July 25, 2017
Canada's FinTech adoption rate more than doubled in the last 18 months
Insurance, money transfer and payments to see biggest increase in uptake
TORONTO -- FinTech adoption in Canada has increased from eight per cent to 18 per cent 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.
"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 per cent of survey respondents in Canada have used two or more FinTech services in the last six months, compared to 33 per cent 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 per cent of respondents reported they had not heard of any FinTech – a lot fewer people than the 49 per cent who reported the same thing almost two years ago. EY expects awareness to increase rapidly, boosting the adoption rate to 34 per cent 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.