Bangkok--29 Nov--PwC Thailand
- Adopting a fintech-centred strategy is paramount
- FS should look to TMT for ideas about how best to use fintech
- FS and TMT should look to each other and retrain to fill skills gaps
- Firms should push cross-sector fusion further
PwC's 2019 Global Fintech Survey polled over 500 financial services (FS) and technology, media and telecommunications (TMT) executives worldwide to figure out the factors that will determine the winners and losers in the race to develop and profit from fintech-driven business models.
FS and TMT industries are using fintech (financial technology) to sharpen operational efficiency, lower costs, improve customer experience, and heighten the appeal of their products and services. They're also carving out new commercial possibilities. Digital-only banks are offering redesigned client propositions and cost profiles. Investment managers are deploying fully customised robo-advice. Insurers are using sensors to monitor people's health and drive illness prevention. And according to a recent PwC survey, consumers are ready for the digital shake-up. The question is no longer whether fintech will transform FS, but which firms will apply it best and emerge as leaders.
Key Findings and Insights
Adopting a fintech-centred strategy is paramount – The survey found that 47% of TMT and 48% of FS organisations have embedded fintech fully into their strategic operating model. Also, 44% of TMT and 37% of FS organisations have incorporated emerging technologies into the products and services they sell.
"The really big changes have to be top-down. They have to be strategic. They have to be something that leadership, the board, and the executives are closely involved in and have decided the organisation needs to pursue," said John Garvey, Global Financial Services Leader, PwC.
FS should look to TMT for ideas about how best to use fintech – FS executives surveyed think that using fintech to improve the ease and speed of their service will be key to retaining customers. But people expect ease and speed, so firms that focus their fintech efforts on these attributes might only meet customers' expectations and not differentiate themselves, especially when competing with digitally sharp-intuitive TMT businesses.
FS and TMT should look to each other and retrain to fill skills gaps – Our survey showed that 80% of TMT and 75% of FS organisations are creating jobs related to fintech. Yet 42% of both TMT and FS organisations are struggling to fill these roles. While 73% of FS organisations are hiring from the technology sector, only 52% of TMT firms are looking to recruit from FS. Finding ways to attract people from TMT to FS, and vice versa, will be important to future success because each sector needs the other's expertise. Upskilling will also be important.
Firms should push cross-sector fusion further– Among organisations that are planning to pursue an acquisition, strategic alliance or joint venture to drive growth via fintech, 78% of TMT and 76% of FS firms are targeting businesses within their own sectors. Less than half (44% of TMT and 47% of FS organisations) are targeting a company specialising in fintech. At a time when FS firms are striving to sharpen their technology capabilities and TMT needs product and regulatory expertise to compete in the FS market, firms will miss opportunities if they don't pursue more cross-sector cross-over.
"In China, convergence is gathering pace. At the top of the market, we've even seen regulators seeking to match up the big four TMT firms with the big four banks and get them to work together — you could call it an arranged marriage. The TMT firm provides the tech-enablement and the FS firm delivers the end product," said Wilson Chow, TMT Global Leader, PwC.
The Current Landscape
Emerging technologies have given companies a low-cost way of creating convenient, personalised, data-intuitive products and services. Fintech has also lowered the barriers to entry for firms — from established FS groups to startups or TMT entrants — and has therefore created a complex web of cooperative competition, or "coopetition," and collision.
Winners and Losers
Companies that have embraced fintech are reshaping the marketplace, and those that haven't are being left behind. Three-quarters of the FS and TMT executives surveyed said they're stepping up their fintech investment in the next two years. More than 90% are very or somewhat confident that fintech will deliver revenue growth over the next two years. But focus, maturity and speed to market vary.
Boonlert Kamolchanokkul, Partner, Financial Services, Clients and Markets Leader for PwC Thailand, commented: "As Thailand becomes more of a cashless society, we've increasingly seen business operators embedding fintech, particularly in the area of digital banking. The financial services sector has seen a wave of new entrants, such as e-commerce, technology companies and other non-bank players alike.
"We expect to soon see even greater collaboration among FS and TMT companies. This is largely because both industries need each other's expertise and know-how. Thai banks need to enhance their technology capabilities to innovate, whereas tech firms need product and regulatory expertise to better compete in the market. Several Thai banks have actively contributed to the development of fintech by launching their own initiatives, as well as funding accelerators. They have also partnered with tech firms to respond to customer demand better and faster.
"Besides fintech development, financial services and technology companies need to consider putting in place data security measures to build trust from clients."