The coronavirus pandemic disrupted most sectors of the economy – even the fast-growing fintech industry, which is expanding almost exponentially. As a result of COVID-19, the entire financial sector was forced to operate more efficiently, focus on customer needs and the most profitable areas of business.
Protection against an economic slowdown
In response to the lockdown and the resulting need to introduce remote work, companies had to implement digital solutions – partly for this reason, the role of fintechs became even more important than before. They were the ones ready to offer innovative software and help many businesses harness their technological potential.
So what lies ahead for the fintech industry in 2021, and what changes can we expect?
Protection against an economic slowdown
Faced with the sudden crisis caused by the coronavirus, many companies did not know what to do to stay in the market. In uncertain times, maintaining liquidity proved to be a huge challenge. Financing offered by fintechs turned out to be a lifeline for companies – especially small and medium-sized enterprises, which typically have less capital than large players. This showed how important it is for SMEs to receive quick support that does not require excessive bureaucracy and at the same time allows them to receive cash within as little as 24 hours. On the Polish market, a good example is Lidya (a company offering alternative forms of financing), which enables businesses to grow and generate higher revenues even under pandemic conditions.
The current crisis has shown just how much flexibility and agility companies need to stay in the market. Thanks to innovative forms of financing offered by fintechs, among others, business owners do not have to wait until their contractors pay the invoices they have issued in order to cover current costs or invest in further growth. The entire process of obtaining financing from companies like Lidya is extremely simple – money can be obtained based on the history of cash flows on a bank account. In this case, from the last three months.
Accelerated move away from cash
Accelerated move away from cash
Cashless payments have been discussed for a long time. The COVID-19 pandemic brought the topic back into the spotlight. Fearing coronavirus infection, many consumers gave up paying with banknotes and coins. More than half of Poles (54%) say that during the pandemic the number of places where you can pay by card increased, while 38% significantly reduced cash payments in recent months. Nevertheless, as many as 60% believe that in places such as markets or bazaars there is a problem with making transactions by card.
People have become convinced that cashless payments are simply convenient. When going shopping, you no longer need to take your wallet with you. It is enough to have a smartphone or smartwatch with you, which we carry anyway. This type of payment is very fast, convenient and, above all, secure, because it usually does not require entering a PIN. Some stores have already stopped accepting cash altogether. Over time, acceptance of cashless payments may only grow, as fintechs increasingly enter the payments market, persuading customers toward a cashless model.
Banking partnerships
Banking partnerships
The most important fintech trends that will dominate 2021
Banks and other financial institutions are increasingly willing to use solutions introduced by fintechs. This allows them to reach a wider group of customers and makes it easier to stay in touch with existing ones. This is possible thanks to the introduction of new, more innovative channels. According to a Deloitte study, the pandemic accelerated digital transformation in the financial sector. Many entities improved their technical infrastructure and invested in upgrading the digital tools they use. This process will proceed faster and more easily if banks embrace innovative fintech services on a broader scale.
Growth in the world of Blockchain and its impact on payments
Growth in the world of Blockchain and its impact on payments
The role of blockchain is growing year by year. In 2019, the value of this market was estimated at $2.01 billion, and by 2027 it is expected to reach $69.04 billion. This technology can revolutionize the world of payments. It will facilitate online transfers and cross-border settlements. The implementation of blockchain by financial institutions not only speeds up the entire process, but above all increases transaction security. This system also makes it possible to bypass payment intermediaries and allows users to transfer funds directly to other entities using this technology. Moreover, blockchain can be used to hold online elections, because this decentralized database enables voters to cast their vote securely and anonymously.
Remote work and the development of digital tools
Remote work and the development of digital tools
In many companies, working from home has already become routine. Employers, wanting to ensure the safety of their team members, opted for remote work. According to an IDG study, from January this year, about 40% of employees will work in a hybrid model. In addition to using teleconferencing software and instant messaging tools, this model requires the use of a range of additional digital tools. Problems include paper documents, which often need to be converted into electronic format and then shared with the relevant entities without exposing them to third-party access.
Fintechs are trying to introduce appropriate solutions to this problem by creating software for secure data storage while also enabling easy file sharing through API tools. Fintechs such as Lidya are outpacing the competition because all processes are paperless, which means they are created without the use of paper. These types of companies use documents only in digital format, and all communication takes place from the start via phones and email.
The above five trends concerning fintech development are examples that may prove the most popular in 2021. One thing is certain: the near future and the outlook for the next few years should belong to companies operating at the intersection of technology and finance.
Summary
The COVID-19 pandemic forced the financial sector to digitalize, which gave fintechs a key role in 2021. Companies such as Lidya offer fast financing for SMEs based on bank cash-flow history, enabling them to maintain liquidity even during a crisis. The importance of cashless payments also increased – 54% of Poles notice their expansion, while 38% reduced their use of cash.
Banks are increasingly forming partnerships with fintechs, and blockchain, valued at $2.01 billion in 2019, may revolutionize transactions, reaching a value of $69.04 billion by 2027. Hybrid work is driving the development of digital tools, and the paperless model is becoming the standard.
