The global pandemic has put major stress on the entire banking ecosystem. The need for mobile solutions, financial inclusion in developing markets, a strong monetary foundation, and visionary leadership is more imperative than ever. There will be major changes in both traditional banking organizations and fintech firms. How will fintech firms adjust for the post-COVID-19 future?
Although a significant amount of attention has been geared towards the impact of COVID-19 on traditional banks, fintech firms have also felt a large impact due to the ongoing crisis. Emerging fintech firms have particularly felt the effects as funding has noticeably decreased and established firms are seeing a drop in revenues. Despite being better positioned for the technological developments in banking, fintech firms are much more susceptible to the effects of the pandemic than their traditional counterparts.
Most fintech firms have only been established for less than a decade, and only a few have demonstrated profitability. Since most fintech firms rely solely on investors for capital, as the economy continues to decline it is not likely that the same level of capital will be available after the pandemic. Aside from the financial aspect other conditions such as age, scalability, and product category will play a role in the future of all fintech companies. We can expect to see the impact on the industry in the short-term as consumer behavior is expected to change greatly.
For fintech firms who can survive the economic impact of COVID-19, the future will be fruitful. Consumer behavior coupled with the economics of delivering financial services indicates a need for digital financial organizations. Fintech companies have a huge advantage due to the low overhead and advanced technology when compared to traditional institutions with numerous physical locations and limited digital knowledge.