Written by Andrew M. Dahdal, Janos Barberis, Prof. Gordon Walker, Prof. Jon M. Truby and Prof. Douglas Arner.
In the midst of 2020’s global pandemic, an unlikely alliance was formed between COVID19 and technology. The nature of the virus alongside containment measures has resulted in almost seamless inception for digitalisation. I.e, social distancing and (now) online meetings.
Financial technology is of no exception. In this article, we explore further the impact of COVID19 on Fintech. Read the first debate on how the pandemic will impact InsurTech and Payments here.
Crowdsourcing and crowdfunding: Using behaviour for the benefit
The wisdom of crowds is perhaps most apparent in the context of mass consumer behaviour. The purchasing behaviour of the consuming public provides real-time indications of trends and fashions. However, it can just as easily highlight public consternation and even full-blown panics. Using digital financing tools to aggregate purchase information (of medical supplies for example – or toilet paper as in the case of Australia) these data points can help identify emerging panics in given population centres. As Artificial Intelligence (AI) analytics technology develops, such sources of information can be easily correlated with other data sets (such as for example, social media communications) to provide even more specific measures of public sentiment.
On a more practical level, various online communities around the world have begun to organically coordinate and crowdsource information in order to help efficiently design, manufacture and distribute medical supplies where they are needed most These groups include engineers, chemists, logistics expert and many other professionals as discussions and ideas are moderated and filtered through various socially co-ordinated channels.
Crowdfunding initiatives (and their supporting platforms) are emerging as vital decentralised lifelines in times when the capabilities of centralised governmental control are being severely tested. Members of the public who might otherwise feel powerless in the face of the virus, have committed millions of dollars to COVID-19-related crowdfunded causes. These include everything from a high profile crowdfunding campaign launched by football superstar Zlatan Ibrahimović, to less high-profile causes relating to people facing economic hardship due to virus-related job loss. Even the Centre for Disease Control (CDC) has turned to crowdfunding, whilst a GoFundMe page for the San Raffaele hospital in Milan has raised over 4 million Euros hitherto. Further, leading Ethereum crowdfunding platform GitHub has likewise announced it will have public health focussed funding round.
Although start-up funding via crowdfunding platforms will take a hit due to the virus, the platforms themselves are proving both useful and versatile. The case can even be made that crowdfunding is, in fact, helping the fight against COVID-19 through its ability to financially support, for example, frontline medical staff who have contracted the virus and been forced into self-isolation (without pay).
The norms of social interaction are shifting due to concerns over the spread of the virus. People across the world are have been instructed to minimise physical contact in the course of their everyday lives in order to slow the spread of the virus. Digital wallets supporting contactless payment and other forms of contactless transacting are proving to be not only more convenient and faster than traditional cash or card transactions, but also more hygienic. The decades-old drive towards a cashless society now has an even more compelling justification.
Housebound or Household name: What will stick?
As quarantine procedures are being implemented in countries where the virus has appeared, millions of people around the world are being restricted from leaving their homes in what is being dubbed ‘social distancing’.
This is changing peoples habits. This change can be measured by looking at the significant spike in e-commerce activity, home entertainment use adoption (i.e. streaming services) and home delivery services. Digital financial services and payment platforms are a key component of the online commercial sphere people have been forced to occupy.
The response to COVID-19 is essentially a large-scale social experiment. The shock is priming people’s behaviour towards more online and digital options. Once the crisis resolves, it is very likely that the habits, cost savings and convenience factors made available to consumers through this crisis will stick.
There is a precedent.
Following the 2008 crisis, financial institutions began to favour video-conference meetings over cross-border travel as part of cost-cutting measures. Banks invested in the necessary hardware and people were incentivised to use these (at the time – new) tools. 10 years later, videoconferencing is the norm for many meetings around the world and is sustaining many sectors (such as education) in these unprecedented times.
Given that the digital infrastructure already exists, the COVID-19 outbreak will likely be the catalyst propelling an even faster adoption of activities relying on digital financial services.
Tokenisation: At risk?
Certainly one of the more controversial innovations where digital finance and the COVID-19 crisis overlap has been the announcement of a so-called ‘CoronaCoin’ crypto-currency. The idea behind the token is that the supply of the coin will diminish every 2 days at a rate connected with the fatalities caused by the virus. This will push up the price of the coin rewarding investors with a return. The total supply of the tokens is based on the global population and 20% of proceeds will be donated to the Red Cross. What utility the coin provides, or where the coin can be used remains unclear and many (including Forbes magazine) have labelled the cryptocurrency a macabre gimmick.
As noted by the developers of CoronaCoin, however, the idea of a cryptocurrency where virus or diseases are an underlying asset-condition, is not dissimilar to the World Banks 2017 ‘Pandemic Bonds’ which were designed to help developing nations facing infectious disease outbreaks (but which are currently being offloaded by investors and have never, even now, paid out).
COVID-19 has impacted global trade and finance with a vengeance. The magnitude of the disruptions and the scale of the actions being taken by governments is unprecedented. Throughout this crisis, the digital financial infrastructure which has largely emerged (and matured) since the financial crisis of 2008, has silently accommodated relief efforts on several fronts. Insurance, money transfers, commercial transactions and fundraising have all proven resilient and responsive in the face of the virus. As efforts ramp up to find a vaccine and help victims recover, FinTech is proving to be a latent but vital social infrastructure amongst the chaos. It is clear that digital financial technologies are helping to steady the ship and steer a path out of the current challenges.