As emerging technologies disrupt traditional financial services value chains, many institutions are lagging in implementing effective strategies, says a new report from KPMG released Oct. 18.
The report surveyed more than 160 financial institutions in 36 countries. It found that “banks, insurers and asset management companies believe technologies like artificial intelligence, blockchain and the internet of things are redefining the very nature of financial services,” says KPMG.
Growing global regulatory uncertainty
Fifty-seven percent of respondents believe 'emerging financial technologies' are the greatest source of disruption today, followed by 'growing global regulatory uncertainty' at 51 per cent and 'new business models' at 46 per cent.
The study also found that addressing the organizational response to fintech is proving challenging to many institutions with only 46 per cent of respondents saying their institution has a clear fintech strategy in place. Forty-two per cent indicated that a strategy is in development and 10 per cent have no fintech strategy at all, says KPMG. Meanwhile, of those with a strategy, only 47 per cent believe it is well aligned with the challenges posed by fintech.
Continuing to struggle with fintech
"We're seeing many financial institutions continue to struggle to build and execute a comprehensive strategy around fintech," explains Murray Raisbeck, Global Co-Leader of Fintech, KPMG International. "In many cases, fintech innovation is left to individual functional areas, without any kind of overarching strategy across the organization."
More than 70 per cent of financial institutions surveyed ranked 'enhancing customer service' as a top objective for their fintech strategy. 'Transforming existing capabilities' was second, with 48 per cent identifying it as a key objective, says the report.
Middle and back-office functions and capabilities
"The majority of fintech innovation remains focused on transforming the front office and strengthening the customer experience," says Ian Pollari, Global Co-Leader of Fintech, KPMG International. "This won't go away, however as the sector matures, we also expect to see a greater focus on middle and back-office functions and capabilities. These types of initiatives will drive greater efficiencies – which can also lead to improved customer and regulatory outcomes."
Partnering with start-ups
The survey showed that partnering, particularly with start-ups, is driving fintech activity for financial institutions. Sixty-one per cent of respondents say their institutions have taken a partnering approach to fintech in the past, while 81 percent plan to partner going forward.
To learn more, read the full report, Forging the future: how financial institutions are embracing fintech to evolve and grow.