not part of their strategic plans.
The opportunities surrounding FinTech innovation continue to grow. The financial services industry has allocated considerable amounts of money to new projects and initiatives that leverage new technology and innovative business models.
However, many of the institutions engaged in their FinTech journey are finding transformation difficult and are not necessarily seeing the return they expect on FinTech and innovation related projects.
Aligning innovation with strategic priorities, building capabilities to ensure agile development and prototyping as well as commercialising solutions are all challenges for financial services organisations.
Although Ireland is behind the global figures when it comes to Artificial Intelligence, AI and Robotic Process Automation offer significant opportunities to reduce costs and get closer to customers.
To start seeing returns, though, means that financial institutions will need to streamline their innovation process, from idea generation to monetisation.