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We hear a lot these days about disruption in various industries and one that is heavily exposed is the financial services sector which is at risk from "fintech" - or financial technology sector. Fintech is changing the way we interact with financial institutions and make transactions.
PwC has carried out a major study on the sector and its impact on the traditional financial services sector. Ronan Fitzpatrick, a director with PwC Advisory, explained that fintech is the use of technology to solve a problem and deliver solutions in a financial services context. "It's about using emerging technology to answer the needs of customers and solve problems for financial services companies. It's broader than online banking. It's about using all of the emerging technologies that are available to address needs across online banking, online payments, identity management, among other issues," Mr Fitzpatrick said.
He said the challenge for traditional financial institutions was in responding to the emerging technologies and keeping up to speed with new developments while they have legacy systems that have to be updated in terms of regulation and technology. "The challenge is how to keep your customer base and be relevant to customers while others can deliver a better solution quicker. The smaller niche players can be more nimble."
Most of the new players start on mobile first and are typically on the cloud. They have the data and analytics built in on day one whereas financial services institutions are catching up on data analytics, according to Mr Fitzpatrick. That raises the question of regulation of these entities and Mr Fitzpatrick said such companies are regulated in the state where they are established. "Regulation is one of the primary reasons why the large players will never be as quick as the smaller ones. By virtue of being in operation for longer, they will have more applications to remediate when it comes to regulation," he concluded.
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