COVID-19 Challenges and Opportunities - Fintech Europe

Fintech: COVID-19 Challenges and Opportunities

As the world fights itself out of the uncertainty created by the COVID-19 pandemic, fintech companies are frustrated by several fronts. Most firms struggle to secure funding investments, especially startups since investors shift their focus on companies with defined business models. Furthermore, the current interest rates status has deteriorated following the economic shutdown. Consequently, many industries have changed their assumptions as of the larger economy shifts from response to recovery strategies. This forces firms to embrace new opportunities as the digital financial services and e-commerce take tremendous growth. While there is uncertainty in fintech's future, we still hope for new, innovative, and transformative solutions to take the front line.

Analysis of the Challenges Faced By Fintech Firms

Well, while much attention is directed on the crisis, a considerable impact of it is also experienced in fintech market place. The major challenges are the slowdown of funding, downfall in fintech startups, and reduction of revenue. In most ways, the companies are more at risk because they primarily rely on investors’ funding, which at this moment is not guaranteed. Revenues have drastically flopped since the corona pandemic and the worst is most firms don’t have finances on hand, yet very few have secured lines on credits. A survey by Genome shows almost 1000 fintechs were not prepared in terms of savings to go on past June.

How Fintech Companies are Facing the Challenge

The major issues for now, of course, are triumphing over the current uncertainty. Most firms rushed into overdrive to respond to the COVID-19 pandemic. They are left to show up their capital and funds from lenders and investors. It is through the implementation of cost-saving strategies, such as workforce reduction, since revenue generation is reliant on daily transaction and volume-based. Therefore, they make sure that expenses are variable and the fixed ones are reduced. Also, they are trying to maintain resilience in their operations. Other fintechs are strengthening their infrastructure by investing in competent resources to endure pressure from higher volumes of transaction.

Other Response Measures on Challenges

What other measures are fintech firms taking to boost their strength for the challenge? First, with most of them starved for funding, some strategies seem far-fetched. Some are doing their best to offer relief to businesses to cope with corona. For instance, they are providing waiver fees on instant fund transfers to bank accounts, and others have adopted allowing customers to pause their policies when no work is being conducted. A company like 7-Chord, which operates the BondDroid AI engine that is generating prices for a bond in the corporate market, temporarily offers its service for free. Nonetheless, the main goal for firms is to survive.

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New Opportunities for Fintech Firms

When corona struck, many fintech companies were not yet prepared for the challenge. Although most of them were affected, it was not all lost as there are new opportunities to embrace as they rise again. One, firms are now shifting to mobile banking to kit their employees as most are working from home. Others have initiated the use of digital collaborative tools to hold meetings and conferences, which is efficient. Besides, COVID-19 has presented a chance for clients to embrace innovations that fintech flourishes. There is a chance that the crisis is favourable for crypto-markets as the platform experiences new users from all levels spending.

Innovations by Fintechs to Curb the Financial Challenges

Fintechs companies are adopting smart innovations to maintain their stability. We have seen new products such as the nCino PPP loan processing solution for clients. Others are using artificial intelligence tech to assign risk scores, i.e. pandemics. Since most startups are reliant on events, with the restriction to maintain social distance, some have shifted their focus on virtual events. While for fintechs with apps and customers operating remotely it's an excellent opportunity as online payments have seen exponential growth, it means that the firms are enjoying an increase in mobile payment usage. These are some of the innovative measures fintechs are embracing to make a comeback.

What are the Future Plans for Fintechs?

Even as the situation is tough now, there may be something to smile about in the future. However, fintech companies need to take relevant lessons from the pandemic and use it to reassess their company models. Even so, how can they merge both new and old assets to benefit from the arising opportunities? Firms can extend partnerships with both financial and other fintech companies. It will provide the benefit of capital, infrastructure, distribution, and digital solutions. Also, there is a need to advance financial inclusion initiatives to both unbanked and under-banked individuals. Firms have noticed that most people cannot even manage an expense of about $400.

Fintech companies can also decide to empower gig workers. Considering their unpredictable financial patterns, this group needs unique financial, tax, and high insurance demand. Therefore, they are a good target market for fintech firms. Nonetheless, even as COVID-9 placed the companies in an uncertain situation, most of them are facing the challenge pretty well. Many are making adjustments to their services and new products to satisfy the current market. Given the conditions posed by the challenge, most fintech firms are well-placed not just to thrive, but to thrive. If there is something many have learnt from this crisis, is to embrace technological means in rendering services.