Fintechs have not successfully established themselves as dominant players yet – but their potential is set to overhaul the financial services sector as we know it. This is according to a report – Beyond Fintech: A Pragmatic Assessment Of Disruptive Potential In Financial Services – by the World Economic Forum (WEF), in collaboration with Deloitte.

Fintechs will bide their time

While new innovations haven't been material enough to attract customers to new fintech companies instead of their traditional financial service providers, there are pockets of opportunity for fintechs in markets where incumbents aren't meeting customer needs.

Fintechs have been more successful in improving existing financial infrastructure, rather than creating new systems, such as alternative payment networks or alternative capital markets.

Having said that, the report found that fintechs have been successful in shaping and driving the pace and direction of innovation and have reset the bar for customer expectations. The report stated: “Through innovations like rapid loan adjudication fintechs have shown that the customer experience bar set by large technology firms, such as Apple and Google, can be met in financial services.”

8 ways fintech will disrupt banking as we know it

While some financial institutions have been working with fintechs to explore innovation, the accelerating rate of change does pose some serious threats, says the report. Some of the disruptive forces mentioned in the WEF report include:

1. Cost commoditisation

Financial institutions will accelerate the commoditisation of their cost bases, removing them as points of competition and creating new grounds for differentiation

2. Financial regionalisation

Diverging regulatory priorities and customer needs will lead financial services in different regions of the world down distinct paths

3. Profit redistribution

Technology and new partnerships will enable organisations to bypass traditional value chains, thereby redistributing profit pools

4. Experience ownership

Power will transfer to the owner of the customer interface; pure manufacturers must therefore become hyper‐scaled or hyper‐focused

5. Platforms rising

Platforms that offer the ability to engage with different financial institutions from a single channel will become the dominant model for the delivery of financial services

6. Data monetisation

Data will become increasingly important for differentiation, but static data sets will be enriched by flows of data from multiple sources combined and used in real time

7. Bionic workforce

As the ability of machines to replicate the behaviours of humans continues to evolve, financial institutions will need to manage labour and capital as a single set of capabilities

8. Systemically important techs

Financial institutions increasingly resemble, and are dependent on, large tech firms to acquire critical infrastructure and differentiating technologies