Strategy Note /

How EM retail financial services are changing and the key growth drivers

  • Fintechs are growing the pie by tackling financial exclusion, notably for business/property loans and general insurance

  • Traditional financial institutions will grow their share of mutual fund/equity investments but lose in card payments

  • Informal channels will grow in life/health insurance but be replaced by electronic money for current accounts

How EM retail financial services are changing and the key growth drivers
Rahul Shah
Rahul Shah

Head of Corporate & Thematic Research

Rohit Kumar
Rabail Adwani
Tellimer Research
20 May 2022
Published byTellimer Research

We previously considered how emerging market consumers expect the financial services industry’s structure to change, and in which countries the biggest shifts are likely to occur. In this report, we gauge emerging market consumers’ expectations regarding their usage of 11 different financial services products. The survey provides some perspectives on differences across markets and on how financial services consumption patterns are likely to change over the coming years.

In a forthcoming report, the last of this series, we will consider how the Covid-19 pandemic has affected consumers' expectations for the industry. Our conclusions are based on responses from a survey of 900 consumers across 14 emerging markets.

How emerging market consumers currently consume financial services

Traditional financial institutions have the highest market share in saving/fixed accounts and card payments. Fintechs are better positioned for payments services. Informal channels have their biggest presence in current accounts. Financial exclusion is most pronounced for general insurance and business/property loans.

Current consumer financial services market share

Over the next three years, traditional financial institutions are likely to make the biggest market share gains in mutual funds/equity investment while their leadership of card payments could be challenged. Fintechs should see their share of business/property loans and general insurance rise, while their existing leadership in mobile payments suggests further gains in this area are unlikely. Informal channels could see greater exposure to life insurance, while their share of current accounts could fall. Financial inclusion is likely to improve most in business/property loans.

Expected 3-year changes in market share

Below, we dig deeper into how consumers believe their usage of different financial services providers will change.

Traditional financial institutions

By product, traditional financial institutions hold the highest market share in savings/fixed accounts (50%) and card payments (50%), most notably in South Africa and Mexico. For reasons such as safety and trust, individuals tend to prefer incumbent banks to hold their surplus savings, which in turn allows these institutions to offer convenient card-based payment and credit solutions. The key insights into saving and spending habits that these products provide can then help these institutions to cross-sell other financial products.

On the other hand, these institutions lag when it comes to mobile payments and international remittances, particularly in the Philippines and Indonesia. High banking transaction charges and 'know your customer' costs related to remittances are prompting users to explore other channels, with fintechs often being the cheapest.

Traditional financial institutions: market share by product

With fintechs growing in prominence, consumers expect the market share of traditional financial institutions to erode, notably in savings/fixed accounts and card payments, with firms in South Africa and Brazil likely to be hit hardest. However, traditional financial institutions can also expect to gain market share gain in some products, notably mutual fund/equity investment, particularly in China and Mexico.

Traditional financial institutions: expected market share changes


By product, our survey indicates that fintechs have the biggest market share in mobile payments (49%) and also possess a considerable force in domestic money transfers (38% market share, on average), most notably in Vietnam, Indonesia and Kenya. Consumers prefer fintechs for reasons of convenience, innovation and pricing. Payment firms are the most common type of fintechs; our data indicate they account for around one-quarter of the overall fintech universe across emerging markets, where they typically focus on domestic P2P transfer and merchant payments services.

Fintechs have the lowest market share in insurance and business/property loans, particularly in Pakistan and South Africa.

Fintech market share by product

Consumers believe fintechs providing general insurance and business/ property loans are likely to win market share over the coming years, particularly in the Philippines and South Africa. Overall, consumers expect fintechs to gain share across all products except mobile payments (where their presence is already strong).

Fintechs' expected market share changes

Informal channels

By product, informal channels hold the highest market share in current accounts (13%); for small amounts, the inconvenience and cost of using formal channels may be prohibitive. Pakistan and Kenya have a particularly strong informal channel preference for this product. Informal channels have the lowest market share in life/health insurance (9%), particularly in Mexico and South Africa.

Informal channels: market share by product

Over the next three years, our consumer survey indicates life/health insurance is likely to gain market share in the informal channels, notably in China and Mexico. In contrast, informal channel exposure to current accounts could decline, notably in Pakistan and Brazil. Individuals expect to shift to electronic money, which typically offers greater convenience and security.

Informal channels: expected market share changes by product

Financial exclusion

By product, financial exclusion is more pronounced in business/property loans (27% of our sample), general insurance (22%) and international remittances (22%). Markets where exclusion is most pronounced include the Philippines, Nigeria and South Africa, respectively.

Key drivers of involuntary financial exclusion include providers’ requirements for proof of income or collateral, which is highly restrictive for low-income workers in the informal economy. Lack of awareness is also an issue. Meanwhile, voluntary financial exclusion arises due to a lack of affordability, suitability or trust in existing product offerings. Financial exclusion is less of a problem in mobile payments, current accounts, domestic money transfers and savings/fixed accounts.

Financial exclusion by product

Over the next three years, financial inclusion is expected to improve most in business/property loans (notably in South Africa) and insurance (particularly in Kenya). Fintechs will likely be the key beneficiaries of these changes, as traditional providers are less likely to introduce low-cost products in these areas.

Financial exclusion: expected changes by product