Former Partner, McKinsey and Founder and Partner, Finch Capital;
The Coronavirus (COVID-19) pandemic continues to fuel social and economic uncertainty, and Fintechs have the capability to reduce stresses and challenges being faced on a number of fronts.
As social distancing becomes an essential part of daily life, and is subsequently accelerating the need for digital solutions, new opportunities may be created for niche Fintech streams with certain Fintech 'winners' well-positioned to grow on the back of the ongoing situation. In examining the challenges ahead for Fintechs and considering a 12-18-month recovery period, a key question is how Fintechs can leverage their skillsets and expand offerings to seize on new opportunities both immediately and in the post COVID-19 world.
A critical challenge facing Fintechs are for firms now seeking to raise money in the midst of the current crisis. Access to funding was already becoming difficult for Fintechs, with funding to the sector contracting in the first quarter of 2020, as the COVID-19 fallout began to hit global markets. With investors more cautious in light of the crisis, firms seeking to raise money now need to solve a burning question or problem, i.e. health-related solutions.
Consumer and SME lending platforms that can deliver capital to key segments of the economy through swift, efficient and flexible mechanisms are in a vastly better position during this crisis and beyond. As SMEs around the world have been hit hard by the COVID-19 pandemic, traditional lending models are, now more than ever, posing a barrier in accessing funding for SMEs. New Fintech-based solutions are in a great position to propel economic recovery for SMEs.
The second category of Fintechs that hold promise in the post COVID-19 period, according to Finch Capital's latest report, are mortgage and life insurance digital solutions that are leaping forward with technology to disrupt the traditional role of intermediaries, whose role was often delivered in a face-to-face capacity.
While the Fintech sector will continue to experience relative challenges in 2020, the positive outlook is mostly fueled by 'disruptive winners' who will use the power of technology, such as artificial intelligence (AI) and Internet of Things (IoT), to create efficiency in digital transactions management across the global financial sector.
Honing in on Qatar, Fintech is largely focused on online payments and remittances, which could very well improve the sector's overall prospects. There has been substantial infrastructure and regulatory work advanced in the country to prepare the grounds for them to succeed in the local context. Qatar Fintech Hub, of which QFC is a partner, brings together a vibrant community of FinTech entrepreneurs, industry experts, regulators and investors.
An important outcome for Fintechs following the onset of the COVID-19 virus may be the continued acceleration of partnerships with financial institutions. Financial institutions are increasingly looking to tech companies, rather than in-house solutions, to accelerate digital transformation. With increasingly discerning customers that have increasing demands for efficient and safe services, competition is foreseen to be brisk. Bigtech firms are increasingly using their extensive rollout of consumer devices to roll out financial service solutions of their own, which could be an additional source of competition in the sector.
For the Fintech organisations that can weather the COVID-19 storm, and partner with banks that have traditionally lagged in adoption of technological innovations, the future certainly looks bright.