With investments in
FinTech going up to 10 times in the past five years reaching $8.2 billion in Q3
2017, the new sector has generated almost $9.2 billion revenue during 2016 and
new home to more than 60,000 new tech entrants. The most striking example in
Asian sub-continent is Alibaba backed Paytm whose market share grew to almost
68% by April 2017 in the payment wallet industry. With competition souring to
new heights every day, the traditional financial firms need to defend their
ground to further avoid losing the competitive edge. Through this research study,
we will examine what are the challenges faced by traditional firms in adopting
the innovation and agility spark brought by Fintech firms and how are they
preparing themselves in times to come. As the competition between banks and
their fintech rivals evolves in the future, it’s the customers who stand to be
the ultimate beneficiaries and customer relationships will become
the banks’ single-most-important
This paper examines the rise of the FinTech
movement, reasons why FinTech has gained significant traction in the financial
ecosystem and how traditional firms are embracing the disruptive innovation brought
by Fintech firms. The key findings from the research study are:
Customers’ perception about
incumbents and FinTech firms
Globally, 41% customers say that they
use financial services from at least one FinTech firm with adoption rate
reaching highest in U.S. (69%) and lowest in Africa (20%).
While customers are embracing FinTech services in Payments,
Trading & Investments, they overwhelmingly prefer well-established
traditional players when it comes to Financing and Insurance related products
Traditional firms hold an advantage over FinTech firms on Security and Fraud detection,
however, when it comes to Convenience and Better value for money, FinTech
firms, by far outperforms the veteran financial institutions.
financial landscape changing so fast, incumbents are falling behind
With exposure to potential systematic risk, the ‘too big to
fail’ incumbents are losing customers’ level of trust.
More than 85% executives working in traditional financial
firms believe their business is at risk to the FinTech firms.
Incumbents feel the need to keep abreast with changing
FinTech community booming, incumbents are finding it challenging to apply innovation
Executives hold the view that Changing Customer Demand (69%)
and Compliance with regulatory demands (48%) poses biggest current challenge
for the traditional firms.
More than three-fourth executives (81%) across all financial
verticals agree that their organization is strategically focused in addressing
the FinTech challenge.
Integrating FinTech comes with challenges especially while dealing
with Regulatory reporting (45%) and incompatibility of IT systems (38%)
innovation requires strategic and disciplined approach
Agility and innovation mindset is the key to adapt
Intuitive product design and Convenience holds the key to
customer retention. Securing senior leadership buy-in with a clear vision will
be important for addressing disruption.
Executives see opportunities for Collaboration with FinTechs
(40%), allowing traditional firms to leverage technology expertise while
offering safety and reliability to its huge customer base.