The fintech sector grew globally in the first half of 2020. This was noted in a study on alternative finance conducted by the World Bank, World Economic Forum (Wef), and University of Cambridge, released in December 2020.
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Over 1,500 fintech companies were part of the study
The study is the result of a survey of representatives of more than 1,500 fintech companies who were asked to indicate the relative status of 19 key industry performance indicators in the first part of 2020 compared to the first half of 2019. Their responses showed that of these indicators, 12 improved from a year earlier during the first quarter and second quarter of 2020.
Overall, the fintech sector grew in 2020, with respondents reporting an average transaction volume growth of 11% and an average number of transactions growth of 13%. When looking at market performance indicators related to customer growth, all relevant indicators (including the number of corporate customers, the number of new customers, and the number of new borrowers) increased year over year. The most significant positive change was reported in customer retention or renewal, which increased by 29% compared to the first quarter and second quarter of 2019.
However, the pandemic also had negative impacts on the fintech industry globally, as illustrated by the 9 red market performance indicators. These include a 14% increase in backlogs or delays in repayments, an 11% increase in Time-to-Value (the time interval between customer introduction to onboarding time) and a 9% increase in the number of claims, non-payments and defaults on outstanding loans compared to the first two quarters of 2019.
Some areas, such as security, data exchange, payment services and digital savings, reported increases of more than 30 and 20 percent. Only lending reported an 8% slowdown. Countries with harder lockdowns have seen greater growth in financial services, even in fields such as online lending, which seems to have suffered more than others, due to obvious difficulties in origination and due diligence of transactions. Also of note is the strong development of fintech in countries in the Middle East-North Africa region: +40%, compared to 8% in Europe, 1% in China, 21% in the US and Canada, and -3% in the UK.
The study shows that fintech companies have demonstrated resilience, with around two-thirds changing their services, products and internal policies, with a particular focus on customer onboarding processes, facilitating online financial transactions and reducing transaction costs. The sector has also demonstrated an ability to innovate, as around 60% of companies have launched new products or services during this period, especially in the payments sector.
As far as Italy is concerned, “there was a difficult six-month period, followed by a surge at the end of the year, which brought equity crowdfunding collections close to $110 (€90 million), while the lending crowdfunding market more than doubled, in contrast to other European countries,” said lawyer Alessandro Lerro, founder of Studio Avvocati.net and president of the Italian Equity Crowdfunding Association. Lerro, who contributed to the writing of the report of the University of Cambridge, underlined that “today fintech, more than economic or fiscal support interventions, needs regulatory interventions that reduce the impact of bureaucracy and facilitate digital solutions, in a correct balance between innovation, protection of consumers’ interests and maintenance of financial stability.”
It is no coincidence that in the fall the European Commission presented its agenda for the next five years in fintech, highlighting a number of strategic sectors that will see the demand for regulatory support for innovation processes met. “Among all of them, the need to innovate the procedure for opening new customer relationships, from identification, to anti-money laundering procedures, to contract signatures, is emerging; these processes are still too complex, very paper-based and of low efficiency. Consumer protection also needs to be reviewed, as does the processing of personal data in the financial services sector,” concluded lawyer Lerro.
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First published in BeBeez, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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