Covid-19 just appears like the black death which occurred in the 14th century all across Eurasia. Though COVID had its roots in China, it spread tremendously across countries.
Coronavirus did not hit humankind as hard as the plague did in the 14th century but this virus is affecting the behavioral patterns of the people and will continue to affect for a few years as they will get habituated to the practice of continuing it.
The virus may choose from the economical classification of people whether rich get affected or poor but this is likely to avenge the practices of all classes of the people.
International lockdowns gave a pause to all the commercial activities across the globe and gave a refreshing start to all the individuals and thought of the ways which are easy, convenient, and affordable to the majority of people.
The virus affected mankind massively and even eradicated some of the industries from the global competition.
In Developing countries, Fintech is still in its infancy because a larger portion of the population does not have access to bank accounts or they have limited access to banking.
For developing countries, it becomes very difficult to go digital and make the inhabitants aware of the fintech industry and the ways to use finance and banking with technology at ease.
The Fintech industry plays a pivotal role in spreading awareness among the people and also bridging the gap between MSME and individuals to actively be a part of the formal financial system.
Fintech industries in developed countries are well-positioned to deal with increasing demand for digital payments and even financial services occur remotely.
The potentiality of Fintech gets fully utilized as it provides secure, low-cost, and financial services that are remotely accessible.
2020 is the year which was also referred to as the remarkable year, which will decide the future of the fintech industry as markets were growing, and many investors invested in the market just along with start-ups.
The pandemic acted as a fulcrum and gave a push start to Fintech as the customers were stuck at homes and could not visit any banks. They were helpless, and all they had was to rely on fintech apps to continue using their financial and banking activities.
After relying on the fintech apps, the individuals felt more convenience while using the apps rather than visiting the banks personally.
The industry has continued to witness economic growth and expansion and the well-established companies are just 6-10 years old.
Global crisis and recession could only exaggerate the existing problems of fintech companies as the company is at its peak, and the uneven distribution of funds is the major problem that the fintech companies face.
Hidden problems:
1. Regulations
Digital technologies are providing platforms for both the fintech companies as well as the users but havoc in this sector will weaken several economies and companies which are well-positioned.
Many major economies are strengthening their rules and regulations to prevent a crash in this sector.
The traditional practices of finances and banking are repeatedly decreasing and the increasing pressure on this industry is increasing which has gained the attention of many fintech companies. They called out for strict rules and regulations for this sector.
2. Business models inspired by traditional finance
Technology has brought several changes in the market but most of the fintech companies are into payments, brokerages, and banks and their ways of approach are new and effective still the business model which they follow is old and broken.
A further major concern for all the startups in this industry is that big high profile banks and companies will soon be entering the market which will create a devastating situation for all the start-ups and even companies.
3. Credibility issues
Number crunchers have continuously raised alarms warning all from this sector that opaqueness regarding the algorithms which are used by the fintech companies to carry out their calculations of interest rates for investors and individuals.
Many fintech companies even provide the methods through which they carry out the calculations of their interests and still the tools and methods they provide are also vague at times.
Whereas traditional financial institutions maintain manual documentation which is to be kept as records when a technology crisis takes place.
Fintech apps provide a user with a single platform for multiple accounts which is doubtful as data theft and cybercrimes can take place as the user uses a single platform to use his multiple accounts.
Phishing, spoofing, and data theft are among the most common financial crimes which have certainly increased because of digital methods of payments.
4. Flooded market
The fintech industry is continuously booming and almost every major economy and the capital city of the state keeps on organizing a fintech event.
There is a cutthroat competition among all the companies and start-ups, the companies are not only fighting for capturing a huge share of the market but also for a larger capital that can be raised by organizing such events.
5. Fintech Bubble
The burst of the fintech bubble is still the worst nightmare for investors and significant individual lenders which eventually got merchandise when the bitcoin market collapsed in the year 2018.
An economic bubble is an occurrence of the event where the price of the assets gush speedily even contradicting the basics of the assets, and it is hyped because of the behaviors of customers and their purchasing capacity.
When no investor is willing to buy the commodity at a high rate, the market observes a sudden crash initiating a downfall in the price of the asset.
Summing up
Digital methods of finance and banking are the future, but not all the start-ups and companies can survive in the competitive market. All the factors or problems which we discussed above will surely affect the fintech sector directly or indirectly.
Recession in the global market along with major banks and financial institutions entering the industry will bring negative results for the startups and companies who are already into the fintech sector for many years.
The financial bubble is the major concern of the sector and not the eradication of traditional banking and financial practices.
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