By Ambareen Musa
A growing number of financial companies and insurance providers are looking to leverage technology and digital innovations in the race to the top. Here's a look at what this increased tech-adoption means for businesses and consumers.
It’s no surprise that FinTech and InsurTech have become the buzzwords every incumbent and newbie in the finance and insurance industry swears by. But how exactly is technology changing how banks, insurance companies and other financial services providers deliver value to their customers.
We take a look at some of the biggest trends that have dominated this industry, both globally and regionally.
The EY Global FinTech Adoption Index 2019, which surveyed consumers across 27 global markets, revealed some interesting insights. 96 percent of the survey respondents claimed they were aware of at least one FinTech transfer or payments service, while 75 percent had used one in the past. Attractive rates and fees were cited as the top reason behind FinTech adoption. When it comes to how consumers want to access financial services - 33 percent turn to someone other than their main bank first, 68 percent would consider a non-financial services company for financial services, and 46 percent are willing to share their bank data with other organizations.
The ever-increasing demand and adoption of FinTech services also hands a lot more influence to key players in the market. Established FinTech companies are not only carving a niche for themselves, but also driving traditional players to build their own FinTech offering.
Globally, financial companies and insurers are making massive investments in data analytics. The Internet of Things, mobile technology, connected devices and social media, have all drastically increased the amount of data a company can leverage.
Access to this wealth of real time data offers the potential to improve nearly every aspect of running a business - Boost operational efficiency, drive revenue & profitability, improve customer experience. Companies that lack a data-driven approach will find their business models severely challenged.
We've come a long way from the time when bank websites were clunky and wouldn't render on mobiles. Today, most financial institutions have transformed their retail user experience, offering full mobile functionality with best-in-class design principles. A top-notch user experience is now the norm.
Mobile technology adoption continues to be on the rise in the FinTech industry. A Statista report estimates that, by 2021, the volume of global mobile payments will reach an estimated $275 billion. Compared to the corresponding transaction volume of $25 billion recorded in 2016, we’re looking at an average annual growth rate of 62 percent. These statistics, among many others, prove that financial institutions stand to reap massive returns on investment in mobile technologies.
To stay on top of their game, keep customers engaged and drive double-digit growth, traditional financial and insurance companies must collaborate with tech startups. Instead of relying on startups as vendors offering specific solutions, these collaborations should help build an ecosystem of partners.
Considered a threat by traditional insurers a decade ago, the image of InsurTech start-ups has evolved over the last few years. Insurance companies have starting looking at InsurTech start-ups as growth enablers. According to recent data from Deloitte, InsurTechs have drawn $16.5 billion in investments over the past decade, putting them at the forefront of innovation in an industry that has historically been resistant to change.
According to a 2017 report by Wamda and Payfort, the number of FinTech start-ups in the MENA region is set to increase from 46 in 2013 to 250 by 2020. In under a decade, the FinTech sector in the region will see extraordinary growth of more than 400 per cent.
Growing FinTech adoption also helps open many doors for the unbanked and underbanked segment of the population, especially through innovations like mobile wallets, online remittance services, peer-to-peer lending and crowd funding.
According to World Bank Findex report (2017) – Since 2014, 515 million people have gained access to financial services. Of the 1.7 billion adults who remain unbanked, a full two-thirds now have a mobile phone. That means there’s a real opportunity to close the remaining gaps in financial inclusion by providing mobile financial services. Between 2014 and 2017, the share of adults who have an account with a financial institution or through a mobile money service rose globally from 62 percent to 69 percent. In developing economies, the share rose from 54 percent to 63 percent.
Insurance aggregators are fast becoming the reference point for users, who want to compare quotes from multiple insurers and buy their policies online through a smartphone, laptop or tablet, without ever having to leave their home or office.
Since launching operations in 2012, Souqalmal.com has grown to become one of the most trusted banking and insurance aggregators in the MENA region. With its instant quotes, side-by-side comparison capability, and customization options, the platform has transformed the way people buy insurance products.
Souqalmal.com made headlines last year, when it raised $10 million in its Series B round of funding. Riyad TAQNIA Fund (RTF) led the investment round, which also saw two local and global strategic partners join in - UAE Exchange and UK-based financial aggregation heavyweight - GoCompare.
With RTF being the lead investor, one of Souqalmal’s primary objectives was to expand its footprint in Saudi Arabia. The company has already entered into a MoU to launch a branch, which would be regulated by the Saudi Arabian Monetary Authority (SAMA). In fact, the regulator’s efforts towards encouraging the entry of foreign insurance players and transforming the Saudi insurance market have also been well documented in recent months.
This forms part of the bigger picture, one where the region’s financial regulators are making it easier for next-gen FinTech and InsurTech players to enter local markets. Right here in the UAE, FinTech is already taking center-stage. The recent launch of FinTech hubs like the ADGM FinTech Regulatory Laboratory in Abu Dhabi and the DIFC FinTech Hive in Dubai, signals that digital innovation is being taken seriously by key decision makers.
Souqalmal’s previous round of funding also made big news for another reason – One of the UK’s most popular aggregators, GoCompare, was coming on board as a strategic partner. This speaks volumes about how international investors are taking a keen interest in the region and its thriving insurance aggregation industry. Not just that, it helps local players like Souqalmal leverage the technological know-how and capabilities that are deemed best in class in the aggregation business globally.