As part of this year’s Scale | FinTech programme we are working with 10 innovative FinTech businesses, helping them to identify commercial opportunities and prepare their business to scale-up.
PwC’s Scale FinTech Programme aims to facilitate partnerships and collaboration between FinTechs and established financial services (FS) institutions to promote innovation across the sector. Over the two and a half years that the PwC Scale Programme has been running, we have worked with over 180 scale ups, putting us at the heart of innovation and the forefront of emerging technology trends.
Throughout our work with FinTechs and incumbents, we have charted the developments and challenges the industry is facing, both in scaling up but also in implementing solutions. This blog reflects on some of the key considerations for established FS organisations to take into account along their journey in adopting FinTech solutions.
The emergence of FinTechs is undoubtedly changing customer behaviour and expectations. Our research shows that 88% of incumbents are concerned they are losing revenue to innovators. Understanding (i) what innovators do differently and (ii) what it is that firms could and should do to remain competitive, is a key step in defining a vision and strategy for innovation and digital transformation. Ultimately, it is the vision and strategy that will guide an organisation when considering FinTech implementation options.
Assessing market trends. With the ever increasing pace of innovation, developing an understanding of the market, technologies and trends is not easy. The emergence of FinTech innovation hubs in Asia, America and Europe adds further complexity (e.g. standardisation of solutions, applicability of regulation etc.). Building a comprehensive view of market trends, internationally, will remain a key challenge for many organisations to address.
Assessing emerging technologies. Skills shortage, capabilities required to assess emerging technologies and expertise required to gauge time to market risks, are just a few factors that need to be considered. In some cases, a technology selection framework could help guide decision making but clearly does not suffice to make well founded decisions on its own.
Assessing the potential, given limitations. Integrating new technologies into existing processes and infrastructure undoubtedly comes with its challenges. Moving from solution integration to digital transformation to achieve the desired level of innovation is an aspect to be considered in the context of any organisation’s scope for change.
As FinTech innovation evolves and established FS organisations are embarking on digitisation journeys, we are seeing three main business models emerging for FS organisations: (a) lease / buy technology; (b) co-create technology; (c) ‘self-create’ technology.
These business models reflect the varying levels of maturity that organisations display on their pathway to digital transformation. Based on our work and research, we find that the majority of organisations currently fall within bucket (b), where more than eight in ten are looking into increasing partnerships with FinTechs over the next three years. FinTechs and BigTechs, facing challenges with customer acquisition, regulation and the development of new financial infrastructure, are also increasingly looking for partnerships with established FS organisations. Few first-mover institutions have already created their own innovation functions and are developing solutions that they can deploy at pace.
Each business model has its benefits and drawbacks. Organisations need to consider these in their own context and may choose to adopt different business models, or hybrid options, for different purposes and stages of their digital transformation. Here are some of the key considerations to look out for:
Choosing the right strategy and business model to drive innovation and digital transformation will strongly depend on an organisation’s mission and context. Given the complexity and pace of change in this field, organisations should consider their approach to assess the market and systematically consider factors that will influence decision making to avoid unintended consequences on their journey to innovation.
   PwC, Global FinTech Report, 2017