Demand

The fintech sector has seen remarkable growth over the past few years. Around the world, fintechs have grown up and out – improving and expanding their offerings, driving increased consumer awareness and uptake, and spurring change across the entire financial services ecosystem.

And consumers are liking what they see. In fact, the EY Global FinTech Adoption Index 2019 (Index) shows almost two-thirds (64%) of digitally active consumers globally now use FinTech products and services – up from just 33% in 2017.

In our recent Index, we made four observations about the sector as it stands in 2019...

• True competitors... Fintechs are no longer just disruptors, but have grown into sophisticated competitors with a global reach.
• Blurred lines... With many financial incumbents, such as banks and insurers, offering credible fintech propositions of their own, this begs the question ‘what is a fintech?’.
• Ecosystem development... The interaction between challengers, incumbents and players from outside the financial industry are forming fintech ecosystems that are replacing traditional bilateral partnerships.
• Different propositions... We are seeing two main types of fintech propositions: ‘disrupted’ and ‘invested’. A disrupted service is one that has historically been offered by incumbents (e.g. Auto insurance or FX). Fintech providers use technology to disrupt these services and to provide a more compelling offer. An invented service is one that didn’t exist before but is now possible by technology's or alternative business models (by peer to peer lending and mobile phone payments).

Although starting from a higher base than many other Asian markets, Australia’s adoption rate has dipped slightly below the global average coming in at 58%. This compares to 13% in 2015, 37% in 2017. However, while fintech use in the Australian market continues to rise, the pace of local adoption has slowed in comparison to emerging markets, although this may change with the introduction of Open Banking and as more challenger fintechs continue to come into the market.

The two main reasons for the comparatively slower growth in Australia compared to other markets are...

• The global average is boosted by countries with less developed banking and insurance infrastructure (e.g. China Mainland, India, Russia).
• Many of the countries with the highest adoption also have markedly different population profiles – in size and in socio-economic composition.

Where to from here?

No longer just disrupters, fintech challengers have grown into sophisticated competitors, with an increasingly global reach. Fintech firms are setting the benchmarks for the financial services industry. Their offerings are attractive to consumers, and usage will only rise as awareness grows, consumer concerns fall and technology advances to reduce switching costs. At the same time, many incumbent financial institutions, are also starting to offer credible fintech propositions of their own, challenging the whole notion of what a 'Fintech' is and adding to the choices available in the market.

Looking forward, the pace of innovation is likely to continue to accelerate, becoming the 'new normal' within the sector. Greater interaction between challengers, incumbents and players from outside the financial industry will continue, leading to the formation of new fintech ecosystems, and replacing traditional bilateral partnerships, as the sector continues to evolve, both locally and globally.

For detailed information about demand within the sector in Australia, please download the EY FinTech Australia Census 2019 Report.