The world has hit the online accelerator in 2020. Indeed, earlier this year Microsoft estimated that two years worth of digital transformation was compressed into just two months.
Nowhere is this more acute than in the financial sector. As the world was thrust online almost overnight we’ve seen a huge uptick in contactless payments and mobile banking, activity on online investing platforms went through the roof as millions were forced indoors and today, at the end of the year, we’re back seeing record prices for cryptocurrencies.
When the dust settles and we look at this pandemic in the rearview mirror, financial institutions of the world will be in a much more robust and resilient position.
But set in a backdrop of uncertainty — on both a micro and macro level — the speed and scope of the changes we have seen this year have not been without disruption.
The digital dichotomy
Rewind the clock to February. While many businesses in the financial sector were ‘digital’ in many regards, not all were in a position to cease traditional modes of operation entirely.
As a result, we saw the entire spectrum of impact. Some businesses that had already migrated to fully digital processes were able to adapt quickly and make the most of the new opportunities and others were scrambling to get networks secure or establish new communication procedures.
Trulioo commissioned independent research before the pandemic that indicated an increasing trend for online account opening and more demand for digital services.
This has been accelerated dramatically by the pandemic. Even fintechs, which were born online, have needed to adapt and develop new services or products to meet increased demand from consumers.
The major areas of growth being onboarding, security, compliance and all other functions that have a role in successful digitalization. The onboarding experience in particular is an area of increased focus.
The Consumer Account Opening Report 2020 revealed that consumers expect an efficient and seamless onboarding experience that ensures security and data protection.
And this is a trend that doesn’t look likely to slow down in 2021 and beyond. With all this increased consumer interest, perhaps it is not surprising that, according to this study, the global fintech market is expected to reach a market value of around $305 billion by 2025.
Fintech: the fuel for businesses
There have been many negative impacts of the pandemic and, unfortunately this is likely to continue for more time to come.
But fintech as a category is certainly not one of them. When emergencies happened, the contrast between “wants” and “needs” became stark — and no matter how other services needed to adapt, fintech was the fuel that kept their businesses burning.
Food delivery companies, ehealth services and various other eCommerce companies all needed to hone their systems, ensuring that the massive influx of new customers could be onboarded and serviced successfully and securely.
Of course, fintech is not immune in absolute terms. As people cut travel and unnecessary shopping, any fintech that was focused on those areas clearly suffered but the losses and damage done here was offset with gains in other areas.
One area that has seen something of a renaissance in 2020 is the cryptocurrency sector, whose growth has been impressive.
While the value of the general cryptocurrency market tumbled along with stocks during the initial first wave of the pandemic, it has quickly rebounded.
With central banks printing vast amounts of money, many are looking to Bitcoin as a store of value.
DeFi is attracting significant investment and introducing numerous innovations that might create a whole new world of financial products.
Even the regulatory environment around the cryptocurrency industry, while still a work in progress, is starting to see clarity in certain markets.
Room for improvement remains
For all the massive steps forward in the industry there is still work to be done in parts.
While open banking is growing, it hasn’t caught the attention of the public that it rightfully deserves because more work is required to help consumers and businesses understand how it can impact their daily lives.
On the other hand, more countries are implementing regulations that help enable open banking and over time we should see all the innovations start to bear fruit.
Indeed, open banking has been noted as one of the innovative forces expected to reshape the banking sector. If traditional banks embrace this opportunity and become savvier in the way they analyze and stream data, they will expand their ecosystem and be in a position to better serve customers.
Once a comfort level with the safety of data is reached, the implementation should lead to lower costs.
We have also seen a huge increase in cases of security and fraud as the panic, disruption and uncertainty has served as an open door for the world’s criminal fraternity to take advantage of the chaos for their own interests.
According to this study from Statista, there has been an increase in identity theft worldwide since the COVID-19 outbreak, while 43% of the fraud examiners questioned in this report, expected a significant increase in identity theft risk over the next twelve months.
Unfortunately, identity theft is an unnatural disaster that too often follows the natural disaster and more must be done. 2020 must be the start of an accelerated push to drive intelligent, rapid and secure identity verification to the top of the fintech agenda.
Though, enhanced identity verification isn’t the only area expected to have a big 2021. Even post-pandemic, many of the changes we have seen this year will not revert to type and will only get more prevalent in the years to come.
For example, the trend to remote banking is irreversible now, as people have gotten used to the new ways of doing things. The same can be said about digital lending.
The lending sector has proven to be a game-changer with its innovation-driven solutions empowering people to address their pandemic-induced financial pressures using a touch-of-the-button customer experience so why would either lender or consumer wish to return to the days of elongated administration.
We can also expect to see major evolutions to the cryptocurrency regulatory market, which is something already underway in Europe where many of the most innovative companies are headquartered.
Necessity is the mother of invention
2020 has endorsed, once more, that necessity is the mother of invention and that the need for growth overpowers other criteria.
This year has seen the status quo challenged and the inertia to change things replaced by a need to evolve everything. We’re going to see this acceleration continue and that’s exciting.
Remember, after the Spanish Flu pandemic of 1918 came the roaring 20s and there’s hope we might see something similar this time around. If we do, you can bet fintech will be at the forefront of this change.