UK consumers double down on fintech use through a turbulent economy

The Fintech Effect is an annual report published by Plaid, which gathers insights on fintech’s consumer impact by surveying over 4,000 respondents in the UK and the US. Our UK spotlight this year highlights the value fintech is bringing to UK consumers after the pandemic, setting the stage for the shift to open finance.

The 2021 Fintech Effect surveyed UK consumers for the first time, finding that 86% of consumers used fintech to manage their money in 2021. Based on these numbers, fintech use in the UK has more than doubled in four years. In 2018, a government report estimated that 42% of UK consumers had adopted fintech.

Many consumers shifted to online channels at unprecedented rates out of necessity during the COVID-19 pandemic. However, as lockdowns have lifted and social distancing measures were scrapped, many sectors have reverted back to in-person interactions. Could financial services buck this trend? 

Based on what our data shows in our new report, The 2022 Fintech Effect, the answer is a resounding yes: 84% of UK respondents use fintech to manage their money in 2022, in line with last year’s results. We explore more of the results from this year’s blog below and the implications for the UK’s proposed open finance regime.

Fintech proves its worth, with high adoption rates across different demographic groups

There’s a reason people are sticking with fintech, even though they don’t have to– it provides real benefits. This year’s survey highlights that fintech is doubling down on the value it created, helping people address new challenges that have emerged since the pandemic, such as the cost-of-living crisis. 

According to last year’s report, in 2021, 88% of UK respondents reported that fintech has helped them in some way, with over half (56%) saying it saved them time, and 49% saying they feel more in control of their finances. This year’s responses highlight that even more people feel that fintech has helped them (91%), with more people appreciating the time-saving benefits (58%). 

There is a common perception that fintech use is concentrated among the wealthy or the tech-savvy. This is not the case. Fintech has been adopted across demographic groups: around 80% of men and women use fintech. While Gen Z are the most prolific users (91%), use is also high among Baby Boomers (72%), signalling that digital apps and services will only continue to be the primary way of interacting with finance. Nor is it a predominantly London-centric phenomenon: there is no difference in adoption rates across rural and urban areas. 

Forward-looking trends suggest that fintech use is here to stay: over the next six months, respondents expect to manage 72% of their finances digitally on average, up from 67% today. Fintech is bucking the trend seen in other sectors, such as retail, which have reverted back to in-person interactions: e-commerce sales as a share of total retail sales declined from 38% in January 2021 to 24% in August 2022.

Fintech is helping UK consumers weather the turbulent economic climate

The high adoption of fintech should be put in the wider economic context. This year’s report highlights that UK respondents are very concerned about the state of the economy: 41% of respondents have little to no confidence in the economy and 83% cite the cost-of-living crisis as their main economic concern. Unsurprisingly, 62% of respondents report that their financial stress has increased since last year. Although 61% say they feel confident in their relationship with money, this is a marked decline from last year, when 77% said they felt confident in their relationship with money.  

In response to this turmoil, respondents are actively using fintech to manage their financial stress: 41% of respondents say fintech enables them to understand their spending so that they can better manage their money, a 5 percentage point increase on last year (36%). Fewer respondents say fintech apps have helped them to increase their savings this year though: 28% in 2022 compared to 35% in 2021.

What is next for fintech in the UK?

Not only is fintech a lifeline for millions of Britons to manage their financial lives, it plays a vital role in the UK economy. Around 2,500 fintechs generate an estimated £11 billion in revenue annually - representing 8% of the total output of the UK’s financial services sector - and employ nearly 80,000 people across the country. 

Forward-thinking regulatory policies, such as the Revised Payment Services Directive (PSD2) and the Competition & Markets Authority (CMA) mandate to improve competition in the retail banking sector, have enabled the UK to become a global leader in open banking. Access to payment transactions data has enabled fintechs to create new products and services across wealthtech, lending, payments, business banking, and other focus areas. 

Open banking has now spread to over 60 countries, while some, such as the EU and Australia, are already looking to open finance. Any delays to the UK’s open finance proposal risk leaving the UK behind. We explore what the UK needs to do to retain its leadership position globally in our next blog.