The novel coronavirus, though blind and unthinking, has revealed itself to be surprisingly variable in its impacts. Some countries have been pushed to their absolute limit – enduring a ferocious, once-in-a-century health crisis – while others have moved forward, albeit cautiously, with relatively little social or economic trauma.
Varying outcomes can also be seen within individual economies. Some types of businesses, such as restaurants and bars, hotels, travel companies, and sports leagues, have been utterly stopped in their tracks. Others, like e-commerce, food delivery service providers, home entertainment companies, and businesses that can easily switch to remote work, are faring comparatively well.
FinTech (Financial Technology) occupies an interesting space between these two poles. On the one hand, this sector is built to operate within a lively economic system, and its profits come from all kinds of financial transactions – from mortgages, to money transfers, to point-of-sale payments. When entire economies skid to a halt, fewer customers will have need of their services.
On the other hand, the nature of FinTech makes it ideally suited to disruption of the kind we are now seeing. At its heart, FinTech is in the business of replacing cash transactions with other kinds of payment. While some types of transactions are taking an enormous hit – far fewer people are buying plane tickets online these days – others, such as stock trading, online shopping and delivery, online donations, and digital media downloads, have thrived in the new business environment.
Indeed, some FinTech applications have benefited directly from the slowdown occurring elsewhere in public life. As businesses struggle and unemployment numbers grow, demand is rising for private sector FinTech lenders, working in coordination with banks. (Some banks, like Bangkok Bank, have also extended favorable terms to SMEs during the current crisis period.)
Ordinary consumers and SMEs alike are turning to specialized software to secure much-needed loans, as a way of getting through these unusual times. These and other digitalized innovations are set to become the new norm in their field, representing the start of a permanent shift away from face-to-face interactions.
A more durable future
As we have seen, some FinTech service providers are in serious trouble due to COVID-19, while others plow ahead or even stand to gain. Overall, two key developments seem likely to remain in place once the dust has settled.
First, the socioeconomic need for FinTech will be universally recognized. Alternatives to in-person exchanges of physical money were initially looked upon as a way to save time and effort. Our collective experience during this pandemic is proof that digital payments and transactions form an essential element of a modern, future-proofed society. Without FinTech, staying at home and practicing social distancing would have been far more difficult to pull off.
Many people who had not previously used FinTech services have recently been forced by circumstances to adopt this new digital norm. After getting used to the convenience provided by AI, IoT, and payments via app, such users may prefer to keep using these FinTech services and technologies even after the crisis has passed. If FinTech companies can maintain good, secure services during this crucial period, they could become “antifragile” – meaning that the strain of a crisis actually helps the industry become stronger than if no crisis had occurred.
The second likely development in the wake of COVID-19 is a much-needed re-alignment phase within the FinTech space. Currently there are dozens, or even hundreds, of small players working on similar advances in Thailand and elsewhere. Differential success rates during this period will allow the more profitable businesses to buy, merge, or at least license technology from, the smaller companies around them. Consolidation and standardization will give consumers a smoother experience when using these services.
Individual companies within the FinTech realm are by no means immune to the ripple effects from the coronavirus. But there is every reason to believe that the industry as a whole will increase its standing in the economy, as we wake up to a post-coronavirus world