PwC’s Global FinTech Report 2016 identified investment and wealth management as the third most likely financial sector to be disrupted by fintech over the next five years; after consumer banking and fund transfer & payments.
Up until 2015, the investment management industry had seen little disruption and innovation in terms of fintech, a joint report from PwC and global startup network Startupbootcamp found.
Last year saw a sharp increase in investment focused startups working on B2C, B2B. robo-advisery, big data, machine learning, equity research, and automated portfolio selection.
PwC expects fintech to transform the way the investment industry operates and empower investors to make better decisions. The industry as a whole is facing cost pressures as fees continue to be pushed downwards and regulation is forcing a clear delineation between fund costs and corporate costs.
However, the relationships between corporates and startups continues to be tricky as incumbents struggle to keep pace with the innovation and culture of fintech companies.
Acquisition was the traditional route but seems to have fallen out of fashion – many companies found that, by bringing the startup within the corporate entity, the value was eventually drained. PwC believe the best approach lies in putting the company at the heart of an ecosystem of fintech companies and drawing on the best solutions in the market to provide value for customers.
Steve Davies, UK and EMEA FinTech leader at PwC, said: “The heart of the fintech problem often lies in the inherent culture of ‘slow and steady’ found in large financial corporations and success will come from incumbents and startups working together. Companies should focus on what they do best and then work with relevant fintechs for innovation to support their strategy.”
Nektarios Liolios, co-founder and global chief executive of Startupbootcamp, said: “Fintech startups emerged because they felt that there was a lack of innovation within the industry and so decided to try and solve the problems themselves by utilising new technologies.
“The financial services industry is slowing waking up to the inevitability of change around it and regulators are looking to facilitate, rather than hinder, the disruption. There’s still so much work to be done and neither financial institutions nor startups can do it alone, the key will be to work together.”
International fintech doors opened
Fintech companies in Australia and the UK looking to grow overseas will receive more support from the Australian Securities and Investments Commission (ASIC) and the UK’s Financial Conduct Authority (FCA).
The two regulators have signed a world-first agreement to cross-refer fintech businesses looking to enter eachothers markets.
They will provide support to the businesses before, during, and after authorisation to help reduce regulatory uncertainty and time to market.