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The financial services industry has seen severe disruption, but that has only opened opportunities for entrepreneurs to leverage technology to deliver services more efficiently.
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2020 has been a year of unprecedented disruption across all sectors of business and human activity generally. The financial service sector has not been an exception. Banks have closed, at least temporarily, and many other services that users have come to rely on have had hiccups or slowdowns of varying degrees. For example, many banks were forced to close several branches, which were the primary points of contact for a large proportion of customers.
Amid all the disruption, technology has been the major bulwark for the financial services industry, just as with other sectors of society. Fintech startups have been able to fill the gap left by traditional banking institutions with their solutions that require minimal human contact, thus complying with social distancing regulations while maintaining or even increasing the convenience level for customers. As things return to normal, it is likely that many customers who began using fintech services out of necessity will continue to use them by choice. As a result, there’s a massive opportunity in the sector now for investors and entrepreneurs. The following are some of the most promising verticals.
Digital Payment Services
In a time when e-meetings, e-schooling, e-parties, and a variety of other traditionally-physical activities have been pivoted onto the internet, it’s no surprise that e-commerce has gotten a massive boost recently, especially in light of its previous steady rise. The spike in e-commerce transactions has been drastic in many places, with Italy seeing an increase of 81%, according to Mckinsey & Company, and according to a new report by Digital Commerce 360, the amount spent by customers with U.S. retailers grew 30% ($60.42 billion) in the first six months of this year compared to the same period last year. Payment processing companies have grown in tandem with the e-commerce surge, and there’s still room for more growth as normal activities resume and customers begin to use digital payment services to pay for more things that they would ordinarily have used cash or bank transfers for.
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Never before have retail investors around the world been as active on the stock market, trading at high volumes and influencing stock prices heavily. The increase in retail investing has been fuelled by a few factors, including people being at home most of the time, along with the ease of accessing information that was previously restricted to more advanced investors. The potential is immense, according to Gordon Gao, CEO of Waykichain, “The effect of this has been a democratization of investment – putting the power to affect global markets in the hands of everyday people. Businesses that can build on this trend to help people get their personal finance right will be able to reap massive benefits in the medium to long-term. As long as the companies are helping their users make a profit or reduce their expenses, they won’t mind paying for the services”
The wave of business shutdowns and layoffs around the world expectedly resulted in a cash crunch for many individuals and households. Although some governments have given stimulus funds either directly or indirectly, it has still fallen largely to financial institutions to provide loans to individuals and businesses to see them through the period. Fintech companies have been able to surpass their traditional counterparts in this area too, leveraging advanced AI tech to screen applicants and rate their credit-worthiness. These loans have been faster and more convenient for consumers, which is why digital lenders such as Funding Circle and Kabbage saw very high interest by small business owners applying for the Paycheck Protection Program. The evidence points to a continuation of the shift to digital lenders, with companies like Korea’s PeopleFund seeing an increase in older users in their 40s and 50s, as opposed to the millennials who dominated their user base previously.
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