95% of Indian financial institutions expect to partner with FinTechs in FY17-18 to boost innovation: PwC report

Apr 20, 2017

  • Most financial institutions (84%) expect to increase internal innovation efforts over the next three to five years in response to the threat posed by new FinTech players
  • 67% of Indian financial institutions consider non-traditional FinTech companies a threat to their business

Mumbai, 19 April, 2017:  A whopping 95% of incumbents in the financial services industry believe that the innovation they seek can be brought about by engaging in FinTech partnerships. The additional edge that innovative FinTechs, who are free from regulatory and legacy baggage, can provide through partnerships is something that incumbents are aggressively seeking to capture. This is by far the highest percentage reported across all nations in a new PwC FinTech report ‘Redrawing the lines: FinTech’s growing influence on Financial Services. The global average being 82% of financial institutions expecting to increase partnerships with FinTech companies over the next three to five years.

In the report, PwC sets out how FinTech companies are changing the market dynamics by focusing on emergent technologies that have the potential to provide a renewed experience for their customers. Most incumbents in the industry are focused on Data Analytics, Mobile and AI technologies, because so far many of them have found it difficult to manage their data and offer customer-centric and insights driven digital services. But developments around emergent technologies like chatbots, natural language searches and digital KYC can enable them to enhance and expand their portfolio of services.

According to Vivek Belgavi, Partner & Leader – Fintech, PwC India, "The entities which are most likely to disrupt the industry are most likely to be start-ups. According to our survey, 87% of financial institutions consider startups to be to source of disruption. However, other entities like social media platforms and e-tailers have also been cited as the source. A majority of the players say they are embracing FinTech and seek to utilise it to grow and transform their businesses. FinTech to us is really about the interplay between different players in the ecosystem and how they work together to disrupt the Financial Services industry. The power of FinTech lies in collaboration.”

The report also states that 84% of the respondents say that they are driving internal efforts to innovate through FinTech. However, a larger percentage of respondents say they are looking

beyond just that. Consumers in India are increasingly getting attracted to non-traditional financial service providers, starting with payments and funds transfers. The industry incumbents are privy to this trend and 67% of them acknowledge that non-traditional FinTechs pose a threat to their businesses. Albeit, this number is slightly lower than the global average of 80%, perhaps an indication that the market in India is not yet as matured as it is globally, particularly in the non-payments segments.

Also, most traditional players expect some real returns from their FinTech expeditions. Although the level of investment each one of them is willing to make varies greatly, on an average, they expect a ROI of around 29% on all of their FinTech investments.

Key insights of the report:

1) Data analytics, mobile and AI will emerge as key FinTech capabilities

Data analytics and mobile are more contemporary capabilities that 69% of players in the industry are spending on to remain competitive. However, several players are also focusing on revolutionary technologies like AI, cyber security, robotic process automation, biometrics and identity, blockchain and Internet of things.

2) Blockchain to move into the mainstream

Financial services players are becoming increasingly familiar with the blockchain. 56% of respondents seek to engage with the blockchain in some form and eventually make it a part of their core business.

3) Digitisation and the proliferation of Big Data

Financial services incumbents are responding to these trends and beginning to focus on areas like product design, accessibility and customer service in order to differentiate themselves, increase retention and stay ahead of their competition. They aim to generate loyalty in this age of disruption. 72% of financial institutions expect a rise in customer interaction through social media and 73% are making ease of use and intuitive product design a priority.

Ends

About the report: The analysis in this report is based on a nationwide survey of 45 Indian financial services and FinTech executives, mapped against a global survey of 1308 participants from 71 countries and also includes insights and proprietary data from PwC’s DeNovo platform.

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