Much discourse about COVID-19-influenced technology adoption has focused on the rise of delivery robots and the evolution of content, but the pandemic has also pushed exciting changes in another key technology: fintech.

Fintech, short for financial technology, encompasses a suite of technologies that empower users with digital tools for banking, payments, insurance, personal loans and wealth management, among many other capabilities.

In Ernst & Young’s 2019 biannual Global Fintech Adoption Index, 46% of American respondents indicated they were using at least of one fintech service. Fast forward to 2020, COVID-19 has accelerated the American adoption rate to 59%, according to a September survey conducted by Plaid, a leading digital payments infrastructure company.

Yet, the overall adoption rate only scratches the surface of the deepening relationship between U.S. consumers and fintech, which is ultimately a story of how evolving trust and availability have shifted the norms of digital money.

Digital Banking and Payments Build on a History Trust

From the introduction of the ATM and credit cards to the rollout of mobile apps, banks and card network incumbents like Consumer Technology Association (CTA)® members JPMorgan Chase and Visa have been intertwined with waves of fintech innovation over the years. Subsequently, consumers have a historical trust in these companies, with 52% of consumers saying they trust their banks with their data more than any other institution.

With the closure of physical bank branches, LendingTree found that 91% of Americans are conducting at least one banking activity online or on a mobile app. Additionally, when stimulus checks were issued, American fintech company FIS noted a 200% jump in mobile banking registrations among the largest banks in the U.S. as Americans sought to deposit these funds, further reflecting consumer comfort with incumbents.

Venmo and Cash App had already become a popular way to pay family and friends, and the pandemic-induced need for safe, contactless payment options in the retail environment has pushed Americans to trust other available payments options as well.

According to CTA’s Future of Consumer Behavior Amid COVID-19 study, 29% have used contactless “tap” payment methods like Apple Pay or Samsung Pay, products offered by CTA members Apple and Samsung, during the pandemic, with 51% indicating they were using these tools more often now. Additionally, 30% of consumers have used mobile wallets for the first time to make contactless payments during the pandemic, indicating that a technology that has struggled thus far to find its footing among Americans is making inroads.

More importantly, this may accelerate the U.S. mobile payments market to finally catch up to global payments trends similar to those in China, which sees $17 trillion in domestic mobile payment transactions annually, driven by the dominance of apps like WeChat Pay and AliPay.

Embracing the Greater Digital Money Ecosystem

With the increased velocity of digital payments, growing trust in fintech services has spurred U.S. consumers to embrace both newer behaviors and fintech firms, such as installment payment services as they leverage the technology proposition of greater flexibility. Notably, Australia’s Afterpay has handled $3.8 billion of installment transactions in the second quarter of 2020, up 127% from the period a year prior. Similarly, its American startup counterpart, Affirm, had nearly doubled its users from all of 2019 by July 2020.

Outside of the payments space, insurtech, short for insurance technology, has gained appeal with American consumers, as shown by their willingness to buy insurance from a technology company rising to 44% in April 2020 from 17% in 2016. In fact, Lemonade, an insurtech startup that went public this past summer, has recorded an 84% year-over-year increase in customers in 2020.

Consumers are also increasingly turning to fintech platforms to not only manage their money, but also grow their money. In the first four months of 2020 alone, Robinhood, a fintech company that allows people to invest in stocks, ETFs and options, grew its customer base from 10 million to 13 million.

Incumbents have recognized the value of newer technologies and entrants in the space, with 65% of banks and 76% of credit unions identifying fintech partnerships as a key priority for 2020.

The Fintech Lifeline

Fintech companies have also innovated their services to further support Americans in weathering the worst economic crisis since the Great Recession. Chime, an entirely digital bank, gave its members early access to their coronavirus stimulus checks, allowing them to overdraft their accounts without paying an additional fee.

To aid small businesses, Unqork, a financial software platform company, developed and deployed a lending-as-a-service solution to secure loans for these enterprises. As a result of this kind of support, 69% of Americans referred to fintech as their financial lifeline during the COVID-19 pandemic in the September 2020 Plaid survey.

However, the fintech sector does face some headwinds in the coming years. As consumers find their money more entrenched in the digital realm, cybersecurity is a growing concern. McKinsey estimates that up to 90% of banks’ workloads will be hosted on public cloud by 2030, and Bloomberg reports 80% will run in the cloud by 2025. With cloud assets accounting for 24% of breaches according to Verizon’s 2020 Data Breach Investigations Report, this represents a crucial area for both incumbents and disruptors to shore up in the future.

Still, the Plaid survey found that 44% of Americans are using fintech apps daily to manage their finances amid the pandemic, with 77% planning to continue using these services as their primary money management tools even after the COVID-19 pandemic is contained. Furthermore, 81% of American consumers age 18-34 prefer fintech companies to traditional banks, and 6.5% and 16% of U.S. households are unbanked and underbanked, respectively, according to the FDIC.

Ultimately, this translates into an increasingly trusted industry with substantial growth prospects as fintech digitally bridges the American banking divide and offers greater availability to personal financial services to all U.S. consumers.

This article is the first in CTA Research’s Industry Intelligence series on digital money, examining the current state of fintech and diving deeper into the innovations and trends of this sector.