Financial institutions are concerned about losing money to new entrants in the financial technology sphere, but are increasingly willing to enter into partnerships with them, according to a PwC survey.
The PwC Global Fintech Report 2017 found that 88 percent of respondents from financial institutions are concerned about losing revenue to innovators, up from 83 percent in last year’s survey.
However, some 56 percent said they are putting disruption at the heart of their strategies, while 77 percent said they are planning to increase their efforts to innovate, compared to 20 percent who said their innovation efforts will remain the same and 3 percent who said they will decrease efforts.
The report said: “By becoming self-disruptors, financial institutions seek to appropriately respond to innovations and thereby empower their customers on a daily basis.”
PwC found that more institutions are already partnering with fintechs—45 percent, up from 32 percent in 2016.
However, 82 percent said they intend to increase partnerships over the next three to five years.
The report: “Fintech companies create an ecosystem that fosters the collection of vast amounts of data and builds trusted relationships with clientele. Financial institutions have realised the importance of these ecosystems and are attempting to engage with and bring innovation inside their companies.”
There are still challenges around the adoption of new technologies, the report found. Among incumbents, IT security emerged as the biggest concern, with 58 percent naming this as a challenge in working with fintech companies.
This was followed by regulatory uncertainty, and difference in management and culture, named by 54 percent and 40 percent, respectively.
Of respondents from fintechs, however, only 28 percent saw security as a challenge. They were more concerned about differences in management and culture, with 55 percent naming this as a challenge.
Fintech were also concerned about regulatory uncertainty and differences in business models, considered a challenge by 48 percent and 40 percent, respectively.
With regards to the particular regulatory hurdles to overcome, the most-named issue was data storage, privacy and protection, considered a barrier by 54 percent of respondents.
This was closely followed by concerns around digital identity authentication, highlighted by 50 percent, and anti-money laundering and know-your-client issues, considered a concern by 48 percent.
Despite these concerns, globally, respondents expect to see a 20 percent return on investment in their fintech-related projects.
In Asia, firms were particularly confident, anticipating returns of 25 percent, on average. In Europe, the outlook was a little less positive, with an average expected return on investment of 14 percent.
The report was based on survey responses from 1,308 participants, including representatives from banks, asset managers, fund transfer institutions and fintech companies.
The majority of respondents were from Europe and Asia, representing 39 percent and 33 percent of responses, respectively. A further 14 percent were from Latin America, 9 percent were from North America, 3 percent were from Africa and 3 percent were from Oceania.
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