5 ways COVID-19 is impacting fintech startups

We’re living in a new macroeconomic narrative with major changes taking place every day. We’re also witnessing exceptional measures being put in place to support startups, for example France making €4 billion available and Germany pledging a €2 billion aid package. Several measures have been put in the place by the Dutch as well. And as the innovation community starts to mobilise and demand support, we might see the UK putting forward some aid. Other governments, such as the Spanish, are experimenting with the universal economic income.

To give you a broader view of the impact on startups here’s a survey on the Dutch startup ecosystem. The survey showcases founders and venture capital firm’s perceptives and sentiment, current needs and possible measures to be taken. Most founders indicate the need for short term funding, while 65% of venture capital funds are delaying investments.

Making sense of it all is not an easy task. What are the implications for startups and for fintech startups in particular? Only couple of weeks ago these startups were living one of their best years for some time.

Not surprisingly, we’re already seeing the first signs of fintech startups adapting. Most of them have the advantage of having built agile teams and systems. It’s now a matter of their resilience and the relevance of their services.

To give you a better overview, we’ve put together five tendencies we’re seeing in the industry right now.

  1. Funding in the new normal

If you are a fintech startup looking for funding you might want to postpone it, as some suggest. On a positive note, the startups which will survive, might become market leaders.

For those succeeding to close rounds, we are seeing rounds raised from current investors together with angels such as the case of Yapily. Other fintechs which have closed in the last weeks are Lunar or Lanister.

2. Major switch to online events

The fintech startup industry, much like the tech one, is quite reliant on events. Several times per year the fintech innovation community would get together in cities such as Amsterdam, Berlin or Paris. This is when partnerships are sealed, or funding deals are signed. Most of these events are postponed or cancelled. Some have already pivoted into free virtual events with live Q&As and mobile apps or a series of webinars. As online events became the norm, startups should repurpose budgets towards customer facing initiatives.

3. Opportunity for online financial services

For those challenger banks and fintech apps with customers working from home, a new opportunity arises. An increase in digital payments and a sharp rise in mobile app adoption means some fintech apps are seeing a 72% surge increase in usage.

Neo-banks such as Monzo are offering a range of repayment options for overdrafts or loans. Others such as Tide are offering guidance to their business customers, creating guides and newsletters.

We’re also experiencing some unusual partnerships, with the likes of Microsoft teaming up with Plaid to let people automatically import their bank and credit card account data in Excel.

4. Risk-taking for some

Some startups are walking the talk and are launching new products. An example of a startup taking risks is Bux, which recently launched a new cryptocurrency platform with zero commission. Venture capital firms are betting on crypto with Speedinvest announcing a partnership with Austrian cryptocurrency startup Bitpanda.

5. Community-focused initiatives

Fintech startups are also supporting the community during this though times. From free advice, to cancellations or waiving of transactions fees, to donations to non-profit organisations and hospitals, to never-before-seen customer-centred products. This might the beginning of a new industry behaviour where the needs of the community are becoming a business priority.

What’s next?

The new macroeconomic narrative and new routine will eventually transform into the next normal. What will happen then and how can you prepare your team and your business? These insights from McKinsey (see section 3 and 4) can help in understanding the shift in consumer behaviour, regulations, organizations or supply chains. For your mid-term planning consider three possible scenarios: end of confinement, partial going back to work and the start of the recovery.