South Africa ranks among the highest in fintech users globally and reports one of the highest incidences of intended use, a new study finds.
The EY study, undertaken through more than 22 000 interviews with digitally active persons across 20 countries, defines users as individuals who used two or more fintech services over the past six months. The consulting firm reported the findings using a “one market, one vote approach” in a bid to gain a cross-market perspective on themes and trends.
At 35%, fintech adoption in South Africa beats the global average of 33% and is mostly in line with its emerging market peers, who boast large tech savvy but financially underserved populations. Domestically, 6% of fintech users use five or more services and are classified as super users.
At 41%, adoption among consumers aged 25 to 34 is highest, closely followed by those aged 35 to 44 at 40%. The largely digital native 18 to 24 year-old category lags behind at 36%, mostly due to them having less sophisticated financial needs. Adoption gradually declines from age 45 upwards. “As people age, their affinity for fintechs diminish. That’s not because of them not being tech savvy but rather because they have formed relationships with major institutions and are not willing to break those relationships in the later years. The trick for fintechs is to get people early and that is what they target,” he said.
Goolab said fintechs present large incumbents with risks and opportunities. Collaboration between the two, which would include leveraging of fintech firms’ agility and laser-like focus on solving particular pain points as well as the large scale and distribution networks of incumbents, would lead the provision of more effective services, he added.
While a number of fintech services and platforms have been billed as serious competitors to large financial institutions for their ability to provide similar services at a fraction of the costs, it appears South Africans favour fintech firms for convenience rather than pricing.
EY found that fintech adoption is highest among South Africans who earn $50 000 to $80 000 per annum at 51%, with usage at 50% among those who earn more than $150 000 annually. Adoption of all five services – money transfer and payments, financial planning, savings and investments, borrowing and insurance – is highest among the former income bracket. Surprisingly, those that earn more than $150 000 are the highest users of borrowing services, possibly due to their ability to leverage off their earnings.
At present, fintech adoption is driven by the country’s urban population, with 42% of users based in large cities and 24% in rural areas.
Fintech adoption over the next six months is expected to surge to 71%, far outgrowing the expected global average of 52%, and is largely due to the presence of established fintech firms in the country as well as higher customer acceptance, said Goolab. All five service categories are expectedly to increase significantly, with growth money transfer and payments, and insurance services trumping the rest.