By Amy Boekstein, account manager, Instinctif Partners
The ongoing pandemic continues to fundamentally alter all aspects of the economy and society. When considering the technology sector – and fintech in particular – its impact has cut like a double-edged sword.
There have been reports that for some fintech companies, 2020 plans have been scaled back, expansion announcements are being put on the back burner, with many understandably taking important steps to maintain cash levels. As is the case across many sectors, firms are also facing low consumer confidence and reduced spending as the global economic recession sets in.
Reasons to be cheerful
Nevertheless, there are still promising pockets of surging activity in the fintech sector. Those enabling contactless payments are at the forefront, while companies operating in the digital payments sphere are seeing significant growth. For these businesses, the pandemic has simply accelerated a trend that was already on the rise.
Amsterdam-based Ayden saw its shares jump considerably this year, while in the US, PayPal and Square have also risen impressively. As the lockdown lingers, forcing consumers online more than ever before, the pandemic continues to turbo-charge the digitalisation of the economy.
Swedish flexible online payment solutions company Klarna, who posted record customer numbers in June, has an interesting role to play as consumer finances become increasingly stretched in the current climate.
The benefits of going cashless have been clear for some time. It can be just as effective in combatting fraud, it is more hygienic, as well as being safer for small businesses. For businesses, going cashless and contactless has taken on an even greater importance: it is now a matter of stopping the spread of the virus.
Weathering the storm
Recent data released from Tech Nation and Dealroom for the Digital Economy Council, showed that in the first five months of 2020, London-based tech companies still attracted £4.2bn of new funding, with fintech dominating – illustrating the robustness of the sector.
However, the encouraging growth in demand and confidence in UK fintech is not without its challenges.
Those that are still able to attract financing in this increasingly scarce environment will be better placed to weather the storm but those that aren’t, could unfortunately fall by the wayside.
The important role of fintech during the pandemic has not gone unnoticed by policymakers. Just last week, it was reported that the UK’s Department for International Trade and the Department for Digital, Culture, Media and Sport are introducing a suite of new measures to support British tech business. Among these initiatives include a marketing campaign to highlight UK fintech businesses that enable digitisation and resilience, in a sign of the significance of this sector to the UK economy and beyond.
Additionally, UK Chancellor Rishi Sunak announced further support for the state-backed Future Fund, which initially saw a spike in demand and was consequently oversubscribed. The scheme aims to plug a financing gap where investment has dried up over recent months.
Fintech companies have the advantage of being more nimble and agile, not tied down by legacy systems and processes. They can react quickly, adjust and be flexible in communicating in this ‘new normal’.
Despite the headwinds, the fintech sector is growing in relevance and is high on the policy agenda. There is a real opportunity for fintech companies to better communicate their proposition to their key audiences, be it consumers, investors, policymakers and wider stakeholders.
Saying the right thing at the right time is not always easy, but those fintech firms that leverage their litheness and communicate successfully are likely emerge stronger from the crisis.
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