Financial technology has been rising fast in the last few years. Fintech is a combination of financial+technology. It is a term used to delineate a new technology that attempts to automate or improve the use and delivery of financial services. These companies are primarily engaged in assisting business owners and other clients in managing financial operations and processes.
During COVID-19, fintech organizations became helping hands to sink businesses by assisting them in digital transformation. Consumers can make any number of purchases of products or services without worry at the doorstep.
Fintech Industry In The Era Of Covid-19
The outbreak of the COVID-19 pandemic has had a widespread impact on financial institutions around the globe, and this crisis has put banking systems in crisis globally. The fintech industry is also hit hard by COVID-19, it is also facing negative impacts such as slowdown funding, a Fall in the establishment of new fintech firms, revenue being reduced in the already established business.
Despite facing obstacles, the fintech industry has managed to remain safe in this pandemic situation. The fintech industry has become more alluring to society, as they are moving to touchless or contactless payment solutions for hygiene purposes.
Many commercial enterprises are beginning to understand how important it is to partner with strong fintech companies to meet customer needs and meet their new expectations. Therefore, there are some positive and some negative impacts on the Fintech industry.
Changes In Fintech Market Operation
The fintech industry has witnessed diverse challenges of operations during the COVID-19 pandemic. Areas affected are loan default rates, transaction volume, customer investment rates, premium dereliction, and the engagement of retail as well as establishment investors in the provision of funding across various fintech solutions.
Dilation of digital finance
People are increasingly suspicious of exchanging currency notes for fear of contracting the disease. Quarantine restrictions have led to the use of the digital transaction. That’s why they prefer digital payments, it has become easier for customers to transfer money through digital wallets and payment gateway to concerned people.
The UK, Germany, Norway, Egypt, and other nations have raised limits on the size of the contactless payment solution. Fintech plays a key part in the development and use of cryptocurrencies such as Bitcoin.
Hence, digital payment has become one of the top fintech segments in the world. People habituated to the benefits of the digital world are likely to actively use it after the COVID-19 period.
Diminution in the number of alternative lenders
Revenue from small and large businesses and retail customers has declined significantly. This has not only reduced consumption but also increased default. Research from the Robocash Group has found that only about 54 percent of borrowers will take loans after the lockdown restrictions are lifted.
Likewise, digital payment frauds in the times of COVID-19 caused low demand, and tightened requirements reduced the issuance and in some cases forced companies to shut down operations.
Exclusive Covid-19 responses by fintech firm
A few days after the lockdown was announced in several countries affected hardly by COVID-19, fintech providers launched came across with brand new solutions for their customers, they have tweaked existing solutions and made their services available for free, payment holidays, reducing or waiving of fees. By such initiatives, fintech firms have adapted their service and product in the response of Covid-19.
Banks Moving Towards Fintech Industry
The Agency banking platform during COVID-19 increasingly turned towards fintech. The inevitable digitization is not the only reason but the Industry has been facing declines in financial performance since last year as well as in this pandemic situation, people don’t want to visit their banks. So, fintech products such as digital wallets and contactless payment getting more trendy.
Modifications in the operating model and digital transformation is a tool for banks to overcome difficulties.
Banks offer distinct apps to their customers to use their services. Net banking is utilized by people to use bank services, fund transactions, open new fixed deposits, apply for loans, and much more without visiting a physical bank.
If the Fintech sector was not there, it would have been impossible to use the banking service in this pandemic situation.
Fintech industries are exposed to regulatory norms, compliance, and legal commitment due to the sensitive service they offer.
Most of the fintech businesses aren’t able to fulfill the norms of the General Data Protection Regulation (GDPR).
Thus, during the COVID-19 situation, it becomes more difficult to meet regulatory expectations as they are dealing with a lack of resources like settled regulatory practices and experienced staff which make them behind conventional banks.
Some regulatory bodies such as the United Kingdom’s FCA have allowed some relaxation for the fintech industry by cropping financial reporting requirements and stretching the deadline for report submission.
Like every other industry, the impact of COVID-19 on the payment industry is immense. This pandemic has put the fintech industry in a serious challenging situation. Nevertheless, slowly economy shifting gears after the COVID-19 disaster, Lots of new opportunities will be on the door of the fintech industry which is bound to happen.
They have an opportunity to come out with an innovative solution to resolve customer issues in such time and assure their own position for the future in the market.