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Blurred lines: How FinTech is shaping Financial Services – PWC

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Article Synopsis :

As quoted by a senior executive at a global banking organization, “We thought we knew our customers, but FinTechs really know our customers.”

 The Digital Insurer reviews PwC’s Report on Blurred lines: How FinTech is shaping Financial Services

FinTechs and InsurTechs are the main drivers of disruption in Financial Services

In the report “Blurred lines: How FinTech is shaping Financial Services”, PwC shares how FinTech is shaping financial services from the outside in. The report delivers insights from a survey of 544 respondents comprised of CEOs and CIOs who are involved in digital and technological transformation initiatives. This survey was carried out in various FS segments in 46 countries with 14% of respondents from insurance carriers.

Of note, as a basis, PwC estimates that within 3-5 years, the investment in FinTech could exceed $150bn.

Key survey findings include:

  • 61% believe over the next 5 years more than 60% of their clients will use mobile apps (on at least a monthly basis) to access financial services
  • 83% feel financial institutions will be disrupted by FinTechs with 22% of Insurance, Asset and Wealth Management business at risk by 2020
  • On the impact of Blockchain technology, 56% of survey respondents feel it’s important with 57% saying that they are unsure or unlikely to respond to the trend. The insurance industry is slightly more familiar with the concept.
  • Key opportunities for FinTechs exists in cost reduction, differentiation and improved customer retention

Important FinTech trends in the insurance industry (InsurTech) include:

  • The rise of InsurTech startups with a fivefold increase in annual cumulative investments since 2010, reaching $3.4b
  • Insurers leveraging data and analytics to bring customized solutions with proactive risk management. There has been an increased creation of self-directed services for customer acquisition and servicing which bring improved operational efficiency with reduced costs
  • Increased interest in usage-based insurance models
  • Capturing, harnessing and enriching data (structured and unstructured) with analytics

FinTechs are perceived as a threat to the overall Financial Services industry with 67% feeling the pressure on margins and 59% expecting a loss of market share. FinTechs are capable of selling products and services directly to consumers and some of them are empowering the incumbents through strategic partnerships with the intent of providing better services.

FinTechs can create real opportunities for the FS industry as a whole with support such as robo-advisors, telematics, process simplification, and digital wallet solutions. The insurance industry has started understanding the need to become digital; InsurTech at the heart of digitization strategy is a priority for 43% of insurers.

FinTech drives disruption in the FS industry with enhanced customer experience and heightened customer expectations. The impact will be seen in the new FS business models which will result in new challenges to  regulators and market players. Firms should start shifting from product-based to need-based models incorporating new technologies to leverage the digital rush.

Though the survey covers Financial Services in general, the following specific trends for insurance are discussed:

  • Ride-sharing
  • Usage-based insurance (pay as you go)
  • New models of holistic advice (robo-advice)
  • Self-directed services
  • Connected health and medical advances
  • Connected/smart car
  • Remote access and data capture
  • Shift from probabilistic to deterministic models
  • Granular risk and/or loss quantification
  • Robotics and automation in core insurance
  • Blockchain

Link to Full Article:: click here

Digital Insurer's Comments

Disruption of the FS industry is happening and FinTech is the driver, reshaping how way companies and consumers engage by altering how, when and where products are provided and consumed. Success is driven by the ability to improve customer experience and meet changing customer needs.

Information on FinTech is somewhat dispersed and obscure, which can make synthesising the data a challenge. It’s therefore critical to filter the noise around FinTechs and focus on the most relevant trends.

In our view, insurance leaders should focus on FinTechs in four areas in particular:  Enhanced customer experience, self-directed services, sophisticated data analytics, and cyber security.

Link to Source:: click here

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