Survey results from a newly released global report by KPMG revealed that fintech was considered the number one source of disruption (57 per cent), followed by “growing global regulatory complexity” (51 per cent) and “new business models”.
The impact of fintech was causing traditional financial institutions to “face a new reality”, according to the report.
“Products, services and business models that have worked for decades are no longer an option in the digital world,” the report said. “To thrive, organisations recognise that they need to reinvent what they do and how they do it.”
When compared with global peers, Australia was found to be more prepared for the challenge of fintech disruption, with 67 per cent of Australian survey participants having a clear strategy compared to 47 per cent of global respondents, according to a statement.
Furthermore, Australian firms (78 per cent) demonstrated more initiative in responding to the fintech challenge, with 78 per cent “planning or already developing capabilities in-house” compared to the average of global firms (52 per cent).
Commenting on the report, KPMG Australia head of banking and global co-lead for fintech Ian Pollari said that Australian financial institutions were “up there with the leading players” in embracing fintech disruption.
“Arguably, taken as a whole, the Australian financial services market has been quicker to adapt to disruption and technology trends,” Mr Pollari said.
“Every Australian respondent to our survey already had a dedicated fintech team in place and had developed frameworks to vet fintechs approaching their organisation.”
The report signalled that customer expectations inside and outside of financial services were evolving, and that fintech adoption needed to be vertically integrated.
“Financial institutions too often deal with fintech in a very inefficient, fragmented and tactical manner,” said Murray Raisbeck, KPMG International partner and global co-leader for fintech.
“The companies that succeed have undertaken careful architecting of their transformation strategy, including the integration of fintech within their organisation.”
Compliance and regulation as well as legal infrastructure remained “stumbling block[s]” for financial institutions around the world, along with day-to-day operations getting in the way of innovation.
“This has led many organisations to simply focus on resolving one issue at a time — usually the issue with the most pressing time frame for action, rather than the one that will lead to the most enduring value,” the report said.
Leadership also played a significant role in an institution’s adoption of fintech, Mr Raisbeck commented in the report.
“When it comes to encouraging fintech innovation,” he said, “the tone at the top that is set by leadership is absolutely fundamental — that needs to be aligned with how they set strategy, and with how they measure performance against that strategy.”