Large financial institutions across the world could lose 24 percent of their revenues to financial technology companies over the next three to five years, according to a new study by PricewaterhouseCoopers.
Of the more than 1,300 financial industry executives polled by the professional services firm, 88 percent said they feared their business was at risk to standalone financial technology companies in areas such as payments, money transfers and personal finance, Reuters reports, citing the study.
In banking specifically, consumer services such as personal loans, were seen as most at risk, according to PwC’s annual Global FinTech Report published on Wednesday.
The report came as banks and other large financial firms face growing competition from a young cohort of companies that take advantage of new technologies to offer better digital services to customers, in areas ranging from financial advice to life insurance.
To counter the threat, financial institutions expected to increase their collaboration with fintech companies, with 82 percent of respondents saying partnerships with tech-savvy firms would increase over the next three to five years, the PwC report found.
To improve their digital offering and remain competitive, large firms have been looking to work more closely with young technology companies through a number of initiatives such as corporate venture arms and innovation centers.
In his annual shareholder letter published on Tuesday, JPMorgan Chase & Co. chief executive Jamie Dimon highlighted some of the bank’s most recent collaborations with fintech companies in areas including mortgages, small business lending and payments.
While collaboration is on the rise, entrepreneurs and executives often note that several hurdles are hindering more effective cooperation.
IT security, regulatory uncertainty and differences in management and culture, were cited by respondents to PwC’s report as major challenges hindering partnerships.
In particular, data privacy rules, as well as anti-money laundering and know-your-customer rules were seen as the biggest regulatory barriers to developing more innovative services.
The report also highlighted how interest in record-keeping technology blockchain continues to grow in finance, with investments in blockchain companies growing 79 percent year over year in 2016 to US$450 million.
While adoption of the nascent technology is not expected to happen quickly, the survey found 55 percent of respondents planned to adopt it by next year, and 77 percent by 2020.
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