Q. What do you see unfolding over the next For incumbent financial institutions to 12 months? succeed, they’ll have to do three things well: A. Looking forward, we expect FinTech  Continuously scan the environment to disruptors to continue to expand into other identify new threats and opportunities. areas within financial services. There’s a lot of  Quickly understand the effect that interest in areas like marketplace lending, emerging trends and technologies could credit underwriting, digital cash, treasury have on their business.3 functions, deposits, and bill payments. We  Come up with solid strategies to react— also anticipate a lot of activity in the robo- advice and wealth management space over from acquiring or working with FinTech the next year. startups to building their own innovative solutions. Perhaps more importantly, we predict a lot of FinTech innovation in the next 12 months in Q. Do you have any recommendations for the the business-to-business (B2B) space. You longer term? can think of this as “FinTech 2.0.” Here, expect tech innovations like blockchain to A. Everyone needs to recognize that this isn’t come on line. As they do, they’ll start to going away. It’s the “new normal.” Over the radically alter business processes and drive long-term, financial institutions are going to down costs. We’re already witnessing a lot of have to make some fundamental changes. firms exploring how they can apply these They’ll need to: breakthrough technologies. Done right, there are some real efficiency gains to be had.2  Become more agile. Incumbents tend to have long planning and delivery Q. What should incumbents do about all this? cycles. They’ll need to change this as Do they need a FinTech strategy? they incorporate emerging technology into their businesses and partner more A. We see incumbent banks, asset managers, with disruptors. and insurance companies looking for ways to  Manage the business from the play defense and offense at the same time. “inside out” instead of from the And that’s reasonable. You have to know how “outside in.” FinTech offers amazing a disruptive FinTech development could hurt potential, but that can actually be a your business, even as you’re looking for ways distraction. Institutions have to start to take advantage of the technology. with their own needs in mind, rather The disruptors themselves take different than working backwards to figure out approaches. Some target specific niche areas how to use the latest technology. of the industry. Others are using new  Change the way they approach technologies, such as blockchain, in ways that innovation. Most incumbents still will cross a lot of boundaries. struggle with finding and implementing innovative ideas. There are ways to do it well, though. In fact, they can learn from disruptors. Once you’ve figured out how to test-and-learn, a lot of other things fall into place. 2 For more information on blockchain, see PwC Financial Services Institute, “Making sense of bitcoin, cryptocurrency, and blockchain” PwC, Feb 2016. 3 For more information on our new platform focused on the impact of FinTech innovation on financial services, visit http://www.strategyand.pwc.com/denovo. FinTech Q&A 3