How financial institutions are embracing fintech to evolve and grow

The financial services industry is undergoing a paradigm shift. Emerging technologies like artificial intelligence (AI), machine learning, the Internet of Things (IoT) and blockchain, combined with ever-changing customer expectations and preferences, are redefining how financial institutions deliver services. Remaining competitive in this constantly changing environment is an enormous task. Banks, insurers and asset management companies are undertaking major transformation efforts — transitioning from complex legacy technology environments to more agile operations, and creating more efficient compliance processes that fully satisfy evolving global and jurisdictional regulations. Financial institutions see startup financial technology firms — or fintechs — as a major part of the digital future. As evidence of this, financial institutions have invested more than US$27 billion in fintech and digital innovation since 2015.1 However, corporate investment is only part of the landscape. To understand how different organizations are approaching the strategic opportunities presented by fintechs, we conducted a survey of more than 160 financial institutions from 36 countries. We also held in-depth interviews with executives from leading financial institutions and our own financial services partners from around the world. Our research shows that while financial institutions recognize that fintech is a substantial disruptor, no single path has emerged to define how companies should approach fintech. Leading financial institutions are pursuing many different avenues — including partnering, buying, sourcing and investment strategies. One key best practice across leading financial institutions is strategy: having a clear fintech strategy that aligns to organizational objectives, considers current assets and capabilities, and includes an execution plan for addressing gaps and managing a transformation that may never have a defined end point as fintech will continue to evolve. There is no clear winner when it comes to fintech today. Every organization has the opportunity to forge a new fintech future and win against their competition. We hope this report will provide a useful resource for understanding how different financial institutions are approaching fintech, and factors to consider as you define your own path forward. If you would like to discuss our findings in more detail or learn what your organization can do to get the most value from fintech opportunities, please contact us or your local KPMG partner.