Standalone fintechs will take business away from banks, according to the vast majority of lenders polled recently by PwC.

Total investment in financial technology – aka “fintech” – could reach $150 billion over the next three to five years, a PricewaterhouseCoopers survey says. The survey also shows the overwhelming majority of banks fear they will lose out to these new business models.

Some 83 per cent of respondents from traditional financial institutions think part of their business could be lost to standalone fintechs; that percentage rises to 95 per cent for banks.

The report, Blurred Lines: How FinTech is shaping Financial Services, is based on a survey of 544 respondents across 46 countries. Respondents comprise CEOs, heads of innovation, chief information officers and top management involved in digital and technological transformation across the finance industry: payments, asset and wealth management, banking and insurance. The survey also encompasses other companies such as consultants, national supervisory and international financial institutions.

Fintech covers a variety of areas: new “distributed ledgers” such as blockchain (which powers the controversial digital currency Bitcoin); mobile platforms for banks and various e-banking channels; analytics systems for clients to envisage how portfolio performance can be affected by market conditions and changing behaviours, and automated advisory/asset allocation offerings such as “robo-advisors”. Fintech is affecting payment systems, monitoring of accounts, security login procedures, marketing and branding. Banks such as UBS, Credit Suisse, Citigroup, DBS, Julius Baer and HSBC are investing in fintech, partly to keep pace with developments and to “future-proof” against upstart competitors.

“Fintech has the potential to deliver a unique customer experience – and that is one of the main reasons why FIs see it as a game changer,” said Matthew Phillips, financial services leader for PwC China and Hong Kong.

Developments are causing some financial institutions to disrupt themselves, rather than waiting for technology to hit them first. Some institutions are choosing to partner with technology companies to digitise and transform conventional models. This has its challenges, both technological and cultural, and is forcing some to create entirely new businesses and brands alongside their legacy businesses.  

However, the report also found that many traditional FIs are hesitant in the face of blockchain technology. While there is widespread appreciation of how transformative this technology will be, 57 per cent of respondents are uncertain as to what their next steps should be, the survey found.

“Blockchain represents a truly transformative opportunity for traditional FIs to restructure their cost base, enter into new business models and maintain relevance for customers who have increasing service expectations of speed and security,” said James Quinnild, financial services consulting leader for Asia-Pacific, PwC.

“In our view, it’s clear certain traditional sectors like payments and consumer banking understand the risk of disruption to their businesses.  However, real disruption and value creation will happen when technologies like blockchain enable new ecosystems of products and services and facilitate new markets for the exchange of assets and transfer of value – cutting across businesses as we see them today,” he said.