Professional Documents
Culture Documents
How FinTech is
shaping Financial
Services
Global FinTech Report
March 2016
20%
57%
pwc.com/fintechreport
Contents
Title
Introduction
Section 1:
The epicentre of disruption
Section 2:
Emerging FinTech trends on the radar
Section 3:
An industry under siege
19
Section 4:
Offence is the best defence
22
Conclusion
29
Appendix
30
31
DeNovo
34
Contacts
35
Key messages
FinTech is shaping FS
from the outside in
Where traditional
financial institutions
have failed, FinTechs
are succeeding
Disintermediation:
FinTechs most
powerful weapon
Blockchain: an
untapped technology
is rewriting the
FS rulebook
Introduction
FinTech is
shaping FS from
the outside in
B. Tech
companies
What is FinTech?
Emerging
technologies
and tools
Regulators and
government
A. FS
institutions
Investors,
incubators and
accelerators
Consumers
and users
D. Start-ups
Source: PwC
FinTech is a dynamic
segment at the intersection
of the financial services and
technology sectors where
technology-focused start-ups
and new market entrants
innovate the products and
services currently provided
by the traditional financial
services industry.
Global breakdown
n Bank 30%
n Asset and wealth
management company
21%
1 Please refer to the appendix for more information about our survey sample.
Up to 28%
of business
at risk by
2020
Banking
and
Payments
Up to 22%
of business
at risk by
2020
Insurance,
Asset Management
and Wealth
Management
Disintermediation:
FinTechs most powerful weapon
80%
70%
60%
Insurance/Reinsurance
50%
30%
20%
10%
0%
Consumer
banking
Investment
& wealth
management
SME banking
Brokerage
services
Property
& casualty
insurance/
Life insurance
Commercial
banking
Insurance
intermediary
Market
operators &
exchanges
Fund
operators
Investment
banking
Reinsurance
Insurance
companies
Other
respondents
74%
26%
Insurance
Source: PwC Global FinTech Survey 2016
Asset &
wealth
management
companies
51%
Other
respondents
31%
Where
traditional
Financial
Institutions have
failed, FinTechs
are succeeding
75%
51%
42%
42%
Source: PwC Global FinTech Survey 2016
Meet changing
customer needs
with new offerings
Leverage existing
data and analytics
Enhance interactions
and build trusted
relationships
Enhance business
with sophisticated
operational capabilities
Banking
Fund transfer
& payments
Insurance
Figure 6: Trends in the banking industry ranked by importance and likelihood to respond
How important are these trends for your industry and how likely are you to respond to them?
(e.g. allocate resources, invest)
The size of the bubbles is proportional to the number of related FinTech companies as assessed by the DeNovo platform
More
1
2
Level of importance
10
9
7
11
12
Less
1 Solutions that banks can easily integrate or incorporate to improve and simplify
operations
Less
More
Likelihood to respond to the trend
Source: PwC Global FinTech Survey 2016 and DeNovo see in Appendix the definitions of the above-mentioned trends.
How important are these trends for your industry and how likely are you to respond to them?
(e.g. allocate resources, invest)
More
The size of the bubbles is proportional to the number of related FinTech companies as assessed by the DeNovo platform
1 Advanced tools and technology to protect consumers from identity theft, fraudulent
transactions and account falsification
2 Increased push for faster payments
3 Rise of digital wallet adoption
4
9
8
3
6 5
10
11
11 Blockchain
Less
Figure 7: Trends in the fund transfer and payments industry ranked by importance and likelihood to respond
Level of importance
Less
More
Likelihood to respond to the trend
Source: PwC Global FinTech Survey 2016 and DeNovo see in Appendix the definitions of the above-mentioned trends.
Mobile smartphone
adoption is one of the drivers
of changing payments
patterns. Todays mobile-first
consumers expect immediacy,
convenience and security to
be integral to payments.
Figure 8: Trends in the asset and wealth management industry ranked by importance and likelihood to respond
How important are these trends for your industry and how likely are you to respond to them?
(e.g. allocate resources, invest)
The size of the bubbles is proportional to the number of related FinTech companies as assessed by the DeNovo platform
More
Given that wealth managers have an upcoming multi-trilliondollar opportunity in the transfer of wealth from Baby Boomers
to Millennials, the incorporation of automated advisory
capabilities either in whole or in part will be a prerequisite.
This fundamental change in the financial advisors role
empowers customers and can directly inform their financial
decision-making process.
Level of importance
10
11
6 Increasing number of service offerings that enable innovation to get to market and
scale faster
4
6 5
7
7 Rise of alternative distribution and marketing channels for awareness and lead
generation
8 Design and distribution of new products and services for traditionally unprofitable
customers
12
Less
Less
More
Likelihood to respond to the trend
Source: PwC Global FinTech Survey 2016 and DeNovo see in Appendix the definitions of the above-mentioned trends.
Figure 9: Trends in the insurance industry ranked by importance and likelihood to respond
How important are these trends for your industry and how likely are you to respond to them?
(e.g. allocate resources, invest)
More
The size of the bubbles is proportional to the number of related FinTech companies as assessed by the DeNovo platform
1 Self-directed services
2 Usage-based Insurance (pay as you go)
3 Remote access and data capture
4 Connected/smart car
2
Level of importance
3
4
8
9
5
6
9 Ride-sharingsolutions
10 Robotics and automation in core insurance
10
11 Blockchain
Less
11
Less
More
Likelihood to respond to the trend
Source: PwC Global FinTech Survey 2016 and DeNovo see in Appendix the definitions of the above-mentioned trends.
Remote access and data capture was ranked third by the survey
respondents according to the level of importance (see Figure 9).
Deep risk (and loss) insights can be generated from new data
sources that can be accessed remotely and in real-time if needed.
This ability to capture huge amounts of data must be coupled
with the ability to analyse it to generate the required insights.
This trend also includes the impact of the Internet of Things
(IoT); for example, (1) drones offer the ability to access remote
areas and assess loss by running advanced imagery analytics,
and (2) integrated IoT platforms solutions include various
types of sensors, such as telematics, wearables and those found
in industrial sites, connected homes or any other facilities/
equipment.
35%
30%
25%
20%
15%
10%
5%
0%
Not at all familiar
Slightly familiar
Moderately familiar
Very familiar
Extremely familiar
n Average all industries n Fund transfer & payments n Banks n AM & WM n Insurance
56%
of survey respondents
recognise its importance,
but...
57%
The use cases are coming thick and fast but usually centre on
increasing efficiency by removing the need for reconciliation
between parties, speeding up the settlement of trades or
completely revamping existing processes, including:
Enhancing efficiency in loan origination and servicing;
Improving clearing house functions used by banks;
Facilitating access to securities. For example, a bond that
could automatically pay the coupons to bondholders, and any
additional provisions could be executed when the conditions
are met, without any need for human maintenance;
The application of smart contracts in relation to the Internet
of Things (IoT). Imagine a car insurance that is embedded
in the car itself and changes the premium paid based on
the driving habits of the owner. The car contract could also
contact the nearest garages that have a contract with the
insurance company in the event of an accident or a request
for towing. All of this could happen with very limited human
interaction.
Time to get
off the bench:
Over 20% of
FS business at
risk to FinTechs
Figure 11: Incumbents views of estimated share of business at risk to standalone FinTech
What percentage of your business is at risk of being lost to standalone
FinTech companies within 5 years?
28%
24%
23%
22%
21%
Fund transfer
& payments
Banks
Average
AM&WM
companies
Insurance
companies
67%
59%
56%
53%
Pressure on margins
Information security/
privacy threat
Heading
for bargain
basement FS?
FinTech is
slashing costs
We work with start-ups
to deliver new innovative
solutions to our clients.
Head of Innovation at one of the
largest banks in France
73%
62%
57%
56%
Cost reduction
Differentiation
Improved retention of
customers
Additional revenues
n Neither/nor 14%
n Disagree 13%
n Somewhat disagree 11%
n Do not know 2%
78%
n Agree 33%
3%
8%
17%
11%
38%
1%
3%
15%
19%
16%
19%
13%
23%
16%
34%
25%
31%
46%
22%
18%
14%
Fund transfer and
payment institutions
Banks
AM & WM
companies
Insurance companies
n Yes 52%
n Currently developing
a mobile app 18%
n No 30%
61%
81100%
81100%
6180%
6180%
4160%
4160%
2140%
2140%
020%
020%
0%
10%
20%
30%
40%
40%50%
0%
10%
20%
30%
25%
9%
9%
11%
14%
14%
15%
22%
25%
32%
Do not know
Other
We acquire
FinTech
companies
We launch our
own FinTech
subsidiaries
We set up
venture funds
to fund FinTech
services
We rebrand
purchased
FinTech
services
We establish
start-up
programmes to
incubate FinTech
companies
We do not
deal with
FinTech
We engage in
joint partnerships
with FinTech
companies
FinTech
Incumbents
IT security
Regulatory uncertainty
Differences in knowledge/skills
IT compatibility
50%
40%
30%
20%
10%
0%
0%
10%
20%
30%
40%
50%
60%
Conclusion
FIs
ONLINE
PLATFORMS
START-UPS
EXPERTS
SOCIAL
MEDIA
R&D
PEERS
REGULATORS
APIs
MOBILE
Appendix
Participant profile
Global breakdown
Global breakdown
Global breakdown
n Bank 30%
n Head of innovation 7%
n Asset management
company 21%
n Head of strategy 7%
n Africa 4%
n COO 4%
n Asia 20%
n CRO/Risk manager 2%
n Europe 56%
n Head of products 2%
n Other* 11%
n CDO/Business
development 1%
n CEO/Board 23%
n Other** 23%
n Head of IT/Digital/Tech 11%
n Directors/Head of
department 10%
n CFO 10%
Lower cost of providing services to customers that are currently underbanked, e.g. in rural Africa.
More granular data enable FS providers to more accurately assess and price risks.
APIs enable third parties to develop value-added applications for company platforms, artificial intelligence is enabling companies to extract greater customer and
insights, employees and intelligent machines are integrating to work as a team, banks are expediting the deployment of digital delivery. And there are many more
ahead.
Engaging customers through gamification techniques in a collaborative environment is leading to better customer experience and reflecting in retention.
Increase of customer autonomy in performing every service without human interaction. Self-service tools, such as internet banking and apps, are becoming more
popular.
Virtual banking utilises online and mobile platforms to integrate and simplify customer banking experience. Virtual banking platforms equip customers with on-
demand access to manage bank accounts, pay bills, apply for loans, open new accounts, and perform other banking activities through a single portal. Banks are
using these channels to collect data from customers, generate new revenue streams and offer compelling value propositions.
ash and treasury management includes the administration of external and internal funds, cash flow management, and corporate finance policies and procedures.
C
The digitalisation of cash and treasury management functions utilises online platforms to disrupt the traditional models, creating new revenue streams and value
propositions. Cross-border payment transfers for businesses, foreign exchanges and invoice management are a few of the functions that are enabled primarily
through the advent of online platforms. For example, organisations are developing new processes to perform international money transfers using mobile wallets and
cryptocurrencies to improve speed and safety.
he democratisation of banking and personal finance describes the shift in which customers take control over their financial health and seek new channels and
T
solutions to assist in this process.
The consumer product application process (i.e. loan origination) has been streamlined with the emergence of cloud-based lending solutions and electronic bank
account management systems which automate the loan origination process and increase overall transparency in the lending process. The move towards such
solutions improves customer experience by reducing the amount of manual work, cutting down time and reducing errors.
New funding options have emerged in mid-market, such as P2P lending and marketplace lending platforms.
12. Blockchain
se of distributed and decentralised ledger technology in which transactions are recorded in order to improve payments, clearing and settlement, audit or data
U
management of assets. There is also the possibility to create a so-called smart contract using blockchain technology. This is essentially a contract that is
translated into a computer program and, as such, has the ability to be self-executing and self-maintaining.
dditional services offered by merchant acquirers and processors including enhanced data analytics, reward and loyalty programs, fraud management, chargeback
A
protection, check processing, refund management and customer relationship management solutions.
inTech companies are providing an increased number of solutions to facilitate P2P payment solutions. Increasing adoption of digital wallet for the use of e-money,
F
secure storage and cryptocurrencies.
hese electronic payment networks are alternatives to traditional networks offered by Visa, MasterCard, Discover and American Express. This includes online
T
payment systems, such as PayPal and Stripe, and loyalty and gift card solutions, such as Starbucks.
Increased number of solutions and points of user interaction that enable faster and cheaper cross-border fund exchange or remittance.
he checkout experience can be directly affected by ease of website navigation, delays in transaction processing, volume of security checks, and limited payment
T
options. New vendors aim to eliminate the multiple inept steps (i.e. shopping cart, card info, etc.) currently required in an online checkout process.
The use of topological analytics to ensure the authenticity or identify fraudulent transactions.
ompanies are focused on the fund transfer and payment space to limit the number of intermediaries for the purpose of faster (to immediate) transfer and/or
C
settlement and with this, a lower fee. This can include direct party transfer, peer-to-peer (P2P) transfer, use of prepaid account to transfer with a mobile phone and
no bank account.
on-cash payment methods, such as credit and debit cards, smartcards, or other devices (e.g. mobile phones), that use radiofrequency identification to secure
N
payments at a physical POS terminal.
10. Blockchain
se of distributed and decentralised ledger technology in which transactions are recorded in order to improve payments, clearing and settlement, audit or data
U
management of assets. There is also the possibility to create a so-called smart contract using blockchain technology. This is essentially a contract that is
translated into a computer program and, as such, has the ability to be self-executing and self-maintaining.
Leverage new technologies to gain competitive edge and accelerate growth in new and emerging markets.
Automated advice solutions (e.g. robo-advisers) are changing the asset management landscape in many ways, including asset allocation.
Alternative distribution models and sophisticated risk quantifying techniques are helping insure previously unexplored/uninsured customer segments.
New models and use of broader data sets are being used to more accurately analyse risk.
5. Community intelligence networks leading to better investment decisions The use of technology and data from social networks in order to improve investment decisions.
6. Innovation to get to market and scale faster
Increased product offerings and/or synergies among existing products increases market differentiation and challenges traditional techniques, most notably in the
investment banking industry.
Innovations enabling advanced analytics and improved interface enhance decision support. Enhanced brokerage services that provide new data sources and tools
analytics, portfolio and market information to enhance investment decision support.
Enable similar functionalities for end users across multiple devices to create streamlined user experience.
An increasing number of companies are leveraging new distribution channels, such as social media and mobile phones, to reach and engage more customers,
resulting in a different economic model for new customer acquisition.
Customer-centric investment products are enabling investors to create personalised investment strategies.
Rather than maintaining a human relationship with the support of technology services, clients are now directly using the technology with little to no human digital
interaction. Human interaction only comes into play when there is a need for customer service.
12. Blockchain
se of distributed and decentralised ledger technology in which transactions are recorded in order to improve payments, clearing and settlement, audit or data
U
management of assets. There is also the possibility to create a so-called smart contract using blockchain technology. This is essentially a contract that is
translated into a computer program and, as such, has the ability to be self-executing and self-maintaining.
Personalisation of insurance through usage- and behaviour-based models in auto coverage leverages new ways to capture driving data.
New models of holistic advice on insurance/investment needs assisted by automated advisors that leverage advanced analytics and artificial intelligence.
4. Self-directed services
Use of self-service tools to reduce cost of serving customers and improve simplicity, transparency, and speed of fulfilment.
From wearables to genomics to enable P4 Medicine: Predictive, Preventive, Personalized and Participatory.
6. Connected/Smart Car
Solutions for connected cars and increasingly assisted/autonomous driving that impact auto claims frequency and severity.
Use of non-traditional data capturing solutions including remote devices, to improve risk and loss assessments.
Real-time data capture and monitoring technology enabling insurers to shift from a probabilistic to a deterministic claims model.
Increased use of capabilities such as robotics and artificial intelligence to automate core insurance functions.
11. Blockchain
se of distributed and decentralised ledger technology in which transactions are recorded in order to improve payments, clearing and settlement, audit or data
U
management of assets. There is also the possibility to create a so-called smart contract using blockchain technology. This is essentially a contract that is
translated into a computer program and, as such, has the ability to be self-executing and self-maintaining.
DeNovo
What is DeNovo?
http://www.strategyand.pwc.com/denovo
Contacts
Manoj Kashyap
Global FinTech Leader
PwC US
+1 (415) 498 7460
manoj.k.kashyap@us.pwc.com
Haskell Garfinkel
US FinTech Co-Leader
PwC US
+1 (312) 298 2647
haskell.garfinkel@us.pwc.com
Steve Davies
EMEA FinTech Leader
PwC UK
+44 (0) 131 260 4129
steve.t.davies@uk.pwc.com
Dean Nicolacakis
US FinTech Co-Leader
PwC US
+1 (415) 498 7075
dean.nicolacakis@us.pwc.com
John Shipman
APAC FinTech Leader
PwC Australia
+61 (2) 8266 0198
john.shipman@au.pwc.com
Acknowledgment
We would like to thank Dariush Yazdani, Gregory Weber and the PwC Global research team for their involvement in the
development of this report. We would also like to thank Javier Baixas, Barry Benjamin, Jeremy Drane, Menekse Gencer,
Roberto Hernandez,Simon Horner-Long, Andrew Jurczynski, Fergus Lemon, Sarah McEneaney, Stephen OHearn,
Aaron Schwartz, Ajit Tripathi, Jamie Yoder, Bhushan Sethi, Stuart Jones and ine Bryn and the Global FS Marketing
team for their contributions.
pwc.com/fintechreport
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