Are we at a tipping point for fintech adoption?  

Are we at a tipping point for fintech adoption?  

More than half of all banking customers are using at least one fintech startup, a large study has found. Are we at a tipping point for fintech adoption? And if so, what does it mean for the future of incumbent financial providers?


More than half of all banking customers are using at least one fintech startup, a large study by CapGemini has found. In its World FinTech Report 2017, the CapGemini consultancy found that 50.2% of global respondents are doing business with at least one non-traditional financial group, with the most significant inroads being made by investment startups.

Companies in the investment arena are standing out also because customers seem to be more likely to rely solely on them, instead of adding them to an existing roster of financial services providers. In a study that polled over 8,000 financial services customers across 15 countries, 17% said they use an investment startup as their only provider for that service, with another 27% using one in addition to a mature provider. This suggests robo advisers and other investment startups are proving successful at tapping into a new customer segment, by offering low-cost services to people who’ve previously not been able to afford it.

Unsurprisingly, the survey found that tech-savvy people are twice as likely to sign up to use a fintech startup. But beyond that, 34% of people who’d describe themselves as not so savvy are also signing on. This suggests the new providers are starting to become more generally accepted, and that they’re easy to get to grips with. Another not-unexpected finding was that younger people are more likely to use a fintech startup: 61% of people in Generation Y (born after 1980) said they use fintech services, but 34% of the older generations also do this. The contrast was less marked between the affluent (61%) and the less well off (49%), which arguably makes sense; while it takes time to research new financial providers, fintech startups often provide services at a lower rate, creating more of an incentive for people with less cash to go to the trouble.  

China and India were found to be the countries where people had most readily embraced fintech startups – over 75% of people there responded in the affirmative in the CapGemini study – closely followed by the UAE, Hong Kong and Spain. The laggards were the Netherlands, Belgium and France, at around 30%. “This pattern indicates that FinTech, like other recent technological innovations, is following the trend of ‘First the Rest then the West’, as services from firms such as Ant Financial and Paytm first find wide adoption in China and India, then expand from there,” concluded the report.

A new financial service climate

The post-financial crisis environment has created something of a perfect storm for fintech startups, as new contenders have come along at just the moment when trust in the stability of the old guard has been weakened. When ecommerce started raising expectations for what customer interaction can look like with highly customised interactions, banks lost the ability to set expectations also here. Paired with increased customer expectations, a level of complacency on part of the established financial groups have come along just as VCs have lined up to provide the funds for newcomers to grow. To top it off, technology has now made it far easier for newcomers to enter the fray.

But these lowered barriers to entry aren’t just benefiting pure fintech startups. It’s now increasingly possible for established businesses in other industries to use these same tools to add payment services to their decks. Neal Cross, Chief Innovation Officer at DBS Bank, said in the report: “In the future, banking will be everybody’s business. Any organisation, including the telecommunications and retailers, will be able to make money from finance.”

The good news for an incumbent financial provider with an eye for innovation is that startups don’t have a monopoly on impressing people. And traditional financial providers still hold one major advantage over the alternatives: only 24% say they currently trust the newcomers. Still, there’s no reason for overconfidence: 56% said they neither trust nor distrust the traditional providers, meaning a great initial experience with a newcomer could see customers sway in their direction. The fact that regulators are working to encourage competition and consumer protection in the industry should help newcomers gain further foothold. Fintech startups already benefit from the fact that young people are also more likely to trust a new company, as the new faces are often perceived as offering better value for money, improved customer service, and being easier to use.

Financial services executives mostly agree that fintech startups are indeed having an impact on the financial services business, but there is little consensus on where this will take us. For now, collaboration between the new and old guard seem to be generally accepted as the best way to go. “Partnerships are going to be absolutely critical. Fintechs have very strong products, but need scale and access to clients,” Eduardo Vergara, Head of Payments Services at Silicon Valley Bank, said in the report. “On the other hand, banks have the scale and the clients, but struggle to build compelling products. With the right model, this can be a win-win”.