Financial technology (FinTech) adoption among consumers is set to grow rapidly in the coming year, a change that would force traditional financial services companies to overhaul strategies to compete with new market entrants, global auditing firm Ernst & Young (EY) said in a report.
About 15.5 percent of consumers have used at least two FinTech services, or financial services and products developed by online companies, instead of traditional banks or insurance companies in the past six months, according to the report based on a survey of 10,131 digitally active consumers in Australia, Canada, Hong Kong, Singapore, the UK and the US.
“The adoption of FinTech products is relatively high for such a new industry that the risk of disruption is real,” Ernst and Young advisory leader Jon Huang (黃昶勳) said in the report.
Adoption rates could double in the next 12 months if the respondents proceed with their consumption behavior, the report said.
Traditional financial services providers would have to assess which customers are most at risk from the new competition and step up efforts to meet their demand, as FinTech catches on with consumers, Huang said.
The Ernst & Young survey examines the use of FinTech services in savings and investments, money transfer and payments, borrowing and insurance. The services include peer-to-peer platforms for investments, equity or rewards crowdfunding, financial planning, stock brokerage, foreign exchange and overseas remittances among other FinTech propositions.
Chinese Nationalist Party (KMT) Legislator William Tseng (曾銘宗) recently called on local financial institutions to set up funds for employment replacements, saying that physical banks, insurers and other financial firms might increasingly lose importance as Fintech evolves and causes massive job losses.
Tseng, who headed the Financial Supervisory Commission (FSC) before becoming a legislator-at-large on Feb. 1, urged authorities to take action and help the sector through the transition.
Under his chairmanship, the FSC last year formed a new office to oversee the integration of resources for boosting FinTech, an economic industry composed of companies that use technology to make financial services more efficient.
Payment services have the highest adoption rate of 17.6 percent among FinTech products in the markets surveyed, the Ernst & Young report showed.
Services in this category include the use of non-bank providers to make payments, foreign exchanges and overseas remittances via the Internet.
Savings and investments rank second with a 16.7 percent adoption rate as consumers are comfortable with online stock brokerage and spread betting, the report said.
Meanwhile, consumers are increasingly receptive with the use of online budgeting and planning, investments, equity and rewards crowdfunding and peer-to-peer lending, the report found.
The adoption rate of online health premium aggregates and car insurance using telematics stand at 7.7 percent, while online borrowing through peer-to-peer Web sites reached 5.6 percent, the report said.
Local financial firms should join forces with cloud computing, big data analysis and information security providers in tapping the FinTech market, Ernst & Young said, as Taiwan enjoys an internationally competitive edge in information and communication technology.
FinTech adopters tend to be young, high-income earners and financial firms must heed the trend to avoid losing customers, Huang said.
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