Fintech companies are quietly shaking up the banking industry - and big payments companies should be scared
- Traditional banks tend to shrug off threats from fintech upstarts, but new research has found that these newcomers are quietly shaking up the banking industry.
- These new entrants have accumulated up to one-third of new revenue, says a report from Accenture released on Wednesday.
- The impact of these companies is different across regions. In the US, they captured 3.5% of the total banking and payment revenue in 2017, compared with 14% in the UK, Accenture found.
Traditional banks tend to shrug off threats from fintech upstarts, but new research has found that these newcomers are quietly shaking up the banking industry.
According to a report released by Accenture on Wednesday, one in six players in the banking industry in 2017 was a new entrant - defined as a company that entered the market after 2005 - even as the total number of banking and payments institutions declined by nearly 20% from 2005 to 2017.
Notably, new entrants to the banking market - including challenger banks, non-bank payments institutions, and big tech companies - have accumulated up to one-third of new revenue, Accenture found.
"While few of these new players have raised alarm bells among traditional banks, the threat of reduced future revenue growth opportunities is real and growing," the report said.
New tech companies are popping up all over the globe, but they've had different effects in different regions.
In the US, about 19% of financial companies in 2017 were new entrants, but they made up only 3.5% of the more than $1 trillion in banking and payment revenue, the report said. Regulatory hurdles in the country have made it more difficult for new entrants to break into the established industry, fostering a relatively stable environment for incumbents, according to Accenture.
But in the UK, whose government launched a crypto-assets task force earlier this year and developed a fintech regulatory sandbox, new entrants accounted for 63% of the financial players and captured nearly 14% of total banking and payment revenue last year, Accenture found.
Fintech's impact in China is even more staggering. Ant Financial, the digital-payments arm of Alibaba, and WeChat Pay, from the social-media platform, have a combined 94% of the country's mobile-payments market with more than 1.3 billion active users.
Accenture's research was based on more than 20,000 banking and payments institutions across seven markets, including Australia, Canada, China, the EU, the UK, and the US.