The fintech sector is being reshaped by the Covid-19 pandemic. We answer some of our readers' most pressing questions on the state of the industry and what to expect in the future.
The first quarter of 2020 was difficult for the financial services sector. Fintech funding stalled amid the Covid-19 pandemic as investors largely pulled back.
Our recent webinar, Covid-19 Has Shaken The Economy: Here’s How Fintech Is Adapting, touched on some of the key trends in our State Of Fintech Q1’20 report, including how fintech companies are responding to the pandemic, bright spots to watch, and how fintech unicorns have fared.
Below, we answer some of our readers’ most pressing questions from the webinar on the state of fintech.
Which proposed regulations or legislative changes will shape the future of fintech?
While regulations and legislation are geographically dependent, there are several noteworthy developments around the world. Firstly, regulators in the US are becoming more amenable to fintech companies acquiring bank charters, as we’ve seen with Lending Club and Square. Secondly, we’re watching global digital currency and stable cryptocurrency regulations to see how crypto plays out. Finally, we’re keeping an eye on global open banking regulations and their impact.
As new business models emerge following Covid-19, which sub-sectors of fintech will see higher growth?
We expect financial services networks & infrastructure and e-commerce enablement to continue to see lots of investment and early-stage activity.
What is the appeal of cybersecurity insurance?
Traditional commercial insurance products do not cover data breaches, network interruptions, or other cyber risks. While companies are heavily investing directly in cybersecurity technologies to prevent these attacks, they’re also increasingly purchasing cyber insurance policies to protect themselves in case of an attack.
The complexities of these risks and the lack of extensive historical claims data have led to some uncertainty in the cyber insurance market. However, the nascent market — estimated to be worth over $20B, according to CB Insights’ Industry Analyst Consensus — presents an opportunity for insurance companies.
Q2’20 saw some major financing rounds for companies like Stripe and Robinhood. What does the fintech funding landscape look like at the moment?
The space looks like it’s in a holding pattern. That means that companies are drawing on all available financing options, including “extension” rounds (like Stripe’s Series G). It also means that investors want to remain liquid and are more hesitant to lock funds up in earlier-stage opportunities. Therefore, investors are putting money in later-stage, more mature companies (like Robinhood) with clear unit economics and paths to profitability. In general, we expect continued uncertainty and funding pullbacks.
