EY’s inaugural FinTech Adoption Index – a survey of 10,131 digitally-active consumers in Australia, Canada, Hong Kong, Singapore, the UK and the US – found that 15.5 per cent had used at least two fintech services (financial services products developed by non-bank, non-insurance, online companies) in the past six months. It also suggested that adoption rates among digitally active consumers could double within the next 12 months.
EY Australia’s fintech leader, Anita Kimber, said it is a change that will require traditional financial services companies to revisit their product, service and retention strategies if they want to compete effectively with new market entrants.
“The increasing availability of innovative, competitively priced products provided by the new fintechs shows that consumers are willing to shop around and experiment. Brand loyalty is no longer enough. As fintech continues to catch on, traditional financial services companies will have to reassess their view of what consumers are looking for in a digital age and step up their efforts to serve them effectively,” she said.
While fintechs have entered the local market relatively late, a 13 per cent early adopter usage amongst digitally savvy Australian consumers is a trend that cannot be ignored, according to Ms Kimber.
Early fintech adopters tend to be younger, higher-income customers with respondents between the ages of 25 and 34 years old the most likely to have used at least two fintech products in the past six months, followed by those aged 35 to 44 (21.3 per cent), and those aged 18 to 24 (17.7 per cent).
Fintech use is highest among consumers with incomes greater than US$150,000 (44.1 per cent). Usage declines to 24 per cent among consumers with incomes between US$70,001 and US$150,000, and 14.7 per cent for consumers with incomes between US$30,001 to US$70,000.
“Higher-income individuals are some of the most economically valuable customers for banks and insurers. A shift to fintech among this group has the potential to lead to increased margin concentration and loss of market share,” Ms Kimber said.
“To combat this, banks and insurance will have to review how their products, and channel strategies will meet their customers’ needs in future. We are already seeing most of them establishing partnerships with fintech providers. This is likely to accelerate – otherwise they may have difficulty stemming a flight to fintech,” she added.
[Related: Busting five myths about fintech]