Amid this coronavirus pandemic, the internet is flooded with talks about “a new reality post-Covid-19”. It has now become necessary that we understand the way the wind is blowing, as it would be idiotic to ignore the obvious.
Since more than one-fourth of the world is locked down, the economic activities have slowed down and many industries are at a loss. Considering the global economic slowdown, banking institutions are also at risk, as the number for defaulters and Non-performing assets (NPA) will possibly increase. Even the UK’s banking institutions are expected to take a financial hit of 25 billion euros.
A new era of banking
The pandemic slowed the global economy down and there seems to be a huge impact of economic slowdown on the banking sector. The increase in bad debts and NPAs will squash many in the banking industry. The operational costs will however remain high, making it difficult for some banks to meet even the BEP (Break-Even Point).
Experts predict that when the pandemic is over, the banks will have to restrategize their operations and make some intrabank reforms. It is anticipated that banks might want to cut down their operational cost and reroute their services via fintech institutions, as fintechs have less operational expenditure requirements, therefore, can handle economic disasters easily.
Fintechs have another advantage over traditional banking, and that is the user convenience. It mitigates the obligation to show up and wait in long queues at the banks. Fintechs empower the users to access banking services with a couple of clicks on their smartphones. Though many banks have started their digital transformation journey a decade ago, they still have a long way to go to compete with fintechs in terms of technology and user convenience.
Banking and finance industry advisers suggest banks to not put too many efforts into improving their customer-facing digital infrastructure. Instead, they advise collaborating with those who already have managed to do it – the Fintechs.
This collaboration will bring in improved efficiencies for the banking industry. On the other hand, fintechs will get new opportunities and product offerings backed by the robust banking infrastructure. The industry experts predict that with this collaboration, banks will no longer focus on the end-customers. The services will be provided via institutions such as fintechs.
Fintechs to Introduce new product lines
Recently, we all have witnessed how companies adjusted their business strategies to survive in the changing environment caused by Covid-19. For example, the alcoholic beverage companies started a sanitizer product line, Bolt Taxi changed to Bolt Food Delivery, and the apparel manufacturers started sewing face masks. Almost every industry vertical is adapting the change and this presents a great opportunity for the fintechs to sail well in the wind.
The fintechs can upgrade to all-in-one payment apps that will also allow customers to pay for utilities, bills, book movie/bus tickets, and receive discount offers from brick and mortar stores as well as online stores. If fintechs don’t tap into this market niche, it possibly will be snatched by the retail sector.
Reforms by Regulatory Bodies
To form a new banking model, the governments, regulatory bodies, and central banks might change their focus on innovation in payments to adapt to the new economic reality. To be precise, there can be new regulations for digital currencies; the customer onboarding regulatory requirements can be made uncomplicated to automate the banking services.
Many countries have already started to streamline their digital banking infrastructure. China has recently launched its blockchain-based service network – BSN – which is intended for global commercial use. The network is aimed to accelerate the establishment of smart cities and the digital economy.
Digital Economy is the Future
The lockdowns made customers to buy online. Many that were reluctant to adopt the eCommerce culture have now realized that online services are more convenient. Easily accessible product/services and hasslefree payments are lucrative enough to delight them. It is certain that most of them will never turn their way back to traditional shopping methods.
Moreover, not only the retail industry will adapt the digital, but also other industries. Education, healthcare, fitness and many such industries that are not obvious to the digital world will most likely to see a considerable amount of digital transformation.
Madhukar is marketing communication specialist at Nimble AppGenie. A writer by day and reader by night, he specializes in technical blogging. Throughout the time, he has been helping businesses by writing valuable business guides and articles. Nimble AppGenie is a renounced fintech and healthtech development service provider that is helping small-large scale enterprises.