6 minute read 20 Oct 2020
Busy shoppping street shanghai china night

How FinTech adoption is as diverse as Asia-Pacific itself

Authors
James Lloyd

EY Asia-Pacific FinTech Leader

Dubliner in Asia. Passionate about early-stage, growth-stage and non-traditional financial services. Husband. Father.

Sharon Chen

EY Global FinTech Adoption Index Lead Author

Disruptive thinker in FinTech and Wealthtech. Passionate advocate for women in financial services and technology. World traveller. Arts lover. Yogi.

6 minute read 20 Oct 2020

In 2017, ease of opening an account was the priority when selecting a FinTech provider. This has changed since, with price now being the top.

Radical differences in the region’s markets mean FinTech success depends on multiple localization strategies.

Every two years since 2015, EY’s Global FinTech Adoption Index has tracked the surging uptake of FinTech across the globe. In Asia-Pacific, as with the rest of the world, adoption rates have grown even faster than anticipated, surging to 63% in 2019. But below the headline numbers lies a diverse mix of attitudes, awareness and appetites – as varied as the cultures and regulatory regimes in this vibrant region.

FinTech fulfils changing consumer expectations

Of course, Asia-Pacific’s consumers do have certain elements in common. The big consistent trend is that the rise of the technology giants has dramatically changed consumer expectations and behavior. Experiences with much less regulated industries, such as retail or media, mean customers have the same frictionless, omni-channel and speed expectations in buying a financial service as they do shopping online or downloading an app.

Traditional financial institutions may see themselves as operating in a discrete sector, but their customers disagree. From a consumer perspective, financial products and services are embedded in their lifestyle and priorities: saving and paying for a house or a holiday, daily spending on groceries or bills, protecting their families or achieving a comfortable retirement.

In other words, the region’s customers expect to consume financial products as part of other purchasing experiences. This is where FinTech providers shine: designed to be personalized, accessible, transparent, frictionless, cost-effective and Application Program Interface (API)-friendly, they are ripe to be embedded into other value chains. And, as our survey shows, FinTech propositions are sufficiently appealing to consumers to create a truly disruptive threat to incumbent banks, insurers and wealth managers.

In effect, FinTech has redefined the rules of the game in financial services. What was considered new and disruptive in 2015 has since become a prerequisite for all financial service providers. With so many participants now offering similar services, each company must strive to differentiate itself to attract and retain customers, whether by brand, price or execution.

Doing that requires a keen appreciation of both what FinTech adopters want – and what they are concerned about.

Why are the region’s consumers choosing FinTechs?

One telling sign of the FinTech industry’s maturation across the region is how consumer priorities have changed. Clearly, a frictionless onboarding experience is fast becoming an industry hygiene factor.

In 2017, ease of opening an account was the top priority in consideration when selecting a FinTech provider. This has changed since, with price now being the top consideration.

However, beneath these averages are very different market preferences.

  • In Australia, where results largely mirror our US and European findings, it’s all about price (35%). Competitive fees and rates are way ahead of the next most common reasons: ease of onboarding and access to innovative features (both 16%).
  • In China Mainland, which has emerged as a clear forerunner in the region, few consumers (7%) are motivated by ease of onboarding – a reflection of China Mainland’s widespread adoption of open APIs and platform-based services, which has made opening any kind of financial services account virtually frictionless. For these consumers, while attractive rates and fees are important (17%), the most compelling reasons for using a FinTech challenger are to get better customer experience (31%) and access to more innovative products (23%).
  • In Hong Kong, 29% of respondents said attractive rates and fees are a top priority, with ease of onboarding and a better experience considerably less important (both 16%).
  • In Japan, only 3% of consumers choose FinTech for a better experience. A massive 41% choose price, with 21% still interested in the ease of onboarding.
  • In Singapore, while price topped the list (36%), the next most important reason for the city state’s tech-savvy consumers is to get access to different and more innovative products and services than are available from traditional institutions (20%).
  • In South Korea, price (34%) and ease of onboarding (31%) remain equally important.

Why are consumers staying with traditional institutions?

Across the region, the most common reasons for staying with an incumbent financial institution are because consumers:

  1. Simply aren’t aware of or don’t understand how FinTech challengers work
  2. Trust incumbents more than FinTech challengers

Trust in traditional institutions is particularly strong in China Mainland, Hong Kong, Singapore and South Korea.

Interestingly, almost a quarter of Chinese respondents say they are staying for better product features and service quality – a clear indication of the general satisfaction with state-owned companies and underscoring the importance of relationship managers in this market.

In good news for incumbents, consumers in Australia, Hong Kong, Singapore and South Korea turn first to their existing bank or insurance provider when looking for a new product – and then to a price comparison site.

In contrast, 35% of Chinese respondents say they would turn to a FinTech challenger they currently have a relationship with, compared with the 45% who would turn to their existing traditional provider.

In Japan, almost a third (32%) of our respondents say they don’t know about or understand FinTech, demonstrating a clear opportunity for incumbents to roll-out FinTech propositions and win on trust. When it comes to who they rely on when making financial decisions, 40% of our Japanese respondents say they would consult their family, friends and colleagues and a third say they wouldn’t ask anyone. In this highly private culture, FinTech challengers and incumbents alike will need to battle to win consumers’ hearts and minds.

Will consumers buy financial services from non-financial providers?

Challengers and incumbents alike face a new competitive threat that comes from outside the financial industry altogether. Non-financial services companies, such as retailers, technology platforms and car manufacturers are increasingly developing their own technology-enabled financial services offerings. These organizations build on existing relationships with customers to offer holistic propositions accompanied by complementary services such as insurance and lending.

Often, these non-financial services companies enter the game having already gone through their own transformations around innovative technologies. They have redeveloped their original consumer propositions to become faster, frictionless, cheaper and more convenient.

In good news for these potential new entrants, 70% of Asia-Pacific consumers are willing to consider a financial product offered by a non-financial services company. They are most open to retailers and telecommunication firms as service providers. Looking at local market results, Australians are most skeptical, with 24% saying they wouldn’t consider a financial product offered by a non-financial services company – compared with just 2% of respondents in China Mainland.

However, all is not lost for incumbents, who will have major opportunities to partner with non-financial companies keen to embed financial services within their customer journey to meet consumer expectations. Across the region, 39% of consumers say they would be happy to use non-financial providers if they were working with a traditional financial services company – rising to 53% in China Mainland and Hong Kong.

Clearly, institutions must be willing to consider new propositions from new partners. And, as they negotiate these agreements, they will need to think carefully about: who owns the customer; and, more importantly, how to ensure the customer experience is engaging, painless and fair.

What are the keys to FinTech success in the region?

A key takeaway from the data for both FinTech challengers and incumbent financial services providers is that, with increased availability and competition, financial products are easily commoditized in the absence of a strong consumer proposition.

The region is often described as a cultural “‘melting pot”’. But, with its array of different cultures, and regulatory and technology regimes, Asia-Pacific is more of a tossed salad than melting pot, incorporating distinct elements each adding their own flavor and color to the whole. While there is growing interconnectivity across the region, consumer needs and expectations differ considerably within and between countries.

As case studies from the FinTech Adoption Index report show, it’s possible to expand a new FinTech or financial services proposition across the region by focusing on:

  • Localization – understanding how markets differ, and being able to pinpoint the biggest challenges and pain points in each one
  • End-to-end consumer experience – ensuring close communications and feedback with local users to understand their perspective at every engagement point
  • Personalization – catering to individual views, goals, and habits, whether by offering a curated experience or by enabling self-service customization

These strategies require time and investment to get right. However, they pay dividends in the long run by ensuring products are appropriate and in demand. Institutions can reduce the cost of implementation by adopting appropriate technology and being open to ecosystem partnerships.

Summary

FinTech adoption is surging in Asia-Pacific, driven by consumers’ desire for more attractive fees and rates and access to more innovative financial products. Consumers currently still turn to incumbents first when searching for a new product – and in most cases are hesitant to buy financial services from a non-financial provider. Incumbents still have an opportunity to partner with innovators to capture their share of the FinTech market. Success will depend on understanding the nuances of local consumers and creating localized and personalized products and services.

About this article

Authors
James Lloyd

EY Asia-Pacific FinTech Leader

Dubliner in Asia. Passionate about early-stage, growth-stage and non-traditional financial services. Husband. Father.

Sharon Chen

EY Global FinTech Adoption Index Lead Author

Disruptive thinker in FinTech and Wealthtech. Passionate advocate for women in financial services and technology. World traveller. Arts lover. Yogi.