In a short time, the coronavirus pandemic has impacted the way people bank and do business. The same is true for financial institutions and fintech companies.
Fintech companies’ meteoric rise following the Great Recession of 2008 has redefined how many consumers and businesses interact with digital banking. The disruption caused by COVID-19 has led to assessments about fintech’s future, with expectations that the fintech space may encounter rapid change, both positive and negative.
Motivated by account holder demand for digital services following social distancing recommendations, FIs that lack a -modern and convenient digital experience may forge partnerships with fintechs to provide such services quickly.
Services such as Instacart have changed consumer behavior—and that effect has only accelerated in response to the coronavirus. Following the pandemic, many consumers may choose to minimize or completely eliminate shopping in grocery stores. The same phenomenon may translate to digital banking services, resulting in accelerated account holder adoption in the digital channel and decreasing in-branch transactions. During this time, consumers are looking for user-friendly, online services to manage money. This time may offer an opportunity to see which fintechs provide customers with the best platforms and experiences, measured by users who adopt (and continue to use) their solutions.
With uncertainty in the markets, new sources of reliable, ongoing funding may be a casualty of the pandemic, leaving fewer emerging companies and resulting in those that already obtained funding best equipped to weather the storm.
Because of their business model that hinges on customer activity in the stock market, fintechs that provide robo-advisor services should prepare for possible adversity as well. Most robo-advisors’ fees are based on the value of their customers’ assets, which could mean decreased revenue resulting from falling stock prices. What’s more, some consumers may choose vehicles with less risk, such as bank CDs, or even pull out of the market altogether.
While the final version of the economic stimulus package didn’t include the creation of a U.S. “digital dollar” or the establishment of “digital dollar wallets,” their inclusion in the proposed bill should be noted. The need to distribute funds in a quick, secure, and reliable fashion may foster more conversation about this topic as Congress considers further responses to the financial stresses Americans are facing, with some predicting it’s “closer than ever to becoming a reality.”
The effects of the coronavirus on the industry will likely continue to unfold in unexpected ways. Q2 is dedicated to communicating important and relevant information to our customers. Continue to check our blog for updates on the fintech space and other topics related to the digital banking channel.