The past few years have seen rapid growth in Fintech investment. It has already made its mark on a wide range of financial services, including microfinance, blockchain, payments, personal finance, digital banking, insurance, wealth management, capital markets, remittances and mortgages.
Fintech fosters the growth of financial inclusion and expands access to financial services by leveraging technological advances. It mitigates the risks and lack of information associated with underserved households and small and medium-sized enterprises through digital financial services and improved risk assessment skills.
Amid the quarantine associated with the COVID-19 pandemic, the number of users of remote services has increased, purchases and payments have moved online, and major online retailers have limited cash-on-delivery payments. Financial firms are seeing an increase in demand for remote account access and interest in investment products.
Looking back at the last three months of coronavirus infections around the world and the measures that have been taken to contain them, some changes are evident. Some of them have gone unnoticed, while others have significantly affected both the economy and consumer behavior. Now that the restrictions are gradually “coming to naught,” it is clear that this quarantine will be remembered not only for the difficulties and inconveniences it brought but also for completely unexpected opportunities. First of all, the pandemic has become a driver of digital development. Every area of business: medicine, retail, real estate, or finance, has truly understood the need for remote service tools.
The pandemic and the economic crisis that preceded it had a significant impact on the financial and Fintech development, respectively. First of all, the global quarantine collapsed venture investments in the technological development of the financial market. At the end of the first quarter of 2020, the overall level of investment fell to the 2017 mark. The Asian market sagged considerably: compared to the previous quarter, it was down 69%. Even in China, which is considered the most important market for fintech, investment fell to a record low level – the indicator of 2015. Only time will tell what will happen to these indicators next, but one should not hope for a quick rebound due to the cancellation of preventive measures to spread COVID-19.
A powerful impetus for the active implementation of Fintech has also occurred in the most conservative segment of the financial market – the insurance business. “During the pandemic, the insurance industry faced two serious problems.
First, the unpreparedness of the full digital customer journey across most types of insurance. Historically, the insurance marketplace has had a large share of offline sales channels. Today, only 5% of services are sold online.
Second, a large share of affiliate sales, which forms a global problem for the industry as a whole, not specifically related to the pandemic, but affecting the marketplace. A large number of intermediaries complicate the processes of interaction and information exchange between the insurance company and the end client. This causes customer dissatisfaction and opens the door to fraud.
Due to the self-isolation regime and the changes that have begun to take place in the markets, the insurance business has had to deal with the need to accelerate the transition to digital as much as possible. Prior to the epidemic, few insurers had implemented an online customer sales path for major products. Companies were forced to adjust situationally to the new consumer behavior.
Digitization of processes and innovation are highly relevant to further stabilize the industry. Insurance players that adopt digital technology faster are changing the usual structure of profit distribution in the insurance market, giving the most technologically savvy players an unprecedented advantage.
Quite unexpectedly, the pandemic has become a driver of digital development. They have also activated in the financial market. In the future, Fintech will follow the path of developing new tools and modernizing existing solutions. And in order to ensure that the trend of active implementation does not pass as suddenly as it began, markets need to work on educating clients and partners, telling them how it works and what benefits it can bring to their work.