Coronavirus' compressed cycle requires more fintech collaboration
Despite the pressures on the COVID-19 economy, there are opportunities for fintech firms that can spot behavioral consumer and business shifts.
As a report from Deloitte titled “Beyond COVID-19: New opportunities for fintech companies” notes, “Yet as the broader economy shifts from respond to recover, COVID-19 may create new opportunities for some fintechs. For example, as social distancing has taken hold worldwide, there has been tremendous growth in the use of digital financial services and e-commerce.”
There is opportunity for innovation after the pandemic. In fact, we have already witnessed the dramatic rise of telemedicine, improved online communication, and flourishing digital content. Fintech firms and small businesses can also find opportunity if they adapt to new customer dynamics and leverage opportunities with traditional financial firms.
A pressing concern for many early-stage fintech in the wake of COVID-19 are financial constraints and a compressed funding environment. Many of these companies are not yet profitable and will rely on investors or potential new collaboration partners moving forward. While banking firms traditionally are not as agile as their smaller fintech counterparts, they do have the benefits of capital and scale to get each through these precarious times. The global financial slowdown from COVID-19 will likely change the pool of fintech players, with the best-managed firms and the most innovative ready-made solutions emerging from the chaos.
Firms that embrace empathy and compassion as part of their corporate mission will thrive. This is already happening with firms like Nomo and Chord offering free temporary access, or PayPal and Lending Club waiving fees and presenting hardship plans. Increasing empathy and supporting small businesses leads is possible through investing in business ecosystems and creating more virtuous and inclusive cycles.
As for small business owners, this new pandemic dynamic should drive counterintuitive thinking – doing the opposite of many things that made sense before COVID-19 - unless they were already well ahead of the curve. The companies that navigate the compressed cycle best will succeed, as they present new solutions that anticipated customer demand proactively, instead of reacting to what already happened.
The pandemic created a compressed cycle. It forced businesses to pivot rapidly, from distilleries making sanitizer to financial firms seeking to bring out new digital products in days or weeks. The normal cyclical patterns of changing demand and innovation are on steroids, setting up a great opportunity for “big guy”/” little guy” collaboration.
Why are the smaller players necessary for the survival of the “big guys?” With customer sentiment changing on a dime, it is imperative that new products and innovation happen at a much faster pace for a company to stay relevant. Financial firms need to digitally transform their businesses fast to keep up and overcome the myriad of challenges for growth. They need the “little guy” to step in by helping add new products and speed to a highly fluxed situation. These institutions, in the past, have been unable to innovate fast enough on their own to keep up with dramatically shifting customer behaviors and needs. They need help, especially requiring assistance from smaller, nimbler product-ready companies.