The emergence of fintech has been initiated by the Internet evolution in the 1990s, followed by online banking, mobile banking, social media, artificial intelligence, and big data analytics.
Fintech companies are usually start-ups that provide financial services using any form of technology.
During the last decade, fintech companies worldwide have shown a dramatic growth rate.
The fintech sector in the Mena region is expected by industry experts to reach to about $2.5 billion by 2022 with the majority of the amount contributed by the GCC countries.
Bahrain has given the development of the fintech sector a high priority.
In April 2018, Bahrain FinTech Bay was established, as a leading fintech hub in the Middle East and Africa, with multiple partnerships with global businesses.
There are also several successful fintech companies established such as Sharia-compliant cryptocurrency platform Rain, open banking API provider Tarabut Gateway, NEC Payments and BenefitPay.
Undoubtedly, the outbreak of the Coronavirus (Covid-19) has highly impacted the financial sector worldwide.
Due to its spread, the World Health Organisation (WHO) has advised people to use contactless payment and avoid handling banknotes as much as possible.
As a result, fintech and e-commerce were the ultimate remedy.
According to the recent report by Deloitte titled ‘Beyond Covid-19: New opportunities for Fintech companies’, the comparative advantage of fintech companies lies in their unique characteristics which supported them during the current period.
Some examples of this uniqueness are their ability to collect, combine and use data assisting them to provide a customer-centric digital experience.
Furthermore, their simplified technological regulations allow them to build platforms using a cloud-native approach.
An example of their recent success in Bahrain is the 1257 per cent increase in the number of remittances, worth about BD103 million ($273m), through Fawri+ service during the month of March as announced by the electronic wallet BenefitPay.
On the other hand, we cannot neglect the challenges faced by some fintech companies worldwide during the current circumstances, such as the slowdown in funding, drop in the number of newly formed fintech companies, and the reduced income.
Possible solutions for these fintech companies will be to collaborate, be acquired or financially supported by traditional financial institutions.
To sum up, the impact of Covid on fintech companies will depend on how these companies deal with it as it can be an opportunity for some while a threat for the others.
The author is an assistant professor at the University of Bahrain
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