Fintech Companies are Experiencing Optimism from Investors

July 28 07:13 2020
Fintech companies are companies that provide all the necessary programs and logistic supports required to perform financial transactions online. This cluster of categories includes technology-based financial institutions such as banks, payment gateways, credit services, and many others.

Venture capitalists appreciate this sector for their massive future potential, with the companies, billed for greater expansion in the year 2020. However, then the COVID-19 pandemic happened. Similar to all the business sectors, the unprecedented circumstances have affected most of the companies in the Fintech industry. Many of them canceled their future guidance, while some others are projected to go out of business entirely. Some companies are also hoping for the governments to bail them out, which is unpredictable. The trends and data presented by Meteo Finanza offer some insights about the rise of Fintech companies, that help understand what will happen next to this sector. 

Survival is the Biggest Challenge

Like any growth sector, the majority of the Fintech companies were spending more money than they were earning, posting big losses on the balance sheets. It wasn’t that big of a problem, as investors are quite content with the losses at the expansion period of the business. However, different times call for different actions, and the looming recession fears caused by the pandemic may see investors and governments opting to save only a few established names. That leaves others fearing for their survival.

The companies that had a good balance sheet, on the other hand, can use this opportunity to expand their hold on the market. At the end of the day, the ones that would survive this crisis can look forward to a rosier, competition less future shortly.

Massive Shift in Consumer Behaviour

As the reported data for the last quarter showed, people are shifting more and more towards performing all their financial activities online in light of the crisis and social distancing measures. They are performing more and more online transactions for shopping to account for statements and transfers. With companies like Square, already allowing their staff to work from home permanently, it is safe to assume that many others would also follow suit; paving the way for a greater amount of financial transactions to happen online.

Therefore, although the Fintech sector can experience a bit of a slowdown in income in the short term, they are greatly positioned to benefit from these changes in our lifestyle.

Funding Possibilities for Investors

The funding events that the Fintech start-ups use to aware investors and raise funds are at a halt at the moment. Once we start to get back to normality, analysts are predicting those events to be organized more frequently. Considering the growth potential and the proven record of dealing with this crisis efficiently, it’s more plausible for investors to inject a massive amount of their piled-up cash into the Fintech sectors, fuelling their growth at a rapid pace.

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