2021: In the shadow of 2020 or a chance for recovery?
The ‘FinTech State of Play Benchmarking Report’, which surveyed 144 sector professionals, found that the three-fold impact of COVID-19, Wirecard’s insolvency and the uncertainty of Brexit was having a chastening effect on the industry.
As such, the report noted that 42% believe the Wirecard incident would lower trust in customers, and 30% admitted that they had not made sufficient preparations from Brexit despite the UK’s transition period ending on 1 January 2021.
Optimistic despite the challenges
Overall, however, FinTech Connect’s research puts forward a defiantly optimistic vision of the future:
- 40% said their company’s digital transformation had been accelerated by COVID-19
- 65% agreed that remote working had increased innovation
- 34% reported accelerated growth owing to the pandemic
“The spread of COVID-19 has brought the sector’s profitability and long-term business model sustainability into sharp focus—to a point where I believe the path to profitable scale for challenger banks has been structurally altered. But it is not at all to write off the sector.
“Challenger banks have several long-term advantages—they are native to the digital arena, with more efficient cost structures, organizational agility, and, most importantly, higher customer loyalty. These advantages will help challenger banks weather the storm.”
This perspective concurs with a , which concluded that, while the ‘battle’ for market supremacy between challenger and incumbent banks is still ongoing, the former need only prove its sustainability and longevity to gain a notable advantage.
Whatever the outcome for fintech in 2021, it seems obvious that the events of 2020 have had a profound impact on the sector. Laurence Coldicott, Content Director at FinTech Connect, concluded that overcoming the challenges of the pandemic could be a defining moment in the history of the industry:
“Whether we look forwards or backwards, COVID-19 is defining a new status-quo for the industry. From regulation to innovation to funding and culture, it is impossible to step out of the shadow cast by the pandemic.
“In response, fintechs are prioritising digital transformation to meet customers where they are, and improving operational processes to ensure they are as efficient as possible.”