Fintechs are becoming more popular among women, low-income households, and small businesses because they face additional barriers to accessing financial services, according to an academician at Monash University Malaysia School Of Business who carried out research in collaboration with other institutions.
Professor Nafis Alam, head of the Monash University Malaysia School of Business, and also a research affiliate of the Cambridge Centre of Alternative Finance (CCAF), recently collaborated with researchers from CCAF, the University of Cambridge Judge Business School, the World Bank, and the World Economic Forum (WEF) to publish one of the largest empirical research into the effects of the COVID-19 pandemic on the global financial technology (fintech) industry.
The Global COVID-19 Fintech Market Impact and Industry Resilience Study is based on panel data from 1,448 fintech companies in 192 countries. This research builds on the Global COVID-19 FinTech Market Rapid Assessment Study, which was published in November 2020 and focused on the short-term effects of COVID-19 on the fintech industry.
The study found that 50% of all customers worldwide of the fintech companies that responded across various industries were low-income households and women.
Professor Nafis Alam says, “Finding out that fintech is significantly contributing to financial inclusion for low-income groups and women who have been struggling, especially in the wake of the COVID-19 pandemic, is heartening. Despite the difficulties, the fintech industry has been at the forefront of innovation and financial institution futureproofing.”
Fintech companies are reshaping the financial sector by driving innovation, increasing competition, and broadening access. The study uncovered fintechs use of regulatory and policy support, as well as their use as distribution partners.
All verticals, except for data analytics, grew more quickly overall than had been estimated in the team’s earlier study, according to the new research. Retail-focused fintech platforms in this panel reported that from USD358 billion in 2019 to USD526 billion in 2020, gross values transacted increased by 47%. By transaction values, digital lending was the second-largest segment after digital payments.
Digital payment fintechs accounted for 63% of all retail-facing fintechs in terms of transaction value. Despite operational challenges and increased spending, fintech companies believe the sector is relatively resilient. Financial regulators implemented various regulatory mechanisms to assist financial firms and fintechs in mitigating the effects of COVID-19.
Three global trends laid the groundwork for this growth: fintechs operating in advanced economies (AEs) demonstrated higher levels of activity than those operating in emerging markets and developing economies (EMDEs); businesses operating in jurisdictions with extremely strict lockdown measures; and businesses acting as a distribution partner for government COVID-19 relief packages.