Featured - 4 items
How is FinTech transforming financial services?
FinTech is at the heart of the new digital ecosystem emerging across financial services.
Even before the COVID-19 pandemic, changing customer expectations combined with major macroeconomic forces were challenging established players and new entrants alike to leverage technology in their business models to get ahead and stay relevant. The pandemic has further accelerated these trends, shining a spotlight on FinTech to alleviate these challenges.
The FinTech industry represents businesses of all sizes, united by the shared objective of harnessing innovation to solve customer problems and maximise opportunities. We play a pivotal role within the industry, working with FinTechs of all sizes and at every stage of their evolution. We are well placed to bring relevant players together from large incumbents to early-stage Fintechs and from growing unicorns to sources of finance and support.
While the landscape is complex and increasingly crowded, we believe that there is significant value to be had for both incumbents and innovators from the careful curation of the FinTech partnerships, and significant investment and value creation opportunities for a wide range of investors. For incumbents, collaboration with FinTechs is becoming increasingly important. Over the past 12-24 months there have been very few acquisitions of FinTechs by incumbent banks as building relationships and forming partnerships has instead been a key focus.
“The right partnerships between the right players have the power to transform financial services and to deliver meaningful social and economic impact, by bringing together the capabilities of the FinTechs & TechFins with the strengths of incumbent players. Technology is making it easier for organisations to work together – partnerships will be key to embracing this change.”
What do we mean by FinTech ecosystems?
FinTech ecosystems consists of technology-driven and technology-enabled businesses ranging from established financial services software vendors to emerging digital service providers. These ecosystems are broad, encompassing discrete sectors such as InsurTech, RegTech and PayTech, which focus on specific areas of the financial services value chain.
FinTechs usually start small and grow at pace- there are now between 25 and 30 unicorns in the UK alone. With a heightened focus on partnerships, collaboration and ecosystems, the dividing line between FinTechs and incumbents may dissolve over time just as the distinction between established and challenger banks has faded in recent years.
FinTech Ecosystem hotspots
- Digital Banking
- Compliance
- Data
- Financial Crime
- InsurTech
- Payments
- Investment drivers
Digital Banking
The scope of customer experience is changing. It’s no longer enough to deliver amazing journeys; financial services companies must also gain customers' trust in order to differentiate. Brands are starting to focus on purposeful experiences to build trust amongst belief-driven consumers and drive customer engagement.
These purpose-driven experiences are meaningful and pleasurable in addition to satisfying the 'table stakes' of a top-class experience (convenient, usable, reliable, functional). They are the basis upon which strong customer advocacy can be developed.
To do this successfully, banks need to be able to continuously capture and monitor customer insights to offer more personalised products and experiences. FinTech brings a more direct way to engage customers in developing beautifully designed and engaging interactions, alongside the core technology that is required to deliver those experiences.
Contact: James Morgan
Compliance
The costs of compliance and non-compliance have never been higher, both in terms of financial penalties and reputational impact in uncertain and challenging market conditions. However, despite significant investment into remediation and complying with new regulations, banks and insurers continue to struggle to demonstrate compliance in a sustainable manner. Given the cost-pressured environment and the continuing pipeline of regulation on the horizon, there is a clear business case for fundamentally rethinking the way that compliance is achieved and maintained.
Organisations need to consider their long-term architectural vision for how they meet compliance obligations across all lines of defence, not just within Compliance. Organisations need to think about how they assess and incorporate RegTech to meet their compliance obligations in the most efficient and effective way. A business case for leveraging new technologies should consider the benefits to customers and colleagues, as well as the cost benefits.
Contact: Angus Goldie
Data
Organisations now have access to vast amounts of business and customer data. In this digital age organisations must find ways to transform this data to stay relevant to customers, drive strategy and target future investment. Customer data is in particularly high demand as organisations can provide insights into spending patterns and lifestyle choices. Challengers into the market are providing new ways to monetise this data, through automating processes, using alternative data points to create cutting edge products and developing cloud based solutions.
FinTechs are using data to improve internal processes of larger organisations, including onboarding and Know Your Customer (KYC), privacy and governance and data migration. By incorporating emerging technologies and partnering with FinTechs/RegTechs,established financial services organisations - including banks, insurers and wealth managers - can enhance their ability to aggregate and analyse data effectively across multiple sources, future proofing their business and complying with regulation.
Contact: Rav Hayer
Financial Crime
Combating financial crime (FinCrime) remains a key challenge for the industry and despite significant regulatory scrutiny, and effort by the private sector, there remains continued focus on enhancing efficiency and effectiveness.
General recognition is that current processes are overly manual and burdensome on already over-extended resources. High levels of false positives and other redundant activities are leading to backlogs and impacting risk coverage. Technology, cross/converging criminal threats and a rapidly changing regulatory picture demands a new response.
Organisations are exploring new innovative technologies to better identify risks and improve efficiency. FinTech solutions are emerging to tackle some of the key issues the industry is facing, this includes:
- Utilising more diverse data pools to provide a more holistic view of the customer behaviour across all financial crime types
- Using graph analytics to identify hidden relationships and complex collusive behaviour
- Use of models that continuously learns and updates to detect unusual activity in addition to rules that target specific risks
- Use of artificial intelligence to replicate complex human decision-making during investigation to increase operational efficiency
Contact:Scott Samme,Graham Ure
InsurTech
Disruptive trends and technologies create imminent opportunities for the insurance sector. Insurance is predicted to be disrupted to the tune of c.£50bn of revenue in the UK market alone. Innovative Insurtech companies have set the stage to begin delivering significant value in this disrupted environment, having the potential to change insurance for the better for both customers and people working within the industry.
We are moving closer to wider ecosystems and a platform economy, designed to meet the customer needs in a single place. We are seeing a response in both new entrants and new products/services, such as distribution models, Insurtechs/Banks collaborating to enable a better experience for customers. This means that insurers will need to adapt more quickly to these changing market dynamics. An ability to respond quickly to new insights from different data sources, to release new features in the market to amplify the customer experience, and integrate new insurtech capabilities to enhance the value chain, will be critical to remain competitive. This will require a revised strategic focus and culture on innovation and experimentation, and structural changes to drive great enterprise agility.
Contact:Glynn Austen-Brown
Payments
Customer behaviours are being shaped by digital technologies such as eWallets and contactless cards as preferred methods of payments, a trend which has been accelerated by COVID-19. The regulatory opportunity created by Open Banking is encouragingnew market entrants to develop innovative and convenient payment experiences at a time when smartphones and tablets are becoming the preferred method for banking and insurance.
We see demand for FinTech related services in areas such as digital banking and wealth management opening new opportunities for revenue generation as well as cost reduction. New players are using digital-only models to reach all segments of society and at the same time, traditional players are looking to FinTech to reduce operating costs and find more cost effective ways to comply with regulatory mandates.
Contact: Jon Maskery
Investment drivers
FinTech market growth has attracted high levels of investment in recent years. As deal volume and valuations continue to gather pace, the market does not appear to be slowing.
Investors are increasingly turning to FinTech assets to provide capital-light access to the Financial Services markets. The drivers for investment in FinTechs are broad, but include:
- The large and growing market fuelled by technological development and innovation
- Capital light business models that often have high margins
- Diverse range of investable assets, from start-ups to mature businesses and from payments technologies to financial crime software
- Efficient and highly scalable business models
Contact: Andrew Macnab
How PwC can help
Whether you're an innovator, an investor, or a global financial services provider, our teams are here to help.
We have experience charting the developments and challenges that the financial services industry is facing, helping innovators to scale and grow, helping investors to create value from the right FinTech deals, and helping incumbent financial service providers to identify and leverage the right FinTech solutions to meet their growth or optimisation goals.
We also know that navigating the constantly evolving FinTech ecosystem can be challenging and that forming the right partnerships is not always an easy journey. Our scale and depth enable us to respond to this rapidly changing industry, bringing together relevant players of all sizes ranging from large incumbents to early-stage FinTechs and from the growing ranks of unicorns to sources of finance and support.
- Financial services organisations
- FinTech - Seed
- FinTech - Venture
- FinTech - Growth
- FinTech - Established
- Investors
- Private Equity & Venture Capital
Financial services organisations
- Driving FinTech and TechFin Partnerships - Speed up your path-to-yield by qualifying and prioritising your growth and optimisation goals, leveraging our domain expertise, global reach and delivery capabilities to filter the noise in the ecosystem and identify the right FinTech & TechFin partners. Benefit from our proprietary online platform, API-enabled innovation sandbox, and data assets to explore and experiment, before structuring a deal that delivers meaningful outcomes.
- Ideas generation workshop: explore the opportunity - Explore the disruption facing the industry and identify opportunities to enhance your existing operations, develop your product suite, and prepare for the future.
- FinTech Horizon Scanning and Scouting: get ahead of the game - Match your key pain points with our insight on the evolving FinTech market, to scout, select and explore potential partnerships that solve your business challenges.
- Innovation Solutions: Accelerate your digital transformation - Accelerate your digital transformation journey by leveraging solutions developed by pairing our business expertise with proven FinTech technology to offer something new e.g. access executive insights into portfolio risk, duplication and waste with our partnership with GainX.
- Co-creation Hub: Test before you invest - Move FinTech ideas forward with support to rapidly co-create prototypes and test Minimum Viable Products in our secure sandbox environment, either building from scratch, leveraging shortlisted FinTechs, and/or using a myriad of third-party APIs to explore new products and services at speed before deployment.
- Implementation and adoption: Realise, commercialise and scale - Move FinTech products beyond MVP, embedding solutions into your organisational DNA as you productionise, commercialise and scale solutions.
FinTech - Seed
- Regulatory Authorisation Support
- Cashflow Coach: Quick way to stay on top of your business cash flow
- Market strategy and product positioning workshops
- Innovative culture and leadership workshops
- VAT e-file spreadsheet: Comply with HMRC making tax digital
- SEIS and EIS tax scheme support
- People related services: global remote working, immigration advice, Brexit, reward strategy including tax efficient share scheme plan advice, employment law
FinTech - Venture
- Scale Programmes: Accelerate Growth
- Raise Programme: Turbocharge fundraising
- Co-creation and Partnership Exploration with PwC
- Legal Ventures: Fundraising expertise through growth, expansion to exit
- HR Support: On demand HR and employment law advice
- Financial Crime Advisory and Managed Services
- People related services: global remote working, immigration advice, Brexit, reward strategy including tax efficient share scheme plan advice, employment law
FinTech - Growth
- Tax Support: Tax health checks, patent box, R&D credits, share incentives, and more
- Pathfinders: Exploring global expansion and immigration support
- My Financepartner: Extend and enhance your finance team with PwC experts
- Cloud Accounting Support Centre: Standardise key financial processes
- People related services: global remote working, immigration advice, Brexit, reward strategy including tax efficient share scheme plan advice, employment law
- Financial Crime Advisory and Managed Services
FinTech - Established
- IP and Corporate Law Advice
- Exit strategy: Make the right exit decision (i.e. M&A, or IPO)
- Cyber Security Readiness: Cyber Security health check
- Technology Risk and Resilience advice
- FinTech Regulatory Audit: Internal and external audit support
- Financial Crime Advisory and Managed Services
- People related services: global remote working, immigration advice, Brexit, reward strategy including tax efficient share scheme plan advice, employment law
Investors
- Due Diligence: investigating investment attractiveness - Support on the commercial, operational (e.g. tangible value estimates and risk profile management), technology (e.g. assessments of longevity and scalability), digital (e.g. digital user experience review), financial (e.g. business plan and assumptions validation), tax and legal issues faced across all stages of the deal cycle.
- Value Creation: creating value beyond the deal - Our Value Creation team helps clients ensure no value is left on the table, bringing together our end-to-end capabilities and technology across the Deals lifecycle.
- Corporate Finance Advisory - Advisory across all aspects of the transaction process, leveraging our deep expertise in the acquisition and valuation of FinTechs and raising finances for investors.
- Market scanning: Generating insights to make better business decisions - Bringing rigorous insights about current and future market dynamics to inform decisions on how best to respond to or reshape market trends.
- Corporate Strategy: preparing for the future - Help to create a strategic and actionable transformation plan for your FinTech business, with a focus on value creation to outpace your piers and enhance your capabilities to win.
- Deal Origination - Our Lead Advisory and Raise teams can bring you FinTech deals, both minority and majority investments.
- Valuations: Our dedicated FinTech valuations team can support you when assessing the value of a current or potential investment by approaching the problem from commercial and technical angles.
Private Equity & Venture Capital
- Market scanning: generating insights to make better business decisions - Bringing rigorous insights about current and future market dynamics to inform decisions on how best to respond to or reshape market trends.
- Corporate Finance Advisory - Advisory across all aspects of the transaction process, leveraging our deep expertise in the acquisition and valuation of FinTechs and raising finance for investors.
- Due Diligence: Investigating investment attractiveness - Support on the commercial, operational (eg tangible value estimates and risk profile management) technology (e.g. assessments of longevity and scalability), digital (e.g. digital user experience review), financial (e.g. business plan and assumptions validation), tax and legal issues faced across all stages of the deal cycle.
- Value Creation: creating value beyond the deal - Our Value Creation team helps clients ensure no value is left on the table, bringing together our end-to-end capabilities and technology across the Deals lifecycle.
- Corporate Strategy: preparing for the future - Help to create a strategic and actionable transformation plan for your FinTech business, with a focus on value creation to outpace your piers and enhance your capabilities to win.
- Valuations: Our dedicated FinTech valuations team can help you understand what your business or assets are worth in the context of a transaction, or as part of a strategic decision making process.
For more information on how we can help visit our FinTech Deals site
