According to the new PwC survey “Global FinTech Survey 2017 – Redrawing the boundaries”, the vast majority of global banks, insurance companies and financial advisors intend to increase their partnerships with FinTech companies in the next 3-5 years, with an expected average ROI of 20% on innovation projects.
The report, based on a survey of more than 1.300 respondents from around the world, shows clear signs of the involvement of innovation in the finance sector. A driving factor behind these partnerships is the rampant fear in the industry that revenues are at risk to independent FinTech companies: 88% consider it a real threat (vs. 83% in 2016). On average, up to 24% of revenues are believed to be at risk.
A mutual understanding therefore emerges between the parties: FinTech start-ups require access to the capital and customers provided by the current protagonists and at the same time large financial firms are starting to understand how FinTech companies could be the key to overcoming finally the problems in terms of technological legacy and communication with the customer.
Turning threat into opportunity
The report shows that, thanks to partnerships with FinTech companies, companies will be able to outsource part of R&D and realize their strategy, ultimately allowing them to offer new products to customers faster.
Mobile money services are becoming the gateway to communities not previously reached by banks. According to PwC, by helping new customers access the financial world via mobile technology, it will open the door to a population that is worth an estimated $3 trillion to the payments industry.
Startups using AI solutions for financial services have received massive funding, averaging about $1 billion a year over the past two years, according to data from PwC's DeNovo platform. The report shows how artificial intelligence, and the data and analysis tools connected to it, will be used by banks, fund managers and insurance companies to assist customers, interacting with them every day to make the best financial decisions .
Blockchain is about to come true
More than three-quarters (77%) of global utility companies expect blockchain adoption for live production systems by 2020
In 2016, funding for blockchain companies increased 79% year-over-year to $450 million globally. Nearly a quarter (24%) of global financial institutions say they are currently “extreme” or “complete” with blockchain technology.
The report clearly states that the blockchain is becoming a concrete reality; cases where it will be used in real life will become more and more common. With the huge reduction in back-office costs and thanks to the transparency that the blockchain can offer, the technology will get more and more funding, as financial companies test its ability to adapt to future growth.
Respondents believe that blockchain will primarily be used for payments, funds transfer and digital identity management. Opinions about the possible uses of the blockchain vary from country to country, often linked to the degree of territorial technological development; US-based respondents cite funds transfer infrastructure as one of the most likely, presumably due to the maturity of the investments already made in the sector in this country.
The Italian FinTech market is less developed, but the path taken is consistent with the rest of the world
The research also involved an Italian sample of twenty financial companies - especially large banks - which allow us to outline a picture of our country compared to the global scenario:
– Despite a certain delay in the development of the FinTech market, even in Italy 4 out of 5 banks are worried that FinTechs are putting their business at risk;
– Similarly to the global sample, the Italian companies are also decisively moving towards collaboration and over 80% expect to increase partnerships with FinTechs in the next 3-5 years;
– However, the research also highlights two areas of attention. The first is that Italian companies, for now, expect lower returns (10% vs 20%) from projects related to FinTechs and the second is that Italian companies are less inclined to embrace the disruptive nature of FinTechs (36% vs 56% ) and to invest in internal resources for innovation;
– Investments in enabling technologies that can help reduce the gap are on the contrary embraced by Italian companies to an even greater extent than in the global context, for example on technologies to enhance information assets (data analytics), on Cyber-security and on the Blockchain.
In conclusion, the research shows that the FinTech market in Italy is on average less developed than in other countries, but evolution shows that both traditional financial entities and FinTechs have embarked on a common collaboration process that can bring benefits to the market as a whole.
