A new report from PwC has revealed that the majority of old-school finance firms believe that 40% of their revenue is at risk due to emerging fintech businesses
Whether it’s using chatbots to help people save money or online-only banks, British fintech startups have been disrupting the way financial services are delivered for years now. And while this might be making the traditional movers and shakers a bit nervous, a new report suggests that they’re taking taking an approach of ‘if you can’t beat them, join them’.
Having surveyed 1,308 decision makers in the financial sector across 71 countries, PwC, the professional-services firm, has revealed that 81% of traditional companies plan to initiate strategic partnerships with fintech startups over the next three to five years. During the same period, 47% plan to acquire fintech businesses.
This is hardly surprising, given that in the UK six in ten of the people polled believe that their revenue is at risk due to up-and-coming fintech firms. On a global scale, 51% of financial services leaders believe they could lose up to 40% of their revenue due to tech-savvy challenger companies.
And it’s not as if they haven’t been trying to develop new technologies themselves. But while UK firms dedicate 9% of their annual turnover to fintech and IT projects, that’s well below the global average of 15%. That being said, PwC notes that the 13% return of investment (ROI) UK businesses can expect from these projects is more realistic than the global expected ROI of 20%.
The report also identified what the biggest disruptors for financial services will be in the next five years: startups, large technology companies and social-media/online platforms. Consumer banking, funds transfer and payments were also identified as the top three areas of business likely to be impacted by these.
Commenting on the report, Steve Davies, EMEA fintech leader at PwC, said that it’s good to see traditional firms embrace new technology. “Fintech collaboration – and innovation more widely – is not about jumping on the latest bandwagon [but] about finding the best, most efficient way to deliver your business strategy and ultimately better serve your customers,” he said. “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.”
Given that almost a fourth of the top 50 tech investment deals in the UK last year went to fintech startups, it’s safe to say that the financial services sector is not alone in putting its faith in technology.