Dr Syed Zaidi, Lecturer, Staffordshire Business School
Fintech (Financial Technology) refers to any business that adopts technology to make financial services better, safe and more efficient. Fintech companies blend technologies like artificial intelligence, blockchain and data management to financial processes to make them secure and effective.
Fintech was no doubt the topic of agenda for businesses prior to the COVID-19 pandemic but has garnered more importance due to this random economic event. This pandemic has forced businesses to think differently and it is anticipated that Fintech will play a positive role in reshaping the businesses. The adoption of digital and contactless payments globally has increased and will likely provide stimulus to banking sector to upgrade their conventional systems and move towards digitally efficient processes.
Impact of Pandemic on Fintech
This pandemic has forced businesses to think differently and it is anticipated that Fintech will play a positive role in reshaping the businesses. The adoption of digital and contactless payments globally has increased and will likely provide stimulus to banking sector to upgrade their conventional systems and move towards digitally efficient processes.
A report by FleishmanHillard discusses the progress of financial technology (fintech) in 2020 in light of the Covid-19 pandemic. E-commerce transactions in the US have increased by 43% since the start of this year. The UK saw a 30% increase in e-commerce transactions, and Australia reported a 117% increase. Businesses and consumers wanted a safer and more secure environment, which has pushed businesses towards cashless and contactless payments. Fintech is predicted to remain profitable and provide safer opportunities for SMEs. It is evident that corporations should focus on cloud-based approaches to managing their businesses in order to provide safer services online.
The fintech sector is renowned for developing digital solutions and streamlining payment processing for business. One technology that has revolutionised the banking system is blockchain.
Blockchain is a system that records information in a manner that makes it difficult or nearly impossible to hack or alter the system. It is basically a digital record of transactions that is replicated and distributed to the entire database on the blockchain. The banking sector around the globe is exploring the potential for adopting blockchain technology for payment systems.
Business leaders realise that digital advancement can give their business an edge over competitors. Innovators and early adopters always have an advantage, so companies are rapidly moving towards digitalisation. As mentioned earlier, the current crisis has also expedited this process. As the global economy prepares to recover from this pandemic, one area of focus for businesses will be financial inclusion. According to the World Bank, there are still around 1.7 billion individuals worldwide who do not use banking systems. Fintech will be a significant factor in efforts to expand the global banking system.
The recovery of the economy is dependent on how well businesses provide safe, secure and simple financial services. Fintech will play a crucial role in mitigating the economic and social impact post Covid-19. Deloitte reported that fintech, along with strategic partnerships with retailers, government sectors and financial institutions, can provide financial services in transparent and impartial ways to economically exposed populations
We have witnessed the effective use of fintech and digital finance during this health crisis. Cashless transactions and contactless payments have proven successful in minimising the spread of Covid-19. Various banks and financial institutions introduced discounts and encouraged the use of technologies like Apple Pay and Android Pay to discourage the exchange of physical cash. Although the use of cash had already been declining, this health emergency has increased cashless transactions. According to a Mastercard survey, 82% of global respondents regarded contactless transactions as safer, cleaner and more secure. Seventy-four per cent of respondents stated they would continue to use contactless payments even after the crisis is over. Contactless payments are also popular as individuals appreciate the convenience of not having to carry cash.
Data protection and cybersecurity will become more important as a result of the digital transformation. Financial technology offers high-quality cybersecurity and plays a vital role in countering digital fraud. The need for more holistic approach by businesses to deliver effective, sustainable and efficient financial services will make fintech more popular post-pandemic.
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