Currently, fintech is one of the most emerging industries all over the world. More and more companies are launched every day using technologies to provide financial services to people involved in the business sector. In fact, fintech is all around us nowadays as everything we do online may be part of the industry without us even realizing it. The reason for this is that all the newest technological innovations are related to fintech. Whether you are using payment apps like PayPal to purchase certain products or managing your finances using other apps, you are taking part in FinTech.
Any company that provides financial services through software technologies, mobile devices, or the internet is described as a part of fintech. Some other examples of fintech are crowdfunding platforms such as Patreon, GoFUndMe, and others that are pretty much different from traditional banking systems as they allow internet and app users to send and receive money from other people more easily and instead of going to a traditional bank and ask for a loan, take advantage of the pool funding from different sources in just one place. Fintech innovations are also used in trading platforms. For example, you can visit BrokersOnline website and see that now fintech has literally opened new horizons to traders because thanks to new technologies now they can easily make money transfers and manage their trading accounts without worrying that they have to involve some financial institution in the process.
Therefore as the number of people who take part in these kinds of activities rapidly grows, not surprisingly Fintech is thriving. There are many reasons why it’s so popular nowadays but as some experts predict, sooner or later there will come a time when fintech innovations start to naturally slow down and the emerging industry will face recession.
What is the reason for the FinTech market disruption?
One of the major reasons that slow down the success of fintech is new waves of the coronavirus pandemic. Some financial experts believe that now the fintech sector is in front of an existential crisis as a result of the ongoing Covid-19 pandemic. In the first half of 2020 investments in the sector decreased by about 10% globally and 40% in Europe as a result of the lockdowns in most countries. It’s obvious that the pace of the funding to fintech companies in the first months of the current year has decreased, returning to the levels of 2017. And as the tendency goes on. fintech may become vulnerable to overcome the crisis and start to slow down.
The virus outbreak caused important declines in spendings and this is why there is a chance that the Fintech industry may face certain threats. In order to continue implementing innovations, as well as attract new customers, the industry has a continuous need for capital. However, this can be a little bit difficult nowadays as the covid-19 crisis had a serious effect on the runway for many fintech startups, posing an existential threat to the sector.
Today more and more financial experts state that currently the industry may be thriving but the recession is predictable because it’s natural for all the industries in the world to come up with crisis at certain times and as there are several factors like the pandemic that slows down developing new ideas and making innovations, it’s highly likely that the tendency of the increase will finally come to its peak shortly and after that the fintech will naturally start to disrupt. Specifically, as estimated, about $5.7 billion will be needed to maintain the success of the EU fintech sector throughout the second half of 2021. But nobody knows where these funds will come from, as businesses involved in fintech are not eligible to access loan bailout schemes because of their pre-profit status.
How can fintech companies survive?
However, there are still many chances for fintech companies to overcome existing barriers and survive. For this FinTech businesses have to navigate all the changes and set the goal according to their priorities. Companies need to take a greater look at current trends in this fast-growing industry to stay one step ahead of their competitors. And for this, the first thing they should do is an open architecture.
If you wonder what opening architecture means, we will tell you that the companies need to prepare their product with the application programming interface (API). This is a technology that refers to multiple apps that interact and function at the same time, obtaining data from one another. This way products will obtain more users because it’s pretty convenient when products work equally well on different platforms like mobile and web. The key takeover from this tip is to balance your cybersecurity and manage the product by adjusting it to the needs of the market and current trends.
One more important thing that you need to pay attention to is access to skilled employees. It may be a trivial idea that every company needs motivated and skilled employees to grow but this is vital for surviving and competing with other brands as today there is a bigger competition among employers. For this reason, Fintech companies should invent new recruitment methods to gain better employees and create educational opportunities for them which is essential for navigating through current trends and adjusting to new developments.
Finally, we can say that today fintech is one of the most thriving industries with lots of benefits, but it doesn’t mean that the tendency won’t change anytime soon if the companies don’t start paying attention to important details. As the pandemic goes on, surviving for the fintech startups becomes harder and that’s why everybody should consider taking precautions and keeping tips from the experts in mind