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Fintech Market Reports Rapid Growth during Covid-19 Pandemic: Study

English covid-19 pandemic
Wahyu Dwi Anggoro • 04 December 2020 10:20
Jakarta: The fintech market has continued to help expand access to financial services during the covid-19 pandemic—particularly in emerging markets—with strong growth in all types of digital financial services except lending, according to a joint study by the World Bank, the Cambridge Centre for Alternative Finance at the University of Cambridge’s Judge Business School, and World Economic Forum.
Access to affordable financial services is critical for poverty reduction and economic growth. For poor people, especially women, access to and use of basic financial services can raise incomes, increase resilience, and improve their lives. Fintech innovations are helping reduce the cost of providing services, making it possible to reach more people, and reducing the need for face-to-face interactions, essential for keeping up economic activity during the pandemic.
"Fintech has shown its potential to close gaps in the delivery of financial services to households and firms in emerging markets and developing economies," said Caroline Freund, World Bank Global Director for Finance, Competitiveness and Innovation, in a press release on Thursday.

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"This survey shows how the fintech industry is adapting to the pandemic and offers insights for regulators and policymakers seeking to promote innovation and reap the benefits of fintech, while managing risks to consumers, investors, financial stability, and integrity," she added.
The study, which gathered data from 1,385 FinTech firms in 169 jurisdictions from mid-June to mid-August, showed most types of FinTech firms reporting strong growth for the first half of 2020 compared to the same period in 2019, which was prior to the pandemic. On average, firms in areas including digital asset exchanges, payments, savings, and wealth management reported growth in transaction numbers and volumes of 13 percent and 11 percent, respectively. Digital lending slumped eight percent by volume of transactions, while also suffering a nine percent jump in outstanding loan defaults.
Regionally, the Middle East and North Africa saw strongest growth, up 40 percent, sub-Saharan Africa and North America, both up 21 percent. In general, emerging markets and developing countries experienced faster growth than developed markets.
However, firms also reported some operational and funding challenges during the pandemic. Two-thirds of firms said they had changed their business model in response, including by reducing fees, changing qualification criteria, and easing payment requirements. About 60 percent reported launching new products and value-added services, such as offering information.  Forty percent of firms surveyed indicated that they have either introduced or are in the process of introducing enhanced fraud or security measures as a response to business conditions under the pandemic. Other operational challenges reported by firms included more agent or partner downtime and increases in unsuccessful transactions and access requests. Further, fintech firms reported increases in expenses for onboarding and data storage.

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