As published on consulting.ca, Wednesday November 13, 2019.
Canadian consumer fintech (financial technology) adoption increased to 50% in 2019 from just 18% in 2017, a recent report from consulting firm EY found. Canadian consumers, however, lag the global average, which reached 64% adoption in 2019.
The EY study (“Global FinTech Adoption Index 2019”) polled 27,000 “digitally active” adults across 27 global markets. A regular fintech user was defined as someone who used two or more fintech services in the last six months. Fintech services include money transfer and payments, budgeting and financial planning, saving and investments, borrowing, and insurance. Digital and app-ified services in the fintech sphere were initially offered by startups, but have since been widely implemented by incumbent financial institutions.
“FinTech adoption has evolved significantly in Canada over the past two years alongside the evolution of customer priorities and the rise of money transfers and payments,” said Ron Stokes, EY Canada FinTech leader.
Though Canadian consumers’ usage of fintech has increased to 50%, it is still behind the global average of 64%. Emerging countries lead fintech adoption rates, with China and India at 87%, and Russia and South Africa at 82%. The Netherlands (73%), UK (71%), and Ireland (71%) lead among developed countries in terms of fintech adoption.
Canadian consumers tagged better rates and fees (42%), ease of setting up an account (19%) and more innovative products and services as the top reasons for using fintech services. Better rates and fees was the top reason globally for fintech adoption among surveyed consumers.
EY’s report also noted that the entry of incumbents into the financial technology sphere has driven adoption: “Markets with a sharp rise in adoption from 2017 to 2019, such as Ireland, the Netherlands and Singapore, reflect the availability of FinTech services offered by banks, insurers, stock brokers, and other incumbent financial institutions.”
Many of the early fintech challengers that haven’t been consumed by bigger financial institutions, however, have morphed into professionally managed companies with broad operational capabilities, wide product suites, and global reach.
“FinTechs are no longer seen as just disrupters to the traditional financial services industry – they’re sophisticated competitors, ready to meet the changing expectations and needs of customers,” Stokes said.
The top reason consumers in 2019 chose an incumbent over a fintech challenger was lack of awareness about how fintech companies work (29%), followed by a greater level of trust for the incumbent financial institutions (24%).
“Both adopters and non-adopters worry about the security of their personal data online and demonstrate greater trust in traditional institutions and providers who offer face-to-face interactions,” Stokes added.
However, nearly one-third of Canadian consumers are ready to use products from new financial services companies if they work together with incumbents. “Our findings show that there is a trust gap that can create opportunities for both incumbent financial institutions and their FinTech competitors,” Stokes said.