A few months ago, the consulting firm PwC published the results of a study on FinTech, these startups applying technological innovations (artificial intelligence, big data , etc.) to financial services. We return to the results of this publication, attempting to provide a personal analysis and insight today.
A LIST TO TAKE WITH TWEEZERS…
Let’s first look at the list of the four trades that should be the most messed up by the technological innovations brought by FinTech, according to respondents:
- The retail bank;
- Payments and transfers of funds;
- Asset and wealth management;
Published and republished hundreds of times, this list must be taken with tweezers. The results come from a survey where respondents were either finance and insurance professionals or fintech experts, which leads to a bias in the innovation vision presented in the report:
– As FinTechs are currently mainly positioned on payment and dematerialized banking solutions, these trades have a significant weight in the results of the study. No startup boss acting in a given business will answer that the impact of technology and innovation will be stronger elsewhere;
– At the same time, the difficulty to innovate financial institutions – a significant proportion of resources being allocated for nearly a decade to regulatory subjects – implies that respondents, bank and finance this time, are more likely to perceive the transformations to come once they have identified the disruptive actors. And since the majority of them work in two or three specific occupations, they are mechanically put forward in this type of study.
Attention, I’m not saying that payments, transfers of funds and asset management will not be transformed in depth by the arrival of new players and their innovations, but simply that the impact of new technologies in financial and insurance sectors will certainly be as broad and important in other trades. The over-representation of a certain type of player during a growth phase distorts our judgment on the entire sector.
The Bitcoin packed in the early 2010s many first-time adopters, but the real innovation in this crypto currency was hiding in its underlying technology: the Blockchain.
The banking and insurance models are obviously changing. From standardization and industrialization, we are seeing the emergence of personalized services made possible by new data storage and analysis capabilities. At the same time, tasks requiring hitherto significant human resources (middle office , compliance ) are about to be automated thanks to the use of algorithms developed in other sectors for a decade ( machine learning , deep learning , etc.).
WHAT IS THE NEAR FUTURE FOR FINTECH?
The runaway generated by startups attacking the means of payment and the transfer of funds will refer, in the months or years to come, to other activities, once the first consolidations have come. Nevertheless, most FinTechs need banks and insurance to survive, and the converse could be true. This poses many challenges to these players, which the PwC survey shows particularly well: even if startups and large banking groups share the same objectives (dematerialization, integration of new services, simplification and automation of procedures, new modes of consumption of services the difficulties to be overcome are numerous.
First of all, everyone’s ability to secure the exchange of information in a universe of connected objects (wifi or bluetooth) and sensitive data. This issue is also that of the entire sector of the Internet of Things.
Then there is the understanding of technology and innovation by banking and insurance stakeholders, at the level of management but also operational teams. The study shows that a majority of the banks and insurance companies that responded have little or no knowledge of the Blockchain concepts, whose founding text was published almost eight years ago.
Finally, and the study is very clear on this subject, we must not predict the ability of teams from such different backgrounds to work together easily. Although long-term objectives are shared, the short and medium term are rarely aligned, and can lead to many disappointments.