We look at both the impacts and opportunities presented by COVID-19 and how Fintech’s have responded.

COVID-19 has changed life as we knew it.

The economic disruption has affected thousands of individuals and businesses and will continue to do so. While the majority of us are still getting to grips with carrying a mask when we leave the house however, fintech companies are preparing for the future and adapting the business to the new normal.

How have fintech’s dealt with COVID-19 so far?

Like much of the economy, fintech immediately focussed on surviving through this period, which might involve reducing employees, relying more heavily on lenders and investors and delaying projects.

However, the fintech industry is known for innovation and is creatively finding solutions not only for business but for customers too. After all, people are working, saving and spending like never before, making fintech services very valuable.

Fintechs are skilled at using different data, collaborating with multiple parties and putting customers first, which has enabled several responses to problems caused by the pandemic.

For example, PayPal, Lending Club and Square have waived additional fees, Nomo and 7 Chord are providing certain services free of charge, and Revolut and Kabbage are aiding those most affected by the pandemic and small businesses. In fact, a study headed by the World Bank found that the fintech industry had reported growth of 11 to 13 percent in the first half of 2020 compared to the same period in 2019.

Companies have had to adapt business models but have still been releasing new products and services, often related to problems caused by the pandemic. Take iwoca’s Open Lending platform and Innovesta’s COVID-19 Resilience Innodex (CRI), which have aided millions of businesses and prepared businesses for further possible pandemics. While COVID-19 has been a setback for many, it has accelerated the fintech industry in certain areas and provided real relief for people.

What will happen next?

It is possible that the solutions currently working well for fintech companies will continue after the COVID-19 era has passed. Partnerships have increased between fintech’s and banks as the need to digitalise has been accelerated and many banks have been left without capabilities. The movement towards Open Finance will also play a role in future collaborations between fintech’s and the wider need for embedded financial services partnerships with non-financial businesses will also increase.

There is also scope for expanding services for those currently not aided or represented by traditional financial institutions as the pandemic has highlighted wealth inequalities. According to the World Bank, over 1.7 billion people are unbanked globally, and even among those in the system, many would struggle financially if a paycheck was delayed by a week according to the American Payroll Association.

Fintechs can play a vital part with government initiatives to reach low-income households, an extension of the assistance already provided during the pandemic. This must be balanced with the fact that the majority of shops have implemented cashless policies for fear handling money could carry the virus, which will accelerate the move to a cashless society.

While the economy has suffered greatly in the pandemic and businesses have had difficulties, the fintech industry has remained positive. Business models and services have changed to deal with immediate issues, helping millions to stay financially stable and supporting companies. Many fintech companies have seen growth in this period and the pandemic has not prevented the release of new products.

Not only has the industry been stable during these unprecedented times, but it uses COVID-19 as a learning curve and looks to the future for further innovation and growth.

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