It is little surprise that fintech usage is highest among millennials, with a global average adoption rate of 48 per cent among tech-savvy 25 to 34 year olds, according to EY.
So-called Generation X, the cohort born between post-war baby boomers and millennials, is not far behind with a take-up rate of 41 per cent.
Specifically, some 30 per cent of 45 to 54 year olds and 22 per cent of 55 to 64 year olds are now using fintech services. Yet, despite their growing asset share, older customers continue to be underserved.
For fintechs, younger people represent the lowest hanging fruit. They are natural early adopters, having reached major life milestones at the same time as new technologies came to market. Millennials have relied on a range of app-based services as they finished education, looked for a job, searched for a home and started a family.
However, although they are the most likely to use mobile and contactless payments for purchasing goods in the UK, when it comes to banking, millennials still favour traditional providers to mobile-only fintech challengers, according to research by Bloomberg Capital.
Fintech’s strength lies in its potential to serve the needs of consumers who have gone unnoticed or ignored by mainstream financial providers
Jake Palenicek, director of financial services at YouGov, says this reticence may stem from a lack of experience and confidence in their financial dealings. “Digitalisation leans heavily on the self-service aspect,” he notes.
Arguably this insight provides fintech companies with another angle from which to frame their business plans. If the sector is to scale and individual companies are to maintain market share, they will need to map their services on to specific demographics’ financial habits, financial experiences and life-stage requirements.
Of all fintech services, transfers and payments are the most widely used, but they are also the most basic. Saving, planning and investment services, however, are gaining ground. Insurance is also on the rise, with 24 per cent adoption globally, but borrowing still lags far behind, with just 7 per cent of UK consumers borrowing through alternative lenders in 2017, according to EY.
While this rate of progression reflects the relative infancy of the market, fintechs will need to demonstrate a greater degree of sophistication to persuade older consumers, many of whom may have long-standing relationships with their financial providers, to part ways.
Their financial footprint is far more complex. “You have home ownership, fixed assets and government benefits that paint a very different picture,” says Evin Ollinger, chief executive of Golden, a personal finance platform tailored to older customers in the United States.
American fintechs, such as Golden, are leading the trend towards tailored services to older consumers by addressing concerns over fraud and retirement planning. EverSafe markets itself as “the first service that applies technology to combat the financial exploitation of older Americans”. United Income, similarly, is a retirement platform that provides money management tools for middle to upper-income consumers.
While True Link, in recognition that only 24 per cent of American baby boomers feel confident they have saved enough for retirement, offers a long-term personalised planning service to help users gauge how much they will need to save to sustain a lifestyle in retirement.
Fintech adoption figures also reveal a gender imbalance between male (35 per cent) and female (28 per cent) users. Here fintechs have another opportunity to serve a marginalised market. In Asia, where firms owned by women are less likely to be approved loans and financing than those run by men, the Asian Development Bank has found that the chances of securing capital through fintech are higher, albeit in smaller volumes.
Globally, the sheer numbers of the unbanked presents the greatest opportunity for the fintech sector. The World Bank estimates that more than two billion people have extremely limited access to financial services, with less than a third of the adult population covered by a credit bureau.
Susanne Chishti, chief executive of Fintech Circle, underscores the groundbreaking role fintech is playing in gathering non-traditional data for credit scoring. “I have seen great fintech companies in Africa that look at other types of data, including mobile phone usage, transactions, social connections, texts and calls, and even where your phone is charged; combined they serve as proxy for traditional financial data,” she says.
Ms Chishti identifies a principle that holds true for every consumer segment. “The fact that this is a ‘fintech solution’ is completely unknown to the users,” she says. “It only matters that it helps improve their lives.”
Fintech’s strength lies in its potential to serve the needs of consumers who have gone unnoticed or ignored by mainstream financial providers. To scale, fintechs will need to capitalise on the sector’s inbuilt advantages: its potential for rapid adaptation, personalisation and an ability to see past unconstructive financial norms.
