The ‘Big Four’ global accounting firms PricewaterhouseCoopers (PwC), Deloitte, Ernst & Young (EY) and KPMG have all been trying to figure out which way Financial Technology (FinTech) is heading.

As such they have been publishing articles and reports and trying to provide the world with an analysis of where the nascent financial technology industry is heading. These accounting firms are important mainly because they service, in one capacity or another, most of the world’s companies and provide insight and shape opinion of industry leaders across myriad of sectors.

It is interesting to see how they foresee the impact of FinTech on the financial sector. While some of the ‘Big Four’ think that Fintech might be the next best thing since sliced bread, others seem to take a dim view.

Earlier this summer, they announced a meeting with the American Institute of Certified Public Accountants where they are set to discuss the establishment of a distributed ledger consortium. Deloitte, Ernst & Young, KPMG and PwC will be looking at various Blockchain solutions for the accounting sector just as the R3 Consortium - which has over 50 members - has been doing for the financial sector.

Deloitte - A Party Pooper

Deloitte is the second largest accounting firm out of the ‘Big Four’ and raked in US$ 35.2 billion in revenues in 2015. The company takes a negative view of FinTech overall and see’s the FinTech industry as a disruptor.

The company has published a report titled ‘Fintech - Disrupting the way we bank’. This report is targeted at the Australian market and looks at how various service providers are putting a spanner in the wheels of the big banks in the country. This includes payment platforms, internet giants, p2p lenders, payday lenders and credit decisioning platforms etc. Interestingly, among the list of disruptors the last names are Bitcoin and Blockchain.

The report takes a grim view regarding the new kids on the street concluding:

“Typical disruptive scenarios start with new entrants entering less attractive segments and then “bootstrapping” themselves into more lucrative areas as their capabilities develop (as per the PayPal example), so there is a clear risk to banks as their services are unbundled and addressed by niche players with better agility, technology or customer propositions. Conversely, there are reasons why banks are asked to hold capital and why deregulated solutions have been eschewed. Once the first P2P lender fails and people lose money, then it is likely to be a different story.”

PricewaterhouseCoopers (PwC) - Drawing Blurred Lines

PwC is the big boy among the ‘Big Four’ with a revenue of US$ 35.4 billion dollars in 2015. They ran a global survey of the top financial institutions in the world and polled 544 respondents. These were mainly CEOs and other executives, as well as the management of companies in the financial services industry. They also got insights and data from PwC strategy and platform which is made up of a 50-member team of FinTech subject matter experts.

The report they published is called Blurred Lines How FinTech is shaping Financial Services. PwC has identified key trends and seems to think that disruption in the financial services sector will first impact consumer banking and payments. In fact, all major heads such as fund transfers and payments, Investment and Wealth Management, SME Banking, Brokerage Services, Property and Casualty Insurance/Life Insurance and Commercial Banking etc can expect disruption from FinTech in the future according to PwC.

The accounting firm is of the view that it is customer centricity that is leading to disruption:

“As clients are becoming accustomed to the digital experience offered by companies such as Google, Amazon, Facebook and Apple, they expect the same level of customer experience from their financial services providers. FinTech is riding the wave of disruption with solutions that can better address customer needs by offering enhanced accessibility, convenience and tailored products. In this context, the pursuit of customer centricity has
become a main priority and it will help to meet the needs of a digital native clientele.”

Ernst & Young (EY) - Reshaping a New Landscape

EY seems to take a kinder view of the FinTech industry. The tone of EY is not one of a spanner in the wheels, the sky is going to fall etc. While they do see FinTech has a disruptor, they see it as an emerging trend.

According to EY, which saw a revenue of US$ 28.7 billion in 2015, their survey indicates that 15.5 per cent of digitally active consumers have used at least two FinTech products in the last six months.

In their EY FinTech Adoption Index they have looked at what type of person is more likely to be an early adopter, where FinTech is really making headway (Hong Kong!) and what the prospects are of the industry. Interestingly the survey also looks at the main reason for not adopting FinTech and that was cited as ‘unawareness’.

EY says:

“While many traditional providers are grappling with how to replace cumbersome, outdated and time-consuming account establishment forms and processes, FinTechs are enabling customers to set up services with as little as one click.”

EY also has a grim warning for traditional bankers. FinTech adopters, according to them, tend to be young, high-income customers and they are the banking and insurance sectors most valuable customers. The writing is clearly on the wall!

KPMG - The Pulse of FinTech is Strong

KPMG publishes a quarterly report titled The Pulse of FinTech. They take a good indepth look at how the FinTech industry is faring. KPMG, with profits of US$ 24.4 billion in 2015 think that there is a considerable growing interest in the FinTech sector.

In the latest edition of the KPMG report they covered how even though in Q2 2016 funding has fallen by 49 per cent, the future of FinTech is positive.

They say:

“Globally, fintech is expanding. New companies and ideas, rapidly evolving technologies and innovations in other industries are being used to advance and drive new offerings in the banking, financial services and insurance sectors.While there was a decline in global funding to VC-backed companies, this pause is not reflective of the sectors’ unique strengths and potential for growth; rather, the decline is most likely a result of global market conditions. Even with the Q2’-16 decline, investment into VC-backed fintech companies is on pace to exceed 2015 levels.”

FinTech is the elephant in the room

We can safely conclude from the findings of the ‘Big Four’ that each and every one of them see FinTech as a trend that will significantly alter the shape of the financial services sector.

While some see FinTech as an elephant in a china shop, others see it as the elephant in the room that is obvious and should be discussed. FinTech is basically just trying to do what technology always does - improve the way things are done.

It is best to put it in the words of James McKeogh, Partner Management Consulting KPMG in Hong Kong who says in the latest KPMG Pulse of FinTech report:

“A lot of companies in Asia are trying to leverage fintech, not from a perspective of disrupting the market, but more from an efficiency and innovation perspective to improve the current processes and digital capabilities that they have.”

How do you view this elephant?