China's 69% adoption rate is more than double the global average.
Levels of financial technology (FinTech) adoption among consumers has surged globally over the past 18 months and is poised to be embraced by the mainstream, according to the latest EY FinTech Adoption Index. An average of 33% digitally active consumers across the 20 markets in the EY study now use FinTech.
The study, based on 22,000 online interviews with digitally active consumers across 20 markets, shows that the emerging markets are driving much of this adoption with China, India, South Africa, Brazil and Mexico averaging 46%.
China and India in particular have seen the highest adoption rates of FinTech at 69% and 52%, respectively. FinTech firms in these countries are particularly successful at tapping into the tech-literate but financially under-served segments, according to the study.
Find out more from James Lloyd, EY's Asia Pacific fintech leader, in this exclusive interview with Asian Banking and Finance:
What are the primary drivers of the high fintech adoption in China?
China is undoubtedly leading the FinTech charge with adoption at 69% among its digitally active population, more than double the global average. This is largely being driven by financial innovation from technology-first players in adjacent sectors (including e-commerce, search and messaging), a flexible regulatory environment, high levels of internet and mobile penetration, access to capital and less competition from incumbents.
Consumers and SMEs in China have traditionally found it difficult to access services from the large banks and are increasingly turning to alternative providers for access to payments, credit, investments, insurance and other financial services. It has been a case of “technology leapfrog” with new market entrants tapping into this tech-savvy, but financially underserved population.
How do you think can other countries replicate this impressive fintech adoption rate?
For consumers and SMEs, FinTech will likely continue to have the greatest impact in markets where the scale of unmet needs and leapfrogging technology combine to create “10x solutions” – that is, solutions that are an order-of-magnitude better than what they replace. This step-change in quality, efficiency, and user experience means that, in the near to mid-term, FinTech is likely to have a significant consumer impact in other developing markets, such as Indonesia and the Philippines.
What are the usual services that customers seek from fintechs? Can you cite some examples based on what you see in different APAC markets?
Across the Asia-Pacific region, we are seeing strong uptake of money transfer and retail payment FinTech solutions. New services such as online digital-only banks and mobile phone payment at checkout are contributing to this trend.
Many fintechs are also using payments as their entry point into the market, creating the infrastructure from which they can build up their wider FinTech ecosystem to include additional services, such as lending, credit scoring, wealth management and even non-financial, on-demand services. We are also seeing strong consumer demand for FinTech products related to savings, deposits, lending, insurance and credit services.
How is this affecting their relationship with their banks?
Consumer expectations are changing and banks will need to look for ways to integrate FinTech developments into their own business models if they want to keep up with the evolving needs of digitally active customers who want higher levels of digital service experience.
Traditional firms will undoubtedly need to step up their efforts in this space in order to remain competitive against those larger technology players moving laterally into financial services. However, this also creates new opportunities and it’s likely we will see greater collaboration between traditional firms and fintechs in future.
Which APAC market/s benefit/s the most from the flow-on effect of China's fintech boom? How?
China’s high levels of FinTech adoption are having a flow-on effect for Asia-Pacific as a whole and, as a result, we can expect to see adoption levels continue to increase rapidly right across the region.
Leading Chinese FinTech players are impacting the surrounding markets both directly – through international market entry, outbound investment and partnering – and indirectly, as fintechs in other countries seek to replicate aspects of their success in local markets. They are also looking for ways to service the outbound tourist market, so those areas with a high proportion of Chinese travellers and expats are likely to be of particular focus.
What are the other notable findings from your FinTech Adoption Index, especially in relation to banks?
Banks remain a hugely critical part of the broader FinTech ecosystem. In most instances, FinTech products are being built on top of existing banking infrastructure – for example, the vast majority of FinTech solutions still require the end user to have a bank account.
So, banks are here to stay although the form they take is likely to continue to evolve and we will see banks increasingly looking for opportunities to invest in or collaborate with fintechs, rather than competing against them.
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