2020 was a giant yr of change for the fintech business.
Before the pandemic struck the globe, fintech corporations round the world entered the new yr with expectations that had been shattered inside months. Many of the developments that started in the yr had been abruptly halted; fintech corporations had been pressured to shortly adapt, or else.
Fintech grew to become a signficiantly extra necessary half of international society as many of the conventional ways in which people and corporations dealt with their monetary dealings had been disrupted. Additionally, fintech corporations performed an necessary function in distributing assist.
No matter which method you slice it one factor is for certain, the fintech business won’t ever be fairly the similar. Here are some of the most necessary adjustments that fintech underwent in 2020.
In the US, Fintech Companies Provided Vital Support for Small Businesses Affected by COVID-19
The COVID-19 pandemic caused widespread monetary problem in many areas throughout the world. In the United States, the authorities’s response to monetary hardship induced fintech corporations to carry a brand new stage of significance.
Indeed, Lindsay Lockhart, Co-founder and Chief of Staff at Neocova, a St. Louis-based fintech offering know-how to group banks and credit score unions, informed Finance Magnates that fintech’s most necessary development in the United States was the “support of the rapid digital transformation of financial community institutions.”
Lockhart particularly pointed to the function that fintech corporations performed in the Paycheck Protection Program (PPP). The PPP was an necessary half of the authorities’s stimulus program that was launched in response to the financial fallout that resulted from COVID-19.
In April, the United States authorities made the determination to approve Paypal, Intuit, and Square as individuals in the US Small Business Administration’s (SBA) Paycheck Protection Program (PPP), which offered forgivable loans to small companies that preserve all workers on their payroll for at the very least eight weeks.
Lockhart stated that these fintech corporations had been “vital” to the PPP and to the conventional monetary establishments “that supported countless businesses and Americans all while handcuffed by legacy technology.”
“Fintech rose to the occasion to help these community banks and credit unions digitally transform at a rapid pace,” Lockhart stated. Fintech corporations helped these native establishments to “support their clients in this new remote world where brick and mortar became obsolete and to fulfil the PPP demand that larger financial institutions shirked.”
Fintech Saw “a Staggering Rise in Fraud and Cyberattacks” in 2020
However, the bigger function that many fintech corporations performed, the extra of a goal they grew to become for dangerous actors.
Indeed, Donald Kasdon, the Founder of fee processing service, T1 Payments, informed Finance Magnates that “the most sweeping change in fintech this year was a staggering rise in fraud and cyberattacks.”
“We’ve seen it all, from credit card testing schemes to identity theft,” he stated. “In response to this dangerous trend, fintech companies have had to adapt to prioritize cybersecurity and fraud prevention.”
This was true in the cryptocurrency world, which skilled a big rise in the quantity of phishing and malware-related assaults all through 2020.
“Many e-commerce merchants don’t think a cyberattack will happen to them and have avoided investments in fraud prevention in order to cut costs,” Kasdon defined.
“This year, many merchants have learned the hard way that this technology is essential to run and future-proof an e-commerce business. It goes without saying that a cyberattack like credit card testing can be devastating to a small business, both from a brand trust and a financial standpoint, as this can result in enormous chargeback fees.”
Therefore, Kasdon believes that anybody coping with fintech ought to be taught to take additional precautions in the future: “as a start, merchants should implement identity verification and SCA tools on their sites, such as AVS and CVV, as well as session validation,” he stated. “These tools are a simple and straightforward way for merchants to prevent fraud while not alienating real customers by making them jump through hoops.”
However, Ruston Miles, Founder and Advisor at Bluefin, believes that “when in-person retail and dining resumes in 2021, I expect to see a sharp rise in card data breaches later in the year and on into 2022.”
“Hackers follow the money. They’ve spent 2020 online, where the money quickly moved to,” he stated. Therefore, “merchants should take the opportunity to upgrade their card acceptance devices to accept contactless cards and phones and to have the latest encryption in place to thwart hackers as consumers return to brick-and-mortars.”
Cash Is out, and Contactless Payments Are Here to Stay
A consultant of the Fletcher Group informed finance Magnates that one of the yr’s most necessary developments in the fintech world has been contactless funds.
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“The digital, contactless payment trend is pushing the envelope on payroll,” Fletcher Group informed Finance Magnates. “The COVID-19 pandemic drove a huge increase in the number of people who want to pay in digital, contactless ways, and experts expect this to continue long after the pandemic is over.”
But, the contactless fee development is not only about playing cards that should not have to be swiped or inserted, it’s also a few lower in the use of money throughout the board.
As such, “this trend is not only impacting a large portion of the workforce, including 14.1M U.S. adults who are still unbanked and locked out of these payment options — it’s also impacting their employers,” Fletcher Group added.
“This is especially apparent in service industries where tipping is a significant portion of wages. According to a recent Netspend survey of restaurants, 93% found that their customers are using less cash as the result of the pandemic, which leaves businesses left with little cash on hand to pay out tips or expense reimbursements.”
As a consequence, the present fee ecosystem nonetheless has an absence of connection between money and digital fee strategies,” the Fletcher Group defined.
Therefore, the Fletcher Group believes that preloaded fee playing cards might play an more and more necessary function in industries that beforehand relied totally on money.
“Payment cards bridge these gaps because they can be loaded with cash and then spent digitally, giving cardholders the freedom to spend where they want,” the Group’s consultant defined. “As people and businesses continue to adapt to current circumstances, the plastic card at the core of each of these payment accounts remains central to the consumer’s convenience, security, and safety.”
Fintech Companies Are “in a Totally Different Environment Where the Need to Prove Value Quickly Is Immediately upon Us.”
The circumstantial adjustments that 2020 caused had been totally different in that the circumstances of survival for fintech corporations modified.
Brandon Dewitt, Co-founder and CTO of MX, informed Finance Magnates that the corporations that survived the change in circumstances greatest had been these “that have substantial value propositions and the ability to sustain a business on revenue without outside investment.”
“Capital markets were difficult to navigate in 2020, and it’s certainly a different world out there right now,” DeWitt stated. “You have to have a business that has already crossed the chasm to make it through this time period.”
There have been lots of corporations that had been unable to cross this chasm. DeWitt defined that in phrases of his personal firm’s expertise, “in a normal year we’ll see maybe two acquisition opportunities in a month” – “acquisition opportunities” which means corporations which can be about to fold and must discover a purchaser in order to remain afloat.
“In 2020, it was more like two a week,” he stated. “We’re in a totally different environment where the need to prove value quickly is immediately upon us. If you’re a good company, you can prove value very quickly based on what you’re going after.”
Which corporations are doing the greatest job of proving their price? “Companies often perform the worst when their goals are not in line with the goals of their customers and consumers,” DeWitt defined.
“As I always say, money is a follower, not a leader. If you’re pursuing money and concerned about that side, you’re going to do worse than if you’re concerned about impact. A lot of organizations have suddenly realized that putting advocacy at the center of their mission has become a necessity.”
Engineering a “Human Touch” into Fintech Platforms Is More Important Than Ever
Another of this yr’s most necessary fintech developments has to do with human connection.
Indeed, Mike Rhodes, associate at full-service CPA agency, Citrin Cooperman, informed Finance Magnates that earlier than COVID-19, “there were high expectations as to how AI could streamline customer experience through chatbots and their ability to complete increasingly complex customer requests and increase customer purchasing of financial products.”
“AI chatbots did not achieve the adoption rates that were originally expected as we entered 2020,” he stated.
While it’s nonetheless potential that AI-powered chatbots might develop into way more fashionable in the future, the incontrovertible fact that they failed to realize widespread adoption this yr might sign a shift towards human contact in the fintech world.
Earlier this yr, Eric Anziani, Chief Operating Officer at Crypto.com, informed Finance Magnates that “one of the reasons why senior citizens still walk to the bank twice a week and queue in line is not because they are incapable of obtaining money in any other way: it is because they value the human interaction and the personal touch that comes from banking face to face.”
“That’s an important point to bear in mind when designing fintech platforms: your mandate to automate processes doesn’t have to come at the expense of dehumanizing the experience. Maintaining customer support who can assist users when they get stuck, while demonstrating that there are real people behind the platform who actually care, is imperative.”