13 February 2025
Saving and investing with FinTechs Is innovation compatible with consumer protection?
In recent years, a number of increasingly audacious technologies have made their appearance in the financial domain. Conspicuous among these are cryptocurrency, peer-to-peer loans and robo-advisors1. These new technologies come equipped with their share of promises. They supposedly make life easier for consumers by providing solutions to some of their most pressing problems. But they also give cause for concern.
Their arrival is creating a disturbance in the market that borders on revolution – it’s hardly surprising that they have been labelled “disruptive” technologies! These new technologies are developing at a phenomenal rate. In 2017, EY2 published a major study that reported China and India as having the highest adoption rates, at 69% and 52% respectively. In Canada, this rate was only 18%.
Two years later, the same firm published another study on the same subject. This one found that China and India still had the highest adoption rates - 87% for each of these two countries - and that Canada now had a 50% adoption rate, with faster than expected growth.
Everywhere, it is young people who are most enamoured of these new technology-based products. According to the EY study published in 2017, the average FinTech adoption rate6 was 37% among 18–24 year-olds, 48% among 25–34 year-olds and 41% among 35–44 year-olds; it was only 30% or less among those aged 45 years and up.
Influenced by the 2008 financial crisis, young people have not yet developed a solid relationship with a financial institution and do not always see the benefit of doing so. Yet, they do not hesitate to turn to a private company offering FinTechs. In the opinion of some, 18 to 24-year-olds may never develop a close relationship with a traditional financial company. This is even truer of the succeeding generation; and some new technology companies are already targeting children.
FinTech companies promise easily accessible, low-cost, quality services. Their deployment is being encouraged worldwide, as long as they protect consumers. With this end in view, several countries, Canada included, have recently adopted “banking supervision approaches” such as innovation hubs, accelerators and regulatory sandboxes. Such measures are useful, especially since they make it possible to study how FinTechs work and how they are evolving, which is essential if measures are to be set in place to adequately protect consumers.