COVID-19: Pandemic or Panacea for Fintechs and Financial Services? 

Published: October 28, 2020 by Jesse Hoggard

The financial services industry is not always synonymous with innovation and forward-thinking. While there are some exceptions with top10 banks and some savvy regionals, as a whole, the sector tends to fall on the latter half of the diffusion of innovation curve, usually slotting in the late majority or laggard phase. Conversely, the opposite is true for fintechs who have been an enormously disruptive force of change in financial services over the past 10 years 

For many businesses, the pandemic has created uncertainty and an inability to conduct or generate business. However, the silver lining with COVID-19 might just be that it’s driving digital innovation across industries. Andreesen Horowitz, a venture capital firm, estimates businesses of all kinds are experiencing at least two years worth of digitization compressed into the last six months. And while they have been significantly impacted, for fintechs who were already pushing the envelope and challenging existing business modelsCOVID-19 suddenly accelerated financial services innovation into overdriveHere are three challenges fintechs are answering in the wake of the COVID-19 health crisis.

Digital Banking  

The first lockdowns flipped the digital switch in financial services. Seemingly overnight, banking moved digitalIn April, new mobile banking registrations increased 200%, while mobile banking traffic rose 85%. Likewise, Deloitte reported online banking activity has increased 35% since the pandemic started. Being mobile-first or digital-only has allowed many fintechs to win in offering presentmentactivation, underwriting, and a contextual digital interface, all capabilities that will only become more relevant as the pandemic stretches onAt Square, direct deposit volumes grew by three times from March to April, up to $1.3 billion; Chime saw record signupsContinued social distancing will only serve to accelerate customers’ use of mobile and online platforms to manage their finances. 

Contactless Payments 

Similar to digital banking as a whole, the health crisis has accelerated the necessity for contactless payments. Whereas convenience and a seamless customer experience may have been drivers for payments innovation in the past, nowmany customers may view it aa life or death health concern. Phones, wearables and even connected vehicles are empowering customers to participate in commerce while avoiding handling cash or coming in contact with an infected surface. Through their adoption of IOT-powered contactless payments, fintechs are accelerating this area of financial services to keep customers safe. 

Financial Inclusion and Speeding Economic Relief 

Any disaster disproportionally affects the underbanked and those living at the poverty line, and COVID-19 is no different. While it will undoubtedly contribute to an increase in unbanked households, the pandemic may also provide an opportunity to innovate through this problem. Financial inclusion was already a focus for many fintechs, who’ve made it their mission to bring equity by offering basic financial services in a transparent way. Unencumbered by legacy systems and business models, fintechs are well positioned to work across the financial ecosystem, from financial services, retail and government to efficiently and more quickly distribute benefits to at-risk groups and impacted businesses.  

From their ability to quickly ingest new and novel data sources, to a focus on using a digital-first approach to delight customers, fintechs will continue to harness their strengths to disrupt financial services, even during the pandemic. How is your fintech driving innovation and customer experience during the health crisis?  

Learn more

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