With innovative and customer-centric offerings, fintech firms are setting new benchmarks for the financial services industry and consumers are responding, with adoption levels increased significantly in the past years.

By James Lloyd, EY Asia-Pacific FinTech and Payments Leader

According to the EY Global FinTech Adoption Index 2019 (Index), 64 percent of digitally active consumers globally are now using fintech products and services – up from just 33 percent in 2017.

It’s a similar picture across the Asia-Pacific region, where the Index shows nearly two-thirds of consumers (64 percent) are active fintech users. The results are even higher in Mainland China, which, at 87 percent, is equal lead with India in terms of consumer adoption levels around the world.

Benefiting From Fintech Feedback Loop

In other key Asia-Pacific markets, consumer adoption rates have doubled and, in some cases, even tripled. Hong Kong, Singapore, and South Korea now all sit at 67 percent fintech adoption (up from 32 percent, 23 percent and 32 percent respectively in 2017), with Australia slightly behind the global average at 58 percent (up from 37 percent).

So, what’s driving this rapid increase in adoption across the region? Most Asian markets benefit from a powerful «fintech feedback loop,» with the increased adoption driving increased innovation – and vice-versa. The impact and inspiration from the major Chinese fintech and «techfin» players are also increasingly permeating across the region and this influence can be seen in the response of incumbent financial institutions, who are now seeking to build out their own fintech-inspired propositions.

Good Combination of Regulatory and Infrastructure Change

At the same time, we are seeing increased regulatory support for non-traditional challenger players across the banking, insurance and wealth management sectors in most markets. These factors are all combining to create a nurturing environment for the rapid growth of robust fintech ecosystems.

In markets like Hong Kong, a combination of regulatory and infrastructure change – including the new Faster Payment System (FSP), the in-process open application processing interface (API) framework, new virtual bank authorizations and digital insurance fast-tracking — are helping build its position as a leading fintech hub, from which to build regional and even global propositions.

More Challenger Fintechs Coming

Meanwhile, in Australia, we expect to see the ecosystem continuing to grow off the back of the upcoming implementation of open banking, more «challenger» fintechs coming into the market and the major players stepping up their innovation agendas in order to remain competitive and address evolving consumer demands.

Right across the region, we are also likely to see increased collaboration between fintechs and traditional financial services providers, as well as the emergence of cross-industry alliances and joint ventures.

Exciting Times

This is an exciting phase of development as the fintech sector, both locally and globally, continues to grow up and out. Adoption will only continue to rise as fintech awareness grows, consumer concerns around issues like trust and privacy fall, and further technology advances help reduce the cost of switching providers.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.