While the financial services industry was already rapidly
evolving its offerings to meet the increasing demand for convenient, digital
financial tools, the Great Lockdown that began in March 2020 sped up that
evolution, as the need for socially-distanced options that provided access to
important services became urgent. The digital financial service space, which
was once populated largely by younger fintech startups, is now seeing more and
more traditional financial institutions transforming their services for a
digital user base.
Here are three digital financial services that are likely to
thrive in the post-pandemic economy.
1. P2P Payment Apps
Mobile payment apps like Paypal’s (NASDAQ: PYPL) Venmo and
Square’s (NYSE: SQ) Cash App saw major growth over 2020. Total transaction
values from digital payments grew from $4.1 trillion in 2019 to $5.2 trillion
While the rapid growth was spurred by the need for better
payment options in a socially distanced, often remote, pandemic-afflicted
economy, the trend is likely to continue. Payment apps are convenient, reliable,
and safe compared to card-based systems or cash.
2. Online Lending
According to a 2020 study by the IMF, digital lending grew
by 57% between 2017 and 2019, becoming a $225 billion market. While there was a
slight slump in the volume of transactions in 2020, loan providers who have
transitioned to a 100% digital application process are likely to gain a
considerable share of that market.
Online lending platforms make personal loans and other types
of loans more accessible to people who might not have easy access to
brick-and-mortar financial institutions.
“The trend toward 100% digital flows, combined with
alternative credit models that look at more than just an applicant’s credit
score, will likely lead to growing interest in online lending services from
previously untapped customer bases,” notes Phillip Rosen, Founder and CEO of
Even Financial, a B2B fintech company that uses a variety of digital tools to
connect financial service providers with the consumers who could benefit from
3. Online Brokers
Despite the unpredictability of the market, individual
investors began trading more heavily in 2020 than they had in previous years,
making up an estimated 19.5% of equity trading volume in the United States.
That’s almost double the volume individual investors accounted for just 10
Younger fintech companies saw the bulk of this increased
interest in trading. Robinhood, for example, had 3 million new customers join
at the start of 2020 and a trade volume reaching 4.3 million daily average
revenue trades (DARTs). While Robinhood led the charge, more traditional
institutions like TD Ameritrade and Charles Schwab (NYSE: SCHW) weren’t far
behind, boasting 3.84 million and 1.8 million DARTs respectively.
The rise of online brokers with low or no fees, intuitive
mobile platforms, and educational tools have played a big role in this trend
toward more active individual investors. Both young startups and traditional
brokers have entered the online trading space as the demand for
investing-made-simple services continues to grow.
What do all of these financial services have in common? They
increase the accessibility and transparency of tools and services that were
previously either hard to obtain or felt too complicated for “everyday” people.
They have not only unlocked a broader market of people who were previously cut
off from these services, they’ve also created a convenient and modernized
alternative for consumers who were already using traditional methods.
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