Dutch investment fund Finch Capital recently published a report on the consequences of the health and economic crisis for the financial sector, and more specifically for fintechs. What are the challenges and opportunities ahead?
An economic crisis lasting several months
As Mikael Ptachek, Chairman of the Observatoire de la Fintech, points out in an interview with Finance Innovation magazine, French fintechs are "young, start-up, growth or hyper-growth companies. They are therefore fragile by nature". In this unprecedented context, it is therefore quite possible that those without sufficient resources will be forced to cease trading. The other concern lies with investors and fund-raising, which could be more timid than in recent years.
Experts estimate that the economic crisis in the financial sector will last at least a year, with a recession lasting until the third quarter of this year, a recovery at the end of the year or early next year, and a return to normal economic conditions by the second quarter of 2021 at the latest.
New opportunities post Covid-19
Alongside this rather gloomy picture, new opportunities are likely to emerge for fintechs.
The spread of telecommuting and recent developments linked to the health crisis will give digital a major role to play. Indeed, banking establishments are finding it difficult to reopen certain branches in compliance with health measures, which will lead to closures. Products aimed at the general public (account management, life insurance, mortgages, savings management) will therefore increasingly be offered via their sites or apps, as well as via fintech sites and apps.
Another new feature is that participatory financing players are now authorized to offer state-guaranteed loans to businesses, in the same way as banking institutions. A number of initiatives have been launched to make it easier for businesses to obtain loans or prepare applications. These include Kriptown and the WeShareBonds business loan platform.
Fintechs that seize post-Covid opportunities, linked in particular to banks' growing need for digital solutions, are likely to emerge as winners from this economic crisis. They are also likely to raise the most funds.