South African Fintech landscape to see strong growth
Alongside other emerging economies, the FinTech landscape in South Africa is due for substantial growth over the next few years, as reported by the 2017 edition of EY’s annual FinTech Adoption Index report. Forecasted for 71% growth in the FinTech industry , the country ranks third in future growth behind only China and India.
Widespread digitalisation has cause disruption in a number of markets over the last few years, particularly in the financial services sector with the advent of Financial Technologies (FinTech). FinTech represents the digitalisation of key processes involved in financial services, thereby improving speed and efficiency. Big Four consulting firm EY defines FinTech as: “organisations combining innovative business models and technology to enable, enhance and disrupt financial services.”
FinTech caters to the digitally mature section of the market, which is rapidly on the rise across markets all over the world. It comes as no surprise, therefore, that the adoption of FinTech has seen a substantial increase over the last year, and is forecasted to increase even more in the future as per the report, which covers 20 markets worldwide, comprising of 22,000 online interviews. Globally, FinTech adoption rose to 33% according to the 2017 study, which is more than double the 16% reported in 2015.
Across the global market, emerging economies such as South Africa, Brazil, China, India and Mexico reported the highest adoption rates at 46% combined. South Africa did particularly well amongst these countries, recording an adoption rate of 35%, which is 2% greater than the global average of 33%. The sample for South Africa consisted of 1,035 respondents, who were digitally active and had made use of two or more FinTech services over the previous six months.
The report further divides the FinTech industry into five categories, namely: money transfer and payments, borrowing, savings and investment, financial planning, and insurance. Alongside its impressive overall growth, South Africa demonstrated significant growth of adoption rates in the insurance category in particular at 32%, ranking fourth in the world for this category behind only India, the UK and China.
The overall growth of FinTech adoption rates is expected to continue into the future, with the global average anticipated to reach up to 52% in the next few years. South Africa is one of the primary drivers of this growth, expected to reach an adoption rate of 71%, significantly higher than the global average and ranked only third amongst the markets surveyed.
Commenting on the impressive figures for FinTech adoption, EY’s Africa Financial Services Director, Ashwin Goolab said: “The findings of the 2017 study show FinTech firms have reached a tipping point, and are poised for mainstream adoption across our 20 markets. Building upon the strength of their core characteristics of focusing on the customer proposition and leveraging technology in novel ways, FinTech companies are gaining traction in the market. In the process, they are blurring boundaries between financial products and lifestyle propositions, as well as defining new standards within financial services.”
Of the future, he said: “Traditional firms, who sometimes struggle to deliver the same seamless and personalised user experiences, will undoubtedly need to step up their efforts to remain competitive. We are likely to see greater collaboration between traditional firms and FinTech firms in the future."
