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COVID-19 has had a catastrophic impact on most industries across the world but if there’s one sector that arguably flourished it’s the financial tech (fintech) sector. With the world turning its attention to the online world as social distancing became the ‘new normal’ and various global lockdowns were announced, fintech took the reins from the ‘old school’ banking world and took some bold steps into the light.
The Business Research Group says the market is expected to reach over $300 billion by 2022 and whilst there has certainly been an immediate negative impact due to the pandemic (with a 30% reduction in investment in the UK), the pandemic might actually have revealed how strong the market is in general.
Resilience and opportunity
The resilience of the fintech sector, not to mention the fact that it’s an industry that is naturally eager to embrace remote working, means that it has not been as significantly disrupted as its more traditional bedfellows. Indeed, Beauhurst speculates that only 1% of fintechs were affected critically by the pandemic, compared to 17% of other high-growth companies.
The pandemic has also had a marked impact on consumers habits, with lockdowns catalyzing a more expedient shift towards a completely digital future. It has been clear for years that fintech is going to play a defining role in banking services going forward but COVID lit a fire under it. Over the last six months, demand for fintech services has soared as customers look to the true innovators.
One of the most notable innovative moves made by the sector in recent years is the concept of open banking. This allows users to manage their entire portfolio of accounts from one platform, regardless of which banks they hold accounts with. So, if you have one account with Santander, one with HSBC and another with Halifax, you should now be able to manage all of your disparate accounts from one third-party app.
The pandemic also allowed fintech lenders such as Nucleus Commercial Finance the means to help SMEs whose business had been adversely affected. With the part help of the government’s Coronavirus Business Interruption Loan Scheme, these companies are able to provide additional support that the government alone simply wouldn’t or couldn’t.
Leading the way
It’s the fintech business leaders that really led the way for the rest to follow during the lockdown and beyond. A major crisis will always lead to a sea change and in this case, it’s managed to catalyze a product that will withstand even worse recessions in the future. Classic financial institutions are too conservative for the way we live and bank in a post-COVID world and that’s ultimately why fintech will come out on top!