Half of banking customers across the globe are using the products or services of at least one fintech firm, according to the first World Fintech Report (WFTR) from Capgemini and LinkedIn, in collaboration with Efma.

WFTR found that fintechs are gaining momentum and mindshare among younger, tech-savvy and affluent customers. Emerging markets led the adoption where more than 75% of customers in China and India report using services provided by fintech firms, followed by the UAE and Hong Kong.

Fintechs have made the greatest inroads in investment management, where 17.4% of customers rely on them solely and another 27.4% use them in addition to traditional providers. With so many fintechs specializing in niche services, the WFTR also found that many customers (46.2%) are using services from more than three fintech providers.

While fintechs continue to gain momentum, overall customer experience and trust remain low. Only 23.6% of customers say they trust their fintech provider compared to 36.6% for traditional firms. Customers noted traditional financial institutions still hold some advantage over fintech providers when it comes to fraud protection, quality of service and transparency.

In the report, fintechs are defined as new financial services firms which are less than five years old and have a relatively small but growing customer base. Traditional firms are generally financial services firms that have been in the business for at least five years and have a large and established customer base

“Rising customer expectations for more personalized and advanced digital experiences, advancements in technology, greater access to venture capital and lower barriers to entry have created fertile ground for growing fintechs,” said Penry Price, vice president, Marketing Solutions, LinkedIn. “Fintechs are largely gaining momentum by meeting needs traditional players have yet to address, but many fintechs lack the transparency required to earn the trust of their consumer audiences to capitalize on these opportunities.”

Key findings in the report were:

  • Traditional financial institutions continue to face challenges, with fewer than half (44%) of executives confident in their fintech strategy. Only a third (34.7%) affirmed they have a well-structured or proactive innovation strategy in place that is embedded culturally. The risk-averse nature of traditional firms also makes it difficult for them to create cultures that prioritize innovation, and 40.3% of executives said that theirs is not conducive to innovation.
  • Traditional financial institutions (60%) now view fintechs as potential partners, but nearly the same percentage (59.2%) are also actively developing their own in-house capabilities.
  • Executives are exploring a full range of models, whether it be investment in fintech (38%), partnering with educational institutions (34.3%) or setting up accelerators (29.6%), while a much smaller percentage (18.6%) are acquiring fintechs.
  • Traditional firms are mainly responding to this shift investing in technology to support better day-to-day customer experiences. Nearly 90% of executives report they are most focused on implementing big data and analytics, followed by the Internet of Things (IoT) (55.8%), blockchain (54.7%), robotic process automation (52.3%) and open API technologies (50%).
  • Blockchain technology, which forms the backbone of the popular virtual currency bitcoin, is increasingly penetrating the financial services industry. It has numerous applications including enhanced transfers of digital assets, identity management, and better management of reward and loyalty solutions.

Capgemini is a global consulting, technology and outsourcing services firm.

Social media platform LinkedIn has more than 450 million members and has offices around the world.

Headquartered in Paris, Efma provides quality insights to help banks and insurance companies make the right decisions to foster innovation and drive their transformation.