- PwC report shows that traditional financial services could lose around 20% of business by 2020.
- Analysis reveals areas of fintech disruption can vary greatly.
- From mobile to blockchain, automation and more – we break down the priorities for leaders of four different sectors.
Fintech is a complex landscape of established companies and start-ups vying for success – driven by technology that’s allowing the innovation of traditional financial products and services.
PwC’s recent Blurred Lines global fintech report revealed that more than 20% of the traditional financial services market share could be lost to disruptive new players in the next five years. However, the financial services is a broad sector and areas of disruption vary greatly thanks to different appetites for mobile technology, blockchain, intelligence analytics, automation and more.
The report analysed emerging fintech trends according to four sectors: asset and wealth management, banking, fund transfer and payments, and insurance. Industry leaders were asked how likely they were to respond to different forces. This information was then combined with real-time data from thousands of companies involved in the financial services sector (derived from Strategy&’s DeNovo platform) to reveal the fintech trends that are most significant for each segment.
Over the next five years, consumer banking will be disrupted by fintech more than any other market. This is propelled by the race to greater customer centricity, critical for all banking sectors, which are competing for the attention of a new generation of digitally-savvy consumers.
- Solutions that banks can easily integrate to improve and simplify operations are rated as most important by industry leaders.
- There is also major focus on methods to reach, engage and retain customers or simplify processes to improve the customer experience.
- In the banking sector, the greatest number of fintech companies are engaging in peer-to-peer or marketplace lending platforms, which allow individuals and businesses to lend and borrow between each other.
Asset and wealth
The proliferation of data is driving major advancements in the asset and wealth management industry, in areas such as risk analysis and automated advice services.
- The greatest priority for leaders in this sector is the use of data analytics to better identify and quantify investment risk and associated risk appetite of potential investors. New data tools and techniques provide behavioural and predictive algorithms that enable real-time analysis of all transactions.
- Automated investment advice poses a competitive challenge to both traditional financial advisers and those that supply execution-only services. ‘Robo-advisors’ can reduce a range of costs and transform the delivery of services.
- Proportionally, a large number of fintech companies are working towards designing new products and services to support previously unprofitable customers.
The insurance sector is focusing on leveraging fintech to create more personalised value propositions and drive down operational costs by adopting a self-directed service approach.
- Insurance companies are investing in the design and implementation of more self-directed offerings for customer acquisition and servicing. This allows companies to improve operational efficiency as well as provide online or mobile channels that meet the expectations of important emerging segments such as millennials.
- New technology-driven products such as insurance that’s based on use, rather than demographic, are allowing insurers to create increasingly personalised offerings. These are supported by advanced analytics that access new data sources such as wearables, telematics, connected home sensors and medical devices.
With increased competition, the fund transfer and payments sector is racing to offer faster and easier payment options for customers – however, security is the paramount concern.
- Today’s mobile-first consumers seek fast, convenient and safe payment services. Payment solutions are expected to take seconds rather than days, motivating both incumbents and newcomers to develop solutions that enable real-time transfer of funds globally.
- Newcomers to the payments industry, such as Apple Pay, Venmo and Dwolla, show that there is considerable activity in this sector with many of the challengers not having a history in payments. For incumbents, this is a serious challenge as they can’t just look at their traditional competitors for what’s coming next.
- As many forms of digital transactions are still nascent, maintaining the trust of consumers is of great importance – otherwise, their support at this crucial stage will be lost.