Finch Capital says fintech firms will have to weather a crisis until the third quarter and then make it through a 12 to 18 month recovery period.
Not only in the fintech sector, but the impact of COVID-19 scenes is also clearly visible on almost all the parts of the economy and the most hit sector is the Fintech sector. Companies and stores were made to close; funding to be given was skipped owing to COVID-19 effects.
But as the catchphrase goes—survival of the fittest—companies working on digital platforms will, for sure, have more opportunities to flourish even after things get back to normal.
This acceleration would cause a “Big Pocket” battle between incumbents and rivals to win the online consumer, Finch predicts, which also expects financial companies to turn to tech firms rather than to drive digital transformation from the in-house options.
Companies involving in-person interactions like consumers and SME lending platforms and firms working on digitization in life insurance and mortgage sectors will be on the emerging side.
In the coming time, demand for AI will be high for activities like call center bots, account opening procedures, and loan automation as it involves the use of AI. Also, digital ID technology will play an important role in functions, like KYC, which operate digitally.
Some areas of the fintech ecosystem may be struggling however, Finch predicts. Among those at risk are Challenger banks that have built up big valuations but have high burn rates and may see lower post-crisis operations.
Wealth management would suffer from post-crisis clients de-risking while payments and FX firms would experience reduced transaction activity.
Radboud Vlaar, Managing Partner, Finch Capital, says “2020 will be challenging for fintech to navigate, but there are better times ahead. Post-crisis, disruptive winners will ‘take all’, as we expect surging demand from financial services for technology to master digital-only interaction, enabled by AI and big-data analytics.”
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