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Financial Services Professionals Say Lending Sector to Take A Year or Longer to Recover to Pre-COVID Levels: Survey

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The COVID-19 pandemic has accelerated the shift to digital with financial services, according to a recent report from TransUnion (NYSE:TRU), a financial services data platform and credit report provider.

The report notes that the Coronavirus outbreak sent “shockwaves” through the financial services sector and has “challenged the way lenders have historically operated.” TransUnion also mentioned that as more commerce begins to move to all-digital platforms, “empowered” consumers will have even more power or control in today’s global, technology-driven economy.

The company’s report pointed out that 40% of consumers are now using all-digital channels more frequently than before the pandemic began. The increase in the use of digital services is taking place at a time when 60% of consumers say that “the majority of their financial transactions are conducted via mobile applications.”

The report also revealed that one in three consumers are “engaging with their preferred financial institution multiple times a week via digital channels and roughly two in three are utilizing such platforms a minimum of once a week.”

Liz Pagel, SVP of consumer lending at TransUnion (and moderator of the Future of Lending roundtable discussion recently held by the company), stated:

“The pandemic has acted as a catalyst for lenders to adopt new technologies and stay competitive in this changing environment. A strong digital presence is now all but required to meet the evolving needs of consumers. Financial institutions that prioritize digital innovation to optimize their consumer interactions are likely to see the most upside over the long-term.”

Although the lending sector is going through a period of recovery following COVID, organizations are beginning to make plans for the future, the TransUnion team confirmed.

Around half of a group of 20 financial services professionals recently stated (during a Summit organized by TransUnion) that the lending sector could take at least a year or longer to “return to pre-COVID levels.” Despite these challenges, the financial services executives said their companies would be making additional investments in improving their digital capabilities because of changes in the business environment due to COVID.

Pagel added:

“Consumers are now accustomed to receiving highly customized retail offers through online channels. As a result, they now have higher expectations for their interactions with lenders. Lenders who integrate into the purchase moment, or who provide customized, relevant credit offers are seeing outsized growth.”

She also mentioned:

“As retail and financial services interactions continue their accelerated shift to online channels, lenders will need to continue to invest in seamless engagement, underwriting and servicing experiences – companies who can make every consumer touch point customized and smooth will win in the future.”

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Southeast Asian Countries are Increasingly Adopting Digital Payments, but Regulatory Issues May Slow Adoption, Fintech Exec Argues

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Fady Abdel-Nour, Head of Global M&A and Investments at PayU, a Fintech firm that provides payment technology to online merchants, has noted that regulators in Southeast Asia are working hard to ensure that digital payments are adopted by consumers.

Abdel-Nour has pointed out that UPI, digital wallets, and various mobile-based payment apps are now being supported by progressive regulations which have led to their successful adoption in many Asian countries.

He claims that there are still several Southeast Asian nations that need to be doing a lot more, in order to help consumers with conducting digital transactions. For instance, Indonesian Fintech companies have revealed that they’re now waiting for a really long time before their applications for banking licenses are reviewed by regulators.

Abdel-Nour argues in a blog post published by Fintech Magazine that these types of issues can slow down the adoption of digital platforms and services, which have become essential following the COVID-19 outbreak. Abdel-Nour recommends that regulators should ensure that they are taking measures and introducing policies that offer consumer protection (like appropriate KYC and AML guidelines).

In addition to regulatory challenges that may be slowing down the adoption of digital services, the Southeast Asia region has been hit hard (especially small businesses) due to the pandemic.

As reported in late September 2020, Indonesian regulators and Fintech firms are now focused on balancing regulations with responsible innovation.

While the payments sector of Fintech has managed to grow steadily, with more consumers conducting digital transactions, peer to peer Fintech lenders in Asia are struggling right now. As reported recently, the Indonesian Fintech Lenders Association has set up a task force to help P2P lending firms deal with the rising number of bad loans.

Other challenges faced by the Fintech sector in Asia include a general shortage of qualified finance industry professionals. As covered, the Southeast Asian country of Vietnam needs more qualified workers and better overall policies to expand its Fintech sector.

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Americans don’t want to give up their paper money, but they should

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The recent health scare surrounding the COVID-19 outbreak seems to have accelerated the move toward a cashless society, with cashless payment spiking in concert with viral cases.

Yet, our findings in a Genesis Mining study called “Perceptions and Understanding of Money 2020” indicate that a significant majority of Americans are not psyched about parting with their paper money on a permanent basis.

To be more specific, we found that 60% of respondents are opposed to the idea of paper money being replaced with “digital-only money.” This could be a “devil-you-know” versus a “devil-you-don’t-know” situation where familiarity with paper money is the driving force behind the wariness of giving it up. This is understandable, but if resisting change were humans’ driving principle, then progress of any kind would be impossible.

It is possible that better acquaintance with the advantages of digital transactions could change the minds of those willing to have their minds changed.

It is also possible that the movement toward a cashless society is a non-Democratic issue — that is, it could be inevitable, depending on who wishes to see a cashless society emerge. Embracing the benefits of digital money could ease our transition into a new financial frontier.

COVID-19 has accelerated the cashless revolution

The U.S. news outlet Axios cites several figures and facts indicating that increased health-consciousness amid the global pandemic has accelerated the migration toward a cashless society. Its findings include that:

  • People in various nations are wary of physical money, which they see as a potential conduit for viral transmission.
  • 63% of consumers report using cash less often than they did before the pandemic.
  • Payment for goods and services through apps and websites, rather than with physical money, has increased.

Of course, we must consider the fact that quarantine measures have prevented many from accessing ATMs, paying for goods and services in person, or engaging in activities where they might normally use cash. In some sense, the increase in cashless payments has not been completely reflective of voluntary consumer attitudes. It may, however, be habit-forming.

The idea that your dollars and coins are dirtier than you would like to consider is — unlike the coronavirus — not novel. A 2017 study found that a collection of bills circulating around New York City contained various bacteria and viruses.

Many people’s aversion to unnecessary risk has been illustrated by widespread willingness to wear masks, quarantine and take other health-conscious precautions. Foregoing physical money in favor of primarily-digital payments could be increasingly viewed as yet another way to protect oneself from possible viral infection.

The benefits of going cashless

Even before “COVID-19” became a universally-recognized term, advocates for digital payments were touting the perks of completely or largely-cashless societies. We’ve already touched on the potential health benefits of eschewing dirty cash for cleaner forms of payment.

In addition to health benefits, the advantages of cashlessness — among others — may include:

  • A greater difficulty for muggers and thieves to rob you of your physical money.
  • A greater ability to trace illegal activity that could be more easily perpetrated by laundering cash through businesses, banks and other means without a trace.
  • Commerce-related perks, which Visa notes include faster transactions (on average), less hassle for customers who would otherwise have to procure, store, count and dole out cash, and the fact that customers are statistically more likely to spend more at a business using a card rather than cash.
  • Ease of currency exchange.

Some forms of digital payments may also provide greater security. Security standards used to protect cryptocurrency wallets are being adopted for other purposes, as Big Four audit firm Deloitte noted, and the further adoption of such practices could further bolster asset protection in a cashless society.

The move toward cashlessness falls in line with the general shift toward global uniformity, for better or worse. Some note that uniformity itself is not necessarily a net positive — one of several critiques of emerging cashless societies.

Critiques of going cashless

It would be unfair to pose the prospective benefits of going cashless without mentioning known drawbacks and still-unfounded critiques of the cashless concept.

For one, there is the notion that moving all nations and individual cultures toward a universal standard of exchange is akin to whitewashing. There is something to be said about coming home from a vacation with a paper bill or coin that you had never before seen or held as a keepsake of your trip. Losing the uniqueness of different currencies is a fair concern, to be certain. But is it a greater loss than the potential benefits of cashlessness?

The answer to that question may vary, depending on your values and beliefs. Other critiques of taking societies cashless include:

  • The elimination of cash will be followed by the imposition of ubiquitous transaction fees for businesses and consumers, which, without the alternative option to pay with cash, may be unavoidable and costly over time.
  • Cashlessness represents a greater trend toward limited choice and autonomy.
  • A reduction in cash services will eliminate a substantial swath of jobs that revolve around cash processing, issuance and management.
  • Less cash and more easily-traceable digital transactions mean less privacy.

These are not illegitimate concerns, and there is a debate to be had. Alleviating these concerns with robust security measures and good faith will be necessary to make a fully cashless society work as it should.

Conclusion

With proper oversight and security, the move toward cashless payment mechanisms could provide numerous benefits, and cryptocurrency-level security may be an integral feature of the move toward cashlessness.

There are certainly kinks to be worked out and concerns to be addressed, but the age of COVID-19 has further reinforced that a shift toward all-cashless payments may be not only beneficial but more necessary than many previously realized.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Marco Streng is the CEO and a co-founder of Genesis Group and Genesis Mining — one of the largest crypto mining companies in the world. Prior to co-founding Genesis in 2013 and becoming an impassioned advocate for blockchain technology and cryptocurrencies, Marco studied mathematics at the Ludwig-Maximilian University of Munich.

Americans don’t want to give up their paper money, but they should

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