After The Pandemic, What Does the Future Hold for Fintech?


Jul 2020

In the wake of the COVID-19 pandemic and the shockwaves it has sent through global industries, the urgency of digital transformation has accelerated across enterprises. But with its high levels of technological debt, or the cost burden of operating and maintaining end-of-life systems, it is the financial services (finserv) sector that faces the greatest reckoning of all.

What’s more is, with vast social unrest, and other segments of voters in U.S. politicizing masks and refusing to wear them, the virus has resurged in states like Florida, Texas, Arizona, and California. This resurgence has led to a flood of hospitalizations for young Americans between the ages of 20 and 40. While Canada seems to have the spread under better control, many experts also warn of a second wave into the fall.  If a socially distant society becomes the new standard for public safety, then all-encompassing digitization will endure as a permanent market shift.

As the financial industry attempts to achieve a new equilibrium in the face of historic uncertainty, four of Information Venture Partners’ core thesis areas for B2B fintech will propel this transformation forward. These categories of change are Software-as-a-Service for Financial Services, Business-to-Business (B2B) Fintech, Financial Software and finserv-focused Cybersecurity.


SaaS for FinServ

Firstly, the social-distancing measures advised by public health leaders and imposed by governments to mitigate community spread of the virus have accelerated the adoption of SaaS technologies across the front, middle, and back office.

Transformation will be most visible in next-generation employee collaboration via the growing acceptance of remote working arrangements. This means that employees will be videoconferencing more using applications like Zoom.

The heightened procurement of finserv SaaS solutions will also reshape customer engagement, with tools tailored for a more frictionless virtual user experience. Firms will also onboard new vendors and products to enhance workflow technologies, including compliance-focused software that helps them manage regulatory risk more smoothly.

This transformation environment indicates that some horizontal SaaS providers, which have traditionally cast a wide net within enterprise markets, may retool to provide specialized solutions for finserv customers exclusively.

With revenues depleted by pandemic-induced business disruption, and now the protests in the United States, firms of all sizes will also be seeking more intelligent cash management solutions to control costs and pay their vendors within viable timeframes. The virus has only aggravated preexisting complexities and volatility for cash reporting, forecasting, and overall visibility of receivable flows.

But today’s bleeding edge, cloud-and-artificial-intelligence powered solutions can help enterprises consolidate a single source of truth for their receivables and cash projections, across organizational silos, global jurisdictions, and cumbersome legacy systems.

Additionally, increasingly digitized and collaborative enterprise environments will require the same level of intuitiveness and mobile-first product design as consumer apps.


B2B Fintech

Fallout from the virus and emerging social unrest necessarily means fintechs will have to reexamine their mission and operating models in this rapidly changing environment. The key question these firms should be asking themselves is, how do I leverage both old and newly innovative assets to capture new markets carved out by altered customer demand?

Trends that should persist for the time being include subscription-based models, instead of those that generate revenues pegged to transaction volumes or the size of payments. Additionally, the growing primacy of mobile finserv business models should unlock a wave of opportunity for more innovative fintechs that feature highly interoperable APIs optimized for the open-banking movement.

Alternative lenders may also have to retune their credit-scoring algorithms to account for new indicators of risk and considerations for businesses hit hard by the pandemic. To this end, a robust framework for processing alternative data will weed out the next generation of online-lending leaders.

Lastly, and perhaps most importantly, the crisis has set the stage for traditional big tech companies like Facebook, Apple, and Shopify to accelerate their incursion into finserv, openly challenging incumbents and fintechs for market share. All three companies have pursued e-commerce customers aggressively.

In May, Facebook launched ‘Shops,’ a new service that allows businesses to establish free storefronts on Facebook and Instagram. Facebook’s Shops are powered by several third-party services, including Shopify, which itself has experienced a 47-percent jump in sales during the pandemic and became Canada’s largest publicly traded company in May by market capitalization.

And last month, Amazon announced a partnership with investment bank Goldman Sachs’ online personal loan platform, Marcus. This collaboration will allow U.S.-based small businesses to access a new digital credit line. The upshot here is that lean, digital-native and digital-first platforms, capable of vast proprietary data assets, and particularly alternative data assets, at scale will increasingly pose an existential threat to legacy financial institutions.

Given looming regulatory and anti-trust considerations, not to mention Facebook’s failed foray into cryptocurrency, it may not be smooth sailing for big tech to go after big banks. Nevertheless, the threat is real.



With finserv product solutions migrating toward digitization at warp speed, the cyber-attack surface is also increasing at an exponential rate, as each application becomes assimilated into a recombinant ecosystem of integrations with proliferating API permutations of data exchange.

From end points, to APIs, and cloud repositories, open-banking architectures and integrations must be conceived and assembled to be anti-fragile in the face of a more sophisticated and relentless threat landscape.

Just consider that a recent study by threat intel firm VMware Carbon Black attributed pandemic-induced business disruption to a “238% surge in cyberattacks against banks.” Hackers are explicitly targeting “weak links caused by processes and technologies in use by the supply chain,” according to the report.

As such, cyber-anti-fragility has arguably never been more vital, especially as digital transaction volumes have surged due to distancing mandates, introducing new vulnerabilities to the operational resilience of cashless payment systems.

Not only will this besieged IT environment require greater cybersecurity spend, but it will entail the selection of fintech vendors optimized for next-generation regulatory frameworks like the European Union’s GDPR and California’s CCPA.

Both of the laws have introduced new standards and compliance risks surrounding privacy and the safekeeping of user data at all stages of the information lifecycle. In the wake of the crisis, regulators will give firms some leeway on user-data tracking for now, but enforcement is sure to rise when conditions improves.


Financial Software

Financial software will evolve beyond customer resource management and revenue management to better leverage alternative data. These new platform software architectures will unveil better automated decision-making capabilities for spend management.

Cash management, the mitigation of cost relative to revenue, and the forecasting of business activity on a more granular level than prescriptive quarterly reporting will become paramount.

Inevitably, this will result in the adoption of financial software that leverages next-generation artificial intelligence, such as advantaged cognitive analytics and graph learning models, for example. At the same time enterprise chief financial officers will transcend the number-cruncher role in which they have been traditionally pigeonholed and assume a more strategic and predictive roles within their organizations.


FinServ Post-COVID

Obviously, economic interruption caused by at least one wave of the virus will drag on all industries and finserv and fintech firms will not be immune from the ripple effect. As such, some particularly hard-hit fintechs and insuretechs may find themselves to be attractive acquisition targets for incumbent finserv firms.

But in the same way that the 2008 financial crisis galvanized the fintech revolution, leading a new breed of founders to pioneer everything from alternative-lending startups, to robo-wealth management, and even Bitcoin, so too will the pandemic inspire a Cambrian explosion of Western fintech innovation.

At the same time, the ubiquitous digitization of the enterprise environment necessarily means that the cyber-attack surface will be greatly enhanced. Just like fintech, this epidemiological crisis represents a threshold moment for the next generation of anti-fraud and cloud-native cybersecurity technologies.