FinTech adoption in Canada has increased from 8% to 18% since 2015, according to EY's 2017 Fintech Adoption Index. The trend means both traditional banks and FinTechs are feeling the pressure to develop simpler, more transparent, customer-centric financial services products.
Ron Stokes, EY Canada's FinTech leader, discusses the status of FinTech in Canada from a consumer perspective.
"Canadians know more about the FinTech options available than they did two years ago, and this trend is going to continue," says Ron Stokes, EY Canada's FinTech leader. "When it comes to banks and FinTechs, we're seeing what used to be a competitive mindset turn into a desire to collaborate. It's becoming clear that working for mutual benefit, rather than competing with each other, will result in more meaningful innovations, faster."
Still, our traditional financial services sector holds strong – Canada has one of the lowest FinTech adoption rates around the world. Only 18% of survey respondents in Canada have used two or more FinTech services in the last six months, compared to 33% globally.
What's behind the adoption rate
EY finds the primary reason Canadians haven't used a FinTech is because they likely don't know of any. But that could be poised to change. In EY's most recent survey, 22% of respondents reported they had not heard of any FinTech – a lot fewer people than the 49% who reported the same thing almost two years ago. EY expects awareness to increase rapidly, boosting the adoption rate to 34% in the future.
The second-most cited reason for not using a FinTech – respondents simply prefer to use a traditional services provider for their needs. This attachment to traditional players means FinTechs have to double down to build their brands and establish themselves in this competitive market.
But the threat from FinTechs is still real and continuous investment in FinTechs or FinTech-like products is the name of the game for banks.
"Because of the strength of the banking sector in Canada, we're seeing a lot of partnerships between banks and FinTechs," adds Stokes. "Banks are looking for faster and easier ways to boost their digital capabilities, both on the consumer side and in the back office. At the same time, Canada's FinTechs need access to more customers and resources to improve their offerings."
EY's Unleashing the potential of FinTech in banking shows that banks are increasingly looking for improvements across the entire value chain – from gamification of compliance training to surveillance software.
But collaboration is easier said than done. Banks need to be smart in picking the right FinTechs to collaborate with, and have strong innovation cultures to implement any new technologies. By the same token, FinTechs need to better articulate the clear benefits of their technology and work with banks to deliver change.
About the study
The study is based on more than 22,000 online interviews with digitally active consumers (i.e., those who use the internet) across 20 markets – Australia, Canada, Hong Kong, Singapore, the UK, the US, Mainland China, India, South Africa, Brazil, Mexico, France, Spain, Switzerland, Germany, Ireland, Japan, Netherlands, South Korea and Belgium/ Luxemburg (considered as one market for this analysis). The study was conducted by EY Sweeney from March to April 2017. In Canada, there were 1,020 respondents.
A regular FinTech user is defined as an individual who has used two or more FinTech services in the last six months.
Following the widespread interest in the first study (2015), the scope and scale of the research has expanded significantly. The 2015 study was based on 10,131 interviews with digitally active consumers across six markets: Australia, Canada, Hong Kong, Singapore, the UK and the US.
Also reflecting the rapid growth and maturation of the FinTech industry, EY's Adoption Index has grown from the original 10 FinTech services included in the 2015 survey to 17 types of service this year. Respondents were asked only about services from non-traditional providers, and brand names of established FinTechs in each market were used to aid with comprehension. EY has also broken out one of the categories from the 2015 study, so there are now five categories. To stay consistent in the report, we then recalculated the 2015 results across those five categories.