EY FinTech Adoption Index 2017
The rapid emergence of FinTech
FinTech: organizations combining innovative business models and technology to enable, enhance and disrupt financial services.
The rapid emergence of FinTech
The rapid increase of FinTech firms operating in the financial services industry, and the corresponding VC and corporate investment in this sector, has attracted significant attention from both industry observers and the media. We launched the first EY FinTech Adoption Index in 2015 to cut through the hype and understand whether digitally active consumers were actually using FinTech services on a regular basis. The answer at the time was yes: 16% of our surveyed consumers had used two or more FinTech services in the prior six months, with adoption potentially doubling in the near future.
The 2017 study reveals that this has happened in just 18 months. Findings from the 2017 study show that FinTech firms have reached a tipping point, and are poised for mainstream adoption across our 20 markets. Building upon the strength of their core characteristics of focusing on the customer proposition
and leveraging technology in novel ways, FinTech firms are gaining traction in the market. In the process, they are blurring boundaries between financial products and lifestyle propositions, as well as defining new standards within financial services. FinTech firms share two core characteristics: a laser-like focus on the customer proposition and a willingness to apply technology in novel ways. These are powerful differentiators in a marketplace where many product-focused incumbent financial services companies struggle to deliver the seamless and personalized user experiences that consumers increasingly expect.
Consumers are drawn to FinTech services because propositions are simpler, more convenient, more transparent and more readily personalized. This has a ripple effect across the industry as consumers come to expect these characteristics in all financial products, regardless of whether in retail banking, wealth management or insurance, and of who is providing the service.
Four key consumer themes emerged from the 2017 EY FinTech Adoption Index
1. FinTech has achieved initial mass adoption in most markets
The average percentage of digitally active consumers using FinTech services reached 33% across the 20 markets. Benchmarked to academic theory on innovation adoption, it suggests that FinTech services have reached a milestone in being adopted by the “early majority” of the population. There is evidence of increasing awareness: for the six markets where a comparison is available, 84% of customers are aware of FinTech services in 2017 compared with 62% in 2015. This is driven in part by the emerging markets in our study: FinTech adoption by digitally active consumers in Brazil, China, India, Mexico and South Africa average 46%, considerably higher than the global average. From an individual market perspective, China and India have the highest adoption rates at 69% and 52% respectively. This is because FinTech firms excel at tapping into the tech-literate, but financially underserved population, of which there are particularly high ratios in emerging countries.
2. New services and new players are driving higher adoption
Among our five categories, money transfer and payments are driving FinTech adoption. 50% of our digitally active consumers have used this type of service in the last six months, which suggests this category has reached “late majority” adoption. Insurance services have also seen significant increases, overtaking both savings and investments, and borrowing, with 24% adoption. One potential influence may be attributed to the greater activity from regulators and policymakers in some markets that support FinTech, such as in money transfer and payments, as well as insurance services. These groups are addressing new business models and technologies that were previously undefined by the current regulatory framework, setting up initiatives, such as steering groups and sandboxes, updating licensing regulations, and introducing infrastructure changes that facilitate open APIs.
3. FinTech users prefer using digital channels and technologies to manage their lives
Unsurprisingly, use of FinTech products and services is higher among younger consumers. Those with the highest use, 25- to 34-year-old consumers, are not only tech-savvy “digital natives,” but are also at the age where they have a greater need for financial services. In some markets, they have not developed many strong relationships with incumbent providers, and are willing to consider non-traditional options as alternatives. FinTech users (across all ages) share similar views toward personal risk, and are equally likely to read the terms and conditions of new products or worry about personal data security. However, 64% of FinTech users prefer managing their lives through digital channels, compared to 38% of non-FinTech users; FinTech users are also more likely to be users of nonFinTech platforms, such as on-demand services and the sharing economy.
4. FinTech adoption will continue to gain momentum
FinTech adoption is expected to increase in all 20 markets, with a segment of current non-FinTech users shifting to FinTech services in growing numbers. On the basis of anticipated future use, FinTech adoption could increase to an average of 52% globally, with the highest intended use among consumers in
South Africa, Mexico and Singapore. Borrowing and financial planning are anticipated to more than double in usage. Money transfer and payments services remain the most widely used at 50%, with anticipated future use by 88% of consumers. FinTech users are also becoming more diverse in their use of services, with 13% of those surveyed becoming super-users who regularly use five or more FinTech services.