Financial Experts’ Take on COVID-19 and Its Effect on the Business World [Insights]2020-05-14T13:32:25.000Z 2020-05-14T13:32:25.000Z We have approached FinTech specialists to share their opinions on the current situation. Our short analysis helped to reveal some insights and see the trends in the FinTech area. This article is based on their feedback.
The world’s economy, as well as separate businesses and industries, were affected by the COVID-19. While some - like media and healthcare - are in overdrive right now, many entrepreneurs - like travel - are struggling.
We have approached FinTech specialists to share their opinions on the current situation. Our analysis helped to reveal some insights and see the trends in the FinTech area. This article is based on their feedback.
The audience that we targeted consisted of representatives from the Financial Services sector whose job positions are in the C-level.
Geographically, the people we have approached were working for companies located in:
- European Union (40%)
- United Kingdom (14.2%)
- International companies (11.4%)
- United States (5.7%)
- Canada (2.8%)
- Australia (2.8%)
- Asia (23.1%)
In terms of company size:
- 17.1% - enterprise-level businesses
- 28.6% - medium-sized businesses
- 54.3% - small businesses
There are many opinions regarding the quarantine measures in different countries. Some governments have instituted harsher standards while others are very light. However, everyone was called to practice responsibility and care as well as keeping a safe distance from other people and wash hands.
The other thing that was imposed during the COVID-19 in an effort to stop the spread of the virus was limiting the interactions between people, which affected numerous businesses in terms of the working force. Traditional offices could no longer function properly because the distance between desks was usually less than 6 feet or 2 meters apart and there were common areas, which could also be potentially dangerous.
The companies that had digitized their processes had an advantage over their offline competitors because their employees were able to work from home (either all of them or at least those who were in the risk categories.)
Do you adhere to the quarantine measures?
From our research, we have found that the majority of the respondents (94%) adhere to the full measures of the quarantine in their respective countries. 3% of the respondents said that they consider the quarantine not mandatory and the other 3% said they try to adhere as much as possible, while not strictly.
Does your company continue to work during the quarantine period?
95% of the respondents said their companies moved to a remote work style, while 5% continue working from the office as before. It will be interesting to note that the respondents that said they are working from the office are the ones who said they adhere to the quarantine measures in full.
If you are an offline business, do you plan to move towards online?
Majority of the people we have talked to during this research work for the businesses that are already online, while other businesses (3% each) said they either don’t plan to move online at all. Over 5% of the respondents made the decision to move online and would like to be represented digitally after 2-3 months.
Business World & COVID-19
Many businesses, however, despite being online, still took a hit because the sales dropped and some departments had to be downsized. As a result, many people worldwide agree that coronavirus will have a financial impact on their family. You can see the statistics below provided by Statista research:
The business world is left between a rock and a hard place because most of the decisions have to balance between keeping the staff and not losing the business itself in the meantime.
While every business is different, the respondents of our survey have mentioned several ideas on anti-crisis measures:
Some plan to use bootstrapping and cost-cutting non-essential development projects while some still plan on continually investing in future business solutions and projects (which will work in the long run.)
What other anti-crisis measures do you plan to take?
- Reduce team & administrative costs (37%)
- Reduce investments (22.3%)
- No specific measures (18.5%)
- Use reserve funds (14.8%)
- Reduce operations (3.7%)
- Reduce risks (3.7%)
Among those companies that plan on reducing team & administrative costs:
- 40% - reduce the number of employees
- 30% - reduce the number of advertising and marketing costs
- 20% - reduce salaries, but keep the employees
- 10% - reduce rent expenses
What other ideas were shared in terms of reducing investment in the development of the project?
- Focus on first-priority projects only and postpone other projects that are not as relevant
- Stop the development of all innovations for the time being
- Suspend the development and implementation of AI solutions for the project
- Focus on online marketing channels and stop funding offline ones
- Relocate resources to emergencies
As one of the respondents has put it: “Management is doing their best to keep things well within the confines of normality in these uncertain times. It’s not about taking drastic measures, it’s about making sure that everything works as good as possible.”
FinTech & Financial Services
The opinions differ in terms of the impact of the crisis on the FinTech and Financial services sector in general.
How much will the crisis negatively affect the FinTech industry?
- Hard enough, everyone will feel the impact, but I think no more than 15% will go bankrupt (45.2%)
- I don’t think there will be a catastrophic effect, only weak startups will go bankrupt (32.3%)
- It will hit hard. I think more than 30% of fintech startups will go bankrupt (12.8%)
- Everything will be fine and everyone will survive the coming economic crisis. (9.7%)
When your customers can’t freely visit the bank or financial institution, it also raises the question of customer identification. While the online world opens many doors, it also exposes one’s business to various risks due to fraud. One of the ways to fight this is customer video-identification.
When asked “Do you plan to introduce customer video-identification?”, here is what our survey respondents said:
- 38% are thinking about it
- 20% are already in the process of this tech implementation within the next 6 months
- 30% do not think it’s possible to implement given their current processes
- 6% are not considering this technology
- 6% never heard of this technology
Cheap government money, which can be loaned from the central bank like the Federal Reserve at low-interest rates, is also a way to deal with the crisis at hand. They aren’t ideal for investors, but great for borrowers.
How many businesses are considering using this?
- 22% consider relying on this money (Enterprise as well as SMB businesses)
- 78%, respectively, are trying to rely on their own resources
Cheap government money is one way to get additional funds for the business. FinTech companies also can be a source of loans for small companies since they are more technology-oriented and therefore can transfer funds to help SMBs faster than commercial banks. As an example, the Financial Innovation Now group sent a letter to Congress asking them to be included in the development of anti-crisis financial measures.
As an idea, it sounds like a good one, but as we can see from the survey results, not a lot of businesses are actually going to do something about it:
- 16% plan to lend to small and medium-sized businesses, which, according to a survey of small enterprises (according to the JP Morgan Chase Institute), have a cash buffer of less than one month and will need quick money
- 42% agree with this idea in general, but don’t plan to do anything in particular
- 29% say that the issue of lending isn’t relevant to them
- 13% say that the commercial banks will be able to issue the loans faster
What are the areas that would be good for investing in right now (possible development zones that need to be stimulated)?
- 35% of respondents recommend investing in building a digital channel for the company’s product
- 19% are advising to invest in financial services marketplaces
- 16% of people say that lending to small and medium businesses is a good investment
- Another 16% say that microcredits are the way to go
- 3% recommend partner integrations.
However, not all agree that there should be investments at all because it might be too early to tell, given that we don’t know how things will go with the pandemic and how long it will take to bounce back.
Business After COVID-19
What will business look like after the coronavirus pandemic? Well, for sure, it’ll be a kind of “new normal” once we all reemerge from the lockdowns.
If we’re talking about the state of FinTech after the COVID-19, the areas that will evolve faster than others are the following, according to our questionnaire:
- 32% say it’s the payment systems, infrastructure, and services that will experience the most impact
- 29% think that neobanks (digital banks) will actively develop
- 19% - loans
- 9% - user identification
In general, the business industries and sectors of the economy that will develop most after the crisis are (it was possible to choose more than one option here):
48.3% - Payments & FinTech in general
- Online payments
- NFC technology
- Contactless payments
- Wealth Management
35.4% - MedTech & Healthcare
- Medical Accessories
- Digital Healthcare
32.2% - Digital Industry
- Collaboration tools
- Online conferencing
- Virtual technologies
25% - Remote Work (while for some it was a shock and many businesses couldn’t move their operations to employees’ homes, remote work opportunities will grow since a lot of people understood that it’s quite possible. For example, Twitter is planning to make remote work permanent for some of their employee.)
- Remote work
19% - HoReCa (despite the initial drop in the activity, the demand for this sector will increase after the COVID-19 quarantine will be lifted)
- Food Delivery
- Travel agencies
Useful Insights & Possible New Trends in the FinTech Market
From the research that we have done, we can highlight the following trends and insights:
- More than 10% of the respondents are going to cut their company’s spending on advertising and marketing (some even downsized their entire departments.) Some companies take advantage of the moment to provide their services for more affordable prices in order to stay in good standing with the customers. However, in the conditions of the artificial crisis (since the economy has been paused), we think that the heavy reduction in the marketing budgets can become a disadvantage for these businesses when the “Play” button for the economy would be pressed again.
- The vast majority of enterprise respondents (91%) believe that the impact of the crisis on the market will not be catastrophic and less than 15% of the financial services market players will actually go bankrupt.
- The small business representatives turned out to be the most optimistic in their forecasts: 36% said there would be no significant influence on the business as a whole or it would be minimal and only the weak startups would suffer. 31% agreed with the enterprise.
- Among the respondents, France turned out to be the country where economists believe in the financial marketplaces with remote user identification.
In terms of trends, the most interesting thing, in our opinion, was the issue of video identification. European companies are already implementing such solutions (14.1% of the total) and 37% are thinking about its implementation. 31%, however, either never heard about this or consider it impossible for various reasons. It would definitely be interesting to watch this trend unfold on the financial services market in the coming months.
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