The Fintech industry which is the backbone of all economies has also been impacted because of Covid. What are the implications of Covid to an important sector?

1. 2021
POSTCOVID
Fintech

2. As 2020 has ended, much to everyone's delight, worldwide, businesses and communities are slowly
reopening. A new normal has been accepted. This is fraught with safety precautions and terms like
“contactless.” Governments and society have realized that the impact of having a prolonged lockdown will
outweigh any known dangers of the pandemic. Life must invariably go on. Hence reopening is a must and
the engines of commerce need to start running again.
Paypal, one of the world’s largest online payment processors, in its two decades of existence, reported their
highest volume of transactions on 1st May 2020, bang in the middle of the raging Covid Pandemic.
According to S&P Global, India’s digital payment market grew by 31% in the second quarter of 2020.
01
Source https:/
/rb.gy/l4cvct
Source https:/
/rb.gy/qgvwfa
How will the FinTech industry look like in 2021, post
Covid?

3. 02
As we can see from the numbers above, digital payments and transactions are boosted by convenience
and compulsions. Cash has certainly not become a pariah overnight. But people, especially in cities and
who have access, are adapting it like never before. Before the Covid pandemic, financial institutions had
digital banking and payments as an alternative mode of transaction. But as we witnessed in 2020 with the
pandemic, digital payments are emerging as the way forward. Hence the need for more investments in
Fintech and scalable infrastructure to meet the increased demand. Businesses that don’t adapt to this
“imposed” radical shift will fall behind.
With countries and people being in lockdown, a few sectors have come to a grinding halt. Similarly, since
people are mostly indoors, demand for a few sectors has shot up. But consistent in this has been the use of
digital payment to drive commerce. As we can see from the survey, backed by Statista, consumers are
spending more on health and hygiene products, household cleaning, home entertainment, etc. Similarly,
spending has reduced for clothing, services, travel, going out, and dining out. Online ordering of items and
services is clearly on the rise.
https:/
/rb.gy/llnmr6
https:/
/rb.gy/tg720d
Source
What’s happening currently

4. Source https:/
/www.statista.com/
+25%
Housing energy,
maintenance
+36%
Health and
hygiene
+21%
Home
entertainment
+32%
Food
and drinks
+30%
Household cleaning
products
Products and services consumers are
spending MORE on due to Covid-19
03

5. Source https:/
/www.statista.com/
-60%
Clothing
-83%
Going out
-76%
Service
-77%
Travel
-39%
Consumer electronics,
household appliances,
furniture
Products and services consumers are
spending LESS on due to Covid-19
04

6. 05
The challenges posed by the current Covid-19 crisis for the payments market can be classified into three
main categories: short term, medium, and long term. The need of the hour for banks, fintech, and other
stakeholders is to establish or increase their existing financial ecosystem into a more stable, secure digital
mode of payment.
In the short term, the challenge for Payment Market Provider is to ensure continuous running, scaling, and
maintain the availability of the systems. This is to ensure that businesses and retailers have access to funds.
With large voluminous transactions happening on a day to day basis, the challenge for payment market
providers is to recognize the most used services, apply analytics, gleam useful insights and chart a
corrective course of action or develop new products
The long-term goal for any fintech is to expand its existing digital services suite. Payment firms will focus on
maintaining strong fundamentals and strive to achieve a digital-only organization.
Challenges for fintech, banks and payment
market providers
Short Term
Medium Term
Long Term:
As the push is more and more towards digital, CxOs are pondering over the extent of digitalization of their
services. Is it going to be beneficial to make their business completely digital payment based? Banks and
financial institutions have taken giant leaps in providing services to customers through non-physical
mediums. But in developing and even in developed markets, there is a large stratum of society that does
not have access to basic banking facilities. There is also a significant number of people who don't prefer
digital banking for security or trust reasons. Financial inclusivity still has a long way to go.
Is 100% digital possible?

7. It is an understatement to say that the COVID-19 crisis has affected how financial institutions conduct their
business. Banks and other kinds of FIs are forced to change or augment their existing channels of working
with more FinTech. FinTech is the use of advanced technology and innovation in financial services and
products to create, build, and improve financial services. Fintech is a complex process and requires
substantial time, skills, know-how to bring to fruition. FIs have the domain knowledge, but not the technical
expertise nor the infrastructure, tools, or process to enable a digital transformation. Sales volumes and
payments revenues have gone down drastically across sectors.
What is going to happen
06

8. Investment more in payment digitalization. Supporting online and mobile banking.
Acquire analytics backed data on new spending, demand patterns.
Strive for financial inclusivity to increase customer base.
With new channels and modes of financial services, new compliance requirements will arise.
Depending on the scope of work, the regulations and compliance requirements will be national,
local, or international.
The Inevitable
Maintaining continuity in operations with minimal staff and active infrastructure.
Focus on improving liquidity.
Reduced or waived overdraft and liquidity-related fees.
Slashed interest rates.
Reduced or waived credit card interest or repayment fees, digital payment fees, cash fees,
ATM withdrawal fees, etc.
How are FIs rethinking short-term priorities to
reduce costs?
Financial institutions also need to disrupt their internal process to manage the digitization of their
products and services.
Promote digital banking and adaptation of digital channels.
Implement safety, security for digital transactions.
07

9. Maintain continuity in operations with minimal staff and active infrastructure.
Ensure processing remains active by remote working.
Focus on increasing liquidity. Reduce or waive overdraft and liquidity-related fees, slashed
interest rates, reduced or waived credit card interest or repayment fees, digital payment fees,
cash fees, ATM withdrawal fees, etc.
Formulate new short-term priorities and reallocate to short-term needs as a priority.
What to do immediately
Focus on inclusivity by reaching out to customers who don't have access to digital services.
With increased digitalization, focus on security and open standards.
Increase interoperability of financial services, reimagine customer journeys
Give customers and businesses more insight and control over their finances and payments.
What to do NEXT
What to do about it
In this new normal, digital-native firms have an obvious advantage when it comes to operational continuity.
For example, an I.T services firm in the pre-Covid world had a flexible working environment, such as remote
login, WFH facility, etc. But when it comes to the payment industry and other financial services, physical
contact based banking remains the norm—particularly when it comes to the economically not well off part
of the society.
For any FI and payment service provider
08

10. Cloud based infrastructure
Mobile and nimble
Process
With the number of transactions and mass adaptation, infrastructure requirements are only going to rise.
The existing on-premise setup will fail sooner or later. Providing scalable, proven, and stable cloud-based
infrastructure is a must for dealing with this increasing transition from cash to digital.
All stakeholders, such as customers, employees, vendors, and partners, will need to use digital tools for
remote working, such as mobile devices. Mobile tools and technology help in contactless communication
and collaboration.
Workplaces need to follow and implement an agile process. This will require adopting a flexible Digital
mindset, whether it's working or communication. The organization's policies and frameworks should be
focussed on people and accessibility instead of physical norms.
How can a financial institution achieve this?
In this post covid world, every financial institution must define a digital framework for operational efficiency
and continued service.
09

11. Digital culture
Having cloud-based infrastructure, a mobile access framework, and an agile process is one half of this
digital framework for FIs and Banks to continue in the Covid and post Covid era. Ultimately the strength of
an organization is its culture. Aided by technology, FIs and Banks have to adopt a digital culture organically.
This digital framework stresses collaboration between employees to manage customer relationships. The
goal is to navigate the short term to stabilize in the medium term. And thus thrive in the long term.
As we saw above, the COVID-19 pandemic is driving a shift to digital banking and payment. Hence the need
of the hour is to provide digital options for B2B and B2C. Technology services are the best partner when it
comes to implementing digitization.
Key factors
10
Adaptation of technology
Business
Scalable Infrastructure with Cloud
Single signons
Omnichannel
Easy access with Mobility
Data Analytics with ML
Process automation with RPIs
Standardisation and Security with
OpenBanking, ISO 20022 messaging
standard etc

12. To conclude, currently, there is no certainty on when the COVID-19 crisis will end. This pandemic has had a
far greater impact globally than any event in recent memory. It is becoming increasingly obvious that
lockdowns are a short term solution. Ultimately businesses and other social institutions have to resume
working with strong adherence to the new normal. This is to maintain the fabric of our social structure.
FIs and Banks are the backbones of any economy and it is in this sector, the most innovative and fast
transformation is needed to tide this unprecedented crisis. With increasing adoption of digital technologies
proving to be safer and faster, in the short term, traditional methods of banking and financial transactions
have ceded ground to the digital way of working. This new form of working will eventually be
acknowledged as an efficient way of transacting post the Covid. With a new order in place, the rules of the
game are no longer the same.Geographical distances dont matter. This gives tremendous opportunities for
Fintechs and FIs and Banks to introduce new products and services.
11
Disclaimer: Any company, product, service names and logos used in this article are the property of their respective owners.