The level of fintech adoption among consumers is set to grow significantly this year – a change that will require traditional financial services companies to revisit their customer service strategies to compete effectively with new market entrants, according to EY’s first ‘FinTech Adoption Index’.
According to a survey of 10,131 “digitally active” consumers in Australia, Canada, Hong Kong, Singapore, the UK and the US, 15.5 per cent have used at least two fintech services — financial services products developed by non-bank, non-insurance, online companies — in the past six months. Survey responses also suggest that adoption rates among digitally active consumers could potentially double within the next 12 months if respondents follow up on their intentions to use fintech products and services.
The index evaluates the use of 10 fintech services in four categories: savings and investments; money transfer and payments; borrowing; and insurance. The 10 services are: peer-to-peer platforms for investments; equity or rewards crowdfunding; online investment advice and investments; online financial planning; online stock broking or spread betting; online foreign exchange; overseas remittances; non-bank money transfers; borrowing using peer-to-peer platforms; and health insurance premium aggregators or car insurance using telematics.
Imran Gulamhuseinwala, EY global fintech leader, said: “The adoption of fintech products is relatively high for such a new sector, so the risk of disruption is real. As fintech continues to catch on among consumers, traditional financial services companies will have to reassess their view of which customers are most at risk from the new competition and step up their efforts to serve them effectively.”
Within the mushrooming fintech sector, payment services have the highest adoption rate (17.6 per cent in the markets surveyed by EY). Services in this category include the use of non-bank providers to make online payments, online foreign exchange, and overseas remittances.
Savings and investments is the second most-used category (16.7 per cent). Online stock broking and spread betting is the most common activity within this category, followed by online budgeting and planning; online investments; equity and rewards crowdfunding; and peer-to-peer or marketplace lending.
Insurance services, including health premium aggregators and car insurance using telematics (7.7 per cent), and online borrowing through peer-to-peer websites (5.6 per cent) are among the less commonly used services by respondents.
Early fintech adopters tend to be younger, higher-income customers. Respondents between the ages of 25 and 34 years old used at least two fintech products in the past six months the most (25.2 per cent), followed by those aged 35 to 44 (21.3 per cent), and those aged 18 to 24 (17.7 per cent).
Fintech use is highest among consumers with incomes greater than US$150,000 (44.1 per cent). Usage declines to 24 per cent among consumers with incomes between US$70,001 and US$150,000, and 14.7 per cent for consumers with incomes between US$30,001 to US$70,000.
Hong Kong has the highest rate of fintech use of all markets surveyed (29.1 per cent). The US has the second-highest adoption rate (16.5 per cent), followed by Singapore (14.7 per cent), the UK (14.3 per cent), Australia (13 per cent) and Canada (8.2 per cent).
For digitally active respondents who have not used two or more fintech products in the past six months, 53.2 per cent say they were unaware the products existed, followed by 32.3 per cent who say that they do not have a need to use the products, and 27.7 per cent who prefer to use a traditional financial services provider, while 21.3 per cent say they do not understand how the products work.
Risk of disruption with fintech is ‘real’ – EY survey