We are at a pivotal time in history where the world as we know it was changed in the twinkle of an eye. The coming of the COVID-19 pandemic has changed the way we work, live, study, play. Every facet of our lives has in one way or other been touched. A paradigm shift has occurred. While the pandemic may have done a lot of health-related and economic damage to millions of people, it has also created changes in the entire financial ecosystem.
As individuals and businesses badly affected by the pandemic try to make sense of it all, some industries have thrived during this period. Two sectors that have done particularly well are the tech and pharmaceutical sectors. Within the tech sector, we have a sub-sector of finance, which is quickly evolving into one that a post-COVID world cannot do without. This industry is known as the financial technology sector, otherwise known as Fintech.
What is Fintech?
The term “fintech” is coined from two words: financial technology. It refers to the use of special computer software and mobile applications to provide or support a host of financial services. These financial services include banking, insurance, trading and investment, etc.
From the definition, fintech does not have to do with banking alone. Fintech covers any ecosystem that involves a financial transaction of some sort, whether it be an online trading broker like Exness, offering an MT5 platform to traders that want to take advantage of financial market movements, or indeed an app for those wishing to send money to a relative overseas.
What Business Models Does Fintech Offer?
Fintech covers several areas of not just the financial ecosystem, but other spinoff sectors as well. This gives rise to several fintech models. Some of these are as follows.
- a) Online payments: This is perhaps the earliest and most famous application of fintech. The advent of companies such as PayPal, Google Pay, Alipay, Flutterwave, Stripe, PayStack (recently acquired by Stripe for $200m) and a host of others, made it possible for people to pay for products and services online, even when they were far away from the sources of these products. This gave rise to the boom of e-commerce that has been witnessed in the last twenty years.
In 2020, the importance of fintech apps that allowed people to make online payments was brought to the fore by the COVID-19 pandemic, as consumers who were locked down at home simply had to use them to pay for essentials.
- b) Remittances: Cross-border remittances are now a big deal. More people living abroad are sending money back home using fintech apps that have simplified the process. With many of such financial requests coming on an urgent basis, no one wants to have to wait 5-7 days for the banks to clear such payments. Not when there are now apps that can enable you to send and receive money in seconds.
Again, remittances became a big issue when borders were closed during the peak of the pandemic’s first wave in 2020. With tourists and some travelers holed up in foreign countries without extra cash or access to their bank accounts, fintech remittance apps assumed major importance once the pandemic hit.
- c) Lending: High interest rates, impossible collateral conditions and other challenges are things that dissuade most would-be borrowers from working with the banks in accessing credit for personal or business use. That was until P2P unsecured loan apps hit the market. In several countries in Africa, these apps are fast beating out the banks from the lending market, despite their higher interest rates.
- d) Personal finance: Personal finance has always been a big deal. Many people want to know where their earned money is going, especially now that the pandemic has made a lot of people own less of it. Tracking expenses, bill payments, budgeting and management of personal expenses are things that some apps in personal finance management can do. The fact that people carry their phones everywhere provided a ready market for these apps. They also save the environment too, as people no longer have to use diaries or paper scraps to do their personal finance management.
- e) Trading & investments: There are apps that users can now use to trade the financial markets from their phones. In this matter, Exness did not stand aside either. In order to start investing (trading) you need to register in Exness and login to your personal area from your desktop or mobile device. Even the popular platforms such as the MT5 which were launched when smartphones were in their infancy, now come as mobile apps.
- f) Digital currencies: Whether you want to exchange digital currency, store your cryptos in your mobile wallets or do some crypto trading, fintech plays a major part in making this happen.
What Has Been the Story of Fintech Ventures During COVID-19?
The story of many fintech ventures during the COVID-19 era has been nothing short of phenomenal. There are many examples of companies operating in the various fintech niches that have seen an explosion in their business.
COVID-19 brought with it massive unemployment. Many people were forced to start looking for alternative means of income. With offices and in-person businesses forced into hibernation, the only available place to make money for most was online. This is what led to a surge in the number of people trying to trade financial products on MT5 and on cryptocurrency exchanges. It also brought a shift towards online business and marketing, with many people trying to open websites to sell stuff online. New payment processing systems are flooding the space and existing ones are deepening relationships and securing round after round of additional funding.
COVID-19 brought the obvious problems with healthcare. Hospitals got overwhelmed with sick patients, one of the biggest fintech companies Exness helped Africa to challenge the third wave of COVID-19 The need for contact tracing, testing, and managing travel protocols has led to the development of several fintech apps.
Lockdowns and the closure of grocery shops, supermarkets and malls meant that people had to find new ways of shopping. Enter the online supermarkets and order fulfillment/logistics companies. Fintech solutions to enable payments, order processing, and fulfillment and delivery of virtually any kind of product have exploded.
The pandemic also brought some hefty economic challenges for individuals and families. Some countries were able to provide financial assistance to their citizens using fintech apps to manage the process. In other countries where the governments were unable to fill the gap, lending and credit institutions have come in to provide fintech loan apps. Decentralized finance saw its greatest growth in 2020, as people sought crypto lending platforms when they felt the banks were too slow in processing loan requests.
There were families that were separated when borders were closed without warning. With no means of sending money to stranded family members, fintech-based remittance services came to the rescue.
The list is almost endless. Had this pandemic hit in the 70s or 80s when none of the fintech structures were in place, the story could have been a lot worse than it is now.
Why Should You Be Getting Involved in Fintech At this Time?
There is no better time than to get involved in the fintech revolution than now. When the COVID-19 pandemic hit in March 2020, it devastated many livelihoods and people were forced to consider alternative means of earning an income not related to being in a brick-and-mortar setup.
Let us take the trading/investment niche. This area is singled out because of all the fintech niches discussed above, this area arguably witnessed the most explosive growth in 2020. Not only were people rushing to open new trading accounts, but spinoff earnings from the industry for affiliates and software providers also witnessed strong year-on-year growth.
Here are some statistics to consider.
- a) New registrations on online brokerages surged a whopping 500%.
- b) One brand in particular saw a 65% increase in monthly trading volume, increasing by $312 billion between February and March 2020.
The story was the same from one brand to the other. Exness, an MT5 broker which offers a strong and unique white-label structure, reported record trading volumes in 2020 of over $6 trillion. The number of active traders doubled from 72,721 in 2019 to 143,560 in 2020. This same brand handled withdrawals of $593million for its clients, and paid out $100 million to its partners. So, who says you should only operate from the retail end of the market? You can also operate from the corporate end of the market, attending to retail participants. Companies like Exness have a white-label MT5 product that enables you to capture some of the money flying around in the FX market at the moment.
Some fintech companies involved in the DeFi space made astonishing fortunes in 2020 and the first half of 2021. If you have not considered entering into the fintech space in one way or another, you are letting water flow under the bridge and leaving a lot of money on the table.
You have to face the realities of a post-2020 world. COVID-19 is not going away anytime soon. Look at history and see how long it took to eradicate viral diseases like small pox and polio, or animal viruses. It took decades of a monumental, consistent vaccination effort to clear the world of these epidemics.
What this means is that contactless transactions and interactions will be the new norm. If people could buy things online using a fintech payment app from the comfort of their homes for months on end, what is to say they will change such habits anytime soon?
One lesson many people have learnt the hard way is how dangerous it can be to have only one source of income coming from a job that is vulnerable to being blown away by a pandemic. Hundreds of millions of people were put out of work in many vulnerable industries. For those who already have a second or even a third income stream, you may find that a fintech app is probably in play.