At the same time, according to the Wall Street Journal, there are projections that overall online payment processing revenues for the full year might decline as increases in online retail transactions are offset by declines in online travel purchases, including hotels and airlines, which generally have a higher average transaction value. Furthermore, the cross-border ecommerce payments business has been negatively influenced by COVID-19.
What Does It Mean For Fintech
The economy of many industries is taking its toll and having major constraints due to coronavirus, and the sector of fintech is not exempt. Payments Journal listed some results, bad ones as well as good ones, of coronavirus' impact on every aspect of business.
- Companies such as Mastercard and Visa have cut their predictions for revenue due to the COVID-19 scare.
- Due to restricted travel guidelines, many airlines are being forced to cancel or reimburse flights.
- Paypal confirmed that due to the coronavirus outbreak there has been drops in ecommerce activity.
- Robo-advisor fintech startups are also likely to take a hit.
On the other hand:
- Banking and Insurance Regulatory Commissions company Ye Yanfei, explained that blockchain is being utilised for medical data verification.
- Many countries are also encouraging the use of contactless payment to prevent the spreading of the virus any further from the exchanging of money.
Along with the pandemic, FinTechs are also facing a social media "infodemic", spread of false information about COVID-19, which is sowing panic among consumers.
Source: Monzo LinkedIn
Companies such as Revolut and Monzo are fighting these fake news by issuing statements about the solid states of their companies, but the question remains is this enough to console the consumers.
Will Digital Solutions Serve As A Cash Boost For FinTechs
In fact, the flexibility in business models and the ability to dial-up or dial-down costs will become critical for FinTechs and will determine which firms survive, writes Payments Cards & Mobile. FinTechs with recurring revenue and long term contracts will be impacted less than firms with transaction-based business models, while consumer-oriented B2C FinTechs (e.g. Challenger Banks) will see business performance contract faster than B2B models.
Payments Cards & Mobile also predicts that reduced funding for FinTechs could force firms to seek collaboration, investment, or acquisition by traditional financial institutions, PE funds, or even non-financial strategic buyers.