Interest in FinTech services highest among younger tech savvy users

24 April 2017 7 min. read

The financial services industry has, since the financial crisis, found itself operating in a rapidly evolving environment, as regulatory requirements, customer expectations, new technologies and new FinTech entrants create a perfect storm of change. A new report finds that uptake of FinTech propositions differs considerably between generations and other groups, and that trust in the industry remains problematic.

The financial services industry continues to face uncertainties from various fronts. Following the financial crisis, regulatory efforts aimed at limiting future risk and creating stability in the industry brought about a range of new regulatory frameworks, which are currently being implemented. At the same time, a raft of changes have begun to take shape in the wider financial services ecosystem.

Financial technology companies (FinTechs) are in particular creating waves – these startups tend to have well focused propositions, are able to meet changing customers expectations for seamless digital services, while benefiting, or creating, new technologies that lower the barriers to entering the formerly too complex and capital expensive marketplace. The promise of FinTechs, like many other startups, has brought in considerable venture capitalist support, while traditional firms themselves have been slow to respond to the changes in market condition – weighed down by legacy technologies and large, inflexible structures.

To better understand how customers, incumbents and entrants are engaging with the changing conditions, Capgemini, in association with Efma, recently released its ‘World FinTech Report 2017’ report. The report is based on a survey of 8,000 financial services customers in 15 countries, as well as industry executives.

Customers using at least one non-traditional form of financial services

The relationship between incumbent institutions and FinTech players remains a key unknown in the longer-term, although a recent Roland Berger study found that FinTech players are keen to partner with institutions to access their clientbooks, meet regulatory requirements and more readily scale.

In terms of the uptake of FinTech propositions by consumers in the marketplace, a mixed bag was identified by the report. The highest uptake has taken place in the investment management segment, with 17.4% of customer respondents using only non-traditional firms, 27.4% using a combination of the two. Payments and transfers too has a relatively large uptake of people using only FinTech propositions, at 13.8%, while 27.8% use a combination of traditional institutions and FinTech propositions. Banking itself has the lowest level of penetration from non-traditional firms for financial services, at 2.9% of respondents.

Customer using at least one non-traditional financial services firm by country

The distribution of respondents that use non-traditional firms differs considerably by country. In China and India, for instance, 84.4% and 76.9% of respondents respectively use some form of FinTech proposition. The United Arab Emirates comes third on 60.6%, while Hong Kong and Spain have similar incidences of use, at 53.5% and 53.3% respectively.

The UK too has a large proportion of the country tapping non-traditional financial services firm for propositions, at 48.8% of respondents. The country with the least penetration of FinTech firms, among 15 countries surveyed, is the Netherlands – where 29.8% of the population has used such a service.

Customers’ usage of non-traditional firms by customer segment

The research also considered differences in generational groups when it comes to using non-traditional financial services offerings. Generation Y tend to be the most active, with 60% of the segment using a FinTech propositions compared to 44.4% of other generations covered. Tech-savvy users were also found to have a considerably larger proportion of non-traditional firm usage, at 67.3% of respondents compared to 33.6% for non-tech savvy respondents. Finally, the affluent were found to be more likely to use non-traditional value proposition than non-affluent respondents.

The research further noted that of users of FinTechs, a large number proportion use three or more providers (46.2%), while 10.7% of respondents use one provider.

Customer trust of traditional and non-traditional firms

Trust in service provider, particularly when it involves personal finances, remains an area of key concern for both traditional and non-traditional players. Trust in the industry remains fleeting however, with 23.6% of respondents saying that they trust non-traditional firms, while 36.6% say that they trust traditional firms. Users that had a positive experience with both categories of institution reported improve levels of trust, for traditional firms this came in at 52.9% and for non-traditional firms at 56.3%.

Customer value perception for traditional vs. non-traditional firms

The firm also asked respondents to indicate what they perceived as the forte of traditional and non-traditional financial services players.

For traditional firms, three areas of high-importance were noted: ‘security and fraud protection’, ‘quality of service’ and ‘transparency’, while ‘personal interaction’, ‘access to relevant products and services’ and ‘brand’ were noted as medium importance.

The forte of non-traditional firm was found to be ‘better value for money’ and ‘timely and efficient service’, while ‘the ability to integrate my social world with my financial world’ was noted as of low importance. Areas in where there is even competition according to respondents is ‘convenience’, ‘user experience’ ad ‘contextual experiences’.

“Both FinTech and traditional firms still have work to do on delivering a better customer experience,” says Vincent Bastid, Secretary General, Efma. “The arrival of FinTechs has accelerated the improvement of overall customer experience in the industry but it is still not at the level that customers perceive that it should be. It is only a matter of time before BigTech companies and players in e-commerce and telecommunications join in to stake their claim to benefit from this industry disruption.”