Feature


Tax & Accounting


Embracing the


FinTech opportunity


David Roper, head of financial services at PwC in the Midlands, discusses the opportunities facing Birmingham’s financial services sector as Financial Technology (FinTech) changes the industry.


The digital revolution is transforming financial services. In the past, financial services companies serviced their clients by acting as intermediaries in the system. But these traditional functions are becoming increasingly disrupted by FinTech – an array of new technologies, services and companies that are changing financial services. Before these traditional intermediary roles become obsolete, firms need to wake up to the opportunity provided by FinTech and the evolving financial landscape. This was a key point of discussion at our recent


event in Birmingham to discuss the challenges and opportunities around how FinTech is shaping the UK’s financial services industry. The debate, which also touched on data security and the tax implications affecting FinTech, was led by members of PwC’s FinTech team. What was clear from the discussions on the day is


that the stakes are high and traditional financial services are feeling the impact of FinTech. This conclusion is backed up by new research: ‘Blurred Lines: How FinTech is shaping financial services’, which reveals that established market players in particular are feeling threatened. Eighty three per cent consider themselves at risk of losing some of their business to stand-alone FinTech firms over the next three to five years.


44 CHAMBERLINK June 2016 The fund transfer and payments sector is feeling the


most pressure, fearing a 28 per cent loss of market share, while bankers think 24 per cent of their business is at risk. In asset and wealth management, this falls marginally to 22 per cent – and to 21 per cent in insurance. The FinTechs themselves, however, are more ambitious: they expect to capture as much as 33 per cent of the incumbents’ business – almost half as much again as the established sector fears is threatened. Blockchain, a distributed ledger technology, represents


the next evolutionary jump in the FinTech story. Not only does it offer the real possibility of huge cost savings, there could also be massive improvements in transparency. At its most basic, Blockchain is a record of data, which,


instead of being held by one entity, is distributed across many different entities. This distribution of information has many far-reaching potential consequences for financial services. Bitcoin is the most famous example of Blockchain technology – a cryptocurrency (a currency underpinned by technological surety as opposed to a central bank) whose distribution and ownership is recorded on the Blockchain. But while Blockchain start-ups are flocking to the


sector, established financial services don’t really get it: while 56 per cent say they recognise the importance of Blockchain, 57 per cent don’t know how (or even if) they’ll respond.


David Roper of PwC in the Midlands


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