Financial technology (FinTech) adoption among consumers has nearly doubled over the past 18 months, according to the latest EY Global FinTech Adoption Index, and the adoption rate is growing faster than anticipated.
Globally, 64% of digitally-active consumers across 27 markets use FinTech, and awareness is even higher.
This year, EY added its first-ever Small and Medium-Sized Enterprise (SME) FinTech Adoption Index given FinTech’s expansion beyond consumers.
EY member firms surveyed more than 1,000 organizations in five countries and found that one-quarter of organizations have used at least one FinTech across the following four categories in the past six months: banking and payments, financial management, financing and insurance.
“FinTech organizations are no longer fringe disruptors and have grown into sophisticated competitors,” said Matt Hatch, Partner, Ernst & Young LLP and the EY Americas FinTech Leader. “Now, financial incumbents are taking note and offering FinTech solutions, forming ecosystems that are replacing traditional partnerships. We fully expect this trend to accelerate as nonfinancial companies enter the space and leverage technology and innovation to provide frictionless, transparent and highly-personalized services.”
What’s driving adoption?
EY firms interviewed more than 27,000 people to better understand how consumers are interacting with FinTech, and the results are promising.
Based on the survey results, money transfer and payments services continue to be the most popular in both awareness and adoption, as only 4% of global consumers are unaware of at least one money transfer and payment FinTech service.
96% of global consumers are unaware of at least one money transfer and payment FinTech service
Global adoption rate could surge from 25% to 64%
46% of fintech adopters are comfortable with their banks sharing their financial data
23% would share data with nonfinancial services companies
89% SME FinTech adopters are also more open to sharing data with FinTech companies
Adoption rates continue to lag in the US, while Europe’s investments in open banking have contributed to higher adoption rates in that region.
SMEs are further behind in their adoption journey compared to consumers. When an SME uses FinTech services, they have essentially selected this company as an approved vendor, so 25% is considered high, and the adoption rate is expected to climb.
Over one-fifth (22%) of non-adopters already use FinTech services in three of the four categories defined in the survey methodology, which means they are on the verge of becoming FinTech adopters.
By this measure, the global adoption rate could surge from 25% to 64%.
The impact of trust on FinTech adoption
The survey indicates that trust plays a large role in FinTech adoption, as non-adopters choose to remain with traditional financial services because they trust them more than FinTech challengers.
Many FinTech propositions rely on data sharing, which can present a barrier for adoption.
Nearly half (46%) of adopters are comfortable with their primary banking institution sharing their financial data with other organizations if it means better offers on products or services, but less than a quarter (23%) would share data with nonfinancial services companies.
This trust gap creates a huge opportunity for financial institutions and FinTech challengers, as 31% of adopters say they are willing to share data with FinTech challengers.
Although nonfinancial services companies might lead innovation, they don’t have full confidence when it comes to providing financial services.
Still, 68% of surveyed consumers are willing to consider a financial services product offered by a nonfinancial services company.
The SME FinTech Adoption Index found similar trends. SME FinTech adopters are also more open to sharing data with FinTech companies (89%) and other financial services companies (70%) over nonfinancial services companies (63%).
The future landscape
Looking ahead for both consumers and SMEs, newly developed ecosystems will encourage industry convergence as FinTech challengers continue to develop and mature, incumbent companies offer new innovative solutions and nonfinancial services companies expand their offerings.
“We’re optimistic about collaboration between FinTech and traditional financial services companies in the future. Just under half (47%) of consumers are happy to use financial services from a nonfinancial services company if that company is working in partnership with the traditional financial services company,” says Hatch.
“Similarly, SMEs are interested in joining FinTech ecosystems that integrate different propositions offered by challengers, incumbents and, in some cases, nonfinancial services companies. These ecosystems will continue to make financial services accessible for both consumers and businesses while enhancing the overall experience.”