Massive surge in fintech app usage due to COVID-19

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Mutoda Mahamba, founder and CEO of Solvency.
Mutoda Mahamba, founder and CEO of Solvency.

Coronavirus (COVID-19)-triggered social distancing, isolation and lockdowns have resulted in a sharp increase in the use of fintech apps across the globe.

Swiss-based financial advisory organisation deVere Group says it has witnessed a massive surge in demand for its financial technology products, with a 72% increase in Europe alone.

The uptake in fintech products comes as the world re-adjusts to life, after governments around the world have instituted lockdowns in an attempt to contain the global pandemic, which is expected to wreak havoc on global health systems and lead to a dire economic downturn, as a recession looms.

However, deVere Group believes the outbreak could have a positive impact on the fintech sector, as more people stay home and use their phones and laptops to make financial transactions.

James Green, deVere Group divisional manager for Europe, notes: “The world has changed in the last few weeks. The measures we’re now all taking to help the fight back against coronavirus are affecting the way we interact, live, work and take care of our finances.

“A new era has already begun, with digitalisation and new technologies driving the shift. This new era has also been evidenced this week with a staggering 72% jump in the use of our fintech apps from existing clients and a sharp increase in enquiries from potential ones.”

Over the last three years, deVere Group has rolled out a suite of fintech apps used across its 100 countries of operation.

“Since the 2008-2009 financial crash, fintech has been filling the void left between what traditional financial services companies are offering and what clients are now expecting, especially in terms of customer experience. In broad terms, this means immediate, on-the-go, 24/7 access to, use and management of their money. It means personalised, on-demand services and lower costs,” notes Green.

It can be expected that due to the coronavirus pandemic and the steps being taken to combat it, this move towards fintech will be significantly accelerated, resulting in increased online activity in future, he adds.

There are more than 12 000 fintech companies operating across the world, and Goldman Sachs estimates the global fintech market to be worth $4.7 trillion.

In Africa, fintech remains an active vertical, with fintech deals accounting for about 18% of the almost $290 million invested in 88 disclosed deals in 2019, according to Ventureburn.

Digital winners

David O’Brien, founder and MD of local insurtech company Meerkat, which is currently in live beta-testing phase, says the company has seen increased activity on its app from consumers who are interested in emergency savings and insurance plans.

“We see spikes in traffic as people look to learn more about how they can improve their finances. Sadly, many people are now realising that an emergency fund is very important, because they do not have one. Our small beta group have begun accessing their savings to augment their reduced income.”

More South African consumers will learn new financial habits during this period, as they will prefer not to venture out to visit branches or ATMs, notes O’Brien.

“Once learned, they will retain the habit, and a change will have happened. The financial services companies that offer comprehensive digital services today will be the winners.”

Consumers’ increasing comfort with digital interaction, amid being stranded in their homes, will lead to reducing the barriers to digital adoption in future, which is set to benefit new and upcoming fintech start-ups, adds O’Brien.

Global online payments platform Boku told Barron’s it has witnessed a 30% rise in payment volumes from people who pay for online gaming, music and video streaming services, as more people stay home.

Mutoda Mahamba, CEO and founder of local insurtech firm Solvency, says while there has been a lot of fintech activity in the local sector, with consumers increasingly being offered a wide range of innovative products, this is expected to increase.

“While we’ve only experienced three days of the envisaged 21-day lockdown period, due to the digitised nature of our offering, we have continued to see app usage well into the late hours of the night. People have more time for online browsing; hence one would expect business to continue as normal for Solvency.”

Mahamba points out that while it’s business as usual for Solvency, in a worst case scenario, the pandemic could lead to consumers’ income/earnings being affected adversely, in which case he could expect clients to cancel their insurance.

“This has always been the phenomena when there is an economy downturn; the first thing that consumers cancel is insurance in an effort to increase disposable income. One would have to resort to personal loans or credit cards – which are more expensive than paying regular insurance premiums,” he notes.

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