The COVID-19 pandemic has had a significant impact on the financial industry, hastening global fintech trends. For several years, fintech has been transforming the financial industry, but the pandemic has accelerated this process, resulting in new innovations and changes.
In this article, we will look at how COVID-19 has accelerated global fintech trends.
The Evolution of Contactless Payments
The rise of contactless payments is one of the most significant fintech trends accelerated by COVID-19.
As consumers have become more concerned about the potential spread of the virus through physical contact, the pandemic has resulted in a significant shift toward contactless payments.
As a result, contactless payments, such as mobile payments and digital wallets, have seen a significant increase in adoption in many countries.
In the United Kingdom, for example, the number of contactless payments increased by 12% in 2020, while in the United States, the number of consumers using contactless payments more than doubled during the pandemic.
This trend is expected to continue even after the pandemic is over, because consumers have grown accustomed to the convenience of contactless payments and are unlikely to switch back to traditional payment methods.
Online Banking and Digital Banking
The pandemic has also increased the use of digital banking and online services. With lockdowns and social distancing measures in place, consumers have had to rely more than ever on digital banking and online services.
Many banks have reacted to this trend by expanding their digital capabilities, such as offering online account opening, digital wallets, and mobile banking apps.
For example, mobile banking app usage increased by 26% in the UK during the pandemic, while new mobile banking registrations increased by 200% in the US.
This trend is expected to continue, as more consumers become accustomed to the convenience and flexibility of digital banking and online services.
Apps for Robo-Advisory and Investment
Another trend accelerated by COVID-19 is the use of robo-advisory and investment apps. Many people have turned to investment apps to manage their finances as they work from home and spend more time online.
During the pandemic, demand for robo-advisory services, which use algorithms to provide investment advice, has skyrocketed. Investment apps like Robinhood have seen an increase in usage, with many new users signing up to trade stocks and other securities.
This trend is expected to continue as more consumers gain confidence in using technology to manage their finances and seek out more affordable and accessible investment opportunities.
Verification of Digital Identity
The adoption of digital identity verification solutions has also been accelerated by COVID-19. As more people work remotely, there is a greater demand for secure and dependable methods of identity verification.
During the pandemic, digital identity verification solutions such as biometric authentication and facial recognition have seen increased adoption. These solutions provide a more secure and convenient alternative to traditional identity verification methods, such as in-person visits to a bank branch.
This trend is likely to continue as more businesses and financial institutions seek ways to securely verify their customers' identities in a remote environment.
Opportunities and Challenges
While COVID-19 has accelerated global fintech trends, it has also presented the fintech industry with both challenges and opportunities.
One of the most difficult challenges for fintech companies is adapting to rapidly changing circumstances. The pandemic has created significant economic uncertainty, making it difficult for fintech firms to plan for the future.
Simultaneously, the pandemic has provided opportunities for fintech firms to innovate and develop new products and services that meet the changing needs of consumers and businesses.
Another challenge for the fintech industry is ensuring the security and dependability of their products and services.
With more consumers relying on digital banking and online services, cybersecurity measures to protect against fraud and cyber attacks are becoming more important.
Fintech firms must also ensure that they are in compliance with regulatory requirements in each country in which they operate.
As fintech continues to disrupt the traditional financial industry, regulators are increasingly focused on ensuring that fintech companies follow the law.
Fintech growth drivers
Fintech’s growth and the overall boost in the digitalization in finance seen throughout the pandemic can be connected to numerous drivers, both seen on the supply and the demand side. We’ve highlighted some of the most important ones:
Supply-side drivers
In what concerns the supply side of things, the main drivers were:
The support measures during the COVID-19 pandemic: there were numerous incentives, both fiscal and monetary, which managed to help supporting the economy.
Institutional transition into the digital world: both newcomers and established financial institutions found themselves in a position where going digital was nigh mandatory given the relentless consumer demand for digital alternatives.
Regulatory frameworks: Fintechs saw fewer obligations in terms of financial regulation which meant that new entrants could find their way and establish themselves easily.
Demand-side drivers
As for the demand side, drivers were simple:
A shift in payment habits: digital and contactless payments began to be the new standard of payments for customers worldwide.
Convenience and overall mobility issues: clients simply became unwilling to go to the bank given the pandemic. This meant that financial institutions had to meet the shift in demand type and search for better processes which addressed customer convenience.
Additional savings: household savings and bank deposits were high while interest was low.
Wrapping Up
COVID-19 has had a significant impact on the fintech industry, hastening trends such as contactless payments, digital banking, robo-advisers, and digital identity verification. Consumers and businesses have grown accustomed to the convenience and flexibility of fintech solutions, and these trends are expected to continue even after the pandemic is over.
While COVID-19 posed challenges to the fintech industry, it also provided opportunities for innovation and growth.
Fintech firms must continue to adapt to changing conditions and ensure that their products and services are secure and meet regulatory requirements.
As the fintech industry continues to disrupt the traditional financial industry, it is critical for consumers and businesses to carefully weigh the benefits and risks of using fintech solutions and to conduct thorough research before implementing new technologies.
Overall, the impact of COVID-19 on fintech trends will continue to evolve over the next few years, shaping the financial industry's future.
