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Defining fintech to better understand the changing ecosystem under Covid-19

When discussing the amorphous nature of fintech, Tania Ziegler, the CCAF’s Global Benchmarking lead was struck by how ‘fintech’ is increasingly used as an all-encompassing term, describing a diverse range of organisations that all have financial technology at the centre of their operations and agenda.

When the CCAF started planning for the Global Covid-19 FinTech Market Rapid Assessment study, it was important to the research team that the unique nuances of a variety of financial technology models were encapsulated within the survey.

When considering the impact of Covid-19 on the global fintech market, no one measure can truly encapsulate the action taken by the fintech industry to mitigate risk and continue to thrive amid uncertainty. Assessment can only be valid if regions and sectors are examined. But when context is applied - geographical, lifecycle or sector - it can help to identify global solutions through shared insight.

In building the Global Covid-19 FinTech Market Rapid Assessment Survey, the CCAF has established a working taxonomy to emphasise the diversity of the ecosystem. It reflects the nuances between 11 industry verticals, including digital lending, digital payments, crypto-assets, insur-tech and wealth-tech, which are each sub-divided into between eight and 11 categories.

The survey is targeting responses from 15,000 fintech companies around the world in order to better understand how the industry has responded to the pandemic and what some of the immediate regulatory and policy implications are.

Context matters Ziegler highlights that: “Fintech has become quite an amorphous term that means a lot of different things to a lot of different people. From our perspective, it’s very important to establish a working taxonomy or a lexicon that can be sufficiently and readily understandable to several different stakeholders, not just regulators and governments, but more critically, the industry itself.”

Fintech, as defined by the CCAF, encompasses advances in technology and changes in business models that have the potential to transform the provision of financial services through the development of innovative instruments, channels and systems. This is in line with the definition adopted by the IMF and World Bank in their joint Bali Fintech Agenda (2018) and previous CCAF and World Economic Forum publications.

“It’s also critical to highlight that for the purposes of this study, fintech refers to a both a set of activities, which can be regulated or unregulated depending on jurisdiction, contributing to the provision of financial services and the entities facilitating them,” states Ziegler.

She adds that fintech cannot be treated as a monolith - when scrutinising the effect of the coronavirus, research cannot just focus on narrow definitions of fintech, it must look at the wider landscape. In doing this, the taxonomy becomes a living document that evolves by being informed by the activity of the industry itself.

As Ziegler states, “Understanding why fintech has evolved in one way in the United States and completely differently in say, Indonesia, is hugely important. That comparative analysis is going to be critical as that proves context matters.

“We’re looking at everything from the unicorns and established players within fintech, to those firms that are just beginning their journeys. It is also important to note that we are primarily interested in researching innovative companies/intermediaries, financial channels and instruments that have emerged from the traditional finance sector.

“When we’re trying to assess why fintech might be a solution to a situation, we need to look at the local factors to assess why the context is important - where they are geographically and in their lifecycles.”

Measuring growth today Examining the impact of the pandemic on fintech startups is significant as their resilience could have a substantial effect on their local context over the next few months and years. In the same respect, more established companies that are heavy hitters in their fintech verticals cannot be ignored because those that are successful will be the organisations shaping the conversations of the future.

The CCAF encourages fintech companies of all sizes to participate in the survey, as only then can frank discussions be had with regulators, policymakers, stakeholders and clients about the state and future of the global fintech market.

“Covid-19 was an exogenous enemy that no one was expecting. Fintech companies are businesses and they have operational constraints and the extent to which they are resilient, is materially important,” Ziegler says. The Rapid Assessment Survey consists of 15 questions and seeks to capture, analyse and understand the following:

  1. Changes in Fintech Market Performance - How Covid-19 has impacted market performance of fintech firms in areas such as transaction volumes, customer acquisition rates, loan default rates, premium lapses and the participation of retail and institutional investors in the provision of funding across various verticals.

  2. Specific Covid-19 Responses by Fintech Firms - How fintech firms have adapted or plan to adapt their product and services in response to Covid-19, e.g. the launch of new products and services, payment holidays, inclusion of pandemic risk cover, a pivot to facilitating Covid-19 related fundraising activities, reducing or waiving of fees.

3. Regulatory Support or Policy Assistance - Assistance or support fintechs have received or will require from governments and regulators. This might include changes to or fast tracking of regulations, the provision of interim permissions, fiscal subsidies and tax reliefs, as well as opportunities to participate in government-run SME emergency loan, employee job retention or cash disbursement schemes as service providers.

4. Operational Challenges - How Covid-19 has impacted the daily operations of fintechs, including challenges related to client onboarding, human resources, cyber security, fundraising and access to platform-held or third-party data. These four points highlight the issues that any business should prepare for, but Covid-19 has accelerated those plans and shone a spotlight on firms that are well positioned to handle the impact of the coronavirus.

Direct and adapt The CCAF has asked directional questions and will use the survey data to reveal whether resilience amid a pandemic can be determined by geography, vertical or level of development and provide an overview of the performance of the overarching fintech ecosystem.

Ziegler explains: “If you’re a lending platform, we will measure platform transaction volumes. If you’re a digital bank, customer acquisition rates. If you’re an insur-tech, changes in premiums.” Alongside this, specific changes to policies and practices that fintech firms have implemented as a result of Covid-19 will also be reviewed, showing adaptability.

Rooted in robust methodologies, this form of data collection on such a large scale is not happening elsewhere. The CCAF has collected longitudinal time series data on several different subjects for five years and is well versed in the sanitisation, anonymisation and aggregation of said data to create an effective report, ensuring security and privacy is at the core of the project.

Combining behavioural science and qualitative elements will ensure that the report can be utilised by multiple parties and encourage interconnectivity, with a range of fintech organisations participating and sharing how they have been impacted by the pandemic.

It is important to note that with this survey being a Rapid Assessment, the directional questions will provide a baseline for future research and reportage. According to Ziegler, “It also provides a clear synopsis on what is happening in the fintech ecosystem, how they are adapting their products, if they are introducing new ones and if they are going to be in a position to continue activities.”

Ziegler continues: “Fundamentally, Covid-19 is a health crisis, but its reverberations have been felt across the economic and financial health of every country, in one way, shape or form. When we were thinking about how we were going to format this survey, we realised that you cannot ignore what is happening as it is a serious, destabilising force, that is presenting opportunities but is also uncovering pitfalls.”

The CCAF invites participants in key vertical FinTech and Digital Financial Services sectors (digital lending, digital capital raising, digital payments, digital savings, Insur-Tech, WealthTech, digital custody, crypto-asset and consensus services, digital banks and market provisioning) to complete the survey. There are two versions available:


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