Late last year, I laid out the top seven fintech trends for 2020. Typically, trends reveal themselves over longer stretches of time, but the rapid spread of COVID-19 and the subsequent shift to a remote world has prompted an acceleration for some.
Acceleration of two key fintech trends in 2020
Acceleration, in this context, means higher adoption at a faster rate as fintech’s value becomes clear. Two of the trends I highlighted in my piece have experienced significant acceleration because of the crisis: a global slowdown of funding for fintech businesses and the increasing importance of AI for financial institutions.
|Related: 10 Software Categories in High Demand to Support Remote Work →|
Global slowdown of fintech funding
In the case of fintech, I predicted a slowdown in global funding. Despite the protestations from VCs that their investment activity will not be affected, the reality is that the brewing economic crisis will force some funds to clamp down until the storm passes. A tough business environment does lead to opportunities for enterprising VCs looking for their next big play. This is particularly true in the tech industry and especially as there is an increased need for working 21st century financial technology to facilitate the switch to a remote world.
According to CB Insights, global fintech funding for Q1 2020 dropped 45% from the previous quarter and 25% year over year. Europe saw fintech funding drop to a three year low in March. As the virus itself and the economic fallout from it hit Europe first, we can expect a delayed repeat of the European funding situation in the United States.
VC belts are tightening, but there is still a significant amount of activity in the space and funding to be won for startups. Fintech companies focused on know your customer (KYC), financial services chatbots, and AI-powered solutions present the most interesting opportunity for funds.
AI of increasing importance within financial services
AI in fintech has always been an important area of interest for financial services companies looking to adapt and evolve in a digital world. The current crisis has prompted an increased emphasis on selecting and implementing AI-powered solutions to deal with the shift to a remote world.
|Read more: The Importance of Fintech in a Remote World →|
KYC, the financial regulations that are particularly important for financial services institutions that need to onboard customers quickly and efficiently while adhering to KYC regulations. Since the advent of the crisis, there has been an increase in the number of digital financial services users. New customers expect a smooth onboarding process and digital customer onboarding software can be used to ensure the delivery of a positive experience.
An influx in digital financial services customers means an influx in the number of customer service requests a financial institution has to deal with. AI-powered chatbots are a way to mitigate the strain on human support agents. As businesses look to lenders for help during the economic crisis that is enveloping the globe, loan origination software that uses AI on the backend to power the credit-decisioning process will become even more vital.
What to expect for fintech in 2020
The current shift to a remote world has driven an increase in fintech adoption. Even though funding will fall in the short term, the demand for fintech products, steered by the current crisis, will ensure fintech companies weather the storm with relative ease. 2020 could prove to be the catalyst for rapid fintech growth.