The ‘black swan’ COVID-19 pandemic outbreak has impacted parts of the global economy in ways that were until late unimaginable. Also the fintech industry, both new and established companies, has had to scramble to come to terms with the fall-out of COVID-19. All of this is not to say that the impact on the industry has only been negative, let alone that the future looks grim for most. There are indeed a multitude of opportunities for growth that present themselves.
We asked our members how they assess both the impact of CODIV-19 in their local markets and what their recommendations are for the fintech companies in their home markets.
Contributions were collected from Eric Hazard (Managing Director of Vested – United States), Kristian T. Sørensen (Partner with Norfico – Nordic countries) and Paul Cheal (Managing Director of Honner – Australia).
Assessment of impact
United States (Vested)
When examining fintech in the U.S., it is helpful to divide the group into two areas of focus: institutional and consumer. Institutional fintech companies, which focus on core banking or transaction processing have done well in the U.S. As the capital markets experienced volatility in February and March, the systems processing transactions demonstrated the resiliency and forward-thinking that has gone into building today’s financial market infrastructure.
Consumer fintech has been hit by reduced revenue and a less than certain funding market. But as we’ve seen the emergence of a new normal, consumers are relying on fintech companies and apps more than ever, creating an opportunity to describe how the future consumer financial world may look.
Nordic countries (Norfico)
Most of the Nordic countries seem to have coped very well with the COVID-19 situation with swift and efficient reactions, well-functioning health systems and not at least a very high degree of resilience thanks to the extremely high degree of digitisation across these countries. This has allowed most companies to shift effectively to remote working and distributed collaboration.
The challenging situation has only increased the global appetite for digital solutions out of the Nordics, which has allowed more mature fintech companies to initiate even more engagement as services like for example digital signature overnight have gone from nice-to-have to need-to-have for many companies.
The smaller fintech companies, on the other hand, find themselves struggling to 1) close funding rounds and 2) close collaboration agreements with the established players like the banks as many of these have put many of their more innovative activities on hold for the time being.
Despite the obvious funding and cash flow challenges, given everyone is now relying on technology more than ever, the pandemic has also created opportunities for local fintechs.
Fintechs received a boost to their fortunes with the news that major banks are offering small businesses the opportunity to defer their loan repayments for six months. This is a welcome reprieve for the sector during a challenging time. The Government is also offering assistance to businesses in the form of JobKeeper payments to help businesses retain employees, guaranteeing 50% of new SME loans to be used as working capital and boosting cashflow for eligible employers with a one-off payment.
Many fintechs are using this breathing space to work out how to help consumers and businesses rise to the challenges COVID-19 is creating. Within our client base we are seeing an increase in technologies that are focused on providing more seamless payments, and work is continuing on finding ways to improve the customer experience as Open Banking is rolled out in Australia.
United States (Vested)
We advice clients to make themselves available to the media. Journalists covering fintech and financial services are seeking credible sources who can quickly and concisely describe how COVID-19 has impacted the consumer interaction with their finances, creating an opportunity for new experts to emerge. With stay at home orders still in place in major markets, financial interactions are moving online and into contactless environments, in ways we have not seen in the U.S. before. This means everything from cash based transactions to digital wallets are topics of conversations in the media, topics which sit naturally in the expertise of fintech executives. COVID-19 has created an opportunity for the emergence of new thought leaders to guide the way forward.
Nordic countries (Norfico)
Going forward both established and upcoming fintechs will need to find new ways to get in front of their potential partners and customers. With no immediate perspectives of trade shows, conferences, hackathons etc. they need to be creative. This means that the fintechs
are also forced to digitise the initial customer engagement from the physical meetings at events to a stronger digital presence.
Fintechs have a key role to play in helping financial services organisations tailor experiences for consumers, many of whom are currently experiencing financial distress. Fintechs are by definition agile and innovative businesses and there are significant opportunities for those fintechs that can demonstrate their ability to pivot to meet changing customer demands.
Write-up by Jo Detavernier, principal of Austin-based Detavernier Strategic Communication.