In late June 2017, the EY network released its second FinTech Adoption Index to highlight FinTech’s rapid emergence. The report covers 20 markets and is based on interviews with more than 22,000 digitally active respondents, as well as seven in-depth case studies with leading FinTech companies.
Here are three key findings of the study:
A 33 percent FinTech adoption rate globally, compared to 16 percent in the 2015 EY study—significant enough to suggest that FinTech has reached early mass adoption
46 percent average FinTech adoption across emerging markets (Brazil, China, India, Mexico, South Africa)
50 percent of consumers using FinTech money transfer and payments services, with 65 percent anticipating doing so in the future
One can hypothesize that the increase of FinTech usage strengthens the common belief that FinTech disrupts banking; the greatest threat and opportunity are changing consumer expectations. Incumbent financial institutions must innovate—and at a faster pace—in terms of their ability to get new ideas into working products and into consumers’ hands.
The 2017 EY report found that 64 percent of FinTech users prefer to manage their lives through digital channels; as digital platforms, such as on-demand services and the sharing economy, become more ubiquitous, consumers are getting more comfortable with running their financial lives through digital platforms as well.
This growing preference presents opportunities for banks to enhance their service offerings and provide uniquely personalized financial products. As we look to the future, banks that focus solely on products designed for mass market consumption will find it tough to maintain or grow their customer base. Here’s why: Consumers have come to expect personalization in all aspects of their digital experience.
Consumers also understand that they create a digital footprint in all aspects of their connected and physical life—and expect that this data will and should benefit them. FinTechs recognize the power in harnessing this data to bring value to the consumer in ways that demonstrate ease of use and customization. The EY report highlights that ease of setup is the number one driver vis-a-vis selecting a FinTech over a traditional financial service provider. By collaborating with FinTechs, banks can offer this same value proposition.
Strategic partnerships are critical to fuel speed and value. Speed means accelerating the time to market for new ideas, products and services. For the most part, this represents a great strength of FinTech and a challenge for incumbent financial institutions that utilize older technologies. FinTech companies have generally made a more focused investment in a particular innovation—which represents a great acceleration opportunity for the incumbent. This is not trivial. Incumbent firms with mature risk and compliance capabilities must customize ways of working with FinTech firms to balance risk and speed.
So what’s a bank to do? Consider these four action steps:
Take stock of your current systems, offerings and customer strategy.
Look for ways to enhance digitally, both organically, and through FinTech partnerships.
Recognize the importance of innovation as a central part of your growth strategy, for both short- and long-term benefits.
Remember that everyone likes progress but no one likes change.
Make your adjustments deliberately and create the framework for continue along that path. While some FinTech innovations may amount to a flash in the pan, the expectation and pace for innovation stand forever changed. And likewise, so has the nature of innovation itself: demonstrated by FinTech to be almost as much about the ongoing process of adoption as the product itself.
Jeannette Kescenovitz, who leads development of banking-as-a-service at Finastra, joins us on the BAI Banking Strategies podcast to share her views on how BaaS might grow its presence at U.S. banks and credit unions this year.
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