The outbreak of the COVID19 pandemic has built uncertainties in fintech companies. Early-stage ventures are facing difficulties as most of the investors are now focusing on established firms with clearly laid-out business models. Moreover, the monetary slowdown has fundamentally changed a few financial industry presumptions. However, if you look at the positive aspects, COVID19 has created immense opportunities for some fintechs, including those offering digital financial services and e-commerce.
Financial institutions accompany a few qualities that give them the deftness expected to adopt the new arrangements quickly. For the most part, they are sorted as underneath:
- Fintechs are unburdened by dissimilar, multifaceted inheritance systems, which allows them to assemble platforms with the assistance of a cloud-native methodology using the application program interface (API).
- They are agreeable and acquainted with partnering within the monetary services industry and afar.
- The industry is always focused on offering unified and delightful digital customer experience.
- Financial technologies are accustomed to collaboration. They utilize several collaboration tools to manage their workflow and operations smoothly.
- The experts are capable of analyzing and harnessing various data types, such as credit and life insurance.
As shown above, fintechs have unique advantages that are allowing them to build innovative ways of delivering real value to the consumers in the existing business environment and position themselves to stay ahead in the market. Some of the fintechs have harnessed these strengths to meet the current challenges of COVID19 in the following ways:
- Flock, one of the popular drone insurance providers, is letting its commercial customers pause their policies while no work is carried on.
- PayPal has now waived expenses on chargebacks and permits instant transmission of money from user’s PayPal business accounts to individual financial statements.
- Kabbage, alongside different fintechs like Fundera, Lendio, and Finix, propelled a platform letting users purchase gift certificates to help local businesses during this pandemic. One can reclaim these gift certificates at any time. Notwithstanding, independent ventures gain revenue within a business day of procurement.
- Nomo supports freelancers in handling their taxes, invoices, and accounting, and in addition, it offers free temporary access to the new users.
- Revolut and some other fintechs in the United States have presented a charitable component in their applications so that users can donate funds to those affected by COVID9.
However, certain fintech companies are unable to utilize the opportunities in this crisis. They are compelled to reconsider their strategic plans of action after COVID19. To support such firms, we’ve curated a list of approaches that leverages both existing and newly developed resources so that they can take advantage of the opportunities later on.
Financial Inclusion Programs
The pandemic’s monetary disturbance has featured the significance of financial inclusion programs in developing and developed nations. If you did not know, at present, there are more than 1.7 billion unbanked people worldwide, as per the World Bank report. Besides, the American Payroll Association reveals that around 40% of individuals in the banking system face challenges paying unexpected bills if their paychecks are delayed for a week.
This could be highly possible in this time of crisis. COVID19 may lead to more significant financial issues, however, fintechs around the world are planning to help low-income households with their inclusion programs. Through strategic partnerships, fintechs can distribute benefits to vulnerable populations across the globe. Indeed, some fintechs have already made it their mission to offer primary financial educations and services most effectively.
Enhanced Partnership Strategies
Partnerships with financial institutions and big techs can offer fintech startups with several benefits, such as distribution access, improved capital, and compliance infrastructure. Alongside, fintechs can also look for partnership opportunities with nonfinancial services to expand their growth strategy. Partnering with nonfinancial services firms offer them with unique opportunities. Examples of such strategies already exist, like the ones Walmart has with Green Dot and PayPal.
Partnerships are crucial for fintech firms to stay ahead in a crowded market. Joining hands with the best companies specializing in certain areas will improve product time to market, save resources, and aids in the acceleration of the learning curve.
Empowering Gig Workers
More than 50 million gig workers in the United States are an attractive segment for fintech organizations. The gig workers have unique insurance, financial, and tax requirements because of their inconsistent income patterns. Because of this explanation, they are commonly underserved by banks and, in this way, offering a growing opportunity for fintech startups. Some fintechs and challenger banks are already serving the gig economy workers, such as Steady, Salaryo, Joust, Green Dot, Qwil, and Cogni.
Some of them also offer specialized features like the ability to find gig jobs on the app or advances against unpaid invoices, etc. Similarly, some fintechs in the United Kingdom like SeedLegals, Coconut, Capital on Tap, Credit Kudos, 11: FS, Mazuma, Fronted, and TrueLayer has built a consortium and generated COVID Credit to help freelancers affected by a coronavirus.
Internet of Things
COVID19 has accelerated the adoption of the Internet of Things or IoT-enabled payments. This element offers contactless payments, for example, connected vehicles that permit individuals to pay for services like gas without dealing with the cash or contacting possibly infected areas. Similarly, queue management systems such as electronic tickets have indeed served the community in these circumstances.
Queues are standard in banks and financial institutions. This can be avoided in the light of COVID19 by using IoT. With the QMS, the customers don’t have to stand physically in the queue, making the financial transactions transparent and safe. IoT fintech startups are using smart gadgets like wearable devices to offer wireless self-checkout services on several domains. At present, Amazon is applying such a concept throughout its self-checkout stores.
The uncertainty due to COVID19 has placed fintech firms under economic stress. However, with the differentiated capabilities, such as adaptability and novelty, fintechs are now well-positioned to survive the disaster, as well as contribute to the society meaningfully.