Despite Covid-19, the global fintech industry has continued to grow, but regulatory changes are needed to improve the situation, research has found.
On average, fintech firms reported growth in transaction numbers and volumes of 13 per cent and 11 per cent respectively, according to a new study by The Cambridge Centre for Alternative Finance (CCAF), the World Bank Group, and the World Economic Forum.
It gathered data from 1,385 fintech firms in 169 jurisdictions, and revealed that 12 out of 13 fintech sectors reported year-on-year growth for the first half of 2020, compared to the same period last year.
Digital lending was the only sector reporting a decline during the period, with an averaged eight per cent drop in transaction volumes.
Fintechs which are facilitating digital lending also reported an averaged six per cent fall in issuing new loans and a nine per cent rise in defaults on outstanding loans.
Meanwhile, digital payments, digital savings, wealthtech and digital asset exchanges all reported year-on-year growth in transaction volumes in excess of 20 per cent.
Digital banking, digital identity and regtech sectors showed more modest growth increases of around 10 per cent.
The impact of Covid-19 on market performance was found to be uneven across industry sectors, geographies and dependent on the levels of economic development, as well as Covid-19 stringency in a given jurisdiction.
Geographically, fintech markets with particularly stringent Covid-19 lockdown measures averaged transaction growth 50 per cent higher than those in low stringency countries.
Some fintechs said they had benefited from regulatory responses to the pandemic but called for more and faster reactions related to supervision.
17 per cent reported benefiting from regulatory support for e-KYC, 13 per cent from simplified customer due diligence and 12 per cent from support for remote onboarding.
More than half reported a urgent need for faster authorisation of new activities, with 31 per cent seeking more streamlined product or services approvals and 30 per cent calling for simplified customer due diligence.
Around a fifth (24 per cent) indicated that an urgent need for admission into a regulatory sandbox is required.
The research found fintechs adapted during the crisis with 92 per cent having launched or being in the process of launching new products or services.
Despite this, the pandemic is still causing operational and funding challenges.
More than half of firms said their capital reserves have been negatively impacted by Covid-19 and about 40 per cent reported that the pandemic had negatively impacted their firms’ valuation.
“This study reveals a global fintech industry that has been largely resilient in spite of Covid-19,” said Bryan Zhang, co-founder and executive director of CCAF.
“Nonetheless, its growth must be interpreted with nuance and in the context of unevenness, and the opportunities for the industry should be juxtaposed with the challenges it faces.”