The Coronavirus has swept into the financial sector and just about crippled the global economy. Global stock market fall, oil price decline, and disruption in various sectors have been the order of the day since more than one-third of the world population has been placed on lockdown.
According to Deloitte, “COVID-19 could affect the global economy in three main ways: by directly affecting production, by creating supply chain and market disruption, and by its financial impact on firms and financial markets. However, a great deal depends on the public’s reaction to the disease.”
Global stock markets crashed in March 2020 after the largest single week decline since the 2008 financial crisis. Although the financial impact of the virus on trade and travel could be difficult to estimate, it is bound to be running into billions and rapidly increasing.
There have also been reports that the United States economy might just get worse than was previously predicted.
In light of this catastrophic event that has literally shut down the world, the financial sector keeps getting massive blows on a daily basis with almost no respite in sight.
However, the world is hopeful that this would pass in no time and that life can assume a semblance of normalcy once again.
How is Coronavirus Impacting The Financial Sector?
The financial sector is one of the most important sectors in the world at any point in time and is one of the most volatile as well. When the novel coronavirus began its onslaught on the world, it was already apparent that this sector was going to be one of the worst hit.
Despite the shelter-in-place order by governments of various countries, the financial sector is not one that can go on breaks on a whim. While people are stuck indoors, financial transactions are still ongoing, else businesses who have found a way to continue their operations would break down completely.
Banks and other financial institutions still rely heavily on the physical presence of personnel, making this period a very tricky one for them to maneuver. Physical branches, while they may be open can only respond to a very limited number of bank customers daily.
Since most people are unable to get into the banks, their lines and social media pages are being besieged with questions and clarifications from frantic bank customers. This period is a pretty dark one for most and they need help determining exactly what their fate would be at the end of the virus.
Filing for unemployment has reached a record high and income sources have dried out. This implies that there would be loan defaulting and issues with mortgage payment. These and more are reasons why bank customer care lines have been ringing off the hook.
Companies that were best prepared for the pandemic were fintech companies. With remote working requirements already in place, not much changed in their mode of operations. The only problem that some of them might face would be funding due to inherent instability.
In order to increase their relevance, fi tech companies have opted to either offer their services free of charge or work on creating a working essential service for businesses that are still standing.
In essence, these are tumultuous times for the financial sector in general and the only glimmer of hope that they are still holding on to is a measure of digitalization.
The Financial Sector Post Coronavirus
The financial sector is going to see a number of major changes after the coronavirus pandemic and the blueprints are most definitely the works already. In the face of the pandemic, financial institutions are tasked with the nearly impossible task of maintaining normal daily operations.
However, the measures in place all in a bid to curtail the spread of the virus do not allow for maximum efficiency.
Branches have closed down and personal contact with bank staff is currently next to impossible. Yet, banks have an obligation to ensure that transactions are completed.
Certain departments have their entire workforce working temporarily from home making banks face administrative challenges previously unplanned for.
The regular guidelines that applied in the physical no longer seem to do the job. Paper-based processes are no longer possible and a significant number of external and internal devices would be available only online.
This brings into the floodlights the importance of digitally transforming the financial sector, especially financial institutions.
An interview with Douglas Fritz showed just how much of an essential role fintech companies have to play the digitization of the financial sector.
As a matter of fact, this is the major thing to expect post coronavirus, the financial sector would be relying heavily on the digital and less on physical processes.
Inadequate preparation made financial institutions very frantic in order to ensure that banking and other services didn’t break down as a result of the physical absence of workers. This is one thing that would definitely be avoided in the near future.
Post coronavirus would see financial institutions evolving to the digital such that a lack of physical personnel would not cause a disruption in any financial process.
To meet up with this global challenge, banks and fintech would be collaborating on a large scale. This would enable them to pool together their respective strengths and take actions that are guaranteed to be highly effective.
Also, in spite of whatever security requirements might be present, the need for digital solutions has been growing steadily over the years and the pandemic is the last straw.
Similarly, Fintechs have a wealth of experience in this area that they have garnered over the last couple of years.
Coronavirus is going to be the reason why players in the financial sector would start to team up in order to avoid services getting crippled.
Seeing that the right strategy is what is necessary to guarantee sustainability, the financial sector is definitely going to rise to the challenge and go digital.
And for individuals with huge stakes in the financial sector, getting top-notch investment advice is going to be a necessity in order to keep up with trends.
Finally, these changes would not be without drastic impacts — impacts that we would see in the days to follow.