UK financial services leaders fear 40 percent revenue loss due to FinTech disruption

BY Fraser Tennant

Sixty-one percent of UK financial services industry leaders fear losing as much as 40 percent of their revenue to standalone FinTech firms, according to a new PwC report.

The report, ‘Redrawing the lines: FinTech’s growing influence on Financial Services’, highlights the views of the leaders of large, small and medium sized financial services companies in the UK, noting that, in comparison to the 61 percent of UK respondents that expressed fears over a substantial revenue loss, 51 percent of global financial services leaders believe their revenue is at risk.

However, the PwC survey also found that almost half of UK firms (47 percent) say they plan FinTech acquisitions over the next three to five years. Eighty-one percent indicated that they plan to initiate strategic partnerships with FinTechs over the same period.

“The financial services industry has embraced FinTech to help drive change and innovation,” said Steve Davies, EMEA FinTech leader at PwC. “FinTech collaboration, and innovation more widely, is not about jumping on the latest bandwagon – it is about finding the best, most efficient way to deliver your business strategy and ultimately better serve your customers.

“The UK’s financial sector seems to have a more realistic understanding of the long-term returns on targeted investments. Managing expectations around returns is important, particularly for firms facing significant cost pressures. Activity in the UK ranges from partnering with FinTechs startups, financing in-house incubators, and deploying new solutions, to testing use cases in areas like blockchain. There is a tension between the time needed for new ideas to mature and the expectations of firms seeking to collaborate with FinTech startups.” 

The survey also found that UK financial services firms currently dedicate 9 percent of their annual turnover to FinTech and IT projects – a total well below the global average of 15 percent. That said, UK firms are more realistic in their expectations of return on investment (ROI) with FinTech, with respondents saying they expect an annual ROI of 13 percent, while firms in the rest of the world expect an average ROI of 20 percent.

Mr Davies concluded: “Embracing FinTech is as much about different ways of working and problem solving as it is about deploying new technology. A sustained focus on innovation is much needed and can only be a good thing for customers, and the firms themselves.”

Report: Redrawing the lines: FinTech’s growing influence on Financial Services

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