Fintech companies, among others, have seen some effect of the current coronavirus pandemic. Let’s take a look at the ongoing changes.
As the world evolves and becomes a lot more advanced, financial technology (fintech) companies have a bigger chance to solidify their positions. While the use of technology is not new, fintech companies exploit technology a lot better, putting them way above traditional financial institutions. With the ongoing coronavirus pandemic, there is a lot of uncertainty about life and business after the pandemic. As biting as it has been, we look at the effects of the coronavirus situation on fintech companies.
How Fintech Is Benefiting from Coronavirus Pandemic
For many fintech companies, the restrictions in place by governments all over the world might not impact them much. This is because many of them already take advantage of remote work, and are used to not having to be in an office all the time. For most of them, work will continue smoothly.
Another advantage is the increase in use. Because people can no longer move around like they used to, they are forced to rely on online payment channels to send or receive funds or make purchases. According to a recent report from international financial consultancy firm deVere Group, the isolation and lockdowns caused a 72% spike in the use of financial apps in Europe, in a week. Many of these fintech startups are now taking advantage of this jump, with several offerings. Monzo and Tide are two examples, as both are offering options ranging from repayment plans for loans to specific guidance services.
Some companies are going further than just online payments. Bengaluru-based Razorpay has partnered with furniture company Featherlite, to allow people to rent office furniture to help them work from home. Another Indian company Paytm has partnered with Reliance General Insurance, to create a COVID-19 insurance plan. Customers can purchase the plan in just a few minutes, on the Paytm app.
According to Prime Venture Partners’ managing partner Sanjay Swamy, the coronavirus pandemic could accelerate the fintech sector, among others, by up to 5 years. According to him, the fintech sector is well-positioned for several opportunities. The coronavirus situation has now quickened this.
U.S. Government Partners with Fintechs
Part of these advantages is a partnership with the U.S. government. The U.S. Small Business Administration (SBA) published a Lender Agreement form to allow non-banks to participate as lenders in its Paycheck Protection Program (PPP). With this, fintech companies are rising to the task, to facilitate loans for small businesses.
There are also reports that some banks are delaying these loans for some reason. This allows fintech companies to take advantage of the situation, and fill the position the banks are not taking up.
However, the coronavirus pandemic is not without its disadvantages on fintech companies.
Here, funding is probably the biggest problem from the coronavirus pandemic. Many of these startups usually raise money in a series of fundings to expand their services. However, even though the funding might not drive them to the ground, fintech firms might suffer at this time.
Another disadvantage is that fintech firms usually hold a lot of events, either for enlightenment purposes or for publicity. While some events are now online, the companies have postponed or canceled others. If these companies cannot use these events to drive positive noise, they might be negatively impacted. This means they might struggle a bit when the pandemic is over.