Over the years, Fintech has grown tremendously.
Last year, global Fintech funding rose to over $100 billion, thanks to huge, successful rounds of financing.
Worldwide Fintech investments were expected to grow even more this year, but COVID-19 hit the entire world like an unwanted, unpleasant surprise and the industries, including Fintech, were forced into a never-ending state of uncertainty.
However, there always is light at the end of the tunnel.
Hoping that pandemic will live its due course and get eradicated totally by 2021, it’s high time that we start visualizing a post-COVID-19 world and devise strategies to march out of this victorious.
What will Fintech look like once the pandemic is over? How soon would it be up and running?
What’s the way out of all this and what post coronavirus changes need to be adopted to have a sound, functioning world?
Let’s approach all of this one after the other and try understanding how Fintech will fare through the coronavirus crisis.
Also, we shall explore an interesting possibility and see how AI, and particularly Machine Learning and predictive analytics can help Fintech be its best post the pandemic.
How Will Fintech Fare Through the COVID-19 Crisis?
Financial technology has been revolutionary for finance.
However, the demand for Fintech services across the globe is dependent on economic activity.
With everything on hold and close to zero economic activity due to strict lockdowns and social distancing measures in place, payment revenues are expected to drop by anything between 8-10%.
Spending is decreasing and so is the overall number of transactions in the Fintech space, hence a decline in the demand for services.
A significant section of Fintech relied on scaling up the customer base and earning small profit margins from money transfer and payment services. This section will suffer a blow.
In addition to this, the Fintechs that depended on international transactions including travel spending or other forms of payment would also suffer because of global restrictions on travel and trade.
There is a widespread lack of funding as well. Several budding Fintech startups will not be able to cope with this and would either fail miserably or witness a massive decline in their valuations.
The Flip Side
Seeing the other side of the coin, COVID-19 times are also the times when a lot of Fintechs, with a little smart work, can position themselves strongly.
How? With social distancing and restricted movements of people, Fintechs can assume an important responsibility.
If approached in an innovative manner, Fintechs could be the bridge between a failing economy and the recovering economy.
Across the world, the governments are injecting cash in the economies to keep the companies from defaulting and helping them run the minimal operations necessary or to start afresh post months of lock down.
The circulation of these large amounts of cash through various coronavirus special schemes in such a short period of time calls for a strong financial infrastructure and supply chain in place, preventing people from actually having to stand in long queues outside the banks.
Here, Fintechs can step in and facilitate these credit requests from businesses and funding to individuals who need it.
Using Customer Segmentation for an Enhanced Outcome
The Survival of the Fittest
For Fintechs, the new normal means the survival of the fittest.
Quality is the key metric for success.
It won’t be wrong to say that the future of Fintech has never been brighter actually but only if they are able to raise the standard and emerge as a strong player, leveraging technology and modern innovation.
AI in Fintech Post Coronavirus
Technology, especially AI, can be of immense help here. Understanding your customers better through customer segmentation using machine learning has immense untapped potential.
Smartly deploying and accelerating the integration of big data and Artificial Intelligence (AI) powered solutions can be a game-changer.
Fintechs can employ these smart solutions to store, process, analyze, understand, and drive insights from huge sets of data about their customers' behavior and their social and browsing history.
Furthermore, customer segmentation provides insights into what trends are underway. Leverage this to answer critical business questions for the future and make smart, data, and logic-based decisions.
Customized Financial Products
Empowered with accurate customer trends, data, and preferences, Fintechs would be able to invent highly customized financial products and services that traditional banking never could.
Yet another opportunity here for Fintechs is to serve those customers who can’t approach banks for credit due to lack of reliable collateral.
Targeted Marketing
The integration of AI-powered solutions makes the delivery of a targeted marketing experience possible.
An abundance of financial products and services in the market today makes it difficult to judge which product would cater to which customer segment the best.
When you are struggling to survive as a firm, you can’t take too many risks. This becomes even more relevant post coronavirus.
Talking about risk management, AI can help you examine data points from credit bureau sources and assess credit risk for consumer and small business loan applicants. That way, you can assess the loan applicant beforehand and point out defaulters, if any.
Such AI empowered platforms like Underwrite collect portfolio data and use machine learning and customer segmentation to decipher and understand patterns to classify applications into good and bad applications.
This can highly help Fintechs to reduce their default rate.
Furthermore, there are platforms such as Ayasdi, that provide anti-money laundering detection solutions to help Fintechs understand and manage risk, and well anticipate the needs of customers.
Having accurate information about customer trends and preferences is more useful and relevant than anything else these days.
Customer segmentation helps decipher previously hidden patterns and get hands-on insights on behavior-based information.
Powerful AI solutions offer accurate results, which you can further use to target specific groups with financial products that will best resonate with their needs after the coronavirus crisis ends.
Macro-Economic Trends
Financial institutions across the globe have impressive amounts of data about macro economic trends.
This information can be life-changing for Fintech investors and policy-makers. However, due to the lack of necessary technology, it remains as it is with its immense untapped potential.
Machine Learning and AI in general, can propose models and solutions to harness the benefits of this and provide the world with a roadmap to better Fintech services and products to cope with a dwindling economy due to the coronavirus crisis.
An Ever Agile Industry
There is no denying the fact that the Fintech revolution emerged partially from the ashes of the previous global financial crisis.
Key players in Fintech are habitual of dealing with such losses and uncertainty. They are used to surviving in an agile, uncertain environment and this would be their greatest strength in the times of this crisis.
Probably it’s too early to comment on anything about it but yes we are sure that irrespective of the economic hardship expected to accompany the coronavirus crisis, now is the time for investors to come forward and support Fintech, whose services are expected to enhance the end consumer’s financial wellbeing in a post COVID world.
With everyone going contactless, digital financial services are the future. These are more necessary than ever in an increasingly digitized, socially distancing world!