The evolving fintech ecosystem is a financial revolution and has become part of the everyday norm much quicker than many ecosystem developments of the past. Thanks to fintech, we can now send money to friends and family using digital cross-border payment services or deposit a check by simply taking a picture on your phone. Banking or moving money across borders has never been easier as fintech makes the experience of financial transactions increasingly hassle-free.
What attracts adopters of fintech towards the use of online or app-based financial services is the convenience and great value they receive. According to a recent study by Ernst & Young, Fintechs’ popularity amongst adopters remains steady with the adoption rate now at 64% amongst global users. Fintech has enabled banking to be more personalised, easily accessible, cost-effective, more transparent – and more democratic.
Fintech businesses have identified opportunities and recognised that customers want to be treated based on their individual needs. Customers nowadays expect to be offered automated loans, when their bank statement displays a low balance and there are upcoming bills to pay. Consumers appreciate services that predict their needs, in a non-intrusive way. And fintech promises to offer precisely that, in fact the new digital players have raised the game for customer experience.
Nevertheless, there are still some barriers to fintech adoption that need clearing up if the industry wants to reach a 100% adoption rate. According to the E&Y’s Global FinTech Adoption Index 2019, 71% of fintech-adopting consumers worry about their data security when dealing with companies online. The concern remains around all types of financial and personal information, as information such as financial history, usernames, passwords or national social security/insurance numbers can be made accessible to third parties. In 2018 The Clearing House published a report concerning the effects of data privacy and fintech in the UK. A large number of respondents answered that they wish they were able to control the third-party access to their information and have a say which data was visible or not.
Lack of trust is still a major issue amongst non-adopters. Consumers of the older generation especially find it hard to adapt to all technological advances. In the 2017 report of EY’s Global Fintech Adoption Index report, 33% of non-adopters had said they are remaining with their current providers as they did not understand how fintech solutions work. However, two years later and with more knowledge, non- adopters are still cautious and often lack trust in digital solutions. When it comes to money that customers put in to their accounts, they trust banks to keep it there no matter what happens. The truth of the matter is some consumers still need convincing that digital banks can do the same.
Despite these concerns, many people, especially in the younger generation, across the board are warming up to using digital services, with 47% of adopters in 2019 feeling more comfortable with using the services provided on digital platforms or branchless banks. In recent years, the popularity of fintech has soared, but motive behind using digital solutions has changed. Back in 2017, the elevated customer experience was the main reason for using a digital challenger. However, according to EY, this is not the case anymore, because consumers today seek fintech solutions for more attractive fees and rates.
A lack of transparency and unreasonable fees from banks is another reason. Fairer and faster payments offered by digital disruptors have flipped the payments market on its head. Access has also got easier with more fintech solutions being available to countries around the world.
Easier accessibility and faster payment methods have also attracted SMEs to switching finance providers. According to the Global FinTech Adoption Index 2019, the SME adoption rate globally is currently at 25%, which means that in the past six months, one in four SMEs used a fintech-based solution.
At the same time, there is a recurrent rise in tech-savvy small businesses transitioning to fintech solution-based products. Fintech-based digital money transfer companies are offering SMEs easy and affordable products, which benefit the businesses that operate abroad and make regular payments to suppliers. Businesses are enjoying digital cross-border payments because they enable them to send and receive money in a fast, convenient and inexpensive way.
Fintech’s popularity is rising along with people’s understanding of the services provided and improving trust with them. What’s also helping is the convenience of use offered by the digital solutions. As more people stand up and take note of the digital offerings on display, what does the future hold for the industry?
With the adoption rate steady, many experts in the industry predict that the big tech players will come in for a slice of the fintech pie. In fact, many are already there. In Asia, for example, we’re already seeing tech companies such as Alibaba, Tencent and Grab slowly, but surely, moving into the digital remittance market and Facebook’s Libra announcement proves that we will see other social media companies from around the world joining the digital payment space.
It’s set to be a competitive market, but that can only be a good thing for the everyday consumer.