UBS Report: Fintech Gaining in Consumer Adoption

UBS Report: Fintech Gaining in Consumer Adoption

by October 7, 2016

Customers are increasingly relying on financial services provided by non-traditional providers, according to survey by UBS Evidence Lab. While the fintech disintermediation risk is real and growing, USB believes that collaboration and new technologies can deliver new opportunities for banks.

In one of UBS’s Q-Series reports titled ‘Global banks: Is Fintech a threat or an opportunity?’ the bank shares findings of a survey conducted at both the consumer level and the bank management level to assess the potential threats and opportunities for the banking industry.

The bank surveyed 27,914 consumers in 24 countries via an analysis of fintech user profiles, behaviour and preferences to gauge the competitive threat facing the banking industry, and 61 bank management teams to examine banks’ strategies towards fintech to assess their expectations regarding partnerships, revenue opportunities as well as the various technological implementation progress they have made.

The survey’s results highlight growing adoption of fintech services notably online, web-based payments, mobile payments, international money transfers, peer-to-peer (P2P) lending and robo-advisors.

Fintech services usage, UBS consumer survey

The report predicts a rise of mobile payments usage of 47% over the next year and a rise of money transfers usage of 73% over the same period.

In P2P lending, 19% of respondents who have never applied for a loan plan to apply over the next 12 months, representing a 138% rise in adoption rate. Robo-advisory as well is expected to experience notable growth with a rise of 150% over the next year.


Opportunities for banks

Based on the survey’s results, bank managements consider the major threat from fintech to be coming from the payment businesses, notably in emerging markets.

Disintermediation risk from fintech is considered to be the next highest in the area of forex and remittance, which is viewed as under major threat by 19% of replies, followed by P2P lending with 13%.

Fintech services, threat to banks, UBS report

Responding to the rise of fintech, 38% of respondents said that they currently have a partnership with a fintech company. UBS expects to see that figure rise to 51% over the next 12 months. Additionally, the impact of fintech on revenues was estimated at 3.8% over the next three years.

“While the threat of financial disintermediation has clearly increased with the ubiquity of fintech companies, there is also evidence of cooperation between incumbent banks and fintech start-ups, with both groups potentially leveraging off each other’s strengths,” the report says.

“Banks have large and loyal customer bases, extensive distribution networks, as well as considerable scope to fund new projects; fintech start-ups are innovative, have technical expertise as well as the agility and adaptability to meet changing circumstances. Rather than competing against each other, banks and fintech could work together to improve customer experience in financial services.”

As of blockchain technology, despite the craze surrounding the tech in the banking and financial services industry, only 8% of respondents said that they have major systems fully implemented or have systems in production and 19% said that they are at the test/pilot stage.

Development stage of blockchain-type systems, UBS report

According to UBS, blockchain technology will likely enable co-operation and trust in entirely new and innovative ways. Among the benefits pointed out by the bank, the technology is expected to enable widespread cost reductions and revenue enhancement in the future.

Alongside fintech, UBS has identified several other fields it predicts will cause major disruptive movements.

During the bank’s CEO Summit in Hong Kong last week, Amy Lo, country head of UBS Hong Kong named automation and robotics as being at the center of the fourth industrial revolution. These trends are expected to drive huge efficiency gains.

While artificial intelligence is expected to affect between 50-70 million, the technology will also create many more in other creative fields, resulting in increased investment opportunity, Lo said.

UBS predicts 2.5 million Internet users to be added over the next decade, mainly driven by Asia.

In China, the millennial demographic is said to be driving the country’s digital revolution. The bank notes key consumer trends on the rise including sharing economy, augmented reality and virtual reality.


Featured image: Fintech innovation by g0d4ather via

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