Somebody asked recently how Fintech has managed to survive the economic pressures created by the Covid-19 pandemic. I found it a somewhat curious question as “survive” suggests a struggle, yet for the Fintech sector – arguably more so than any other global industry – the pandemic proved highly prosperous. Up until this year, whether you were providing Fintech solutions to banks or were a B2B or even B2C Fintech, the pandemic was very good for your business. It was a Fintech boom – and there are two reasons why.

Firstly, global lockdowns meant huge swathes of people stuck at home with more time on their hands than usual. This resulted in a massive upsurge of people going online. Whether it was online shopping or online trading, people had more time and arguably more money courtesy of spending less and, for some, even receiving government handouts. The pure and simple effect was digital trading and online investing took off.

We estimate that, over and above existing growth trends, the pandemic led to an increase of between 21-26% in the relative rate of daily downloads of finance-related mobile applications. That equates roughly to an aggregate increase of more than 900 million app downloads that would have likely not occurred in the pandemic's absence.

The second reason for the Fintech boom is the almost risk-free opportunities it presented to investors and traders. At the start of the pandemic, the financial markets took an absolute hammering, as they fell into bear market territory in March 2020, with most markets loosing at least 25% in a single week and unemployment in the US alone soaring to 14.7% by April 2020, the highest since the Great Depression. In fact, the US economy, as measured by real inflation adjusted GDP fell by about 32% in the second quarter. As a result, central banks across the Globe acted to reassure markets that they would do everything in their power to maintain market stability. This was led by the US Federal Reserve as it dropped its target range for Fed Funds by 50 bps and then a further 1% to 0 - 0.25% which was significant given they had not moved rates lower by more than 25 bps increments since the Great Depression. In addition, the Fed restarted its re purchase agreements to the tune of $2 trillion along with an open-ended asset purchase program to inject liquidity into the economy

With all the central bank intervention the initial rapid sell off became a huge buying opportunity across all asset classes as the markets set off on a prolonged rally backed by Fed stimulus, with statements that they would underpin stability; they refused to allow the pandemic to destabilise markets and companies.

Now there is an argument that we are about to start suffering from that, but at the time the way the markets read the situation was that it was almost risk-free. That is why the markets proceeded on one of the longest bull runs in history.

And that is also why, when I heard someone asking about how Fintech “survived” the pandemic, it felt backward. It has been quite the opposite; it has been a race to the top and in our industry – whether you are a robo-advisor, providing online access to your bank, or an online broker – business has thrived. Additionally, due to the amount of liquidity and low cost of raising capital caused by the pandemic, start-up fintech benefitted the most. They effortlessly received great valuations simply based on the ability to acquire customers rather than on profitability.