Among developed countries Ireland is one of the top three adopters of FinTech, with almost three-quarters of all Irish adults availing of FinTech services in one form or another, according to the most recent EY Global FinTech Adoption Index report. Globally the pace of FinTech adoption is gaining momentum, with Ireland at the forefront of this trend. While the comparable global average adoption figure nearly doubled from 33 percent to 64 percent between 2017 and 2019, the Irish figure rose from 26 percent to 71 percent over the same period. EY’s Niall Corrigan and Richard Walsh examine the Irish data for the latest issue of Finance Dublin.
The EY Global FinTech Adoption Index, which examines the FinTech industry and demand for these services globally, shows almost three-quarters of all Irish adults (71 percent) avail of FinTech services in one form or another; higher than the global average of 64 percent. When compared with FinTech adoption in 2017, Ireland stood at 26 percent which was 7 percent below the global average, adoption of FinTech has increased almost threefold over approximately a 24 month period.
What was once considered as complex and challenging, FinTech has seen a remarkable increase in growth in Ireland over the past number of years. This rapid growth can be attributed to the changes in regulation, e.g. PSD2, increased customer expectations, and changing priorities, but also partly due to the rise of mobile-first platforms, and initiatives by the Irish Government to encourage FinTech innovation. FinTechs are continuing to gain traction in the Irish market by blurring the lines between traditional financial products and needs-based or lifestyle propositions.
Driving FinTech Adoption
Findings from the report reveal that Irish consumers favour FinTech services over more traditional financial services due to more attractive rates and fees (37 percent); ease of which to set up an account (22 percent) and access to different and more innovative products and services (18 percent).
With FinTech services now becoming a day-to-day feature of Irish consumers’ lives, it is clear that FinTechs are quickly becoming recognised financial services providers within Ireland. The most used services within Ireland are money transfer and payments (85 percent), insurance (63 percent), peer-to-peer payment and non-bank money transfers (76 percent) followed by insurance comparison sites (61 percent). The results show that adoption across age demographic segments are relatively similar. In money transfer and payments, for example, which is the most utilised FinTech service, adoption is highest amongst 25-34 year olds (93 percent) and 18-24 year olds (91 percent), but is also very high among 45-54 year olds (84 percent) and 55-64 year olds (76 percent).
It is broadly acknowledged that there has been a decline in consumer trust in the Irish banking system. However, according to the survey, the main reasons for non-adopters not transitioning from more traditional transaction methods are their distrust of FinTech challengers (29 percent) and limited understanding of how FinTech companies work (39 percent). As more traditional institutions offer their own innovative products and services akin to FinTech services, their ability to build on pre-existing trust takes on new significance. Thirty-five percent of Irish adopters said they would first turn to alternative providers, be it other traditional institutions, a price comparison website or a FinTech challenger. In contrast, 14 percent of non-adopters said they ‘did not know’ where they would turn, suggesting they are under-served by their current banks and insurers while lacking knowledge of alternatives.
As FinTech services continue to gain a foothold in the Irish market, both FinTech adopters (73 percent) and non-adopters (75 percent) share their concerns about the security of their personal data when dealing with companies online. Yet, in contrast, Irish consumers are increasingly becoming more comfortable sharing their data with traditional financial services, FinTechs and non-FS companies. Similarly both adopters (69 percent) and non-adopters (68 percent) still prefer to interact with their bank through traditional methods, preferring the personal interactions to that of social media.
Changing customer priorities
Irish FinTech adopters are more likely to use multiple providers for financial services, including traditional institutions and FinTechs, with 24 percent of Irish consumers using five or more different providers. This willingness to purchase products from multiple providers shows brand loyalty is no longer a factor when it comes to financial products. Price-conscious Irish consumers are now readily choosing between a wide variety of traditional institutions and FinTech challengers, and they are using tools like comparison websites to help them to select the most suitable products which fit their needs. While 19 percent of Irish consumers perform their own individual research on financial products, it is ultimately word-of-mouth which plays a substantial role in the selection of financial providers, with 31 percent of Irish consumers relying on family, friends, and colleagues for advice, versus just 1 percent who depend on bank or insurance relationship managers.
In the past, traditional financial institutions and FinTech challengers competed against one another for market share. But now a threat has emerged from outside the financial industry, with traditional players and challengers competing against non-financial organisations such as retailers and technology platforms. Seventy-two percent of consumers are willing to consider a financial services product offered by any non-financial services company, with Irish consumers particularly open to retailers (48 percent), and power and utilities (42 per cent) as service providers. Forty-five percent of Irish consumers have also indicated a willingness to have a linked smart device for their car and home insurance and 47 percent having an eWallet which can be used for payments across a number of different businesses.
Future of FinTech Adoption
Gartner forecasted that by 2030 80 percent of financial firms will either go out of business or be rendered irrelevant by new competition in the marketplace, changing customer behaviour and advances in technology. With such rapid growth in FinTech adoption and FinTech challengers using regulation like PSD2 and Open Banking to their advantage to win consumer business, traditional Irish financial institutions are also being driven to develop their own FinTech products and services. Those who are offering their own FinTech services need to be mindful that in today’s marketplace certain product characteristics are now considered by consumers to be prerequisites for any service offering, including that they be simple, transparent, frictionless, personalised and omni-channel. The traditional institutions which meet these prerequisites can then build on their inherent strengths, such as existing customer relationships, longstanding connections with regulators, and a global brand name.
Looking ahead, we see an increasingly ecosystem-driven approach towards managing consumer financial service(s). This will see a market with a more enhanced collaboration between existing and new players which will enable more choice and innovate products for consumers. Demand for FinTech services are growing and the opportunity for innovative Irish FinTechs at home and abroad is strong, and although some challenges have yet to be overcome, it seems that growth in the FinTech space will continue to reach new heights.