In the past few years, Fintech has dramatically changed the face of the global financial sector, right from the introduction and rise of digital payments to asset & wealth management. In fact, according to the Business Research Group, the market was valued at approximately $127.66 billion in 2018 and at the time was predicted to reach $309.98 billion at a 24.8 percent annual growth rate through 2022.
Having said that, the COVID-19 pandemic has created major disruption in the Fintech business, as it has in other sectors, and has cast doubt on many predictions and projections. With the decline of the economy and many people losing their jobs, the devastating effects of the pandemic has left its mark on investments worldwide.
This has brought down the economy and seen many people lose their jobs, which has ultimately left a devastating effect on many investments worldwide. So, will the Fintech sector thrive or succumb in the post COVID-19 world?
The Current Standing of The Fintech Sector
There’s no doubt that the Fintech sector has taken a hit from the COVID-19 storm. However, most FinTechs have also shown resilience and the ability to deal with financial issues, giving them hope of surviving the crisis almost unscathed.
Fintechs have been able to endure the disruption due to their high amount of equity capital, flexible operations, and willingness to embrace remote working. Many companies in this sector have also taken actions to decrease their risk exposure and cut costs, including reducing their workforce.
This has greatly benefited the entire sector, as according to KMPG, only 1% of Fintechs have been critically impacted by COVID-19, whereas 2% have been severely impacted. In comparison, approximately only 17% of other high-growth companies fall under this category.
Along with their resilience, the ability of the Fintech sector surviving and thriving in the COVID-19 pandemic can greatly be credited to the surge in demand as working practices and consumer habits have changed significantly in the COVID-19 era.
The financial services industry's face is changing as a result of technological advancements. When compared to traditional financial services, the introduction of digital financial services, for example, has resulted in faster, more efficient, and often cheaper banking.
Prior to the pandemic, it was obvious that Fintech will play a critical role in financial services in the future. COVID-19, without a question, has hastened that process. In a post-COVID-19 world, business models are being re-evaluated to integrate new tactics and remote capabilities.
The Impact of Fintech In The Post COVID-19 World
COVID-19 has been an unexpected motivator for worldwide technology adoption. According to a recent McKinsey report, the world has advanced five years in consumer and business digital adoption in just a few weeks. Online activities and transactions are no longer a luxury, but rather a need.
Banks are launching digital channels to allow customers to bank from home and to provide more assistance to distressed borrowers. For the first time, senior citizens are using QR codes and digital banks. Teleconferences are used in schools to conduct classes. Grocery stores have begun to provide online ordering and delivery. Telemedicine is now being provided by doctors. The list goes on.
We’ve outlined the impact of this sector in most prominent sectors that have been completely revolutionised in the COVID-19 era due to Fintech solutions.
The Rise of E-Commerce and Mobile Wallets
COVID-19 has expedited the expansion of digital payments, particularly in the retail sector, with eCommerce experiencing a tremendous surge in global traffic since 2020. As global markets begin to reopen, the moment has come for governments, corporations, and individuals to embrace future financial services. The question is no longer whether customers will embrace e-commerce and contactless payments, but how easily and quickly they will do it. The imminent rise of e-commerce and digital wallets is proof that consumers prefer this type of contactless payment, that’s not only secure, but also extremely convenient.
The Ability to Reach & Aid the Underbanked
As the global economy recovers from COVID-19, financial inclusion is a key area of focus for Fintech. According to the World Bank, there are around 1.7 billion unbanked people globally, and Fintech will play a critical role in attempts to incorporate these people into the global financial system.
Fintechs could assist governments in offering financial services to those who do not have access. Digital technologies are boosting transaction security, speed, and transparency, allowing for the development of long-term financial products adapted to the needs of those with unpredictable or low incomes.
In fact, the growing democratisation of mobile money has already impacted the financial services business in areas where access to finance is limited. The number of registered mobile money accounts has surpassed 850 million across 90 countries, with $1.3 billion exchanged daily through these accounts. Furthermore, advancements have proven that these accounts can serve as a foundation for more sophisticated financial services such as digital lending, insurance, advising, wealth management, and many others.
Using AI & Big Data For Personalisation
The world has witnessed the application of big data and artificial intelligence (AI) in multiple areas, even before the COVID-19 pandemic. The involvement of large technology businesses would hasten their integration into numerous economic sectors. Financial companies may now store, analyse, and act on unprecedented amounts of client behaviour data.
When supplied with the correct data, these technologies can provide customers with more advanced, tailored financial products and services than traditional banking ever could. The combination of a wide range of services with AI-powered solutions may offer the proper marketing experience for clients at the right moment.
There’s no doubt that Fintech will be one of the few industries that not only successfully braves the COVID-19 crises and survives, but will also be a dominant player in the post-pandemic world.
To conclude, as Fintech businesses evolve to stay relevant, it will be a win-win situation for customers, and with the sector's impending rise, we can expect Fintech to be an integral part of our lives in the now and the future.
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