20 years ago today, paying another person, domestically or internationally, was a slow and arduous process. The only obvious means was through visiting your bank branch, which came with costly fees, or via cash. Fast-forward to 2018 and the rapid rise of financial technology has disrupted a historically rigid and conventional industry. You can now send money digitally in a matter of seconds and thanks to multi-million-pound investment, there appears to be exciting times ahead for financial services.
So, what exactly is FinTech? It can be defined as ‘a business that aims at providing financial services by making use of software and modern technology.’ To name a few; companies such as Transferwise, World Remit, Revolut, Starling Bank and Monzo have attempted to disrupt the way we operate with our everyday financial needs.
Given the excitement, we decided to ask a nationally representative sample of 1,000 UK consumers about the phenomenon that is ‘FinTech’ in order to explore how financial services are changing from a consumer point of view.
How well do consumers know the sector?
Firstly, we quizzed consumers on which FinTech brands they were aware of, providing a list of Money Transfer Operators, digital challenger banks and cryptocurrency trading platforms. Monzo and Atom led awareness for digital banks with 1 in 3 aware of these institutions, and MoneyGram (43%) and Western Union (65%) were by far the most known money transfer operators. Only around 1 in 5 were aware of crypto trading platforms such as Coinbase and E-toro. It’s evolving, yet some brands have a long way to go to build strong awareness.
Why would consumers consider using a digital challenger bank?
Convenience is key for Consumers
With everything now seemingly possible using your mobile phone, payments are increasingly being carried out online, on mobile or via contactless. As the Independent reports ‘some 13.2bn payments were made by cards in 2017, overtaking cash (13.1bn) for the first time’ and banking trade body UK Finance (via the BBC) confirmed ‘an estimated 3.4 million people hardly used cash at all during the past year.‘
Therefore, are we approaching a cashless society in the UK? The evidence suggests this general societal shift and correlates with our proprietary research in which we asked consumers how they prefer to carry out banking activities: 9 in 10 said they like to check their account online or through an app, and more than 4 in 5 prefer to transfer money to friends and family in the same manner. It is therefore unsurprising that 1 in 3 would consider using these banks due to the perceived convenience. It seems that consumers view fintech brands as making banking easier and more suited to their busy lifestyles.
According to our data, 43% of consumers would consider using digital banks when holidaying overseas. I can empathise! I have a Revolut card and could not live without it. The inter-bank exchange rates are exceptional when using abroad and it is extremely easy to monitor and control everything through my mobile phone.
What might be preventing even more of us using these types of banks?
Perhaps unsurprisingly, the fundamental barrier for uptake stems from education. 2 in 5 consumers in the UK claim they simply ‘don’t know enough about them yet’. A sizeable group (1 in 4), also have security concerns and question whether these institutions are financially credible or stable enough. Thus, digital banks perhaps need to do more to inform consumers about their range of capabilities and instil confidence with prospective customers that they are able to provide comprehensive financial security.
Nonetheless, this potential barrier could be fixed relatively quickly given the rapid growth of this sector. As the Financial Times reports, Monzo are close to achieving ‘unicorn’ status (a start-up worth at least $1bn) with a customer base of 1 million users, whilst Sky News announced that World Remit aren’t far behind that valuation either and are aiming for 10 million customers by 2020.
It is evident that these start-ups are revolutionising financial services and facilitating consumers’ everyday needs, creating noise and excitement. However, there’s still a lot more brand building and education to be done if they intend to keep disrupting one of the most established and traditional sectors in the economy.
It is an exciting time for the sector and will be interesting to see what the future holds for financial technology.
At Morar HPI we design solutions that enable clients to access the true voice of the consumer. The result is confident decision-making based on reliable and accurate insights. If you work for a financial technology company and want to gain deeper, meaningful insights into your customer base or the market place in general. Please contact our Divisional Director, Caroline Hawkings or myself.