FinTech, short for finance and technology, was one of the few industries that continued to grow despite the global pandemic of Covid-19. During the health crisis, FinTech solutions served as a powerful way to navigate financial services both for businesses and individual end-clients in times of severe worldwide social restrictions. Alternative financial services also gave a thought for food to industry regulators and policymakers to adapt to the changing economic environment. During the pandemic once again it became crystal clear what huge impact technology has on our lives.
From my experience working in a bespoke software development company, I learned that technology is not just for tech startups and modern business solutions. Rather, nowadays in our technological society, digitalization and innovative software solutions are a necessity for every traditional business that aims for success. By being especially valuable in emerging markets and developing economies, FinTech companies also have the potential to dramatically change the outcomes of global development strategies for financial inclusion and equality.
The pandemic of Covid-19 was both a game-changer and an eye-opener for new possibilities. This is how the global health crisis and all its consequences have influenced the FinTech industry so far.
- Steady Market Increase
The World Bank has been following the development of FinTechs during the crisis and according to expert reports, this expanding sector has achieved rapid growth in market shares. Despite economic fluctuations and financial uncertainty, FinTechs responded well to the crisis. Global data from 1385 FinTechs in 169 jurisdictions were gathered from mid-June to mid-August only to conclude a stable market growth.
This should not come as a surprise though. FinTech products offer entirely digital financial solutions that are conveniently accessible, provide clients and SMEs with personalized offers (e.g. risk evaluation, budget analysis, or credit deals) in exchange for much lower prices than traditional banking can offer.
All this is possible thanks to advancements such as AI (Artificial Intelligence), RPA tools (Robotic Process Automation), Big Data, and blockchain to only name the most popular cutting-edge technologies. These core benefits of FinTechs give them a strong competitive advantage, allowing them to prove themselves as quickly adaptable to changing economic environments and incredibly resilient to various market challenges, like fewer investments.
- Dealing with Security Challenges
In the survey mentioned above, some of the main objective challenges FinTechs faced during the pandemic were increased fraud attempts and the employment of high-security standards. With changes in business conditions and the prevalent tendency for remote work, many SMEs restructured their organization and shifted to digital-first or digital-only product and service delivery. This requires additional security features and measures to protect client’s data privacy.
So, what can FinTechs do to prevent account hacking and financial data fraud? As they deal with sensitive personal data, digital financial service providers need to ensure secure data storage. One way to address this issue is through device-oriented cryptograms that identify the device used for the payment. In case of fraud alarm, cryptograms automatically cancel the transaction. AI Fuzzing tools (e.g. Fuzzbuzz, Google’s ClusterFuzz, Peach Fuzzer, etc.) are another weapon in the arsenal of software developers used to fight cyber attacks. They are employed to find memory corruption bugs in software, which help prevent major security issues.
Many FinTech companies work with third-parties that are often used as a shortcut to access sensitive information. As a precaution against cyberattacks FinTechs can hire outsourcing developers and partner with them to enhance their software product. For instance, developers can create an app that corresponds to the highest security standards and is compliant with privacy guidelines as well as AML (Anti-Money Laundering) compliance programs which helps minimize the necessity of third-party service providers.
- More Initiatives to Regulate FinTechs
Ever since the pandemic outbreaks economists observed the rapid adoption of FinTech services. This popularity of modern alternative financial solution providers was not left unnoticed by regulators. On the contrary, many regulatory initiatives took place during the pandemic and are summarized in the following The Global Covid-19 FinTech Regulatory Rapid Assessment Study.
Some of the key findings of the study indicate that the vast majority of respondent regulators “have either accelerated existing regulatory innovation initiatives or introduced new initiatives”. 72 % of them answered that they have either accelerated or initiated a procedure on the adoption of digital infrastructure. What is more, industry regulators saw continuous support by FinTechs to the pandemic relief efforts in their jurisdictions. Among the most popular use cases were digital payment and remittance disbursement (38%), delivery of governmental relief and stimulus funding (28%), healthcare applications for Covid-19 infected contact people (22%), and support for SMEs (12%).
Another essential regulatory issue that stroke as a survey insight was that no implementations of innovative technological initiatives were canceled due to the pandemic. Only 20% of the respondents noted delays that are directly linked to Covid-19. Generally, the pandemic was recognized as a powerful accelerator for global innovation alongside regulatory initiatives.
- Fintech Future Beyond Covid-19
Will FinTechs remain relevant even in a post-pandemic world? Business analysts from the Business Research Group confirm that. Not only are FinTechs here to stay, but their market value is also expected to reach tremendous for an emerging industry $309.98bn and achieve an annual growth rate of 24,8% through 2022.
Once the pandemic is over, cost-saving measures and a reduced workforce will most likely further accelerate the transition from on-site financial services to digital account management and payments. As digital finance is marking an unprecedented expansion across the world, FinTech could positively influence consumers in developing countries and remote areas, which have less access to traditional banking. In fact, in the 21st century, 1,7 billion people are still unbanked according to the World Bank, which is counterintuitive when one thinks of how much we humans have advanced technologically.
If their popularity continues to grow strongly, FinTechs can play a crucial role in tackling global issues like social inequality and poverty. By allowing cost-effective financial services, rapid access to personalized offers backed up with a higher degree of security, FinTechs will both reserve a well-deserved big market share and contribute to making the world a better place.
Author Biography Aleksandrina Vasileva
Aleksandrina is a Content Creator at Dreamix, a custom software development company, and is keen on innovative technological solutions with a positive impact on our world. Her teaching background mixed with interests in psychology drives her to share knowledge. She is an avid reader and enthusiastic blogger, always looking for the next inspiration.