Big UK banks forecast 40% revenue hit from fintech disruptors, finds PwC report

By Daniel Lanyon on Thursday 6 April 2017

Digital BankingAlternative LendingSavings and Investment

The mood of finance firms in the UK is distinctly more sombre than others around the world.

Traditional financial services leaders are facing a dilemma with many senior staff expecting an imminent and substantial hit to revenue due to a variety of new entrants to their long established businesses.


Nearly two-thirds (61 per cent) of UK financial services industry leaders believe they could lose as much as 40 per cent of their revenue to fintech firms, compared to 51 per cent of financial services leaders globally according new research by PwC.


Momentum is gathering for finance technology-focused start-ups and new market entrants seeking to disrupt and innovate the products and services currently provided by the traditional financial services industry. Now, despite the worries, established players are looking to buy up fintech firms.


Almost half of UK firms (47 per cent) say they plan fintech acquisitions over the next 3-5 years. 81 per cent say they plan to initiate strategic partnerships with fintechs over the same period, according to the survey of more than 1,300 financial services industry leaders worldwide.


The key challenges to the sector from fintech are expected to come from increased price competition, loss of market share and threats to information security and privacy.


Steve Davies, EMEA fintech leader at PwC, said: “The financial services industry has embraced fintech to help drive change and innovation. Fintech collaboration, and innovation more widely, is not about jumping on the latest bandwagon.


“The UK’s financial sector seems to have a more realistic understanding of the long term returns on targeted investments. Managing expectations around returns is important, particularly for firms facing significant cost pressures.”


“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.”


Activity in the UK, he says, ranges from partnering with fintech start-ups, financing in-house incubators, and deploying new solutions, to testing use cases in areas like blockchain. There are few overnight successes, he adds.


“There is a tension between the time needed for new ideas to mature and the expectations of firms seeking to collaborate with fintech start-ups.”


The UK stands ahead of most of the rest of the world in its understanding of blockchain technology, with over a third (35per cent) of UK financial services firms saying they are now ‘very’ or ’extremely’ familiar with the technology compared to 24per cent of respondents globally.


UK finance firms believe the most useful business use cases for blockchain will be digital identity management, payment infrastructure and post trade settlement.


PwC’s 2017 Global Fintech Survey is based on the responses of 1,308 participants, principally CEOs, Heads of Departments, Heads of Innovation, Heads of IT/ Digital/ Technology from 71 countries spread across six regions and a variety of industries including banking, asset management, fund payments, insurance, reinsurance and Fintech.


The UK survey comprises answers from 57 respondents. The majority of respondents are from large companies, but small and medium sized companies also took part in the survey.

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