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As the whole world is under the grip of the deadly coronavirus, one thing is clear; the human and economic impact of the COVID-19 is significant. Firstly, the pandemic is drastically transforming the way consumers used to shop. Secondly, the pandemic has resulted in reduced revenues, increased non-performing loans, and the rising demand for customer service teams, and other major changes for the financial tech companies. Total transaction volumes have sunk down due to the decline in consumption and trade. People have become more cautious about shopping in public places. Moreover, as most of the people are working from home, COVID-19 has changed the way they used to shop and make payments. A sudden rise in the payment processing needs has made it difficult for both merchants and financial tech companies to handle the payment processing efficiently. Hence, fintech companies are looking for new ways to manage huge volumes of transactions.Let’s dig deeper to see how Covid-19 has impacted all the fintech firms around the world and how they are coping up with the situation with digital payment solutions. Impacts of COVID-19 on Financial Tech Companies1. Growing Demand for a Cashless SocietyIn the beginning of March, the WHO warned people about the spread of the novel coronavirus through banknotes. The WHO emphasized making contactless payments wherever possible to control the spread of the deadly virus. The pandemic has also compelled the retailers and merchants to close their stores and switch to selling online. Hence, the COVID-19 has accelerated the adoption of digital payments significantly, pushing towards a cashless society. 2. Emerging Need for Fraud Protection SolutionsThe world is aware of the bitter truth that any crisis gives birth to numerous criminal activities. With the speedy rational changes happening every single day, fraudsters and cybercriminals are finding new loopholes that are encouraging them to make devious attempts to steal money from innocent people. Some of the common COVID-19 scams that happened recently include impersonating government organizations and public health authorities and demanding payment from the victims. These fraudulent activities have made it mandatory for large merchants and financial tech companies to invest in fraud prevention and detection solutions. Using artificial intelligence and machine learning in digital payment solutions can be an effective way to prevent fraud and cybercrimes.3. Formulating a new trust equationThe trust equation is the cornerstone of financial tech companies. However, the pandemic may change the trust equation for two reasons: First, the rise in fraud cases and second, the higher level of economic crisis worldwide. As individuals and business leaders are tight on their budget due to the COVID-19, digital payments will be observed closely. Employing Blockchain solutions will be a great way to track assets and online payments, especially in trade finance.4. A difficult situation for payments fintechsThe dropping transaction volume is not a good sign for fintech companies as it means a decline in fees for digital payments solution providers. This will largely impact all facets of the payment industry; however, payments fintechs will face more challenges as investment in capital demands low-risk environments.Financial tech companies should focus on creating a less approachable funding environment where some may find new opportunities to accelerate their profitability while others may connect and build partnerships with established financial services organizations.5. Stringent cashflow managementThe devastating pandemic has put a massive population worldwide, along with business leaders into a dire financial crisis, which has accelerated the general scrutiny of all outgoing cashflows. On an individual or small business level, physical payment methods such as direct debits and recurring card payments are likely to drop significantly and be replaced with digital payment solutions that are more secure and have greater control.Using a more impactful expenditure forecasting dashboards that come with the loan, sweep and savings features will be advantageous for fintech firms and banks in the coming years. From a transaction banking perspective, treasurers will require feature-rich, real-time dashboards that will display predictions and actionable insights for making more informed decisions.6. The evolution of tokenized mobile walletsCOVID-19 has accelerated the use of digital or mobile wallets. Some of the giant digital wallets like Google Pay, Apple Pay, and Amazon Pay allow contactless payments, without touching a card to a terminal and entering a PIN. These tokenized mobile wallets are expected to be used greatly during and post-crisis, replacing the physical payments through cards. Businesses not being able to accept digital payments may be adversely affected in the post-pandemic world. On the contrary, digital payment solutions can work great for digitally-driven businesses.7. Growing online shopping and digital checkoutsAs the worldwide population is staying at home, there has been an outburst of online shopping and delivery systems due to the panic-buying. Giant businesses like PayPal, Amazon, and Instacart have experienced sudden spikes in demand. It has posed two major implications for both payment providers and consumers. First, anyone providing a sub-par online shopping and digital checkouts has to implement more secure systems to handle the explosion of online payments. Second, as more and more consumers are purchasing daily essentials online every day, they might get annoyed about going through the same process every time they purchase online. Online shoppers may prefer ordering their daily essentials using IoT-driven devices. For instance, IoT-driven digital payment solutions may help in purchasing items at a scheduled time automatically. This solution is likely to witness growth in the upcoming years.8. Evolving customer behavior is the key driver of digital innovationSeveral safety measures such as self-quarantine and social distancing have increased the demand for digital banking services and banking software services. This will compel many digital payment solutions providers to accelerate their digital innovation efforts. Legacy banks and financial tech companies may look forward to improving and bringing innovativedigital payment solutions to the marketplace.As the global economy has been strongly hit by the pandemic, the financial tech companies will play a pivotal role in reviving the economy. Some of the ways how the fintech industry can contribute to the early economic recovery include:
- Swapping traditional and physical payments with digital payment solutions
- Supporting distant merchants with digital infrastructure
- Embracing digital currencies into universal digital payment solutions
- Adoption of cloud-based and digital infrastructure, analytics and automation to ensure higher scalability
The BottomlineAs the wave of the deadly pandemic sweeps across various industries, the fintech industry has felt the pinch more than any other industry during the COVID-19 outbreak. E-commerce, banks, and financial industries have witnessed sudden spikes in the bulk-buying, net-banking, and online transactions as more people are purchasing the vitals or making payments online in light of COVID-19 anxiety and panic. In such a context, making transactions and payment processing easy and convenient has become the top priority of these industries.As the majority of the worldwide population use mobile apps for shopping and making payments online, e-commerce companies, banks, and financial tech companies should offer solutions that will effectively help consumers to shop or make online payments on the go. Investing in fintech app development service and banking software service can significantly drive business growth through smooth processing of all financial transactions amid COVID-19 pandemic. If you’re looking for fintech app development, banking software service and other digital payment solutions, it is always wise to approach a professional digital payment solutions provider that will provide you with a plethora of features and solutions to level up your fintech firm. These providers can help you with mobile wallet app development, banking software services, payment gateway, fintech app development services, and other solutions that will cater to all your requirements at every level.