Many giant technology corporations are setting their sights on FinTech (financial technologies), which is gradually changing the way people are making purchases, transferring money, and so on. According to data from research firm Accenture, $12.2 billion was invested in FinTech in 2014, more than three times as much as 2013.
Among companies investing in FinTech are Apple and Google, which launched digital wallets and have not won great success so far. About a month ago, it was published that Jack Dorsey’s Square startup would attempt an IPO, and at the end of the week it was reported that the company, which is developing a cellular payment service, hopes to become a public company valued at $4 billion.
There are new players in the FinTech market, including startups, but there are also established entities - primarily banks and credit companies. One of these banks is Citi, which operates an Innovation Center in Israel, and an accelerator, now hosting its fourth group of startups.
Next Monday, Citi Innovation Center will host a FinTech exhibition, showcasing new technological solutions. Ahead of the exhibition, Citi and "Globes" commissioned Geocartography to study the Israelis' views on financial innovations in a survey encompassing 500 respondents.
81% prefer credit cards
The survey found that Israelis prefer, overwhelmingly, to conduct transactions via credit cards. 81% of the respondents cited this as the main payment means used. Only 15% use mainly cash, 4% prefer any specific method of payment, and no one cited checks as a preferred means of payment.
According to the survey, the use of cash as a primary means of payment increases as the level of education and income declines. Globally, cash - bills and coins - are expected to disappear in the future, and the survey findings support this. Most of the respondents (73%) believe that the use of cash will decrease in another decade, 17% think there will be no change in cash usage, and 10% believe the use of cash will actually grow 10 years from now.
One of the possible alternatives to cash (in addition to credit cards and checks, of course) is the digital wallet. The survey checked to what extent the general public is familiar with the digital wallet and the prevalence of its use. The data indicates an impressive level of awareness, together with slow implementation: 82% of the respondents said they had heard of the digital wallet, but only 4% make use of it. The remaining 14% responded that they did not know what a digital wallet is.
The survey also checked the respondents’ familiarity with Bitcoins and found that 64% are familiar with the virtual currency, 35% are not familiar with the term, and only 1% use Bitcoins.
Citi Innovation TLV Center head Lyron Wahrman said, "We generally see that there is great awareness of technological tools in the financial field, but there is a considerable gap between awareness and adopting methods of digital payment on a daily basis - such as digital wallets, virtual currencies, peer-to-peer lending, and so on. There are reasons for this and the primary one is the decentralization of the means of payment, and the high security demands of digital payment methods. In this field, the technology still has a long way to go in order to change the market. But just as we’ve become accustomed to listening to music on YouTube, we’ll also eventually learn to pay and transfer money from place to place via the cellular device.”
Wahrmann added, “In the first generation of FinTech, many payment applications were developed. Most of them did not succeed, and a few achieved success, like Jack Dorsey’s [one of Twitter’s founders] payment clearing application Square, which enables consumers and small business owners to pay and receive payments via cellular devices."
“But even the systems of second-generation development still have high security requirements and segmentation for each type of payment, which complicates every simple payment transaction via the cellular device as opposed to credit clearing, which is quick and available. That’s the reason we see today that the large companies are trying to enter this market via hardware components, chats or email all in order to make financial transactions easier for the consumer."
“Ultimately, a single and simple integrative technological solution that covers payments in all fields of life, from buying at the supermarket to transferring funds between accounts overseas, is what will be able to change our consumption habits in the financial field.”
13% use a tablet
One of the prominent innovations in the FinTech field is peer-to-peer lending - a format that enables private individuals and small businesses to borrow money from other people, without the mediation of financial institutions. While this field is growing in the world, it is still in its infancy in Israel.
The survey indicates that only 15% of the respondents would agree to lend their money in this format (3% to a great very extent, and 12% to a great extent), compared to 24% who would refuse to do so, 30% who would agree to a moderate extent and 31% who would agree to a small extent.
Wahrmann said, “Peer-to-peer lending is only partly successful, in the world too. Despite the phenomenal numbers presented by the leading companies in the field, these are very small sums relative to the loan market from the traditional financial institutions, but I expect this market to grow in parallel to the change in users’ financial consumption habits.”
The survey participants also addressed the possibility of identification via finger prints (biometric identification) in order to make purchases. 10% of the respondents agreed (to a very great extent) to make use of biometric identification, 23% are willing to do this to a great extent, while 49% are willing to do this to a moderate (18%) or small extent (21%). The rest - 28% - would refuse to do this.
The survey also examined the technological means people use to conduct transactions in their bank account. (The respondents were allowed to choose more than one option.) Most of the respondents - 79% - manage their bank account via their personal computer at home, 50% use their cell phone, 29% use a computer at their work place, 13% use a tablet and 10% do not use any technological means.
The survey also found that the use of technological means was higher among men, and that there was a positive correlation between the use of technology and the level of education and income.
Published by Globes [online], Israel business news - www.globes-online.com - on November 10, 2015
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