Bangkok--31 Aug--PwC Thailand
Consumer banking is the sector most likely to be disrupted by Financial Technology (FinTech) over the next five years, a PwC study says.
Some 73% of executives surveyed believe the sector is most vulnerable to FinTech innovators as loss of market share and margin pressure threatens growth in the banking industry, according to PwC's Customers in the spotlight: How FinTech is reshaping banking.
The report is based on the responses of 163 executives from 46 countries around the globe, mainly Chief Executive Officers, Heads of Innovation, Chief Information Officers, and top management involved in digital and technological transformation. It is part of the 2016 PwC Global FinTech Survey.
Boonlert Kamolchanokkul, Partner and Financial Services Leader for PwC Thailand, said FinTech players are most impactful in responding to changing customer needs.
FinTech start-ups are now going directly to the end-user. These new entrants are building customer-oriented solutions to address market needs, leading many customers to bypass banks altogether.
"Today's banks are not only facing competition from their own industry, but from FinTech entrants who are offering both solutions and customer experience that better meets the needs of consumers toward banking services," he said.
Some 76% of banking respondents fear part of their business is at risk to FinTech. Nevertheless, just 53% of those in the banking sector see themselves as consumer-centric, compared with more than 80% of FinTech companies.
Competition between banks and new entrants is beginning to give way to direct collaboration across the FinTech ecosystem.
"FinTech companies are great at offering product simplicity and seamless integration, while banks have the proper IT security and regulatory certainty. Collaboration would allow both parties to benefit from each other's strengths," Boonlert explained.
According to the survey, 42% of the traditional banks are now engaging in joint partnerships and setting up venture funds to finance FinTech companies.
Customer experience is key
Today's customers want convenience, personalisation, accessibility, and ease of use.
Still, most bricks-and-mortar banks are lagging and only delivering incremental improvements to customers.
Unlike traditional banks, FinTech companies offer solutions for consumers with no or poor credit scores who aren't able to get loans, Boonlert said.
FinTech is also driving the rise of peer-to-peer (P2P) lending markets for those unable to secure loans from the traditional sources, and the use of personal finance management tools.
FinTech players offer services through non-traditional channels, including social media, which empowers customers to a greater extent. They also focus on ubiquity and omni-channel offerings.
"We're starting to see both traditional banks and new entrants forming new, mutually beneficial relationships, and customers will benefit from this," Boonlert added.
The majority of banks (71%) expect that more than 60% of their clients will use mobile applications at least once a month to access financial services within the next five years.
More than 90% of banks expect growth in the use of mobile applications, much higher than any other financial sector. This underlines the need for banks to improve overall customer experience.
Banks need to start simplifying products and services to meet customer expectations.
They will also need to streamline digital capabilities and develop a better understanding of customer preferences in order to maximise their value potential.
"It's now time that banks revisit their strategy and approach," Boonlert said. "They need to design their products and services with the user experience in mind.
"Mobile applications are among the solutions which all banks are working on, along with security and third-party assurance services. Whoever gains more trust from customers will come out on top."