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Canadian consumers have greatly increased their use of financial technology, such as payment or budgeting apps, but trail their global counterparts in adoption across every age and income bracket, according to findings from accounting firm Ernst & Young.
The new adoption index published by EY shows fintech use in Canada jumped to 50 per cent in 2019, up from 18 per cent in 2017, yet still below the 64 per cent global average for this year.
“While fintech use may be on the rise and the number of fintech companies in Canada are on the rise, we continue to lag behind our global peers with one of the lowest adoption rates in the world,” said Ron Stokes, EY Canada’s fintech leader.
Among the countries studied by EY, only the United States, Belgium, Luxembourg, France and Japan had lower rates of fintech adoption than Canada. China and India, meanwhile, at 87 per cent, sported the highest rates of adoption. The United Kingdom clocked in at 71 per cent adoption and Australia reached 58 per cent.
Canada’s biggest obstacle to more fintech use is blindspots among consumers. The top reason EY heard for going with an incumbent financial institution, such as a bank, was a limited understanding or lack of awareness of fintech firms.
“The incumbent financial institutions have done a good job of digitally reimagining themselves, and so I think even with the awareness out there, the market isn’t as deep as you see in some of the other economies,” Stokes said.
Fintech use was highest among 25 to 34-year-old Canadians, at 69 per cent, and among the richest quartile of Canadians, at 59 per cent. However, both of those figures were lower than the global average of 76 per cent.
The top reason for a consumer to use fintech, at 42 per cent, was more attractive rates or fees, EY found.
EY defined a regular fintech user as someone using two or more such services in the last six months. But in one area of fintech, money transfers and payments, Canada’s 78-per-cent adoption rate was actually ahead of the global average of 75 per cent. The country, though, was behind the global average in all other technologies, such as financial planning apps and insure-tech.
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The report comes as Canada’s banks are spending billions on technology to upgrade their systems and lure in more tech-savvy consumers. Indeed, one of the keys to the rising adoption rate worldwide is that incumbent financial institutions “have entered the fray in a big way,” EY said in its global report.
Stokes said it was “reasonably possible” that Canada’s adoption rate could reach the global average in two or three years or so given the amount of money being spent on marketing and better technology among fintechs and banks.
EY’s findings also come as the federal government has been weighing an open-banking regime, which could allow Canadian customers to force their bank to share their financial data with third-party companies that could use the information to develop products and services for the consumer.
A June report from a Senate of Canada committee said open banking could spur growth and innovation in the fintech sector and create an economic benefit for the country.
The EY study, however, suggests that there is still a high degree of mistrust Canadians have in sharing their personal financial data online. Among adopters, 67 per cent agreed they were worried about the security of their data when dealing with companies online. Furthermore, only 28 per cent of consumers said they were comfortable with their bank securely sharing their data with another traditional financial services company in return for better offers, and just 19 per cent were at ease with the information being shared with fintechs.
The firm’s findings were drawn from more than 27,000 online interviews with “digitally active” adults, including approximately 1,000 in Canada, that were conducted in February and March of this year.