When economic activity across the world grind to a halt, the direct impact is diminished payments activity. Not all payment activity is impacted, however, as consumers and businesses still purchase the essentials and can do so online or without human contact. Nonetheless, payment activity will be severely impacted as well as other types of financial activity as everyone cuts back in a protracted period of uncertainty.
2019 was an active year in FinTech in which $18 billion was invested in the space compared to $13 billion in the year prior. And M&A and partnering activity was robust with the industry seeing some of the biggest deals including Fiserve and First Data, Visa and Plaid, Apple teaming up with Goldman Sachs on a new credit card, PayPal and Honey, Schwab and TD Ameritrade, Morgan Stanley and E-Trade, LendingClub and Radius Bank, and Intuit and CreditKarma, among others.
FinTech companies facilitate the billions of transactions across the world on a daily basis and there is no doubt that economic activity will resume once the coronavirus clears but what will be the aftermath for those who were less liquid and financially prepared heading into the crisis?
One likely and strong possibility is that those companies with strong balance sheets and whose stock prices have held up relatively well will be on the hunt for acquisitions. Large financial institutions such as JP Morgan and Goldman Sachs who have the wherewithal and who are eager to expand their operations into the various areas of financial technology will be keen on picking through FinTechs in a weakened position. However, they aren’t the only ones who will be on the hunt.
Stripe, for example, could look to expand by acquiring another payments company. After all, they recently received $250 million in funding and have both Visa and American Express as investors. And MoneyLion, with 5 million customers, could align with a traditional bank to gain even more market share by leveraging its customer insight analytics to cross-sell and for product development.
Many other FinTechs are in a position to think creatively during the aftermath and improve their positions in the overall financial technology ecosystem. Perhaps the wealth management platforms will become more active as individual investors seek better solutions for protecting their nest eggs. Or digital banking companies more aggressively roll out solutions for those seeking to rely less on services that revolve around brick-and-mortar interactions.