If that came to pass, it would represent a major upheaval in the financial services market and could force many of them to make drastic changes, including potential mass layoffs.

Of the executives PwC surveyed, 88% indicated that they believe their firms are threatened by fintech firms that offer standalone financial services. By focusing on specific segments of financial services, fintechs have in many cases been able to build better technologies and products than entrenched firms. And on top of those better technologies and products, many are delivering better overall experiences than established firms.

That has encouraged consumers to “unbundle” the financial services they purchase, making the days of giving all their business to one or two companies, such as a national or regional bank, a thing of the past.

Segments of the financial services industry that PwC has identified as being most vulnerable to standalone fintechs and unbundling are payments, money transfers and lending.

Down, not out?

But are established financial services firms really so vulnerable that they could lose a quarter of their revenue in the next several years? That figure is a significant one, but it’s not as far-fetched as it might seem.

For evidence that change can occur quickly in the typically slow-moving market, consider the following:

  • Following its fake account scandal, Wells Fargo, considered by many to be the best-managed big bank in the U.S. after it emerged from the Great Recession largely unscathed, recently revealed that new checking account openings have dropped by 43% year-over-year and new credit card applications have plunged by an even greater amount (55%) year-over-year.
  • Non-bank lenders, many of which conduct business primarily online, have grown their share of the consumer, business and mortgage loan markets substantially since the Great Recession. And their visibility among borrowers only continues to increase. For example, according to a J.D. Power study, 60% of small business owners who applied for a loan in the past 12 months considered a non-bank lender. At the fastest growing small businesses, that number increases to nearly two-thirds (74%).

The good news for large financial services firms is that most of them clearly recognize that they are being disrupted and are taking action. 82% of the executives PwC polled indicated that the coming years would see increased partnership between their firms and fintechs, and many of their firms are investing in homegrown initiatives that could help thwart competition from fintechs.

For example, JPMorgan CEO Jamie Dimon recently mentioned that his firm spent more than half a billion dollars last year on “emerging fintech solutions.” That’s a huge amount when compared to the capital available to the average fintech, but still just a relatively small portion of the $9.5bn his firm invested in technology generally.

But it’s not clear that the abundance of capital is even beneficial to big financial services firms. Fintechs are largely succeeding by focusing on a very specific segment of the broader financial services market, building better customer experiences, and taking advantage of their ability to move in a nimble fashion. They largely don’t have to worry about large legacy systems, and their priorities aren’t pulled in a million different directions because they don’t have a million different lines of business.

In other words, contrary to what financial giants might be inclined to believe, older, bigger and richer can bring with it many liabilities for established institutions – liabilities that many fintechs are successfully taking advantage of.

From this perspective, the greatest challenge large financial services firms have in addressing the fintech threat might be themselves, not the fintechs. Those that don’t want to risk losing a big chunk of their revenue base would be wise to recognize that instead of trying to crush fintechs, they should try to emulate them.