In the past few months, people have had to access various types of services and products over the internet. There has been a massive global rise in the use of Fintech applications. This is good news for both the Fintech companies and the software providers. Some banks recorded double the usual number of registrations to their online banking service at the onset of COVID-19. Will the rate of adoption of Fintech apps persist post coronavirus? In respect to banking apps and fintech apps, the trend is likely to continue since more adoption was being experienced even before the pandemic. The apps provide convenience and efficiency, and the pandemic has only served to create exposure to these apps. According to the deVere Group, there was a 72% increase in Fintech app users in Europe within the first week of the coronavirus outbreak and social distancing.
The Necessity to Speed up Innovations
Fintech companies are in a position to come up with new ideas of providing value to the SMEs and consumers during and after the Covid-19 period. There’s a need for innovation for fintech companies to position themselves for long=term success.
The use of digital payments has increased; this creates an opportunity for the creation of new products and services for both consumers and businesses. The 2017 data global report showed that there were approximately 1.7 billion unbanked adults. These may be among people who will need to shop online. Fintech companies need to come up with payment solutions that include the unbanked population now more than ever.
Amid coronavirus, the de Vere group launched a new fintech app, the Contactless Advice service. The service offers professional and personalized financial advice. This comes at a time of growing demand for an on-the-go service. It advises on cutting costs, diversifying and meeting regulatory requirements.
Another innovation gap that emerged with the onset of Covid-19 is the lack of digital infrastructure, especially for the banks that were tasked with distributing funds to those who need it. There is a need for new innovative financial technology for distributing funds to the right people during a crisis. In the past, emerging technology has faced some roadblocks that may be lifted post coronavirus to give room for innovation.
Recently, some innovative solutions have come up. There had been a lack of freelancers’ financial aid in the UK since there was no financial solution to prove the effects of the pandemic on their salaries. A group of Fintech developers created solutions for this over a weekend and gathered hundreds of sign-ups in a day. This demonstrates the urgency with which innovation is needed.
Additionally, there has been the issue of distributing business rescue loans to SMEs. A loan issued through the bank traditionally may take up to a month. Fintech apps have the potential of distributing such loans in a day. This is crucial, especially post the pandemic when SMEs need the loan to boost and revive their businesses.
Impact on Large banks and Investment Institutions
Long lines and close interaction are a common characteristic of physical bank branches. This exactly what the safety guidelines are against during the corona period. Banks have been forced to make some of their staff work remotely. On the other hand, more customers have been discouraged from going to physical bank branches. The most immediate solution for the banks was to move it’s services online. The banks have had to rely on online banking, mobile phone banking and call centre services. However, this hasn’t been a smooth transition.
The most significant impact on the commercial banks is speeding up the development of e-banking over the internet, which includes online banking, digitizing transactions and operations, electronic payments.
Banks registered a significant decrease in lending to protect themselves against the losses that may occur due to the deteriorating economy. The banks face two scenarios; higher level of non-performing loans as well as reduced credit purchases. This led to banks reporting lower profits. To solve this, banks came up with offers such as zero-cost accounts that had hidden fees on some financial services. A large percentage of the bank customers have opted to switch to Fintech companies and investing without the offers that banks are providing. This further negatively affected the profitability of banks.
Almost every aspect of banking and investment currently depends on third parties such as credit card processors, depositories and payment services. These third parties are fintech services. More banks are forming partnerships with Fintech startups.
Impact on Companies Offering Software
Both individuals and businesses are adopting digital platforms that will help them push through the pandemic and thrive post the pandemic. People are adapting to digital life, and companies have to move to e-commerce and create a comfortable digital environment for their customers. Fintech will be more integrated with the digital lives of both the businesses and the consumers.
As the rest of the economy is struggling, the software providers are thriving. Apart from the financial services related software, all types of software are in demand. At the onset of the pandemic Amazon reported hiring additional 100,000 workers, and Microsoft said that the use of its software for online collaboration increased by 40% within a week.
As people are forced to stay at home and shop online, there’s a possibility of a permanent change in the consumers shopping habits. All businesses, large and small, will be forced to capitalize on e-commerce. E-commerce works together with Fintech payments. The movement to e-commerce comes with the increased need for security. As the demand for e-commerce software and apps increases, the demand for Fintech solutions for more secure payment also increases.
Considering the available innovation gap and the increased demand for e-commerce software, COVID-19 has had a positive impact on the software providers. According to Ainhoa Campo, the global head of Innovation BBVA, e-commerce and digital payments are among areas that will provide new opportunities after the pandemic. Companies offering software are bound to come off the pandemic stronger than when it started. The companies are positioned to continue thriving post the pandemic.