Is fintech truly going to revolutionize our lives? According to the latest EY Fintech Adoption Index, the answer is a resounding yes.
Polls of 20 markets indicate that approximately one-third of consumers who actively use digital technology have adopted some type of fintech service.
First of all, it appears that emerging markets are most responsible for the upward trend. Among digital users in China, Brazil, India, Mexico, and South Africa, about 46% have embraced fintech products. According to the study, fintech has become particularly popular in these countries because it gives unbanked and underbanked populations access to financial services that were previously available only through traditional financial institutions.
Millennials and others adopt fintech services.
And while millennials have predictably thrown their support behind fintech services, older adults are not too far behind. Of those respondents ages 45 to 64, 22% indicated that they use some type of fintech product. And among those respondents older than 65, 15% claimed to regularly use fintech products.
Imran Gulamhuseinwala, the EY global fintech leader, expanded on these findings: “Fintechs are not only becoming significant players in the financial services industry, but are also shaping its future. … Their new propositions are increasingly attractive to consumers and this trend is only set to continue as awareness grows, concerns are allayed, and new advancements are made. Traditional firms, who sometimes struggle to deliver the same seamless and personalized user experiences, will undoubtedly need to step up their efforts to remain competitive. I think it’s likely that we will see greater collaboration between traditional firms and fintechs in the future.”
Value in collaboration.
Gulamhuseinwala is not the only industry professional to see the value in collaboration. In a July 6, 2017 article in Forbes, Alan McIntyre, senior managing director and head of the global banking practice at Accenture, also points out the need for cooperation between fintech startups and traditional banks.
McIntyre is less convinced of fintech’s meteoric rise, pointing out that it’s been two decades since Bill Gates proclaimed “banks are dinosaurs.” While it’s obvious that many people representing a wide demographic range are eager to adopt these convenient technologies, banks still dominate the financial services industry. In fact, as McIntyre explains, banks have been much more willing to develop their own fintech services, instead of allowing startups to replace them.
Rise of fintech.
McIntyre’s explanation for what he perceives to be fintech’s slower-than-anticipated rise? As he puts it, there’s been a “lack of true innovation in the sector.” McIntyre goes on to write, “Many fintechs have found, to their disappointment, that an elegant user interface on top of a traditional product is not enough to pry customers loose from long-standing bank relationships. The digital mortgage origination platforms that promise agreement in principle on your phone are great; that is until you reach the screen where it asks you to put a bunch of paper in an envelope and mail it in to get the final loan approved.”
However, while McIntyre is skeptical about startups’ ability to dismantle traditional financial institutions at any point in the immediate future, he also believes that other tech giants—such as Amazon and Google—could soon make a foray into the financial services industry. He is convinced that they pose a greater threat to banks than startups. Thus, it’s important for banks and other traditional financial institutions to adopt a collaborative attitude early on. Even if startups aren’t set to overtake them right now, they will eventually. In the meantime, larger companies could threaten their continued dominance.
Collaboration benefits all parties involved.
Collaboration, as McIntyre explains, is beneficial to all parties involved in that it provides banks the opportunity to evolve with their customers’ expectations, while giving startups and tech companies an opportunity to work with entities that already have crucial experience in navigating the often Byzantine regulations that can hinder the growth of any type of financial service.
For users, the benefits are especially clear. Fintech has again been very useful in terms of providing unbanked and underbanked individuals with access to financial services. However, for those who already have established relationships with banks, there may be some reluctance to abandon a service that they have relied on for years. If a user’s bank collaborates with a fintech startup to offer more efficient service without requiring that all of their accounts be migrated to a new provider, then everybody wins.
Fintech is growing, even if some industry professionals are skeptical about its pace. Eventually, banks will have to adapt. Those that choose to do so by collaborating will have the best chance of surviving this latest tech revolution.