Although Canadians’ adoption of financial technology (fintech) is relatively low, it could triple within the next year, according to a global study from Ernst and Young LLP (EY).
The firm’s Fintech Adoption Index found that only 8.2% of digitally active Canadian consumers have used a minimum of two fintech products in the past six months. This puts Canada behind the U.S. (16.5%) and the U.K. (14.3%).
The most popular reason for low fintech usage is lack of awareness, which was cited by 57.2% of digitally active Canadian survey participants who have not used two or more fintech products in the past six months.
“Despite currently low fintech adoption in Canada, traditional players need to accelerate development of digital tools,” says Gregory Smith, Toronto-based partner at EY’s financial services advisory practice, in a statement. “Based on reported user intentions, we anticipate adoption among digitally active consumers to triple within a year.”
It appears that a dramatic jump in fintech usage will come from Canadians who are over the age of 55 and earn more than US$150,000 a year. Less than one-fifth (16.7%) of digitally active Canadians in this group state they are fintech users, but 50% of these specific digitally active consumers say they intend to use fintech within the year.
In addition, usage is likely to double among millennials between the ages of 18 and 34 who earn more than US$150,000. Although 27.3% of these Canadians state they are currently fintech users, 54.5% say they will be using this type of technology within the next year.
“These young Canadian fintech adopters also tend to be high earners,” says Smith. “They will become even more valuable for financial services providers as time goes on.”
Almost half (43.8%) of Canadian individuals who use fintech say it’s because it’s easy to set up an account with these types of service providers. Lower fees, often cited as the main advantage for fintech companies, is the second most-popular reason, as this was the response provided by 20.4% of Canadian fintech adopters.
The results suggest that traditional financial services firms have to keep up with these technological disruptors to retain their client base, Smith says.
“Financial services companies have to review their customer experience, products and services to fit with the new reality,” he says. “And they have to learn from and partner with the fintech community to meet their customers’ needs before newer entrants do.”
Established financial services firms are heeding this message. Toronto-based Bank of Montreal has recently launched the BMO SmartFolio robo-advisor platform while Toronto-based HollisWealth Inc., a subsidiary of Bank of Nova Scotia, is planning on releasing its own robo-advisor service this year.
Canadian Imperial Bank of Commerce, Royal Bank of Canada and Bank of Nova Scotia, all based in Toronto, have each indicated that they are looking into digital advice options.
Montreal-based National Bank of Canada has offered InvestCube, an automatic-rebalancing system, through National Bank Direct Brokerage Inc. since 2014.
EY’s Fintech Adoption Index is a global research project that included the responses of 2,016 digitally active Canadians among a total of 10,131 respondents from six nations. Fintech users are defined in the survey as individuals who have used two or more fintech products in the past six months. The survey was conducted between Sept. 1, 2015 and Oct. 6, 2015.