The adoption of financial technology by consumers has surged globally in the past 18 months and is on the verge of becoming mainstream, the results of the latest EY FinTech Adoption Index show.
On average, a third of digitally active consumers in 20 markets covered by the study are now using FinTech.
The analysis, based on 22,000 online interviews with digitally active consumers, shows that the emerging markets are the main drivers of FinTech adoption, with China, India, South Africa, Brazil and Mexico averaging a 46 percent adoption rate.
Consumers in China and India have embraced FinTech services more than any other countries with usage rates of 69 percent and 52 percent, respectively. FinTech firms in these countries are particularly successful at tapping into the tech-literate but financially underserved segments, the EY study noted.
The U.K. has also shown significant growth and is leading the developed markets with an adoption rate of 42 percent.
Most use payment services and insurance
Half of the surveyed consumers use FinTech money transfers and payment services, and 88 percent stated they anticipate using these services in the future.
EY noted the new services that have contributed to this upsurge include online digital-only banks and mobile phone payments at checkout.
The EY FinTech Adoption Index evaluates FinTech services in five categories: money transfers and payments services, financial planning, savings and investments, borrowing and insurance.
Insurance has also made huge gains, the report found, moving from being one of the least commonly used FinTech services in 2015 to the second most popular in 2017. It is now used by nearly a quarter (24 percent) of the respondents.
This is mainly the result of the expansion into technologies such as telematics and wearables, which help companies to better predict claim probability, and in particular the inclusion and growth of premium comparison sites.
Chris Maiato, EY advisory leader in Bermuda, the Bahamas and Cayman (BBC), says, “We are seeing widespread FinTech interest in the BBC region, across all industries. FinTechs not only provide an opportunity to our market; but our market provides an opportunity to FinTechs by giving a window into some of the largest companies in the insurance, banking and asset management industries.”
In the region, FinTech companies have direct access to leadership teams and global markets, he added.
FinTech adopters actively use the sharing economy and on-demand services
According to the study, 40 percent of FinTech users regularly use on-demand services, such as food delivery, and 44 percent of FinTech adopters regularly participate in the sharing economy, for instance car sharing. This is in stark contrast to non-FinTech adopters, who are much less inclined (11 percent) to use these services on a regular basis.
Millennials, the group of 25- to 34-year-olds, are the most likely demographic to use FinTech, followed by 35- to 44-year-olds.
The study showed that people in these age cohorts are not only comfortable with technology, but they also require a wide range of financial services as they achieve milestones such as completing their education, gaining full-time employment, becoming homeowners and having children.
There is growing adoption among the older generations: 22 percent of digitally active 45- to 64-year-olds, and 15 percent of those over 65, said they regularly use FinTech services.
The study has also identified a new segment of users, the “super-user.” These individuals use five or more FinTech services and account for 13 percent of all consumers. “Super-users” generally consider FinTech firms to be their primary providers of financial services, EY said.
“There are those who believe that FinTechs struggle to translate the innovation and great customer experience that they create into real customer adoption. The EY FinTech Adoption Index suggests that thinking is now outdated,” says Imran Gulamhuseinwala, EY global FinTech leader.
“FinTechs are not only becoming significant players in the financial services industry, but are also shaping its future. Their new propositions are increasingly attractive to consumers and this trend is only set to continue as awareness grows, concerns are allayed and new advancements are made. Traditional firms, which sometimes struggle to deliver the same seamless and personalized user experiences, will undoubtedly need to step up their efforts to remain competitive. I think it’s likely that we will see greater collaboration between traditional firms and FinTechs in the future.”
FinTech adoption is set to increase globally
The EY FinTech Adoption Index predicts that FinTech adoption is set to increase in all 20 markets covered by the study. Based on the results of consumers’ intention to financial technology in the future, FinTech adoption could increase to an average of 52 percent globally. The highest proportional increases of intended use among consumers is expected in South Africa, Mexico and Singapore.