Fintech is going global – and fast

Fintech has reached a tipping point when it comes to mainstream adoption on a global scale, with levels of adoption among consumers surging over the past 18 months.

According to the latest EY FinTech Adoption Index, a third of digitally active consumers globally are now using fintech products or services, up from just 16 per cent in 2015.

The study, based on 22,000 online interviews with digitally active consumers across 20 markets, shows emerging markets are driving much of this adoption, with China the clear global leader recording fintech adoption rates of 69 per cent – more than double the global average. At 37 per cent, Australia also makes it into the top five markets. 

" A third of digitally active consumers globally are now using fintech."

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Click HERE to see an interactive version of this chart. Interactive: Tom Hounslow

Results were varied across other Asia-Pacific markets surveyed. Hong Kong and South Korea both had adoption rates of 32 per cent, roughly in line with the global average.

While Singapore’s current levels of adoption are comparatively low at 23 per cent, it recorded one of the highest proportional increases of intended use among consumers of all 20 markets surveyed, likely in part to be driven by the government’s effort to place Singapore as a top fintech hub and friendly regulatory environment.

The China ripple

As the survey results show, China is undoubtedly leading the fintech charge with high adoption rates largely being driven by financial innovation by technology-first players in adjacent sectors (including e-commerce, search and messaging), a flexible regulatory environment and less competition from incumbents.

Chinese consumers trust fintechs more than they do traditional services and look to fintechs to provide more innovative products.

This is having a flow-on effect for other parts of Asia-Pacific, with leading Chinese fintech players impacting the surrounding markets both directly – through international market entry, outbound investment and partnering – and indirectly, as fintechs in other countries seek to replicate aspects of their success in local markets. As a result, we can expect to see adoption levels continue to increase rapidly right across the region.

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Click HERE to see an interactive version of this chart. Interactive: Tom Hounslow

The EY FinTech Adoption Index evaluated the services offered by fintech organisations under five broad categories – money transfers and payments services, financial planning, savings and investments, borrowing and insurance.

Globally, money transfers and payments services are continuing to lead the fintech charge with adoption standing at 50 per cent in 2017. Eighty eight per cent of respondents globally say they anticipate using fintech for this purpose in the future.

New services such as online digital-only banks and mobile phone payment at checkout are contributing to this trend, which is also evident across the Asia-Pacific markets surveyed.

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Click HERE to see an interactive version of this chart. Interactive: Tom Hounslow

Insurance has also made huge gains, moving from being one of the least commonly used fintech services globally in 2015 to the second most popular in 2017 - now at 24 per cent.

According to the study, the upswing has largely been due to the expansion of technologies such as telematics and wearables (helping companies to better predict claim probability) and the inclusion and growth of premium comparison sites.

The future of fintech         

Fintechs are not only becoming significant players in the financial services industry, they are also shaping its future direction.

Their new propositions are increasingly attractive to consumers who are underserved by existing financial services providers and their use will only rise as fintech awareness grows, consumer concerns fail and technological advancements, such as open APIs, reduce switching costs.

Based on consumers’ stated intention of future use, fintech adoption could increase to an average of 52 per cent globally.

While current levels of adoption vary across the region, future use of fintech is also expected to increase in each of the Asia-Pacific markets surveyed - although the factors driving this increase are mixed.

In some instances, it’s a case of ‘technology leapfrog’, with new market entrants tapping into tech-savvy, financially under-served populations. This is particularly evident in markets like China, Indonesia and India.

In Australia on the other hand we are seeing greater engagement from the larger, traditional financial services players, as they invest in their innovation agendas and partner with fintechs to keep pace with evolving consumer expectations.

Regionally, we are also seeing strong uptake of alternative retail payment services, with many fintechs using payments as their entry point into the market – providing the infrastructure from which they can then build their wider fintech ecosystem to include additional services, such as lending, credit scoring, wealth management and even non-financial, on-demand services.               

Traditional focus

Fintech start-ups have been very successful in building on what they do best – using technology in novel ways and having a laser-like focus on the customer.

What the EY research clearly shows is fintech is gaining widespread traction, both locally and globally, and has already achieved the early stages of mass adoption in most countries.             

Incumbent financial services companies are also recognising fintech adoption is now a reality. In this environment, traditional players will need to continue to reassess their business models and look at ways of integrating fintech developments into their own business models if they want to keep up with the changing needs and expectations of digitally active consumers.

Traditional firms, who sometimes struggle to deliver the same seamless and personalised user experiences will undoubtedly need to step up their efforts to remain competitive against larger technology players who are moving laterally into financial services.

However, this also creates new opportunities and it’s likely we will see greater collaboration between traditional firms and fintechs in the future.

James Lloyd is the EY FinTech Leader for Asia-Pacific

The views expressed in this article are the views of the author, not Ernst & Young. The article provides general information, does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Liability limited by a scheme approved under Professional Standards Legislation.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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