LONDON — PwC says the financial services establishment has moved from viewing fintech startups as an amusing aside to seeing them as crucial collaborators, with a huge proportion hoping to partner with new innovators in the future.
In its latest Global Fintech Report, published on Thursday, PwC says that 82% of incumbents it surveyed plan to increase collaboration with fintech companies over the next three to five years.
"Mainstream financial institutions are rapidly embracing the disruptive nature of fintech and forging partnerships in efforts to sharpen operational efficiency and respond to customer demands for more innovative services," PwC says in its report.
The "Big four" consultant surveyed 1,308 financial services and fintech executives from around the world for its latest report. It concludes that: "The influence that fintech is having on the market is growing and the long-term potential is even greater."
Business Insider highlighted the trend for established financial service businesses to partner with fintech businesses recently when HSBC announced a partnership with Tradeshift.
PwC succinctly sums up the rationale for deals like this, saying: "Fintech startups don’t just need capital, they need customers. At the same time, incumbents need new approaches to drive change and deliver innovation."
Fintech startups are fast realising that it takes a huge amount of money and effort to attract a customer base that stretches beyond early adopters and the tech-savvy. Partnering with a large incumbent who will pitch them to their client base seems like a sensible growth hack.
Established finance companies, meanwhile, are struggling to innovate at the pace and to the standard demanded by clients. They are simply too big and cumbersome to deliver new digital products. Partnering with a nimble startup can fix this, allowing the incumbent to offer a slick service to clients with their brand on.
Steve Davies, PwC's EMEA fintech leader, says partnerships also help large corporates transform their ways of working, helping set them up for a nimble future.
Davis says in an emailed statement: "Fintech collaboration, and innovation more widely, is not about jumping on the latest bandwagon — it’s about finding the best, most efficient way to deliver your business strategy and ultimately better serve your customers.
"Embracing fintech is as much about different ways of working and problem-solving as it is about deploying new technology."
PwC's survey also found:
- 88% of incumbents are worried they're are losing revenue to fintech startups;
- 77% plan to increase internal innovation;
- 30% are investing in artificial intelligence;
- 77% expect to adopt blockchain technology in some form or another by 2020.
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