Increasing consumer adoption: Data is the lifeblood of fintech and innovation

Financial technology adoption among consumers has nearly doubled over the past 18 months, according to the latest EY Global Fintech Adoption Index. The firm interviewed more than 27,000 people and 1000 businesses to explore how their behavior around fintech is evolving.

Tearsheet asked Matt Hatch, EY's Americas FinTech Leader, about what's driving fintech adoption over time and where he thinks this is all headed.

How has consumer adoption trended over time? Where do you think we are in the cycle?

Fintech adoption has increased steadily since our first Global FinTech Adoption Index in 2015 (particularly in emerging countries), and we believe fintechs have achieved mainstay status in most countries. In the US, we have seen a steady increase over the past six years from 17% to 33% and now 46%.

Adoption of services in the US has been driven by greater use of money transfer and payments, particularly peer-to-peer payments and non-bank money transfers (69%).

I also believe that one factor impacting US adoption numbers is the number of fintech products used by consumers, and how these services were categorized by our survey methodology. For the 2019 Index, we introduced the concept of ‘buckets’ to group together similar fintech services in order to improve compatibility with prior surveys. Therefore, a fintech adopter for 2019 was someone who used two or more ‘buckets’ of similar types of services. So, while we see large scale adoption of fintech payment products in the US, fintechs in other countries provide consumers with a more diversified offering of fintech products and have made it easier for consumers to use multiple categories of fintech products on one platform.

Looking ahead, we see an increasingly ecosystem-driven approach towards managing consumer financial services.

What's driving consumer adoption and why?

Globally over the past five years, we have seen emerging markets leapfrog the more developed countries in terms of adoption rates.

In many countries in the EU and Asia, open banking trends, and concerted regulatory oversight and infrastructure, have made it easier for consumers to manage their financial data across tradition and fintech propositions.

Beyond open banking, incumbents have entered the fray in a big way. 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. We’ve also seen increased collaboration and partnering between technology/social media platforms, traditional financial institutions and fintech companies leading to greater adoption rates.

What's the role of data in adoption?

Data is the lifeblood of fintech and innovation. It is the fuel for increased levels of customization and insights that are quickly bringing more value to the consumer, and increased adoption. Data, and digital trust on the part of consumers in traditional financial services providers and fintechs, continues to impact how consumers choose to work with financial services companies.

US consumers are increasingly becoming more comfortable with sharing their data if it means better offers from traditional financial services companies.

They still see their main bank and insurance companies as the first point of contact for new financial service products, and are not very comfortable with considering new products from alternative providers.

68 percent of consumers globally would consider a non-financial services company for financial services. What's happening here? Where will consumers manage their money in the future?

This data, at least in part, may be down to the fact that non-financial players like retailers, have made technological transformations, but can also provide a seamless customer experience, building on prior relationships to offer holistic solutions. From a customer’s perspective, why not bank where you shop – especially if both are online? Notably, consumers are most open to retailers (45%) and telecommunication firms (44%) as service providers, and most are willing to use money and transfer payment fintech services such as digital-only banking and multimerchant eWallets.

In addition, many consumers have a trust gap with traditional financial services companies and fintechs and non-financial services companies are beginning to present compelling alternatives. Where consumers manage their money in the future will be a combination of both, as the rise of digital assets creates the need for other mechanisms, as well as the ease of technical solutions.

I believe in the future it will be less obvious when a person is ‘banking’ or interacting with a traditional financial services company.  The continued integration of these services into our everyday activities, as well as larger, ‘moments that matter’ (from your daily commute, to having a baby and starting a college savings account) will lead to a blending of financial service models and providers, where the financial service needed (payment, investment, etc.) will be seamlessly linked to, and dictated by, the life event or activity rather than the reverse.