Financial services firms globally were initially dismissive when financial technology start-ups pledged to reinvent their business, but are now taking this competition increasingly seriously, reports accounting group PricewaterhouseCoopers.
For its latest global fintech report, entitled ‘Redrawing the Lines: FinTech’s Growing Influence on Financial Services’, PwC surveyed 1,308 financial services and fintech executives from around the world and found that 82% of respondents plan to increase collaboration with fintech companies over the next three to five years, including peer-to-peer (P2P) lenders and digital money transfer platforms.
Nearly half of the firms canvassed plan to acquire fintech start-ups over the next three to five years. “The influence that fintech is having on the market is growing and the long-term potential is even greater,” the report concludes.
“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.”
“Fintech start-ups don’t just need capital, they need customers. At the same time, incumbents need new approaches to drive change and deliver innovation.”
Steve Davies, the head of PwC’s fintech practice in Europe, the Middle East and Africa (EMEA), added that the latest report’s findings confirm that fintech is shifting into a new deal-making phase.
“Fintech collaboration 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,” commented Davies.
“Embracing fintech is as much about different ways of working and problem-solving as it is about deploying new technology.”
Competition concerns are just as much a motivator as a desire for innovation: 88% of survey respondents are worried that they are losing revenue to fintech start-ups, while 77% plan to increase internal innovation and the same percentage expect to adopt blockchain technology in one form or another by 2020. Three out of 10 are investing in artificial intelligence (AI).
The PwC report comes in a week when France’s BNP Paribas has agreed a deal to take a 95% stake in Financière des Paiements Électroniques, operator of three year-old digital bank Compte-Nickel, for €200m (£170m; US$213m). Reports suggest this is France’s biggest fintech acquisition to date.
Further fintech acquisitions by banks could be to the benefit of venture capitalists. Investors globally funded fintech start-ups to a total of US$132bn between 2010 and 2016, according to KPMG International and New York research firm CB Insights. Last year, there were 51 acquisitions or initial public offerings (IPOs) of fledgling fintechs in deals worth US$1.1bn.
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Morgan Stanley is moving staff to Frankfurt in time for the March 2019 Brexit deadline.
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