The majority of Irish financial services firms are bracing themselves for revenue losses of up to 40% over the next five years, according to the PwC’s report on fintech.
Financial technology, known as fintech, is said to describe the fast-growing fusion of financial services such as banking or accounting with innovation such as online banking. The fintech industry has seen investment grow from €850m in 2008 to €11bn in 2015, according to an Accenture survey.
The asset and wealth management and insurance sectors are bracing themselves for a surge in disruption from fintech over the next five years, according to the PwC report.
Partner at PwC, John Murphy said: “With new business models, the pace of change in financial services seems only to be increasing. In the future, customers will be forced to make financial decisions based on a combination of artificial intelligence, even greater automation, less human intervention and new payment options.
“The survey confirms that fintech in Ireland is having a growing influence on financial services and the long-term potential is even greater.”
Some 76% of Irish financial services firms are concerned that part of their business is at risk of being lost to fintech companies compared to 88% globally, the report found. Almost three in five financial services firms are concerned about IT security when dealing with their fintech counterparts, and the same number plan to invest in cybersecurity in the year ahead — significantly higher than global plans to do so at just one in three firms.
Almost three in five financial services firms are concerned about IT security when dealing with their fintech counterparts, and the same number plan to invest in cybersecurity in the year ahead — significantly higher than global plans to do so at just one in three firms.
Data analytics partner at PwC, Darren O’Neill said that Irish financial services firms would have to find a way to keep up with the technological changes.
“The survey reveals that traditional financial services firms are likely to be the least disruptive over the next five years."
"Fintech companies are driving market changes by focusing on emerging technologies to drive enhanced customer engagement. Financial services organisations will need to step-up and really embed emerging technologies such as artificial intelligence and the internet of things in order to really become more aligned with fintechs,” he said.
The survey was carried out in the spring and included participation from Ireland’s banking, asset and wealth management, fund payments, insurance and fintech sectors. The survey also found just 14% of firms are familiar with blockchain against 24% globally.
Blockchain is “an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value”, according to global business technology consultants Don and Alex Tapscott.
It was first used for digital currency bitcoin. More than €400m was sent via blockchain money transfers in 2015 and Goldman Sachs has said the technology “has the potential to redefine transactions”.
PwC Advisory director Ronan Fitzpatrick said: “The potential of blockchain is now being realised by all sectors, not just financial services, including energy, telecoms and pharma.”