Crossing the lines: How fintech is propelling Financial Services and Technology firms to converge

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PwC’s 2019 Global Fintech Survey identifies factors that will determine the winners and losers in the race to develop and profit from fintech-driven business models.

Third in a series of surveys, there is an evolution in the way fintech (financial technology) is viewed by financial service (FS) organisations: starting out with caution for fear of the threats fintech would cause their business, through collaboration as fintech start-ups recognise the need for scale and onto distinctions between FS and technology, media and telecommunications (TMT) companies being fully blurred. But this convergence is really nothing new: in 2014 Citigroup’s CEO said, “In many ways, we see ourselves as a technology company with a banking licence”.

The current era sees a pinpoint focus on data, on hyper-personalisation and on the ‘always on’ connectivity of the consumer, and with that background it’s not surprising that Artificial Intelligence and Internet of Things are top of the list of technologies FS and TMT organisations are implementing.

FS and TMT industries are using fintech to sharpen operational efficiency, lower costs, improve customer experience, and heighten the appeal of their products and services. They’re also carving out new commercial possibilities. Digital-only banks are offering redesigned client propositions and cost profiles. Investment managers are deploying fully customised robo-advice. Insurers are using sensors to monitor people’s health and drive illness prevention. And according to the PwC Global Consumer Insight Survey 2019, consumers are ready for the digital shake-up. The question is no longer whether fintech will transform FS, but which firms will apply it best and emerge as leaders.

Steve Billinghurst, Advisory Leader for PwC Isle of Man, stated:

‘These findings are important to the Isle of Man, as not only do they show the direction of travel in the wider global economy and set into context the environment in which Island based FS firms are working, but they also show the size of the prize that can be gained by local collaboration and cooperative competition (‘coopetition’) between FS and TMT organisations. Open banking, which creates a digital shop window for the best products and services in the marketplace, is the most significant manifestation of this.’

The survey polled over 500 FS and TMT executives worldwide to understand the current fintech landscape. Key findings and insights are:

Adopting a fintech-centred strategy is paramount – The survey found that 47% of TMT and 48% of FS organisations have embedded fintech fully into their strategic operating model.

‘The really big changes have to be top-down. They have to be strategic. They have to be something that leadership, the board, and the executives are closely involved in and have decided the organisation needs to pursue,’ added Steve.

FS should look to TMT for ideas about how best to use fintech – FS executives surveyed think that using fintech to improve the ease and speed of their service will be key to retaining customers. But people expect ease and speed, so firms that focus their fintech efforts on these attributes might only meet customers’ expectations and not differentiate themselves. The focus for FS companies has moved on from the pure technology deployed to the hyper-personalised customer experience – the key to keeping customers.

FS and TMT should look to each other and retrain to fill skills gaps – Our survey showed that 80% of TMT and 75% of FS organisations are creating jobs related to fintech. Yet 42% of both TMT and FS organisations are struggling to fill these roles. Finding ways to attract people from TMT to FS, and vice versa, will be important to future success because each sector needs the other’s expertise.

‘Fintech will have the biggest impact on people. Financial services professionals are going to have a very different background, mind-set and skill sets. It is critical that businesses find new, effective ways to upskill and boost the digital IQ of their workforce’, stated Steve. 

Firms should push cross-sector fusion further– Among organisations that are planning to pursue an acquisition, strategic alliance or joint venture to drive growth via fintech, 78% of TMT and 76% of FS firms are targeting businesses within their own sectors. At a time when FS firms are striving to sharpen their technology capabilities and TMT needs product and regulatory expertise to compete in the FS market, firms will miss opportunities if they don’t pursue more cross-sector cross-over.

Winners and Losers

Firms that have already embedded fintech and are beginning to fuse TMT and FS strengths are set to seize most of the marketplace opportunities for differentiation and growth. Organisations that ignore the shake-up not only risk falling short of customer expectations, but also open the door for aggressive entrants to move in and claim market share and customer relationships. And that is the same for a jurisdiction as it is for the FS and TMT businesses set up within it.

Steve concluded: ‘It is imperative that the Island creates the right environment of innovation to bring together local FS and TMT organisations that can learn from and combine each other’s strengths in their respective markets.’


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