As the world continues to deal with the coronavirus pandemic, measures taken to prevent its spread have led to a global economic slowdown. Social distancing actions and lockdowns have led to reduced movement, travel and business, leading to loss of revenue for companies across most industries. The financial technology (fintech) sector, like many others, is also among those that have been affected by COVID-19.
The economic slowdown has changed many assumptions about the fintech industry. Before COVID-19, not many fintech companies were breaking even or making profits, as most were focusing on managing yearly growth with the resources at hand. With the pandemic, the immediate concern shifted from future projections to how to manage the uncertainty. As with many businesses in the financial sector, fintechs have instituted measures to survive the crisis that range from shoring up capital from investors to implementing cost-saving steps like reducing workforce numbers. Since revenues for many fintech companies are based on volumes and transactions, the strategy during COVID-19 is to minimise fixed expenses and ensure other costs are variable.
The reasoning behind these moves is clear. Keeping operational resiliency is a must if the business is to survive. However, fintechs have also had to grapple with customer requests for relief, not to mention their efforts in accessing government aid where provided. Similarly, fintech businesses focused on payment solutions may have witnessed higher transaction volumes, leading to decisions on whether to expand capacity to withstand the extra volume. With financial resources being limited, these decisions aren’t easy to make.
A Silver Lining in Tough Times
However, it’s not all doom and gloom for the fintech sector. As close to half the world has been compelled to adhere to self-isolation and stay-at-home measures, people’s capacity to conduct business and socialise is limited. Businesses that relied on foot traffic have borne the brunt of the crisis. Still, with a variety of fintech options on the market, a lot of these businesses have resorted to providing online services. Fintech options have made transactions convenient in this regard, allowing customers to order and make payments while adhering to self-isolation rules.
While fintech solutions can’t replace all aspects of business, they have made it easier for people to follow government lockdown measures effectively while supporting the online economy. Thanks to fintech, many service and product delivery operations have continued to meet customer demands, ensuring that a complete shutdown of the economy is avoided.
That fintech has been a force for good during the pandemic is not in doubt. As fintech entrepreneurs such as Razi Salih know, this might be the stepping stone to make fintech solutions more integrated into the economy after COVID-19.