| | | | FEATURED CHART HOW THE CORONAVIRUS COULD AFFECT FINTECHS: The coronavirus has spread to over 80 countries, including the UK and the US, with total cases surpassing 100,000 as of Friday. Fallout from the virus has the potential to significantly affect the fintech landscape, posing a boon in some segments while hindering others.
Here are three ways the virus could impact fintechs across industries and geographies: | | | Boost in demand for certain insurance types The virus' dominance in headlines may increase awareness of insurance and boost demand for health and life coverage, as well as business interruption and event cancellation coverage – for instance, the outbreak has led to many conferences and events being canceled at the last minute. At the same time, we do not expect insurers to face a meaningful rise in claims on the back of this outbreak: Most travel insurers, for example, exclude pandemic, epidemic disease or infectious diseases from their coverages, meaning that likely only few will be affected by the virus.
| | | Consumers wary of investing Stock markets have been highly volatile in the past few weeks, largely due to the coronavirus, while many fear a global recession. And the Federal Reserve has already implemented an emergency rate cut – marking the biggest one–time cut in the US since the financial crisis – indicating that the virus is already impacting the economy. Under these uncertain circumstances, consumers may be less keen to invest their savings, impacting digital wealth managers that conventionally make money by charging customers fees that are a percentage of assets under management, while online trading platforms like Robinhood and eToro could be faced with declining trades.
| | | WORST NEGATIVE IMPACT ON CHINESE FINTECHS Funding for Chinese fintechs was already down in 2019, likely due in part to trade tensions between the US and China: In Q4 2019, fintechs only secured $298 million, down from $1.8 billion during the same time the year before, per CB Insights. Having originated in Wuhan, China, the coronavirus is making the country’s economic outlook particularly uncertain, and more investors may shy away from the market as a result. That means Chinese fintechs might need to prepare for an even less funding–friendly environment in 2020 and shift their focus to a sustainable business model that isn’t reliant on the constant influx of external investor money. Of note, this will likely not be exclusively limited to Chinese fintechs – for instance, VC firm Sequoia has warned startups to “brace for turbulence,” per Business Insider. |
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