Author: Dmitry Dolgorukov

COVID-19 fintech pandemic payments

Banking, Fintech And The Second Pandemic Wave: What’s Next For 2020?

Back in May 2020, a couple of months into the coronavirus crisis, governments across the globe were scrambling to implement measures to protect their economies while maintaining public health and safety. Now, with Covid-19 casualties having surpassed the one million mark worldwide, it’s clear that the crisis is far from over. Conversely, the second wave is just beginning.

So, what does this mean for businesses moving forward, and in particular, the banking and fintech sectors? What measures can be taken to protect businesses in the future?

Reopening The Economy With Caution

In recent months, some businesses have begun to open their doors again, and the economy has been restarted, or it seems that way. Despite early indicators of recovery, such as the 7.9% decline in unemployment, the reality of the current situation is mixed. Economists predict that the real impact of 2020’s Covid crisis will emerge in the Q4 results.

As expected, the FAANGS have continued to perform well throughout. Growth at +72.9% for Amazon, +65.2% for Netflix, +56% for Apple, +25% for Facebook and +8% for Alphabet, at time of writing, highlights a growing consumer dependency on digital services that has continued to thrive, not just survive, during the pandemic.

Meanwhile, small to medium business (SMEs) struggled, despite governmental aid such as the CARES Act and funding from the Federal Reserve (Fed). According to a Yelp report, up to 100,000 SMEs could shut their doors permanently due to the impact of COVID, affecting millions of jobs.

Turning to the banking sector, the pandemic has sparked a renewed focus on technology solutions, ranging from internally focused systems for remote working to customer-focused technology. So far, I predict that the crisis will only accelerate previously expected fintech sector growth.

Even financial giants, such as Visa and Mastercard, are sharing in the drive for digital. In recent months, both companies have made large-scale acquisitions: Finicity and Nets for Mastercard in deals totaling $1 billion and $3.19 billion respectively, with an additional recent investment in the card-issuing platform, Marqeta, for an unknown amount, and for Visa, a $5.3 billion acquisition in Plaid.

In the financial and insurance industry, 16,000 jobs were added in September 2020 alone, indicating a rise in the sector despite the challenges, or perhaps even because of them.

Banks And Lenders: Preparing For The Second Wave

As I have seen, companies are continuing to focus on transformation, both internal and external, to adapt to the crisis: 59% of businesses have accelerated their digital transformation, with many focusing on the increased need for internal digital processes, such as remote working solutions, risk management tools, sustainability and assuring against employee illness, and adapting to the new capacities of their businesses.

Currently, what we’re seeing is a crisis management approach: a reaction that is directed at combating the risks from the coronavirus crisis. Yet it would be incorrect to assume it is only this. Behind these changes are moves toward long-term business development and sustainability. 

First, let’s look at these internal processes. Workplace productivity software provider Jira saw a 125% rise in new user sign-ins for its tools and, in the third quarter of 2020, reported an increase from its second quarter results. While one company’s results are not conclusive of an entire ecosystem, they do highlight the drive toward facilitating remote working and distance solutions.

In addition, I’m also seeing more businesses involve new technologies to assess risk, particularly financial risk. This is partly driven by the unexpectedness of the pandemic, but also serves as future planning, causing a rise in the demand for risk management software.

Secondly, with lenders being more cautious now than ever before, and financial providers needing to adapt to changes, I’m seeing developments in the area of customer-focused tools, too. 

The need to avoid face-to-face encounters has driven the adoption of tech solutions for anti-money laundering (AML) and know your customer (KYC) software that aids companies in verifying client identity from a distance, especially in traditionally brick-and-mortar banks. The recent uptick in fines given by the financial regulator for failure to prevent fraud also indicates that traditional risks from fraud have not disappeared, but that financial providers need to be evermore vigilant. It should be noted, however, that some of these fines are due to delays on the regulator’s side, which are indicative of the overall instability of working processes faced by all industries.

But what about lenders? What does the future hold for them and are they prepared for the second wave? While recovery is underway, volatility remains across many business sectors, and this presents an unprecedented risk to lenders. Government providers have gone some way to ensure economic stability, yet this has not fully prevented business closures or unemployment across the board.

As restrictions increase in the second wave, I predict we may again see businesses close periodically, and an increased need for credit. In turn, this requires lending providers to analyze risks effectively in times of crisis to ensure that the loans they provide are sustainable over the long and short term.

Crisis And Opportunity: Why Reaction Time Is Everything

Timing is everything. The coronavirus pandemic reminds us precisely how vital future-planning is for any industry. Although Covid-19 vaccination trials are in progress, the reality is it may be some time yet before we get back to any semblance of our previous normalcy. 

That means businesses that have failed to prepare in the last few months may be preparing to fail, as the second wave is likely to continue to present evolving challenges for a longer term than originally anticipated. 

Yet as we continue to confront this ongoing reality, a quote by the famous hockey player, Wayne Gretzky, comes to mind: “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”

For companies seeking to thrive and survive into the post-Covid era, it is essential to plan ahead for a permanently changed business landscape by implementing strategies for the future, right now.

Source: Forbes

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