The Fintech Industry Continues to Grow Despite COVID-19 (New Research Reveals)
The COVID-19 pandemic has had a significant impact on some industries. However, the global Fintech industry is one industry that despite all the difficulties, is still continuing to grow.
The Cambridge Center For Alternative Finance (CCAF), the World Bank Group, and the Economic Forum have conducted new research which found the growth rate of transaction numbers and volumes for the Fintech industry to be 13% and 11%, respectively.
The above report is based on the data of 1,385 Fintech firms in 169 jurisdictions. Within this data, it revealed that 12 out of 13 sectors within Fintech are recording continuous year-on-year growth.
The Figures by Sector
Digital lending has proven to be an area within Fintech which has struggled the most. This was the only sector that had shown a decline in transaction volumes, coming in at 8%.
Fintechs that provide digital lending services reported a 6% decrease in the issuing of new loans. There was also an increase of 9% in the number of people defaulting on their loans.
The majority of other areas within Fintech such as digital payments, wealthtech, digital savings etc. faired considerably better, recording a significant rise of 20% in transaction volumes. This is not surprising given that these services were crucial in keeping our economy afloat through the pandemic.
Digital banking also recorded modest growth with a 10% rise in transaction volumes. This is also not surprising given the fact that the pandemic forced many banks to close their branches, naturally leading to more people to switch over to digital banking.
The Impact of COVID-19 on Performance
The level of performance within different sectors was dependent on a variety of variables such as geographical location, levels of economic development, as well as the severity of COVID-19 lockdown measures.
From the results, it was revealed that transaction growth was 50% greater in countries with stricter lockdown measures than those countries with less stringent measures.
Some Fintechs reported that they had benefited from regulatory responses, but felt faster reactions were needed in regards to supervision. Among those figures, 17% benefited from the regulatory response of e-KYC, 13% from simplified customer due diligence, and 12% from remote onboarding.
Overall, the Fintech industry managed to adapt reasonably well to the crisis and continued to operate effectively, with 92 percent of Fintech businesses stating that they launched or were in the process of launching new products or services.
The Impact of COVID-19 on Funding
Despite most areas within Fintech recording positive growth, the level of funding that Fintechs receive has been hit. Among the research, more than half of Fintech firms reported that they faced a negative effect on their capital resources, and around 40% said that the valuation of their business has also fallen.
Based on this study, we can see just how well the global Fintech industry has managed to cope under difficult circumstances. However, whether the industry can continue to maintain this growth is dependent on just how well it can handle the future challenges that will inevitably come its way.