Non-traditional financial services firms could be forced to find collaboration and funding from traditional banking organizations. Naturally, this is very bad news for early-stage fintech firms – some of them will inevitably shut down.
Also on the negative side are fintech firms in the payments sector. There is an expected drop in transactions at all levels of the economy worldwide. However, now fintech startups experience a boost of payments at the moment.
Hardware shortages could also impact firms that are connected with the Internet of Things or produce devices that help to process payments in the physical world (Square, for instance). Fintech startups that rely on traditional retail might experience a decline really soon.
Positive Impact of Coronavirus on Fintech
On the other side of the spectrum are companies that serve consumers who are new urge for digital banking services. Surprisingly, coronavirus improves fast-track digital innovation efforts in the financial sector.
Legacy banks and credit unions are expected to look to fintech firms for assistance in bringing better digital banking solutions to the marketplace.
This increase in demand for digital solutions could provide a lifeline to fintech firms at a time when VC funding may not be an option.
Also, coronavirus has driven a massive 72% rise in the use of fintech apps in Europe, according to new research published by deVere Group.
In addition, weakening economies may force government organizations and regulators to stimulate the expansion of fintech solutions.
For instance, South Korea is planning to temporarily ease regulations on fintech and ten other industries in March, in an attempt to jumpstart its economy amid the coronavirus outbreak.
CNBC reports that British financial companies are lining up to get financial aids to get a piece of UK’s coronavirus relief measures.
The World Health Organization encouraged contactless payments. Consumers are increasingly ready to embrace digital wallets. In Germany, more than half of payments currently made by card are contactless, compared with 35% before the coronavirus crisis hit.
Finally, for those fintech, regtech, and advanced data and analytic firms that can weather the current coronavirus storm, more venture funding will most likely be available. According to many reports, private equity and venture capital firms will have significant cash available once the market stabilizes.
Recent Fintech Activities
What are the sectors that will continue to grow in the fintech domain? According to the deals made just before the COVID-19 outbreak, most of the movements, collaborations, and investments were made between companies involved in data, advanced analytics, payments, lending, and investment sectors.
It makes sense to have a look at the recent transactions to figure out the strategies that were set before the coronavirus update.
Fiserv and First Data. Fiserv acquired First Data in July 2019. This acquisition strengthens Fiserv’s position in the marketplace as an information partner for both traditional and non-traditional financial firms.
Apple and Goldman Sachs. These giants jointly launched a new consumer credit card last August. The new Apple credit card works with the iPhone’s digital wallet app.
PayPal and Honey. PayPal expanded its reach into e-commerce in November by acquiring the shopping assistant and rewards program company Honey for $4 billion. This purchase illustrates the importance of building a platform for financial services that becomes an integral part of a consumer’s daily life.
Visa and Plaid. Avery aggressive acquirer of fintech firms, Visa agreed to buy startup Plaid for $5.3 billion in January. Plaid’s data network allows consumers to securely connect their traditional bank accounts to fintech firms such as Venmo, Robinhood, Acorns, Betterment, and Chime.
Morgan Stanley and E-Trade. Morgan Stanley announced that is buying discount brokerage E-Trade Financial Corp for $13 billion.
Speculation on Upcoming Fintech Activity
Despite the current equity market conditions, many believe the current market is ripe for additional fintech activity.