EY's FinTech Index shows Canada has been slow to adopt
TORONTO, Jan. 28, 2016 /CNW/ - According to EY's FinTech Adoption Index, Canada has had surprisingly low adoption rates for FinTech offerings—financial services products developed by non-bank, non-insurance, online companies. But while consumers here may be behind, the finding is a timely message for Canadian banks, as adoption could triple within the next 12 months.
"Only 8.2% of digitally active consumers in Canada have used at least two FinTech products within the last six months," says Gregory Smith, Partner at EY's Financial Services Advisory practice. "This puts Canada behind five other countries surveyed, including the US and the UK."
Smith explains: "FinTech is relatively recent in Canada, but as the trend continues to catch on, traditional financial services companies will have to be much more aggressive and creative to keep their current customers."
EY's Index shows that FinTech adopters are young and wealthy—an important target market for financial services players and are very likely to transition to FinTech services.
"A big piece of the customer pie will be at stake here," warns Smith.
Awareness, not trust, a key factor in low adoption
Part of the reason why FinTech adoption in Canada is so low is because consumers don't know what products and services are available. For digitally active respondents who haven't used two or more FinTech products in the past six months, more than half (57.2%) say they were unaware the products existed. Only 10.3% of Canadians say they're not using FinTech because they don't trust them.
"Canadian financial institutions have traditionally enjoyed consistently high levels of consumer trust," says Smith. "And yet only 10% of digitally active consumers report lack of trust as a reason for not using FinTech products. This finding shakes up our understanding of how far Canadians' trust goes, and is certainly something for traditional players to make note of."
Selling points: ease of set-up and low fees
By quite a margin, nearly half of users cite ease of set-up as the reason they prefer FinTech offerings. Traditional players will need to focus creative energy to streamline their onboarding process to rival the newer entrants and at the same time offer more attractive fees. Over 20% of FinTech users cited lower fees as the reason they use FinTech products.
Use of FinTech is highest among younger, wealthier customers
It's no surprise that young Canadians use FinTech products the most. Almost 15% of Canadian respondents between the ages of 18 and 34 years old used at least two FinTech products in the past six months, followed by those aged 35 to 54 (9.8%). Less than 2% of those aged 55 and older reported the same usage.
"These young Canadian FinTech adopters tend to also be high earners," says Smith. "They will become even more valuable for financial services providers as time goes on."
EY's Index finds FinTech use is highest among Canadian consumers with incomes greater than $150,000 (20%). Usage declines to 15.1% among consumers with incomes between $70,001 and $150,000, and 7.9% for consumers with incomes between $30,001 to $70,000.
There's still time to catch up
In Canada, traditional financial service providers can take advantage of Canada's low FinTech adoption and use the next 12 months to catch up.
"Despite currently low FinTech adoption in Canada, traditional players need to accelerate development of digital tools. Based on reported user intentions, we anticipate adoption among digitally active consumers to triple within a year," says Smith. "As a result, financial services companies have to review their customer experience, products and services to fit with the new reality. And they have to learn from and partner with the FinTech community to meet their customers' needs – before newer entrants do."
To read more about the Index, click here.
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