Financial services firms fear a 40pc revenue hit from fintech
Irish financial service providers, including banks and insurers, fear a massive hit as a new generation of financial technology - fintech - firms elbow into their traditional markets.
A majority of Irish financial services firms expect revenue losses of up to 40pc to fintechs over the next three to five years.
More than three-quarters fear part of their business is at risk, according to PwC's Irish fintech report, 'Redrawing the lines'.
The default response from most firms is to partner with their new rivals.
That's partly because incumbents haven't been able to generate returns from innovation themselves. Almost eight out of 10 firms surveyed expect to increase internal innovation efforts over the next three-to-five years, more than their global counterparts.
However, less than half of Irish firms say they are good at commercialising these ideas.
The expected annual return from fintech-related projects in Ireland is 8pc, compared to 20pc globally.
"With new business models, the pace of change in financial services seems only to be increasing. In the future, customers will be forced to make financial decisions based on a combination of artificial intelligence, even greater automation, less human intervention and new payment options.
"The survey confirms that fintech in Ireland is having a growing influence on financial services - and the long-term potential is even greater," John Murphy, partner with PwC said.
The survey was carried out in spring with participation from Irish banking, asset and wealth management, fund payments, insurance and fintech sectors.
In terms of the benefits from fintechs, Irish firms see the ability to leverage data analytics (54pc) as a much greater opportunity relating to the rise of fintech compared to global peers (46pc).
Unsurprisingly then, data analytics is regarded as the most relevant technology for investment by Irish financial firms.
On the flip side, fear of exposure to IT security breaches when engaging with external fintech providers is the big concern.
In contrast, artificial intelligence (AI) - 16pc - and the internet of things (IOT) - 7pc - are seen as much lower priorities, and are lower down the agenda in Ireland than elsewhere.
Regulation is seen as a significant barrier to innovation - in particular the need to painstakingly process client details to comply with anti-money laundering/knowing your client provisions.
Irish survey respondents said that anti-money laundering/knowing your client (76pc) provisions and data storage/privacy (67pc) were the greatest barriers to deploying fintech.
Nearly half of firms see use of fintech to improve customer retention as an opportunity, including greater focus on product design/ease of use, cost, superior customer service and 24/7 accessibility.
On the other hand, Irish banks are less likely than their global peers to feel that increasing customer empowerment is an important trend.
Despite billions pouring into the sector elsewhere, blockchain remains a minority interest here. Just 14pc of Irish respondents said they are familiar with the distributed ledger technology, compared to 24pc globally. Investment in blockchain here is lagging significantly behind global peers, even though all Irish respondents plan to adopt blockchain by 2020.