Although Fintech companies have experienced remarkable growth in recent years, like many businesses, they suffered during the COVID-19 pandemic. Reduced investment in the sector — dropping by as much as 30% — led many Fintechs to consolidate their capital reserves and implement cost-reduction measures, including the laying off of employees. That said, most Fintechs proved resilient during the crisis, with their operational flexibility and readiness to adopt remote working enabling them to not only weather the storm but capitalize on the opportunities that have arisen as a result of the crisis.
From Crisis to Convenience
As working and banking habits changed due to social distancing, digital financial services have expanded dramatically. The use of cash may have been predicted to fall irrespective of the pandemic, however, its decline has been accelerated by the crisis, resulting in a huge uptake in online services, including digital payments and e-wallets. According to a Mastercard, 82% of people view contactless as a ‘cleaner way to pay’, with 74% saying they will continue with contactless payments after the pandemic has ended.
What’s more, with ‘face-to-face’ meetings between banks and their customers fading since the outbreak, the need for cybersecurity systems to combat online fraud has grown to new heights also. In response to this, Fintechs are developing products with online security protocols at their heart, which will no doubt appeal to an increasingly security-conscious public even if traditional ‘face-to-face’ banking makes a return.
Availability and Equality
Interestingly, as the global economy recovers from the pandemic, Fintech companies are focusing their attention on one specific area — financial inclusion. According to the World Bank, approximately 1.7 billion individuals worldwide have no access to basic financial services. Given the relative flexibility of Fintech companies in the marketplace, they are perhaps better equipped than traditional banks to plug unbanked individuals into the global financial system.
1.7 billion potential customers may sound like an appealing business opportunity, however, integrating these individuals into the financial system has a much broader aim — to ease the economic and social disruption caused by the pandemic. With economically vulnerable populations in need of basic financial services, Fintechs, working in collaboration with governments and financial institutions, can offer these unbanked populations financial solutions in a democratized, transparent and fair manner.
The Right Tech At the Right Time
In fact, it’s exactly this kind of involvement that Fintech companies were created for in the first place. Even before the outbreak, it was evident that Fintechs were going to play a central role in the evolution of global financial services — the pandemic has simply quickened that process. Traditional financial institutions have found themselves in alien territory where new demands have placed extraordinary pressure on them to digitize — pressures that Fintech companies are well-placed to ease through their commitment to innovation. With the initial wave of Fintech companies having arisen as a result of the global financial crisis in 2007, the pandemic may offer them yet another chance to prove their worth.
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