Coronavirus effects on Fintech — the positive and the negative

The negative economic consequences of the novel coronavirus, aka Covid-19, are still difficult to measure; however; some effects did surface in the first quarter of 2020. The Equity markets across the world are plummeting; many countries are under lockdown, which is causing massive losses to the businesses. Visa has reported an enormous downfall in its cross-border transactions. Their stocks have dropped by more than 12% since the market hike registered on the February 19th. Air France–KLM has reported that it has already suffered a loss of $200 million because of coronavirus. Overall, the airline industry has already registered a loss of about $1 billion.

A Forbes report mentioned that the recent stock market slump could begin a chain of lower valuations of fintech firms and cause a lack of funding. AsiaTechDail has also observed that the slowdown of transactions at every level, i.e. from supply chain to retail to travel and events are going to affect fintech businesses. Experts are stating that in case we reach a stage where there is a repeat of 2001 recession when the world witnessed a tech bubble burst, many fintechs startups would no longer be in business as they’ll be facing a lot of trouble getting finances.

Now let’s talk about the silver lining under the negativity of Covid-19 on fintech:

• The world is witnessing a rise in the demand for insurance. To stop the Covid-19 from spreading further, many businesses, as well as sports events, were cancelled last minute. Tokyo Olympics have also been postponed for about one year. This has opened a new window of opportunity for the insurance business, i.e. business interruption and event cancellation insurance coverage.
• The World Health Organization recently advised people not to handle banknotes instead switch to contactless payments to deter the spread of the deadly coronavirus. This would lead to many legacy banks and credit unions, asking for fintech services and bring better digital banking solutions to the marketplace.
• The weakening economies may also force governments to heighten the expansion of fintech solutions. E.g. South Korea is aiming to ease regulations on fintech firms (+10 other industries) temporarily in March to kickstart its economy during the coronavirus pandemic.

Fintech’s helping SMEs amidst novel coronavirus outbreak

In these hard times, when small and medium enterprises are going to find it difficult to funds their projects, a few of the fintech companies have extended their hands in Europe. Trade Ledger, Wiserfunding, Nimbla, and NorthRow have collaborated and formed a task force to offer a turn-key origination and an underwriting platform. The platform will allow banks, alternative finance providers and private debt lenders to grant funds to SMEs during the Coronavirus pandemic digitally.

This new platform is going to support all types of term-loan, invoice financing, as well as asset finance. The funds are going to be released in days as opposed to the weeks’ time window that currently prevails.

Efforts are being made by the government to deal with the increasing economic crisis. The government has offered grants, loans as well as established British Business Banks’ Coronavirus Business Interruption Lending Scheme to help businesses. However, there is a possibility that the SMEs are not allocated funds that they need or in the crucial time-frame.

Martin McCann, the CEO of Trade Ledger, has said that with the Covid-19 outbreak overall has put enormous financial pressure on worldwide supply chains. Small and medium enterprises require cash to stay in business. If we talk about the lending business, the lenders take around 90 days to onboard a customer and establish a new credit line. The government offering funds adds a massive boost to the market; however, its impact could be lost if lenders are not able to grant loans to their customers as quickly.

Fintech firms helping banks in the time of crisis

Many fintech organizations across the world are assisting the banks in helping their customers in the current crisis. While some firms are offering their services for free, some are charging nominal prices, or offering accelerated deployment packages.

Agora Services

The company is offering financial institutions a robust and customizable cloud-based offering that helps banks to manage the accounts in real-time. The banks can simply accelerate their current system without replacing the core banking system.

Bankingly

Bankingly is a cloud-based, mobile banking software service company. The company has developed an App with which the financial companies can communicate with their clients, and can also display various forms like user or product on-boarding.