The global coronavirus pandemic has far-reaching implications for every aspect of the economy, and fintech is already feeling some of the consequences of the escalating crisis.
From canceled events to shrinking opportunities for fundraising, we’re talking through some of the biggest challenges this crisis will present to the industry. We’re also highlighting the areas of opportunity unique to fintech as the situation continues to evolve.
Challenges facing Fintech as COVID-19 becomes a global crisis
Fintech, like every industry, is facing major challenges due to the coronavirus outbreak. Below are some of the issues we anticipate the sector will experience in the coming weeks and months.
Conferences and events postponed - Events across every single sector have either been postponed or delayed indefinitely as part of an effort to slow the spread of the virus. Postponed events mark missed opportunities for fintechs to develop relationships and focus on new business.
Venture capital funding may be impacted - The markets are incredibly volatile right now and in the months to come fintechs may face challenges fundraising as investors retreat to more cautious positions. However, as digital solutions become more of a focus on the other side of this crisis, fintechs that can weather leaner fundraising rounds in the near and medium-term may see investment bounce back strongly once the worst of the pandemic is behind us.
Consumers may be less willing to invest savings - Fintechs with a focus on consumer investments may be impacted by consumer wariness about investing during such a volatile moment. Even those investors lucky enough to be relatively insulated from the economic fallout may choose to put their money in safer options for the time being.
Payments may be down - Fintechs that handle payments may see a drop in activity from consumers feeling the squeeze of an economy in freefall.
Opportunities for Fintech as the crisis evolves
It’s not all bad news for fintechs, however. There are some key factors that may enable fintechs to continue operating and growing through the crisis.
Globalized workforces are positioned to thrive - Companies with higher levels of globalization and remote workforces are better positioned to survive and even thrive during this difficult moment. Many, if not most, fintechs are well-structured to continue to operate at the same capacity as before the outbreak, and are thus less likely to suffer high levels of disruption.
A concerted push for contactless systems - There’s naturally been a lot of focus lately on ways to reduce exposure to surfaces where the virus may be lurking. One target of this focus is paper money, which changes hands many times over. The World Health Organization has specifically encouraged the use of contactless payments. The pandemic could very well act as an impetus for greater adoption of these systems and fintechs in this space are in strong positions for growth.
Companies will make digital systems a priority - As communities continue to promote self-isolation as a means of slowing the spread of the virus and businesses shift to remote work, banks will need to find ways to incorporate better digital solutions. Fintechs are well-positioned to step in to offer solutions to replace legacy systems.
Potential rollbacks to regulation - South Korea, one of the countries that felt the impacts of the virus early on during the outbreak, has already announced that it will be temporarily relaxing regulations on certain industries in order to spur economic recovery. Fintech is one of the industries targeted as part of that recovery program.
There’s no way to know yet exactly how this crisis will unfold and what the long term impacts on the fintech industry will be. For now we know that fintechs should be prepared for consumers and investors to be cautious about spending at least in the near-term. Still, the crisis seems almost certain to spur global investment in contactless payments and digital financial solutions, which is good news for fintechs in the long run.