83pc of traditional Irish banks are fearful of fintech outpacing them

30 May 2016122 Shares

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A new report compiled by PwC looking at the attitude traditional financial services organisations have towards fintech found that 83pc of those surveyed feel part of their business will be lost as the fintech sector grows.

The PwC report, entitled Blurred Lines: How Fintech is shaping Financial Services, was compiled from responses from 500 global business leaders across the financial sector in 46 countries, including Ireland, and it is interesting reading for any up-and-coming fintech start-ups.

For a start, the figures show a broad picture of an ageing sector that is well aware of the turning of the tide.

83pc of Irish respondents to the survey said they believe that indigenous financial sector companies will lose part of their business to the rising number of fintech companies within the next five years.

Giving a better idea of how much business they envision losing to fintech companies investing heavily in technologies like blockchain, 45pc of respondents said they think 20pc of their business will be lost to these new technological developments.

Optimistic of fintech potential

Rather than trying to learn or adopt these new fintech applications, however, 27pc of respondents admit to having no deal with fintech companies or technologies.

But in the sector’s defence, 69pc of Irish respondents said that they are putting fintech at the heart of their strategy, which puts it reasonably ahead of the global average of 60pc.

67pc of the Irish financial sector cited cost reduction as the best outcome of further adoption of fintech.

When it comes to the potential for greater customer retention, 51pc of Irish respondents said it was a great benefit of fintech, compared with 57pc of the world.

Biggest threats?

So what are the biggest threats, according to the established Irish banks?

69pc of Irish financial companies ranked pressure on profit margins as the top fintech-related threat, followed by 65pc who fear a loss of market share.

However, when it comes to dealing with fintech companies to develop their services, over half (58pc) of traditional Irish FS firms cited fears about their IT security, followed by regulatory uncertainty (50pc) and differences in business models (50pc).

Harking back to blockchain technology, the distributed ledger technology at the forefront of fintech is something that appears to be largely misunderstood by Irish respondents, with 86pc only being moderately familiar with the technology.

Irish companies know the risks involved

Yet, the survey shows that Irish banks are far more likely to respond to blockchain opportunities compared to global banks, with 62pc stating they would respond to the phenomenon compared with 26pc globally.

“The survey further suggests that Irish companies have a greater understanding of the risk faced by fintech companies and this awareness may be driven by Dublin’s reputation as a digital hub,” said Malcolm Craig, senior manager, PwC Advisory Consulting.

“Similarly, Irish companies also show a greater desire to respond to this threat and have access to the skills required through the depth of local technology talent.

“This recognition and the results which indicate Irish companies are putting fintech at the heart of their business strategies show the local financial services industry is ready to take on and lead the fintech sector.”

Fintech image via Shutterstock

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Colm Gorey is a journalist with Siliconrepublic.com

editorial@siliconrepublic.com