COVID-19 has bought the world into a state of emergency. The economy is losing its balance and countless once-solid entrepreneurs and businesses are sent into a tailspin. The stock market has also gone mad, resulting in an urgent requirement for consulting among the many alarmed investors.
Major cities which are the financial pulse of a country are the ones that are affected the most by this pandemic. By their nature, these cities are densely populated, clamouring with activity, dominated by services ranging from retail to hospitality. And by their very nature, these cities offer a perfect scenario for the spread of this COVID-19 virus. From New York to London and Hong Kong to Singapore, large cities are struggling to contain the spread of the novel coronavirus and its economic consequences.Fintech News
Almost every type of business is affected in some or the other way. The COVID-19 pandemic could be one of the most serious challenges faced by the financial industry in nearly a century. The impact of COVID-19 on finance sector will be severe fall in demand, lower incomes, production shutdowns and will adversely affect the business of fintech firms.
Let us have a look at the impact of COVID-19 on three rapidly growing sections of fintech industry,
Impact on banks
Banks certainly have their hands full in light of the novel coronavirus outbreak. Businesses and borrowers face job losses, slowed sales, and declining profits as the pandemic continues to spread around the globe. Banking customers are likely to begin seeking financial relief, and federal bank regulators in the United States are encouraging banks to help them.
In addition to managing the direct economic effects of the coronavirus, banks need to have a plan set up to protect employees and customers from its spread. Many banks have already begun to encourage remote working of some employees.
Customers, who are increasingly careful of spending time in crowded public spaces, will need to have a method to conduct banking without physical interaction. By implementing completely digitized and remote customer transactions, banks can make sure that both everyday and exceptional processes will be carried out with limited disruption. Banks, consumers, and governments are gauging the risks of in-person banking, and opting for digital channels when they have the choice.
As more cases inevitably appear across the United States and around the world at large, physical banking will look less engaging for everyone, not just the most vulnerable populations. This is fueling the development of digital banking as an alternate method of banking.
Impact on insurers
Insurance is a centuries-old business which has witnessed numerous worldwide pandemics. Over the years, the likes of the Spanish Flu in 1918 and the more recent Ebola outbreak have taught insurers enough to be prepared. Insurers consistently factor such risks into their models and analyse potential implications. They utilize dedicated catastrophe response (CAT) teams such as those for natural disasters.
The insurance industry is generally well prepared for major misfortunes, including pandemics, but the financial impacts will take time to assess and will be insurer and reinsurer specific.
But it’s not as easy as it sounds. COVID-19 is an unprecedented situation that is inserting tremendous pressure on even the richest and most powerful nations and their healthcare systems of the world.
For life insurers, broader financial adversity because of outbreak-led business interruption and stock market crashes can affect earnings from investment portfolios. To be fair, on the part of insurers, the pandemic has so far been one of a kind and no business could have adequately prepared itself or its customers. We should also remember that insurance is a business that must take care of its solvency and commercial viability amid great regulatory pressures and uncertainties and policy provisions and avoidances are tools towards this.
As and when the disaster eases, insurers have a real opportunity to rethink products to address coverage gaps and accelerate digital transformation to furnish them with the platform, technology, and skills to effectively confront future crises. They must also strive for more transparency in disclosures and communication to restore trust in the idea of a true and hassle-free financial protection at a time of need.
Impact on Cryptocurrency
At the end of coronavirus pandemic, will emerge a new digital society status as usual, one that will accelerate major technological advances that are already in progress. Among the numerous significant innovations that the pandemic will push forward are blockchain and cryptocurrency.
Amid the economic crisis, the value of Bitcoin had a surge for the past months. Presently per Bitcoin values $6,314.79. This surge is unavoidable as China, the major country that handles the cryptocurrency transactions had disrupted workflow because of the outbreak in Wuhan. Also, China and South Korea own over 70% of the mining power of bitcoins, the most substantial cryptocurrency, it is easy to say that the massive impact was expected as soon as the virus started to take its toll on the Asian continent, much less the world.
Experienced analysts call this event as “Black Swan” a negative incident which can’t be predicted earlier. In such cases, the financial markets act in an unexpected way. At such times, the investors and traders usually sell off their equities and invest in gold and securities to minimize their risk factors. Presently, Cryptocurrency has also joined the asset class of safe haven making them, Gold 2.0.
Right now, times are tougher than ever before for businesses, on both ends. If we’re going to keep going, we need to figure out a way to work together in a better manner.
Aashish is currently a Content writer at FintecBuzz. He is an enthusiastic and avid writer. His key region of interests include covering different aspects of technology and mixing them up with layman ideologies to pan out an interesting take. His main area of interests range from medical journals to marketing arena.