As businesses try to recover, it's time for fintechs to get proactive
The novel coronavirus has had an immense impact on a range of industries, including the digital banking sector. In parallel to the difficulties it posed, the unforeseen circumstances have opened up new opportunities for increasing industry security and enhancing customer experience, as well as accelerating further development of fintech companies and the digital banking market itself.
Banks and other financial institutions (FIs) have been a major target for scammers since the start of the pandemic, as cyberattacks between February and April alone have spiked an astonishing 238%. The increased amount of threats have encouraged companies to face the situation head-on, revisit the AML and KYC procedures and implement additional safeguards to prevent data breach and protect their clients from fraudsters.
Without a doubt, the pandemic put the industry’s cyber resilience to the test, however, it also acted as a great incentive to reinforce current fraud prevention methods. Not to mention, putting more safeguards in place will benefit market players long after the crisis has blown over, as market players will be better equipped to deal with the constantly evolving digital threats.
The increase of digital payments usage amid the pandemic is well reflected in the e-commerce boom. Along with many retailers that went cashless, the crisis has had a significant stimulus to the growing amount of e-payments. In order to keep up with the spike in demand, developing more innovative solutions for the digital payments market moved up the list of priorities. Amid the uncertainty, Sweden’s central bank signed an agreement to gain access to Eurosystem’s TIPS platform, which will act as the basis for the country’s own platform for instant payments.
Sweden’s approach shows that in order to be in a better spot to satisfy increasing demand for faster, more convenient services, you need to be proactive.
As brick-and-mortar establishments had to severely limit their working hours during the lockdown, digital banking picked up the slack to accommodate the financial needs of people working from home. These circumstances unveiled the true importance of taking a digital-first approach. As the new wave of customers sieged the system, faster development of banking services took precedence.
In the U.S. alone, more than 45% have changed the way they bank amid the crisis, and based on a European customer survey by McKinsey, there has been a 20% increase in digital engagement levels in parallel with a significant decrease in the use of cash. According to A. Selemonaitė, this shift to online will remain even after COVID-19, further accelerating digital market development.
According to McKinsey customers who are highly satisfied with their digital banking experience, are two-and-a-half times more likely to open new accounts with their existing bank than those who are just merely satisfied. Considering the growth of users, the aftermath of COVID-19 should continue down the path of developing simplified UX to attract and retain clientele.
The 2008 financial crisis gave a boost to the fintech industry, as conditions were causing consumers to lose trust in the system, and in legacy financial institutions. In the aftermath, some entrepreneurs parted ways with the concept of traditional banking, aiming to present the market with a more technologically sophisticated solution.
The previous crisis accelerated the development of many fintechs; this time, it could have an even greater impact due to the more pressing necessity for digitized solutions. The current situation affects RegTechs too, as they are reliant on innovative solutions that the fintechs can develop.
As countries are starting to ease lockdown restrictions and opening up borders, the real impact of the pandemic will become apparent. That said, current circumstances will undoubtedly play a vital role in the future of digital banking.