While already underway prior to 2020, the pandemic has greatly accelerated three key trends that will increase the adoption of FinTech

Insights

While growing in recent years, Canadians’ adoption of digital financial tools has trailed growth in many other countries. Many Canadians continue to prefer conducting their day-to-day banking in person at branches; however, reluctant tech adopters have found their routines disrupted by the physical distancing requirements associated with COVID-19.

 

The disruption of routines forced by the pandemic represents a potential opportunity for many financial institutions (FIs) to encourage more Canadians to adopt new financial technology (FinTech) solutions. In order to make an effective case to reluctant users, FIs will need to construct targeted appeals that connect with users’ values.

 

Using our Social Values Research Framework, Environics Research has identified four key segments of Canadian FinTech consumers, each with distinct values and worldviews. By understanding the social values that each of these segments are most aligned with, we can build in-depth profiles to describe the motivations and attitudes that shape their reactions to FinTech tools. FIs that offer support and messaging tailored to each unique customer segment amid the COVID-19 disruption have the potential to increase FinTech adoption rates, even among those who have been reluctant to adopt in the past.

 

COVID-19 is accelerating three key trends

 

While already underway prior to 2020, the pandemic has greatly accelerated three key trends that will increase the adoption of FinTech:

 

#1. Increased acceptance of digital tools, including among more hesitant adopters.

 

#2. Increased pressure to create a digital identity as in-person options are scaled back.

 

#3. A move away from cash and toward other forms of payment: debit, credit and mobile.

 

 

Consumer reactions to FinTech trends – and how can FIs support them?

 

Trend #1. Increased acceptance of digital tools, including among more hesitant adopters.

 

Millions of Canadians have been banking online for years, or even decades. For the segments we refer to as Enthusiastic Experimenters and Adaptive Achievers, banking sites and apps are old news – already part of daily life, long before the pandemic hit.

 

Our Anxious Traditionalists and Reserved Skeptics segments, on the other hand, have been more reluctant to take their financial activities online. Of these two more hesitant groups, the Anxious Traditionalists are more likely to go digital in response to pandemic disruptions. Although they’re wary of technology, the threat of COVID-19 is also tapping into these Canadians’ generalized fears about the dangers and complexities of modern life. For some, privacy concerns and other tech fears may be less powerful than the fear of contracting the virus through in-person interactions. Anxious Traditionalists will do everything they can over the phone – ideally speaking to a live person – but if FIs can offer sufficient support to these users, the pandemic might finally push them to digitize some basic tasks.

 

The Reserved Skeptics, by contrast, are actively resisting the shift to FinTech. They will likely refuse to use digital financial tools until their local branch closes, and it becomes impossible to bank in-person or by phone – a change they will resent.

 

Trend #2. Increased pressure to create a digital identity as in-person options are scaled back.

 

A key barrier to the use of digital tools and platforms is consumer fatigue over creating an online profile or identity. Some Canadians have avoided creating a profile for digital banking, whether because of privacy concerns or simply because they’re uncomfortable using technology. The inconvenience of in-person banking during the pandemic could be the extra pressure these Canadians need to bite the bullet and create a profile – or upgrade an existing one with enhanced authentication functions.

 

Consumers in our Enthusiastic Experimenters segment are at ease with change and complexity. They are already at the leading edge of online identification tools, so the pandemic is unlikely to spur any changes for them. Adaptive Achievers are also at the head of the pack; they tend to embrace new features that will enhance their experience in some way, delivering extra convenience or granting them access to additional tools.

 

The Anxious Traditionalist consumer segment, fearful of having their identities stolen or exploited, will go to considerable lengths to avoid creating digital identities, or enhancing them with biometric or other data. Reassurances that new features can make them more secure, not less, may or may not persuade them. FIs will need to offer strong step-by-step support, as well as plain-language explanations of the purpose and value of each step, to bring these users along. Consumers belonging to the Reserved Skeptics segment are as wary as the Anxious Traditionalists. Their reluctance to adopt new tools is partly due to lack of confidence with technology, and is partly rooted in a more generalized resistance to change. Here again, step-by-step support will be vital – but it will be uphill work to persuade these users to create and use digital identities.

 

Trend #3. A move away from cash and toward other forms of payment, including mobile.

 

Canadians’ use of cash – both the share of transactions they make in cash and the overall value of those transactions – has been declining for years. A recent study by Payments Canada found that COVID-19 is accelerating this trend: 62 percent of Canadians reported using less cash since the beginning of the pandemic. Many retailers have stopped accepting cash altogether due to fears of virus-contaminated bills and coins.

 

Long at ease with credit and debit purchases, the Enthusiastic Experimenters and Adaptive Achievers have been incorporating payments with their mobile phones into their daily habits. Reduced acceptance of cash by retailers will likely have minimal impact on them. The Anxious Traditionalists will likely be comfortable with an accelerated move away from cash, increasing the share of the transactions they make with debit and credit cards; a small proportion may even experiment with mobile payments for the first time. For the Reserved Skeptics, mobile payments are likely a bridge too far, but these Canadians can be expected to increase their use of their existing debit and credit cards – reducing their usually substantial reliance on cash.

 

A temporary disruption may help users make a permanent change

 

In a six-month span, COVID-19 has advanced the adoption of Fintech in Canada by at least three to five years, by forcing even the most reluctant consumers to change their behaviours. While some may try to revert to their old ways when the pandemic subsides, the longer the pandemic continues, the less likely this will be the case, as retailers and other consumers make these advances and innovations permanent.

 

When it comes to FinTech adoption, one message will not fit all. Consumers’ different values shape their reactions to many aspects of new technology – from privacy, to convenience, to change itself. While Adaptive Achievers will be enticed by messages about enhanced functionality, Reserved Skeptics will tend to prefer familiarity over new bells and whistles. While the novelty of FinTech will appeal to Enthusiastic Experimenters, Anxious Traditionalists will be much more nervous, and will need to understand why a change is being recommended to them, and exactly how they need to proceed.

 

By understanding these profiles, retailers and FIs can help support the transition to the Fintech future by training and arming their front-line staff to recognize each segment and tailor their communications accordingly. Doing so, FIs can deliver smart, targeted support to customers during this disruption, and guide the more reluctant adopters to make permanent transitions to digital tools and platforms.

 

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