FinTech App Development: Impacts of COVID-19 on FinTech Industry

Within a few months, COVID-19 has changed the world forever. What started as a global halt is now turning quickly into a procedure of turning towards new technologies to face adequately with the present reality. Global productivity is in recovery mode due to an uncertain economic downturn that has affected the businesses and individuals financially.

So what are the new norms? The answer is robust digital financial services such as FinTech. Companies offering FinTech application development services have been placed at an advantageous position. So, FinTech must prepare them to not only meet the customer’s demand but also to scale up to enterprise IT infrastructure for getting well adapt to the new COVID-19 world.

Not surprisingly, experts are seeing signs of deterioration as well as, revitalization of the businesses of the various FinTech industries in handling the given pandemic. Most of them come with agile teams and systems, and it is now a matter of time how their resilience will either pave way for their success or leave them for decay.

To offer a better overview of how the impact of COVID-19 on offering the best FinTech software solution by FinTech companies will go either in a good or bad way; follow the given effects wisely:

I. The Moment of Successful Survival

As per the reports of CB insights, investors are less attracted to investing in FinTech industries in 2020 that is one of the lowest since 2020. What does the given fact indicate? It reveals a lower appetite among investors towards FinTech app development and the full blame is on the given pandemic. Due to it, many experts have come to the point that the future of the FinTech sector is uncertain.

So, one can see that global deals have greatly decreased for FinTech app development companies from Jan’2019 (306) to Jun’2020 (175). What will be the consequences of the FinTech space? The consequences will be severe as companies will be unable to secure funding from the investors, and will result in lower transaction-based revenues for numerous business organizations.

Though it will create trouble for several small players and will also compel them to shut down their services, yet it will also leave the industries for stronger companies. Although the given scenario will be bad for FinTech startups, yet it will give momentum to those companies that can successfully cope up with the given challenge.

II. A Great Expansion of Digital Finance

With widespread havoc caused by the current pandemic, there is an imposition of quarantine restrictions. So what? It says that visiting a physical financial institution is not as easy as was in earlier times. Due to such restrictions, the use of remote services has become more prominent.

One notable example is the increased usage of cashless payment. Moreover, many countries have raised the limits on contactless payments, and in some cases, it has also doubled.

Besides, it will also have a great impact on the regulatory progress of FinTech enterprises. Countries such as China have adopted FinTech & Regulatory technology to provide security to the FinTech companies from unseen damage in the future.

So, really good news for the FinTech enthusiasts! Though pandemic is proving to be tough for the industry, yet it has offered a grace period for most of the FinTech industries that will help them achieve success in the longer run.

III. Setting Up of Tone towards Higher Personalization

With the current ongoing pandemic, there has been a great interest in offering a personalized solution to the customers. How it will impact the working of the FinTech industry? Also, it will help the companies to improve their forecasting and assessment capabilities that will have a great influence on what people act and think.

Though the given pattern is an old idea, yet powered with robust 5G, it has offered companies to move the buyers towards a comfortable situation in a more drastic manner. So with the given aspect, it will help FinTech companies to focus more on client procurement by providing them with improved credit scoring techniques and so forth.

Besides, the given scenario will compel the FinTech industries to move beyond profit-seeking and offer more products with complete IT arrangements to match the need and expectations of the customers successfully. Therefore, a great way towards personalizing the financial products will help in getting more customers into their fold.

IV. The Borderline between FinTech & Banks will get Somewhat Blur

The traditional form of banking has seen the severe loss of customers during the pandemic and is looking with hope at FinTech. Why?

It is because the financial and banking industry is facing a significant decline in their financial performance since last year. Besides, research from Bloomberg Intelligence has revealed that the average cost-to-income ratio is all-time high to 67% in most of the top-level European financial institutions. What’s more, there is a steep decline in the return on equity to -8.7% that is lowest for the last three years.

Combining with the global recession in 2020, COVID-19 is aggravating the economic situation to a low level. Due to the current pandemic, the income of people is an all-time low. With the rising number of unemployment among the people, there has been a decrease in the size of bank deposits and purpose loans.

Clearly, changes in the functioning of institutions have paved the way for combining bank features with that of FinTech services. Moreover, greater digital transformation due to FinTech has allowed banks to offer smaller loans for less formal assessment of the customers and also to acquire FinTech firms. Remarkably, such situations are proving favorable for FinTechs as they are using this opportunity to improve its performance.

V. Alternative Lenders will reduce in Great Numbers

The ongoing pandemic has made alternative lenders focus on the agile scoring approach such as emphasizing on smaller loan amounts. Nevertheless, a different picture is being shown in the present tie as the income of small and big businesses and even retail customers have displayed a significant amount of reduction. Not only it is a leading decrease in consumption but also increases in default cases.

Some research work has revealed that more than half of the people (or investors) will offer loans only after improvement in the present condition. More harshly, lower demand, and tighten requirements have resulted in a significant drop in issuance. In the worst condition, companies have been forced to cease their functioning.

Moreover, borrowers have become more insolvent in these highly uncertain economic times. This, in turn, has made investors pull their funds from investing in financial companies and startups. Though some reports are hinting that conditions might improve by the end of the year, still, longer uncertainty will make only a few FinTech players remain aloof in the market.

The Final Word

Since the start of the pandemic, the FinTech industry has been exploring numerous facets to remain relevant in such a tough situation. There has been a significant impact on the working efficiency of the FinTech companies as described in the given blog. They are also going through various ups and downs. But, it is in the hand of enterprises to find opportunities in negative impact and fortune in positive impact and be ready to rock the world with the best financial services (albeit in digital mode)!