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How Can Fintechs Leverage Technology In The Times Of Economic Uncertainty?
COVID 19, the Russia-Ukraine conflict, supply chain interruptions, rising prices, and stagflation low growth and high inflation are generating a worldwide economic disaster Makers of the Square. The IMF said that three-quarters of G20 central banks had raised interest rates by 3.8 times since July 2021 due to growing inflation suntell. Inflation and recession threaten. Scaling is suffering from the economy. FinTechs must establish new business models and manage their organization to scale swiftly to achieve continuous revenue growth with optimal cost and resources to prepare for the coming crisis. FinTechs should assess their technologies to aid economic development and transition throughout the crisis. Most firms suffer during recessions due to falling revenues and uncertainty. Reduce economic upheaval. During 1980, 1990, and 2000 recessions, 17% of 4,700 public enterprises went insolvent, privatized, or were purchased. 9% of enterprises outperformed competitors by at least 10% in sales and earnings three years following a recession. Bain & Company discovered that the top 10% of organizations' profitability grew continually throughout and after downturns because they adopted new technologies.
Impact of Recession on FinTechs
Leading FinTechs warned of deteriorating macroeconomic conditions at Money 20/20 Europe. Klarna, a buy now, pay later lender, is raising capital at a 30% discount to its $46 billion valuation, while Affirm lost two-thirds of its stock market value since 2022. Financial institutions and FinTech will suffer from the approaching recession. FinTechs must adapt to the approaching recession Makers of the Square. This article summarizes the FinTech industry's biggest recession challenges:
Managing Loans
There will be changes in the demand and supply pipeline for loans as a result of the recession, which presents an opportunity for FinTechs to capitalize on innovative offers that will not only satisfy but also please clients. Because loans are the lifeblood of a bank's bottom line, they are also its most vulnerable asset when the economy is unstable. From the perspectives of loan origination, loan servicing, and loan management, the lending industry must strike a balance with the capabilities of technology in order to build a robust pipeline and portfolio.
Managing Investments
Immediately after the pandemic hit, digitization became the standard for all businesses, paving the path for FinTechs to provide inexpensive means of fundraising, account settlement, and collections. FinTechs have recently made shrewd investments to facilitate smaller, higher frequency, and more varied transactions. To weather the coming economic catastrophe, however, they will need to make investments in cost-cutting methods like as technology, product simplification, expanding borrower self-service options, raising resource productivity, and so on.
Managing Payments
FinTechs will suffer from recession-driven inflation and increasing interest rates. FinTechs must invest in long-term economic decline chances to mitigate the damage. Despite the recession, US banks will invest 10.6% more in technology in 2022 to strengthen digital payments. To survive the crisis, FinTechs must recognize the rising popularity of digital payments among Gen Z and millennials worldwide. FinTechs may capitalize on economic volatility by being relevant to B2C and B2B customers.
Managing Secured Transactions
Fraud and suspicious activity will skyrocket in FinTechs during the recession. FinTechs must be careful and prepared to invest in long-term fraud control measures enabled by cutting-edge technologies to monitor client business flow. Cloud-based technologies will aid struggling firms with loan origination and servicing. FinTechs may navigate post-recession market adjustments and industry fate by investing in technology's future.
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