Financial technology, or Fintech, covers innovations the crossover between the financial industry and technology. The term was first coined in the 1990s when e-commerce and the Internet really began to take off and it has continued to evolve ever since. It incorporates everything from trading stocks to crowdfunding platforms like Kickstarter and GoFundMe to Blockchain to Bitcoin and ranges from things that are currently in use to things that are just being explored.
Bitcoin is taking center stage at the moment, with one Bitcoin being worth more than $9,000. The cryptocurrency was started in 2009 and, like other cryptocurrencies, is not backed by any bank or single administrator. The value and transactions are recorded through blockchain, a public ledger that creates a link of software each time a transaction is made. Other cryptocurrencies like Ethereum (ETH), Ripple (XRP), Litecoin, Tether and Monero are also experiencing interesting periods of growth and fluctuation.
While Bitcoin is a slightly risky investment given its speculative nature, it has been gaining strength pretty consistently since it was founded. It is marked by steady increases and sharp declines in value, but the investment is on an overall upward trend and most Bitcoin investors are optimistic about its performance in 2020. The value is predicted to rise to nearly $20,000 per bitcoin this year, despite the coronavirus global pandemic has introduced a measure of uncertainty to these figures. While experts differ on the effect the current situation will have on Bitcoin, they agree that if it doesn’t grow coming out of this economy in the next two to five years, it is unlikely to recover to the same level of success that it has enjoyed in the last decade. It will definitely be an interesting trend to watch in the near future.
While social quarantine orders and the global pandemic have wrought havoc with global economies and businesses in all sectors, online shopping and payment processing services have suddenly become more essential than ever before. While many people prefer to shop offline and in person, they are suddenly being forced to do almost all of their shopping online, giving payment processors like Stripe, platforms like Shopify and Online Money Transfer services like Remitbee a swell of business. During the pandemic, Shopify just overtook RBC as the most valuable business in Canada in any sector, which is unprecedented.
While this will likely decrease as businesses reopen, online shopping will likely continue to see increased traffic as people and businesses alike are forced to explore the convenient nature and challenges of this trend.
The coronavirus crisis has been unprecedented, with economies around the globe grinding to a halt as businesses are being ordered to close and people are being asked to stay home. One thing that we are almost guaranteed to see coming out of the pandemic is a sharp uptick in bankruptcies. This will range from personal bankruptcies to startups and established businesses being unable to carry out their operations. Many countries may even be unable to pay back their debts after having had to spend trillions in loans to small businesses and stimulus payments to people to try to float them through unemployment or keep the economy going.
While bankruptcies don’t necessarily mean businesses will have to close down, it does necessitate liquidating some assets and renegotiating with creditors. So far, a number of large businesses have already filed for bankruptcy, including Gold’s Gym on May 4, J. Crew on May 4, Pier 1 on February 17and Virgin Australia on April 21.
While there is a popular belief that loan businesses will benefit from the coronavirus pandemic, this is unlikely to come to fruition. With the economy coming to a standstill, businesses across the board will see reduced profitability and will have a hard time recovering those profits once the situation is resolved. Customers are spending less now because they physically can’t go anywhere and many people have experienced reduced or lost wages, and that conservative spending is likely to continue for a while as individuals try to build their financial security back up. Looking at these trends, it seems clear that many individuals and businesses will default on loans and Fintech companies that provide these funds will feel additional pressure to try to collect on the loans. It is unclear how this will affect the industry yet but there will almost certainly be some amount of hardship.
As businesses are suffering and declaring bankruptcy, consolidation and Mergers and acquisition actions will become the name of the game. Banks will likely take back control of some of the fintech ground that has been gained in recent years by startups, and even in that market, digital-only banks and financial services will gain traction over traditional brick and mortar institutions. Since countries around the world are printing more money, the price of gold will increase as well, and faster money transfers will be developed as a direct result of the boom in online services and shopping.
While we obviously will not be on a stay at home orders forever and life will start to regain a semblance of normalcy as countries around the world see a decrease in coronavirus cases and an increase in testing, the world as we know it will never be the same. Having to work remotely has allowed businesses and consumers to see some of the benefits of doing business online, and has forced people to rely on and develop new fintech operations that were being pursued more slowly before the global pandemic.
While many of these trends and fintech elements have been developing for years, the unique situation that people around the world suddenly find themselves in has prompted unprecedented changes in the market. The face of business is changing, businesses that were doing well previously are declaring bankruptcy while others that were struggling to stay open suddenly find themselves struggling to keep up with demand. Regardless of what happens, the next few years are sure to bring interesting changes to the world of fintech.