Today we're moving in the ocean of global financial trends. It’s not a secret that COVID-19 is impacting all spheres of our life. That’s why we want to speak about the role of FinTech in the post - COVID19 world.
The COVID-19 pandemic has accelerated the trend toward the digitalization of retail financial services. Comprehensive data on market shares of FinTechs, BigTechs, and incumbent financial institutions in retail digital services are lacking. Still, proxies in the form of revenue and app downloads, and insights from market outreach suggest that BigTechs and larger FinTechs have further expanded their footprint in financial services.
The global fintech market size is projected to reach USD 16.6 billion by 2028 from USD 65.8 billion in 2021 at a Compound Annual Growth Rate (CAGR) of 13.9% during the forecast period 2022-2028.
Resilience, opportunity, and innovation
But most FinTechs have also demonstrated resilience and an ability to handle financial difficulties, giving them hope of surviving the crisis intact. Their high level of equity finance, coupled with agile operations and a willingness to embrace remote working, has enabled FinTechs to withstand the disruption. They have also taken steps to reduce their risk exposure and cut costs, including workforce reduction.
According to Beauhurst, only 1 percent of FinTechs have been critically affected by COVID-19, and 2 percent severely affected. By comparison, around 17 percent of other high-growth companies fall into these categories.
Many сompanies from this industry have experienced a surge in demand as working practices and consumer banking habits changed in the COVID-19 era. Technology continues to change the face of the financial services industry. The advent of digital financial services, for example, has created faster, more efficient, and typically cheaper banking compared to traditional financial services.
Before the outbreak, it was clear that FinTech would play a pivotal role in financial services as we advance. COVID-19 has undoubtedly accelerated that process. Business models are being re-evaluated to incorporate new strategies and remote capabilities in a post - COVID19 world.
“Before the outbreak, it was clear that FinTech would play a pivotal role in financial services as we advance. COVID-19 has undoubtedly accelerated that process.”
Established financial institutions have been forced to expedite their digitalization plans to meet new demands. As their infrastructure needs have evolved, automation and other digital services have become more important, with FinTechs ready to deliver innovative solutions.
As the global economy recovers from COVID-19, one particular area of focus for FinTech is financial inclusion. According to the World Bank, there are currently around 1.7 billion unbanked individuals worldwide, and FinTechs will be central to efforts to integrate these people into the global banking system.
Doing so will help to mitigate the economic and social impact of the pandemic. According to Deloitte, FinTechs, in strategic partnerships with financial institutions, retailers, and government sectors across jurisdictions, can help democratize financial services by providing basic financial services fairly and transparently to economically vulnerable populations.
Digital finance is also expanding in other areas. Health concerns in the COVID-19 era have made physical cash payments less practical, opening the door to an increase in digital payments and e-wallets. Though cash use was predicted to decline in any case, COVID-19 hastened that decline, due to concerns that handing over money can cause human to human transmission of the virus. According to a Mastercard survey looking at the implications of the coronavirus pandemic, 82 percent of respondents worldwide viewed contactless as the cleaner way to pay, and 74 percent said they will continue to use contactless payment post-pandemic.
In addition, improved ‘know your customer services are required to counter the rise in digital fraud and cybercrime since the beginning of the outbreak. As more of the global economic and financial system continues to move online, cyber defenses will become even more crucial to protect data. Security-conscious FinTechs are designing their products with this in mind – even if face-to-face meetings and processes do return.
Given the rising reliance on technology, digital transformation will be a primary focus for FIs in the months and years ahead. Whereas previous efforts to integrate technology may have been limited in scope, many FIs are awakening to the fact that to deliver an efficient, effective, and sustainable banking service, they must adopt a more holistic approach to digital transformation, which includes utilizing FinTech.