Fintech users overwhelmed by choice, concerned about security: Study

The report finds that customers face initial challenges because of the wide array of options, coupled with a lack of meaningful differentiation.

Deni Ghifari

Deni Ghifari

The Jakarta Post


Illustration of fintech(Shutterstock/File)

March 31, 2023

JAKARTA – A survey conducted by Boston Consulting Group in collaboration with Indonesia’s AC Ventures shows that financial technology users are having a hard time choosing which app to rely on.

Respondents across the four different age groups surveyed said selecting from the large range of options was the number one problem, ahead of security concerns and higher costs compared with traditional banks.

“Platform differentiation is crucial. [A crowded] space means players need to build unique offerings in order to capture a share of nonfintech users,” reads the report titled “Indonesia’s Fintech Industry is Ready to Rise”.

Released on Wednesday, the report finds that customers face initial challenges in settling on a fintech platform because of the wide array of options, coupled with a lack of meaningful differentiation.

In addition, a majority of users in three age groups cited concerns about security as the second biggest gripe they had with fintech, reflecting a lack of public trust when it came to leaving funds in nonconventional institutions.

The report revealed that 40 percent of consumers would like to see “concrete assurances” about the safety of their funds.

Fintech providers beat legacy banks in four aspects, namely ease of use, application interface, special offers and access to additional financial services, according to the survey. The only field where fintech is perceived as inferior is security.

“Investing in platform safety and security should be a top priority to instill confidence in consumers and alleviate any apprehensions they may have regarding the trustworthiness of financial service providers,” said the report.

This matter is tricky, however, since users want attractive financial incentives too, with 26 percent of respondents demanding lower costs of services.

Offering incentives incurs additional expenses, as do efforts to enhance safety and allay security concerns. This is problematic considering how low profitability is in much of the tech industry.

“Eventually fintechs will have to strike a balance between being attractive through incentives and maintaining sustainable unit economics. While low prices may make fintechs attractive to consumers, it is unlikely that such pricing strategies can be sustained in the long term,” the report reads.

“To preserve their lead over banks, fintechs need to adopt a more innovative approach to user-friendly delivery while reducing their reliance on incentives and product promotions,” it added.

The report revealed that there were a total of 134 fintech funding events from 2020 through 2022 in Indonesia with a total capital value of US$3.2 billion, marking a great jump from only 81 deals totaling $708 million from 2017 to 2019.

The increasingly crowded field makes it paramount for providers to stand out.

“Broadly, the times of everything for everyone in fintech services are over. There are clear gaps between the top-tier players and the rest from a consumer preference perspective. It’s the long-tail players who have to identify specific niches that hold potential and assess their medium-term business case from a growth and profitability perspective, Roshan Raj Behera, the Southeast Asia partner of Indian management-consulting company Redseer, told The Jakarta Post on Thursday.

The quantitative consumer survey involved more than 1,000 smartphone-user respondents from a diverse range of age groups, wealth bands, occupations and geographical areas, claimed the report. It also said that a baseline threshold was set to ensure that every participant held a certain degree of financial literacy by making sure they were using at least one type of financial product.

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