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Which Digital Financial Services Are Going to Thrive Post-Pandemic?

·3 min read

While the financial services industry was already rapidly evolving its offerings to meet the increasing demand for convenient, digital financial tools, the Great Lockdown that began in March 2020 sped up that evolution, as the need for socially-distanced options that provided access to important services became urgent. The digital financial service space, which was once populated largely by younger fintech startups, is now seeing more and more traditional financial institutions transforming their services for a digital user base. 

Here are three digital financial services that are likely to thrive in the post-pandemic economy.

1. P2P Payment Apps

Mobile payment apps like Paypal’s (NASDAQ: PYPL) Venmo and Square’s (NYSE: SQ) Cash App saw major growth over 2020. Total transaction values from digital payments grew from $4.1 trillion in 2019 to $5.2 trillion in 2020

While the rapid growth was spurred by the need for better payment options in a socially distanced, often remote, pandemic-afflicted economy, the trend is likely to continue. Payment apps are convenient, reliable, and safe compared to card-based systems or cash. 

2. Online Lending

According to a 2020 study by the IMF, digital lending grew by 57% between 2017 and 2019, becoming a $225 billion market. While there was a slight slump in the volume of transactions in 2020, loan providers who have transitioned to a 100% digital application process are likely to gain a considerable share of that market.

Online lending platforms make personal loans and other types of loans more accessible to people who might not have easy access to brick-and-mortar financial institutions. 

“The trend toward 100% digital flows, combined with alternative credit models that look at more than just an applicant’s credit score, will likely lead to growing interest in online lending services from previously untapped customer bases,” notes Phillip Rosen, Founder and CEO of Even Financial, a B2B fintech company that uses a variety of digital tools to connect financial service providers with the consumers who could benefit from them most. 

3. Online Brokers

Despite the unpredictability of the market, individual investors began trading more heavily in 2020 than they had in previous years, making up an estimated 19.5% of equity trading volume in the United States. That’s almost double the volume individual investors accounted for just 10 years ago. 

Younger fintech companies saw the bulk of this increased interest in trading. Robinhood, for example, had 3 million new customers join at the start of 2020 and a trade volume reaching 4.3 million daily average revenue trades (DARTs). While Robinhood led the charge, more traditional institutions like TD Ameritrade and Charles Schwab (NYSE: SCHW) weren’t far behind, boasting 3.84 million and 1.8 million DARTs respectively.

The rise of online brokers with low or no fees, intuitive mobile platforms, and educational tools have played a big role in this trend toward more active individual investors. Both young startups and traditional brokers have entered the online trading space as the demand for investing-made-simple services continues to grow.

What do all of these financial services have in common? They increase the accessibility and transparency of tools and services that were previously either hard to obtain or felt too complicated for “everyday” people. They have not only unlocked a broader market of people who were previously cut off from these services, they’ve also created a convenient and modernized alternative for consumers who were already using traditional methods. 

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