Strategy Note /

What consumers tell us about the fintech growth opportunity

  • Retail financial services is undergoing rapid change; consumers can give a reality check on executives’ growth ambitions

  • They see big fintech market share gains in Brazil/ Mexico, and in life/ health insurance and international remittances

  • Fintech gains come mainly by tackling financial exclusion and ejecting informal channels; not by beating traditional FIs

What consumers tell us about the fintech growth opportunity
Rahul Shah
Rahul Shah

Head of Corporate & Thematic Research

Rohit Kumar
Rohit Kumar

Global Financials/Thematics

Tellimer Research
12 November 2020
Published byTellimer Research

This report, part of our series on the emerging market fintech space, uses the results of our proprietary consumer survey to highlight the current and expected financial products usage mix in seven major EMs (Brazil, China, India, Indonesia, Kenya, Mexico, South Africa). We highlight which markets and products are likely to see market share gains for traditional financial institutions, and those where fintechs will make the largest incursions. We also assess where consumers are most reliant on informal providers, and where the problem of financial exclusion is likely to be addressed most aggressively. Finally, we showcase some fintech firms taking innovative approaches to tackle the problem of financial exclusion in emerging markets.

EM consumer financial services market share

Our proprietary survey of 700 consumers in seven emerging markets asked which types of providers they use across 11 product categories. Customers use fintechs most in China and least in South Africa. The most common fintech products include mobile payments and domestic money transfers, with least traction in general insurance and personal/vehicle loans. Informal providers of financial services are most prevalent in China, particularly for current account proxies. Financial exclusion is most pronounced in South Africa and for business/property loans.

For each product, we also asked survey respondents to consider the type of providers that they expected to use in three years. The results indicate that both traditional FIs and fintechs are likely to gain market share, largely by servicing financially-excluded customers. By market, the biggest fintech gains are expected in Mexico and Brazil. By product, fintechs are likely to grow volumes most in life/health insurance, international remittances and personal/ vehicle loans. Considering traditional FIs, these are most likely to gain share in Kenya; consumers expect them to lose market share in Brazil. By product, traditional FIs should gain share in business/property loans, and lose share in card payments.

Current and expected market share of key retail financial products, by provider type

Source: Tellimer Research, third-party survey

Earlier this year we carried out a detailed survey of the current and expected usage of financial services of 700 individuals in seven emerging markets (Brazil, China, India, Indonesia, Kenya, Mexico, South Africa). We summarise some of the main findings below.

Fintechs have already made significant inroads, notably in China and Kenya

In aggregate, our respondents indicate that traditional financial institutions have around half of the market, while fintechs have around a quarter. Informal channels have a 6% share, while 18% of our respondents are financially excluded. Note that our survey does not weight responses by volume of business; accordingly, we think it understates the market share (by volume) of traditional financial institutions. However, we think the results do allow us to make meaningful relative comparisons, both across markets and products, and over time.

By market, traditional financial institutions have the highest market shares in Indonesia (66%) and South Africa (65%). Fintechs are most prevalent in China (37% share) and Kenya (36% share), which we think makes sense given the rise of fintech industry leaders in these markets such as Alipay, Tencent and M-Pesa. Informal channels are most important in China (8%), while financial exclusion is the biggest issue in South Africa (29%); although the ubiquity of M-Pesa has successfully raised financial inclusion levels in Kenya, South Africa has lacked a similar game-changing product.

Current market share by country

Consumers use fintechs most for mobile payments and domestic money transfers

By product, traditional financial institutions have the biggest stranglehold on credit/debit card payments. Fintechs have made the biggest inroads in mobile payments. Informal providers are mostly used for current accounts. Financial exclusion is most prevalent for business/property loans.

Current market share by product

Fintechs and traditional financial institutions are both expected to win market share

In our survey, we asked consumers to consider their expected usage of financial products in three years. The results indicate that fintechs should see the biggest market share gains, followed by traditional financial institutions. The bulk of these gains should arise due to lower levels of financial exclusion.

Expected 3-year market share changes by provider type

The biggest market share gains for fintechs are expected in Brazil and Mexico (both 11ppts). Mexican fintechs are likely to benefit from the country’s large unbanked population; Brazil fintechs could benefit from the country’s high e-commerce penetration usage, which is the highest in our surveyed markets.

Expected 3-year change in fintech market share

For traditional financial institutions, the biggest gain is likely to take place in Kenya (12ppts); banks in this market have been receptive to using technology to reduce unit costs and to improve accessibility.

Expected 3-year change in traditional FI market share

Financial exclusion is projected to decline most rapidly in Mexico (-10ppts), with fintechs leading this change.

Traditional financial institutions

By product, traditional financial institutions have the highest market share in savings accounts and card payments; people generally prefer to hold their savings in established institutions, while banks are traditionally well-placed to issue cards due to their strong knowledge of their customers’ savings and spending habits. They have the lowest market share in mobile payments and international remittances. These institutions are often quite late to the game in terms of mobile phone functionality, while their price points for international remittances tend to be uncompetitive due to correspondent banking charges and costs related to AML/CFT.

Looking ahead, traditional financial institutions’ biggest market share gains are expected in business/property loans, mutual fund investments and general insurance. We think these are products that our sample may not currently have purchased, and therefore these are not market share gains from other types of providers.

There are also several products where market share erosion is likely, most notably in savings/fixed deposit accounts and card payments. As fintech competitors become larger and more established, their credibility will likely improve. They may partner with established brands (financial partners such as Visa and Mastercard, but also non-financial partners such as retailers) and pass on operating cost savings in the form of better interest rates. Customers are also likely to become more comfortable with digital-only product offerings.

Expected 3-year change in market share for traditional FIs


By product, fintechs have the highest market share in mobile payments, and they are also a significant force in domestic money transfers. Over the past decade, consumers have moved away from cash-based transactions, most notably in China and Kenya. Given low banking penetration, payments fintechs have proven successful in both domestic P2P transfers and merchant payments.

Fintechs have the lowest market share in general insurance and personal/vehicle loans; we think these are areas where even traditional financial institutions have sizeable untapped opportunities; over one-quarter of our survey did not currently use either of these products.

Over the next three years, fintechs are expected to gain market share across the board, but the most notable gains are expected in life/health insurance, personal/vehicle loans and international remittances These are products where overall penetration levels are quite low and/or where traditional providers are struggling to introduce low-cost products. Market share in mobile payments and domestic money transfers is expected to remain flat as these areas are already well penetrated by fintechs.

Expected 3-year change in fintech market share

Informal channels

By product, informal channels have the highest penetration in current accounts because people hold cash for their daily use, and the lowest in savings accounts as traditional financial institutions are perceived as most secure.

Over the next three years, informal channels are expected to gain market share in domestic money transfers, while all other products would see a drop in usage, with the biggest dips in life/health insurance and business/property loans. Fintechs are venturing actively into both these latter product areas; compared to informal channels they can provide a better combination of convenience, security and pricing.

Expected 3-year change in informal channel market share

Financial exclusion

By product, financial exclusion is most prevalent in business/property loans, personal/vehicle loans and international remittances. These loan products require a certain level of documentation in terms of borrower income and asset ownership, which makes access difficult for workers in the informal economy. For international remittances, traditional providers are often expensive, particularly if the amount being sent is quite small.

Financial exclusion is less of an issue for savings/fixed accounts and current accounts. Here, the risk to the service provider is limited, although KYC and anti-money laundering legislation is increasing documentation requirements.

Looking ahead, financial exclusion is expected to decline across the board with the biggest changes in personal/vehicle loans, business/property loans and international remittances. As highlighted above, consumers expect fintechs to drive this process.

Expected 3-year change in financial exclusion levels

The fintechs doing most to tackle financial exclusion

Our consumer survey clearly highlights that fintechs’ market share gains should primarily come from addressing financial exclusion. Our desk research of 2,610 fintechs in the seven surveyed EMs highlighted an array of firms that are taking innovative approaches to deal with the problem of financial exclusion. We showcase some of these companies below:

Fintech innovators tackling financial exclusion

Related reading:

The ultimate guide to Chinese fintech

Ant Group: Profiling the world’s most valuable fintech firm

The ultimate guide to African fintech