A majority of banks are concerned that part of their business will be lost to new FinTech entrants who better understand evolving customer needs, according to findings from the PwC Global and Irish 2016 FinTech Survey.
Some 76 per cent of the banking respondents think part of their business is at risk 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.
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.
This may explain why competition between banks and new entrants is beginning to give way to collaboration.
Banks are the most active of all financial sectors in partnering with FinTechs, with 42 per cent of the banking respondents engaging in joint partnerships and setting up venture funds to finance FinTech companies.
In Ireland, banks see increased sophistication, solutions to improve operations and self-service tools as trends that are more important than global banks. They are also more likely to respond to these trends compared to their global counterparts.
Digitisation of cash and transaction services is also a trend that is more important for Irish banks and to which they are more likely to respond.
Commenting on the findings, John Murphy, PwC Ireland FinTech Leader, said: "Customers want convenience, personalisation, accessibility and ease of use. 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.”
