Fi­nan­cial ser­vices jump into new fin­tech

The Star Late Edition - - BUSINESS REPORT - Sandile Mchunu

THE ma­jor­ity of global banks, in­sur­ers and in­vest­ment man­agers in­tend to in­crease their part­ner­ships with fi­nan­cial tech­nol­ogy (fin­tech) com­pa­nies over the next three to five years as the fi­nan­cial in­dus­try is get­ting to grips with their in­no­va­tion.

The sec­tor is ex­pect­ing an av­er­age re­turn on in­vest­ment of 20 per­cent on their in­no­va­tion projects by part­ner­ing with fin­tech com­pa­nies. This is ac­cord­ing to a new Price­Wa­ter­house­Coop­ers (PwC) re­port, “Re­draw­ing the lines: Fin­tech’s grow­ing in­flu­ence on Fi­nan­cial Ser­vices”.

Fin­tech is an in­dus­try com­posed of com­pa­nies that use new tech­nol­ogy and in­no­va­tion with avail­able re­sources in or­der to com­pete in the mar­ket place of tra­di­tional fi­nan­cial in­sti­tu­tions and in­ter­me­di­aries in the de­liv­ery of fi­nan­cial ser­vices. Rev­enue at risk The re­port is drawn from more than 1 300 re­spon­dents glob­ally. It is said that one driv­ing fac­tor be­hind these part­ner­ships is an in­creas­ing fear within the in­dus­try that rev­enue is at risk to stand­alone fin­techs, with 88 per­cent of fi­nan­cial ser­vices re­spon­dents glob­ally and also 88 per­cent in Africa, see­ing it as a real threat. On av­er­age, up to 24 per­cent of rev­enue is thought to be at risk.

Manoj Kashyap, Global Fin­Tech leader at PwC, said: “Fin­tech col­lab­o­ra­tion and in­no­va­tion is not about jump­ing on the lat­est band­wagon, it is about find­ing the best, most ef­fi­cient way to carry out your busi­ness strat­egy and ul­ti­mately bet­ter serve your cus­tomers. As fi­nan­cial in­sti­tu­tions work ever more closely with in­no­va­tors, con­sumers will be­gin to feel the ben­e­fits.”

He added that the costs and frus­tra­tions cus­tomers of­ten en­counter when in­ter­act­ing with their bank, in­surer or fund man­ager will hope­fully be­gin to sub­side as they feel the ben­e­fit of stream­lined, ef­fi­cient busi­nesses pro­duc­ing more tai­lored, cus­tomer cen­tric prod­ucts. Out­source The re­port also shows that part­ner­ing with fin­techs will be a key way for firms to out­source parts of their re­search and devel­op­ment (R&D) and bring their strat­egy to life, ul­ti­mately al­low­ing them to of­fer new prod­ucts to cus­tomers much more quickly.

Cur­rently, 45 per­cent of par­tic­i­pants are part­ner­ing with fin­tech com­pa­nies, an in­crease from 32 per­cent last year.

In South Africa, more than half of re­spon­dents (63 per­cent) are presently en­gag­ing in part­ner­ships with fin­tech com­pa­nies, and 96 per­cent of those said they are ex­pect­ing to in­crease part­ner­ships over the next three to five years.

Paul Mitchell, fin­tech leader, PwC South Africa, said: “Fi­nan­cial in­sti­tu­tions need to find the right com­bi­na­tion of ini­tia­tives that al­lows them to learn about the im­pact fin­tech will have, while in­cor­po­rat­ing new ways of work­ing and get­ting in­no­va­tions to mar­ket.”

PwC pre­dicts us­ing mo­bile tech­nol­ogy to help new cus­tomers gain ac­cess to fi­nance could open up a de­mo­graphic worth $3 tril­lion (R39.4 tril­lion) to the payments in­dus­try.

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