More than three-quarters of financial services firms believe their business is at risk to more spry and nimble fintech start-ups.
Irish financial services players appear to be focusing on data analytics and traditional IT rather than trends in AI and blockchain.
Despite this, there is a feeling in the ranks that more nimble fintech start-ups could steal away as much as 40pc of their revenues.
‘There seems to be this mindset that the robot is coming for my job rather than using AI to sort out regulatory burdens’
– RONAN FITZPATRICK
Ronan Fitzpatrick, director of digital at PwC Ireland, said that the asset and wealth management and insurance sectors are likely to see a surge in disruption from fintechs over the next five years.
The PwC study of 1,300 business leaders around the world, Redrawing the Lines, looked at how various countries are getting to grips with the rise of fintech.
Sticking to their knitting
It found that 76pc of Irish financial services leaders are concerned that part of their business is at risk to fintech start-ups and, as such, plan to increase their investment in fintech partnerships.
The report indicates that there is a sense of ‘sticking to the knitting’ about financial services firms in Ireland, rather than being caught up in a new trend.
The majority (58pc) plan to invest in IT security compared to their global counterparts (32pc). Irish firms also see greater opportunities from data analytics and plan to invest accordingly.
Meanwhile, just 14pc of Irish financial services players are familiar with blockchain compared to the global average (24pc), while customer retention (48pc) is seen as the greatest opportunity for fintech, compared to 28pc globally.
“There is a lot of opportunity there in an Irish context, particularly with asset and wealth management,” Fitzpatrick explained. “The emergence of robo-advisers versus traditional advice and changes in the distribution network are likely to have an impact.”
Fitzpatrick said that Irish financial services players are going down a slightly different path to their international counterparts.
“Large financial services institutions are still looking at data analytics and mobile, but new start-ups are built on the cloud and are already steeped in mobile and analytics.
“When it comes to artificial intelligence (AI), Ireland is lagging international figures when it comes to investing in new areas. International players are looking at AI and robotics to help address regulatory demands.
“Just 16pc of Irish financial services players plan to invest in AI versus 34pc globally. There seems to be this mindset that the robot is coming for my job rather than using AI to sort out regulatory burdens.
“But there is also a sense that Irish-based firms are determined that if they get their data in order then only then can they really exploit AI, so they are not entirely wrong.
“One area that Ireland does excel is it has a higher than global average when it comes to generating ideas and commercialising them. However, when it comes to fintech, there is a lower than average expectation of success.”
Fitzpatrick suggested part of the problem is that while firms are focused on customer-facing services, using new technologies to tackle regulatory hurdles such as MiFID, PSD2 and GDPR, as well as back-office problems, is not a focus.
“They need to focus on two streams: improving their productivity internally and then leveraging this technology to get closer to customers.”