Has the Pandemic Influenced the Fintech Expansion?

For the last decade, the rate of fintech growth has been doubling every two years. This doubling in the rate can be attributed to advancement in technology. The year 2020 was, however, very disruptive for fintech. The pandemic caused changes in the industry that were not being anticipated, these changes increased the rate of mass adoption of many fintech solutions.

Convenience and Sustainability

In 2020, fintech simply became essential for many businesses. As the Covid-19 SOPs came into effect, many businesses had no option but to follow them and thus adopt the latest fintech innovations, that allowed them to not only continue their business but also reduce their cost and increase their productivity and profitability.

While the future was looking very uncertain in 2020, the year 2021 started with the positive news of Covid-19 vaccines being rolled out en masse. Thus dispelling uncertainty and allowing investors and other stakeholders to realign their strategy.

In 2020, businesses were adopting fintech solutions out of necessity. In 2021, that is not going to be the case. Businesses around the world have gotten a taste of what fintech can do to their productivity and profitability. As a result, the continuation of the trend to adopt fintech in 2021, is based on factors such as convenience, inclusion and sustainability in a transformative digital environment. These factors will not only be the driving factors in 2021 but for the years to come as well.

So prior to 2020, businesses that could see the potential of fintech were adopting it. The rate was fast but not as fast as we saw in 2020. In 2020, businesses started adopting fintech because it became a matter of survival for them. In 2021 and beyond, businesses will adopt fintech because of the convenience and sustainability that fintech has to offer.

Banking Partnerships | Has the Pandemic Influenced the Fintech Expansion?

Fintechs are now realizing that identifying the legacy financial institutions such as high street banks as their primary competitors was not a good strategy. Fintech startups have a lot to gain by building up meaningful partnerships with the legacy institutions, instead of taking a head-on collision approach by identifying them as main competitors.

Banks have realized that their products and services are not only outdated but they do not have the right infrastructure and systems to provide innovative products and services to their customers.

Let us look at the saving products for instance. The savings rate provided by banks is at a very low level right now due to the expansionary monetary policies adopted by Central banks across the world. This means that if you keep your savings in a savings account, your savings will most likely go through erosion because of the rate of inflation being higher than the savings rate in many countries.

Banks can provide better products to their customers by partnering with fintech companies. For instance, there is great potential for budgeting and micro-investment applications to work with banks and provide investment platforms to customers.

This will allow banks to offer a diverse range of products and fintech companies in return will get access to a larger market. This will create synergy for both the banks and fintech startups. It will also allow locked up liquidity to enter the markets.

Services like Android pay and Apple pay are pushing the big banks to reclaim the payments space by introducing their own digital payment systems. While the banks have been slow on uptake, we can expect the big banks to move towards digital payment platforms in the coming year and this will be possible through collaboration between the existing fintech ecosystem and the ability of the banks to work through the bureaucratic setup.

Rise of Digital Banking | Has the Pandemic Influenced the Fintech

Expansion?

Digital banks have seen a meteoric rise in 2020. Traditional brick and mortar banks offer digital banking facilities but the costs and rates being offered by completely digital banks are lower as compared to digital banks, they also have better and faster services as compared to the traditional banks.

This rise of digital banks is pushing the traditional banks to adopt digital transformation and coupled with the pandemic induced SOPs, traditional banks are now switching to completely automated services. These services include online bank account opening services, where the customers are not required to walk into the bank branch at all. 2021 is likely going to see banks adopt more and more automated services.

Customer-centric services | Has the Pandemic Influenced the Fintech Expansion?

The industry on the whole is going to lean towards more customer-centric services. Why? Because vast amounts of data are being collected and all projections indicate that for the foreseeable future, data collection and data analysis are going to be two very important functions.

These two functions mean that as corporations learn more and more about consumer behaviour patterns, there is going to be an increase in demand for more customer-centric fintech applications.

This is going to be an important area for future fintech entrepreneurs. More niches are going to develop as time moves on. There is limitless potential for customer-centric applications starting from health management apps to financial management apps. Productivity enhancement applications are also going to be an important area to focus upon, for future fintech startups.

The pandemic has created a very conducive environment for fintech to lead the transformation. We are seeing the convergence of multiple disruptive technologies that include not only fintech but AI and machine learning. These technologies are eventually going to merge together and this is where the entrepreneurs should focus now. How to merge the present technologies and integrate them with the legacy systems already present, to create more value for the customer and users.