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Fin companies fear FinTech

Results from a PwC survey in the financial services (FS) sector has revealed that 83% of respondents from traditional FS firms believe part of their business is at risk of being lost to standalone FinTech companies.

Traditional financial services (FS) firms believe part of their business is at risk of being lost to standalone FinTech companies.

A new PwC survey, which assesses the rise of new technologies in the FS sector and their impact on market players, reveals 83% of respondents in general see this as a risk, rising to a staggering 95% in the case of banks.

The report, ‘Blurred Lines: How FinTech is shaping Financial services’, features the responses of 544 CEOs, Heads of Innovation, CIOs and top management involved in digital and technological transformation across the FS industry in 46 countries. Incumbents believe 23% of their business could be at risk due to further development of FinTech. What’s more, FinTech companies themselves anticipate they could capture 33% of the incumbents’ business.

Banking and payments feel most heat from FinTech

The survey shows the banking and payments industries are feeling the most pressure from FinTech companies.  Respondents from the fund transfer & payments industry anticipate that in the next five years, they could lose up to 28% of their market share to them, while bankers estimate they are likely to lose 24%. This compares to around 22% in the case of asset management & wealth management and 21% in insurance.

Top threats from FinTech

Two-thirds (67%) of FS companies ranked pressure on profit margins as the top FinTech-related threat, followed by loss of market share (59%). One of the key ways in which FinTechs support the margin pressure point through innovation is step function improvements in operating costs. For instance, the movement to cloud-based platforms not only decreases up-front costs, but also reduces ongoing infrastructure costs.

Blockchain untapped and underestimated by FS

Blockchain, a distributed ledger technology, represents the next evolutionary jump in business process optimisation technology. According to PwC, it could result in a radically different competitive future in the FS industry, where current profit pools are disrupted and redistributed towards the owners of new, highly efficient blockchain platforms. Not only could there be huge cost savings but also large gains in transparency. Yet it ranks low on the agendas of participants.

While the majority (56%) recognise its importance, 57% say they are unsure or unlikely to respond to this trend.

“When faced with disruptive technologies, the world’s leading companies succeed by rapidly weaving them into their DNA, as part of their ‘business as usual’ process,” says Haskell Garfinkell, US FinTech co-leader, PwC.

“Blockchain and disruptive ledger technologies offer a once-in-a-lifetime opportunity for financial services companies to transform the way they do business. In our view, the lack of understanding of blockchain technology and its potential for disruption poses significant risks to existing business models and the firms that do not take the time to understand the impact will underestimate the opportunities and threats that blockchain can provide.”

To put this into perspective, PwC’s Global Blockchain team has identified over 700 companies entering this space, 150 of whom it says are ‘ones to watch’ and 25 of which it expects will likely emerge as leaders.

Challenges for FinTech companies and incumbents

PwC’s survey shows the most widespread form of collaboration with FinTech companies is joint partnership (32%), which, says PwC, is indicative FS firms are not ready to go all in and invest fully in FinTech.

Asked what challenges they face in dealing with FinTech companies, 53% of incumbents cited IT security, regulatory uncertainty (49%) and differences in business models (40%).

In the case of FinTech companies, differences in management and culture (54%), operational processes (47%) and regulatory uncertainty (43%) were deemed the top three challenges when dealing with traditional FS firms.

Steve Davies, EMEA FinTech Leader at PwC comments:

“FinTech is changing the FS industry from the outside. PwC estimates within the next 3-5 years, cumulative investment in FinTech globally could well exceed $150bn, and financial institutions and tech companies are a stepping over one another for a chance to get into the game. As the lines between traditional finance, technology firms and telecom companies are blurring, many innovative solutions are emerging and there is clearly no straightforward solution to navigate this FinTech world.”

Paul Mitchell, Fin Tech Leader, PwC South Africa, says:

“South African financial services players, old and new, are uniquely positioned in a sophisticated industry on a high growth continent. The opportunities for innovative solutions for a young and adaptable population is huge, and the impact of FinTech in Africa could well overtake what we are seeing in the US and Europe.”

“Customers’ behaviour, and their expectations around how companies interact with them, is changing quickly. The FinTech industry is driving these changes in financial services, and the established businesses in the industry who recognise this are having to learn fast. This is leading to a reassessment of many elements of the customer experience and engagement process that will play out over the next few years.”

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Mobile is the new branch

Standard Bank has launched an account for mobile devices that gives back 500MB of data a month

Standard Bank has introducd a R4.95p/m bank account called MyMo that customers can open on their mobile devices, loaded with data and airtime offerings and other benefits such as virtual and Gold physical card.

MyMo account holders will also enjoy the convenience of a cheque account through a Visa and Mastercard gold card. Once the account is open, users can choose to either receive R50 in airtime or 500MB of data a month, if their card is swiped more than four times a month. A further megabyte of data is loaded on the account for every R20 spent.

“MyMo is an account for everyone, whether you just landed your first job or have been around the block. With no documentation required it only takes a few minutes to open the account,” says Funeka Montjane, Chief Executive for Personal and Business Banking, South Africa, at Standard Bank Group. “For just R4.95 a month customer will be able to enjoy free swipes and ATM withdrawals at only R6.50 for amounts under R 1 000.

“Mobile is the new branch. This account is about bringing the mobile branch into customers hands, it is about convenience and security while banking.”

She says mobile offers low cost transactional banking which integrates people and businesses into the new connected economy, making mobile the new branch ecosystem that will drive and connect Africa’s growth. Physical connections to the economy are rapidly changing to digital where banks have to move from being financial institutions to service organisations.

“In the past people congregated in communities and eventually cities to maximise the advantages of connectivity. Today a simple hand-held device has the potential to open infinite doors, transforming individuals’ access to opportunities, regardless of where they are, and like never before in history. 

“Historically, a bank account represented access to economic citizenship. Today, having a simple device enabling digital access to a modern banking platform is a passport to global connectivity and vast human development potential.”

The bank says it is using technology, and mobile phones in particular, to deliver low-cost transactional channels accessible to all our customers. The evolution in mobile can be seen in transaction options like cash back at the retail checkout till rather than the ATM, free digital banking rather than using a branch, and the ability to transact using digital wallets, even without a bank account.

“Developing comprehensive connected ecosystems requires a mind-set change from Africa’s banks,” says Montjane. “Banks will evolve away from traditional financial service organisations, into service ecosystems enabling broad universal access to almost everything like enhanced purchasing experiences of vehicles and homes, online procurement of goods and services and lifestyle elements like rewards and travel. 

“These connectivity drivers will also act to future-proof evolving connectivity ecosystem by allowing us to offer untold future services while deriving income from as yet unrealised revenue streams,.   

From a customer perspective, the kind of ecosystems of knowledge, access and, ultimately, connectivity that banks will come to provide will radically transform the share of life that almost all individuals will be able to access.”

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Two-thirds of SA staff hide social media from bosses

With 90% of people in employment going online several times a day, it can be hard for most workers to keep their private and work-life separate during the working day (and beyond). The recently published Global Privacy Report from Kaspersky Lab reveals that 64% of South African consumers choose to hide social media activity from their boss. This secretive stance at work also extends to their colleagues, with 60% of South Africans also preferring not to reveal online activities to their co-workers.

Globally, the average employee spends an astonishing 13 years and two months at work during their lifetime. Interestingly though, not all this time is directly related to solving work tasks or earning a promotion: almost two thirds (64%) of consumers admit visiting non-work-related websites every day from their desk.

Not surprisingly, 35% of South African employees are against their employer knowing which websites they visit. However, more interestingly, 60% of South African are even against their colleagues knowing about their online activities. This probably means that colleagues constitute an even greater threat to future perspectives of an office slouch or maybe the relationships with colleagues are more informal and therefore, more valuable.

On the contrary, social media activity appears to be a less private domain for many and therefore, more suitable for sharing with colleagues but not the boss. This is probably because workers fear harming the public image of a company or interest in decreased staff productivity motivates companies to monitor employees’ social networks and make career changing decisions based on that. Such policies have led to 64% of South Africans saying that they don’t want to reveal their social media activities to their boss and 53% even don’t want to disclose this information to their colleagues.

A further 29% are against showing the content of their messages and emails to their employer. In addition, 3% even said that their career was irrevocably damaged as a consequence of their personal information being leaked. Thus, people are worried about how to build a favourable internal reputation and how not to destroy existing workplace relationships.

“As going online is an integral part of our life nowadays, lines continue to blur between our digital existence at work and at home. And that’s neither good nor bad. That’s how we live in the digital age. Just keep remembering that as an employee you need to be increasingly cautious of what exactly you post on social media feeds or what websites you prefer using at work. One misconceived action on the internet could have an irrevocable long-term impact on even the most ambitious worker’s ability to climb the career ladder of their choice in the future,” comments Marina Titova, Head of Consumer Product Marketing at Kaspersky Lab.

To ensure workers don’t fall prey of the internet threats at a work, there are some core guidelines to adhere to in the digital age:

  • Don’t post anything that could be considered defamatory, obscene, proprietary or libellous. If in doubt, don’t post.
  • Be aware that system administrators may at least, in theory, be informed about your web browsing patterns.
  • Don’t harass, threaten, discriminate or disparage against any colleague, partner, competitor or customer. Neither on social networks or in messages, emails, nor by any other means.
  • Don’t post photographs of other employees, customers, vendors, suppliers or company products without prior written permission.
  • Start using Kaspersky Password Manager to ensure your social media and other personal accounts are not at risk of unauthorised access by someone else in an office. Install a reliable security solution such as Kaspersky Security Cloud to protect your personal devices.

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