With three-quarters of the world’s banks admitting their business is at risk due to fintech start-ups, Irish banks are taking a different view, a new report from PwC claims.
The PwC Global and Irish 2016 FinTech Survey has found that as many as 76pc of the banking respondents surveyed believe part of their business is at risk due to fintech.
They see start-ups going directly to the end user, bypassing banks altogether. A loss of market share and margin pressure are seen as the key threats in the banking industry.
Three-quarters of the survey respondents view an increased focus on the customer as the top impact fintechs have on their business.
‘Fintechs are great at offering product simplicity and seamless integration, but they lack the proper IT security and regulatory certainty that banks have’
– JOHN MURPHY, PWC IRELAND
But while customer orientation is a weak spot for traditional banks, it’s a position of strength for start-ups.
Symbiotic relationship between old banks and agile fintechs
New entrants have identified customer frustrations as an opportunity, and are building solutions to address these, while traditional banks are still lagging behind in delivering incremental improvements.
According to the report, banks are the most active of all financial sectors in partnering with fintech companies. Almost half (42pc) of the banking respondents in the survey say they are engaging in joint partnerships and setting up venture funds to finance the fintech sector.
According to the report, Irish banks in particular see increased sophistication, solutions to improve operations and self-service tools as trends that are more important than global banks. Irish banks are more likely to respond to these trends, compared to their global counterparts.
The digitisation of cash and transaction services, as well as blockchain technology, are also viewed by Irish banks as important trends to respond to.
“Customers want convenience, personalisation, accessibility and ease of use,” said John Murphy, PwC Ireland’s fintech leader.
“To live up to these expectations, banks and fintechs should focus on opportunities that leverage each other’s strengths, whether in product design and development by start-ups, or distribution and infrastructure capabilities by banks.
“Fintechs are great at offering product simplicity and seamless integration, but they lack the proper IT security and regulatory certainty that banks have. We see both sides coming to the realisation of a new, mutually beneficial relationship and it’s ultimately the customer who will benefit the most from this.”
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