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FinTech Industry

How COVID-19 has impacted the FinTech Industry?

by SML Kumar

”FinTech Industry” COVID-19 pandemic has drastically changed our lives. Lockdowns and strict implementations of social distancing norms have lessened global business operations. Due to this, the global economy has to face a tremendous slowdown that has decreased the financial stability of businesses.

Businesses that are providing digital FinTech Industry are taking the best advantage of this situation. As per statista, the global digital payment markets will have a transaction value of US$4,406,431 (approx.) in 2020.

While the coronavirus pandemic has forced the Fintech companies to modify their business operations, it hasn’t disturbed the payment process. There might be few short-term challenges, but there are also vast opportunities for FinTech companies in the future.

How the pandemic has affected the global FinTech industry?

As the demand for digital FinTech solutions has hiked amid the COVID-19 pandemic, there’s potential for fintech companies to get fresh customers. Moreover, with the expansion in B2B opportunities and relationships, fintech companies can increase their market capitalization. So let us look at how fintech has affected the global markets:

1.    A decrease in the number of lenders

The lending segment has been affected hugely by the pandemic as many people have missed the installments of their loans due to job cuts. No doubt, the insurance companies will surely help Fintech businesses to limit its losses and allow their business operations, but this ambiguity of payments is still a big concern.

The agile scoring approach towards assessment of the underprivileged segments and focus on smaller loans should make a strong case for alternative lenders in the current situation. There has been a huge decline in the incomes of businesses and retail customers. This has not only reduced consumption but also raised the loans.

The repayment holidays have also reduced the revenue streams for the lenders. As a result, lending has decreased, which has forced the companies to stop their business operations. The insolvency of borrowers and economic uncertainty are responsible for the decline in the P2P lenders.

2.    The emergence of digital FinTech solutions

The rapid growth of investment in fintech has tremendously transformed a wide array of financial technologies such as blockchain, digital wallets, personal finance, digital banking, insurance, wealth management, capital markets, money transfers, and mortgages.

The digital FinTech solution will enhance financial inclusion by integrating technical advancements, and it will also increase access to financial services. It alleviates the financial risks among impoverished households and small and medium-sized enterprises (SMEs) via digital banking solutions and enhanced risk-assessment skills.

FinTech impacted banking businesses to serve specific sectors and demographic groups via business-to-consumer and business-to-business debit and credit extended to underbanked and unbanked individuals, households, and SMEs. Thus, fintech has not only improved the variety and efficiency of financial services but also enhances financial inclusion.

3.     Diminishing borderlines between banks and FinTech

The COVID-19 pandemic has aggravated the situation. Due to which, traditional banks are increasingly adopting digital fintech solutions.  Lower incomes of the population, swelling unemployment, and financial uncertainty are the main reasons for the decrease in the size of bank deposits and purpose loans, such as mortgages, car loans, and others.

The enormous transformation in the banking sector stipulates banks to provide smaller loans and assess customers less formally, as well as start acquiring fintech firms. The digital fintech solutions have effectively provided various opportunities to the traditional banks to strengthen the performance.

4.     Increased personalization of finances

The increased demand for telemedicine amid the COVID-19 pandemic will potentially transform into a large-scale phenomenon. It is going to boost commercial interest in biological data such as body temperature, blood pressure, and others. It allows the companies and governments to improve assessment and forecast, and influence the way people think and act.

With the massive 5G adoption, digital payments promise to shift the consumer paradigm. These changes are going to affect fintech services like targeting and customer acquisition, credit scoring procedures, etc.

It will be an important step towards enhanced customer experience and comprehensive IT solutions as they might combine solutions from different fintech segments, as well as serve diverse audiences.

5.    Enhanced globalization of businesses

FinTech companies are looking to expand their businesses internationally, partly to access attractive emerging markets, partly to access overseas talent, and increasingly, in the UK at least, because of the diminishing attractiveness of their domestic market. Globalization is particularly attractive for ‘Profitable’ FinTech areas such as payments, Robo-advisory, and international remittances.

Global FinTech companies are heavily using blockchain technology for improving their payment security and operational efficiency. It involves the implementation of a distributed database that is accessible to all the users over a network, where they can add a new block, with a timestamp that cannot be altered.

Blockchain technology will authenticate the data by restricting changes in older data blocks and allowing the users to continue adding new data blocks, thus, providing high security and transparency to companies operating in the fintech market.  Blockchain offers multiple benefits to businesses such as enhanced trade accuracy, fast settlement process, and low risks.

Summing Up

We don’t know how the coronavirus pandemic will impact the global FinTech industry. The crisis will be going to increase investments in digital fintech solutions and mobile banking software, which is good news for fintech in the long run. To grab this opportunity, you need to build a profitable

FinTech solution for your business. You can extend dedicated software development team or hire software development team for creating an app for your business. I hope this blog has provided you with enough information about the FinTech industry. Keep following this space for more such insights.

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