Studies have predicted various trends to shape the future of the fintech sector in 2020. These include increased investment ion platforms supporting financial inclusion, increased collaboration and investment in fintech firms by traditional banks, and the rise of Asia as the epicenter of the fintech universe.

Fremont, CA: Fintech firms have made a significant impact on businesses in recent years, and this growth has exploded through 2020. In 2019, USD 18 billion was invested in U.S. fintech firms compared to the USD 13 billion invested in 2018. Companies that benefited the most from this were the ones that focused on data, analytics, and other advanced technologies to deliver improved customer experiences. Fintech firms globally also benefited from more flexible regulations in emerging and mature countries, as organizations sought to improve financial inclusion and serve a broader digital economy.

Studies had predicted various trends to shape the future of the fintech sector in 2020. These include increased investment ion platforms supporting financial inclusion, increased collaboration and investment in fintech firms by traditional banks, the rise of Asia as the epicenter of the fintech universe, the importance of advanced data analytics startups, and regtech firms providing enhanced automation of compliance. However, the COVID-19 pandemic outbreak has disrupted all these trends and set the fintech industry on a completely different path.

The impact of coronavirus disease has had a significant effect on both the fintech market and consumer behavior. Consumers are looking for risk-free options to invest their money during these challenging times. This can have a severe impact on the venture capital funding of existing and new fintech firms. This potential drying up of financing to non-traditional financial services firms could force many firms to find collaboration or investment partners from traditional banking organizations. Some early-stage fintech firms may need to shut down.

At the same time, fintech firms in the payment sector expect a drop in transactions at all levels of the economy, on a global scale. This means fewer fees collected by companies on the payments side of the fintech sector, impacting profitability and valuations for traditional payment firms and fintech firms such as Chime. Hardware shortages could also impact firms like Square, which rely on digital devices to support transaction processing.

While the pandemic has caused a lot of damage to the fintech industry, it has also proved beneficial for many. An increasing number of consumers are now demanding digital banking services. Social distancing norms and fear of contact at physical banks has also increased the demand for digital financial services. This has forced many traditional banks to fast track digital innovation efforts. As a result, many legacy banks and credit unions are looking upon fintech firms for aid.