The Future of FinTech and Banking: Digitally Disrupted or Reimagined?

03 Apr The Future of FinTech and Banking: Digitally Disrupted or Reimagined?

Global investment in financial technology (FinTech) ventures tripled to $12.21B in 2014, clearly signifying that the digital revolution has arrived in the financial services sector. It is still unclear whether this presents more of a challenge or an opportunity for industry incumbents, but established financial services players are starting to take bold steps to engage with emerging innovations.

Investment in financial-technology (fintech) companies grew by 201% globally in 2014, compared to 63% growth in overall venture-capital investments, confirming this sector as a hot ticket. Expectations for new digital start-ups in the industry continue to swell, with the amount of money flowing into first round investments alone growing by 48%1. It is clear that the digital revolution in financial services is under way, but the impact on current banking players is not as well defined.

Digital disruption has the potential to shrink the role and relevance of today’s banks, and simultaneously help them create better, faster, cheaper services that make them an even more essential part of everyday life for institutions and individuals. To make the impact positive, banks are acknowledging that they need to shake themselves out of institutional complacency and recognise that merely navigating waves of regulation and waiting for interest rates to rise won’t protect them from obsolescence.

This Accenture report brings together the views of 25 influential financial services executives involved in innovation, and maps out the activities that established players have identified as necessary to allow them to disrupt their own business model rather than watch challenger models disintermediate them. Openness, Collaboration and Investment are the critical themes that emerge for existing banking players if they are to benefit from growth driven by new services and productivity. Banks also recognise two other fundamental steps to ensuring that they are net winners from digital disruption: successfully dealing with the issue of legacy technology and managing a large infusion of new talent.

Embracing these themes and creating the right foundations creates challenges to the rate of change and approach to risk that are hardwired into the way banks currently adapt to innovation. This hands an advantage to challengers who only hit regulators’ radar once their new business models have found ways to cherry-pick services and customers.

Banks are anticipating this by creating new businesses within their existing structures that adapt and collaborate to meet these challenges and make better use, faster, of their enduring source of competitive advantage – customer insight.

Existing banks will know they are winning in digital when bank valuations start to factor in the future value of proven innovation, in addition to protecting the core franchise.

Read the report from Accenture here