The results of a new survey indicate that increasingly, banking customers worldwide are utilising the services of at least one financial technology (fintech) company. However, consumer trust in the fintech sector remains low worldwide, due to security concerns. Htet Tayza comments.
Recognising changing consumer trends, the financial services industry is embracing fintech. In Q1 2016, for instance, global investment in fintech increased by 67% from the year before, with the Asia Pacific leading this rise. Furthermore, in a recent survey, business financial services provider IDC Financial Insights found that 60% of international banks would be willing to partner with fintech firms.
The incentive financial institutions have for embracing fintech was shown by LinkedIn and Capgemini’s recently-released World Fintech Report. Surveying 8,000 consumers from 15 nations, these firms found that half of global banking customers now use the products or services of at least one fintech company, with these businesses being particularly popular among younger, tech-savvy customers.
LinkedIn and Capgemini also learned that engagement with the fintech sector is highest in emerging markets. Three quarters of customers in India and China now use the services of fintech businesses, with the United Arab Emirates and Hong Kong following. However, just 23.6% of those polled trust fintech firms, in contrast with 36.6% who say the same of traditional financial services providers.
When asked why they trust traditional providers over fintech firms, customers said that the former are better at fraud protection. As financial services are a favourite target for cyber-criminals, security is a problem for the fintech industry. The perception that fintech firms cannot provide secure services is not always true. In research from NTT DATA, an IT innovation firm, 60% of company executives questioned said that mobile payments would help them build their firms, because they are secure.
Fertile fintech ground
Commenting, LinkedIn’s Penry Price was quoted by NFC World, saying: “Rising customer expectations for more personalised and advanced digital experiences, advancements in technology, greater access to venture capital and lower barriers to entry have created fertile ground for growing fintechs.”
Going on, Penry noted: “Fintechs are largely gaining momentum by meeting needs traditional players have yet to address, but many lack the transparency required to earn the trust of their consumer audiences to capitalise on these opportunities.” The report also showed that under 44% of executives at traditional financial institutions are confident about their fintech strategy.
According to the research firms are now investing in technologies that “facilitate more streamlined and effective operations, thereby providing better day-to-day customer experiences.” The most common focuses are big data and analytics (almost 90%), the internet of things (55.8%), blockchain (54.7%) robotic process automation (52.3%) and open API technologies (50%). Adding further, Vincent Bastid from Efma, a financial sector networking body which helped conduct this survey, said:
“Both fintech and traditional firms still have work to do on delivering a better customer experience… The arrival of fintechs has accelerated the improvement of overall customer experience in the industry, but it is still not at the level that customers perceive that it should be… It is only a matter of time before big tech companies and players in ecommerce and telecommunications join in to stake their claim to benefit from this industry disruption.”
Tackling the problem
With advancing digital technologies, customers can now access financial services easily via mobile devices on the go, promoting convenience. With this report, it is clear that consumers are embracing fintech providers, despite a lack of trust, so that they can access financial services easily, while living hectic lives. However by investing in security measures such as blockchain, the financial services sector is showing that it is committed to addressing these concerns. With this strategy, they can promote global consumer engagement with the fintech industry, which could boost the market going forward.