COVID-19 has created steep challenges for financial institutions—as well as opportunities. Here's how Coronavirus has impacted the future of Fintech.
One of the furthest-reaching effects of the COVID-19 crisis has been the impact on the global economy. Business across multiple industries have felt the repercussions of the pandemic, particularly due to lockdown orders in which consumer spending stalled and customer behavior changed on a dime.
Not only are businesses experiencing ongoing challenges and disruptions as the pandemic continues, but there are many considerations on the horizon, too, as the global crisis' long-term effects haven't yet come to light.
Among the industries that have felt the impact of COVID-19 is financial technology (fintech), which has experienced both unique challenges as well as opportunities during these unprecedented times.
Fintech in the Era of COVID-19
Although many industries have been disrupted or changed amid the global pandemic, COVID-19's impact on fintech has been unique.
As consumers have experienced restrictions on setting foot in brick-and-mortar stores, e-commerce has been more important than ever. Fintech as a sector, particularly within the sub-categories of merchant services and mobile banking, has had an opportunity to acquire new users due to fundamental changes in how consumers transact as they move to spend online. But they have also encountered unexpected technical stress and pressure to meet rising user demands.
Importantly, fintech products have become more alluring to a society moving away from hard tender and other in-person transactions. The lockdown has led to a significant dip in cash transactions and cash withdrawals. Instead, consumers are moving in favor of contact-free and touchless payment, both due to speed and hygiene concerns. Fintech companies are among those facilitating the technology to meet the demands created by this new customer behavior.
Alongside changes for the fintech industry itself, many businesses are beginning to understand how important it is to partner with strong fintech companies to meet the needs of customers and address their new expectations.
Opportunities and Open Doors for Fintech in a Post-Pandemic World
Along with physical lockdown, the emphasis on safe and hygienic transactions has created a boom in online purchasing. Merchants need to be able to facilitate these transactions and integrate new merchant services. This opens up unique paths of growth for fintech companies.
Many merchants have prioritized the integration of online payment systems, which require partnerships with fintech companies that can provide an effortless, straightforward solution to accept online payments and facilitate transactions. Additionally, many businesses that didn't have a set-up to accept online payments have had to quickly and easily find a way to offer an e-commerce solution for customers.
As business demand for fintech solutions increases amid COVID-19, there's potential for fintech companies to acquire new customers. They have to be strategic about it, however: if fintech companies can make their product integration seamless and simple—such as with plug-and-play APIs—and ensure their platform is easy to use, they may find an opportunity to increase market share and be more competitive. Additionally, as B2B opportunities and relationships expand, fintech companies can grow, and even see their market cap increase.
Unique Challenges for Fintech Companies in Wake of Coronavirus
Even with new opportunities amid the global pandemic, fintech companies need to acknowledge some challenges they may experience in order to be nimble and iterative.
First, a higher volume of platform adoption may mean customers and users demand better technology and better user experience. That might include more straightforward solutions for integration and more product education. As a result, some fintech companies may need to quickly update and augment their existing systems to provide more seamless integration and user experience. Companies that make their products easy to use on all levels stand to benefit more than those who don't.
The fintech landscape also may become more competitive. New companies may spring up and existing enterprises may grow amid a hurry for merchants to adopt fintech solutions. This may mean more pressure on existing businesses to innovate in order to remain competitive and preserve their market share.
The global pandemic has already changed the landscape for fintech companies both in terms of the opportunities they can seize as well as the challenges they may face. However, it's important for fintech companies—and those businesses that are integrating fintech solutions into their operations—to acknowledge that there are still unknowns as the crisis continues.
Although it's uncertain how the effects of the crisis will play out, despite the variables, businesses integrating fintech can still best position themselves to succeed. Companies that keep a close eye on consumer behavior—as well as the needs of merchants—will likely hold the advantage to rise to the occasion and overcome future challenges.