With COVID-19, known as the coronavirus, spreading across the world, everything is suddenly different. Stuck at home, doing our shopping online, the entire economy is turned upside down. As we previously explored, the measures taken to prevent the disease from spreading is giving travel-startups a tough time as their business comes to a standstill. But where the leisure and travel sector has all but grinded to a halt, the financial world is currently moving in different directions.
So we decided to speak to three leading fintech startups from Amsterdam, The Netherlands to understand what’s going on.
Fintech’s challenges and opportunities, post-COVID
“2020 will be challenging for fintechs to navigate, but there are better times ahead”, says Radboud Vlaar. He is managing partner at Finch Capital, which invests in fintech, AI and IoT startups. In the analytical report titled ‘FinTech: The Future Post CV-19‘, Finch Capital discusses the challenges and opportunities that the sector will face both during and after the crisis. Vlaar sees troubling times ahead, but identifies a clear silver lining: “Post-crisis, disruptive winners will ‘take all’, as we expect surging demand from financial services for technology to master digital-only interaction, enabled by AI and big-data analytics.”
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The thorough shake-up of the way people do business with each other, comes with new opportunities, according to the report of Finch Capital: “Digital-only becomes the new industry norm in financial services, greatly accelerating a trend which started in the last decade. The shift to digital-only triggers a ‘big pocket’ battle between incumbents and challengers to win the newly online customer. And financial institutions turn to tech companies rather than in-house solutions to accelerate digital transformation.”
Crisis leading to ‘exceptional’ growth
Indeed with everyone sitting at home, unable to fork out cash in high street, it is the digital-only payment services that are currently working hard to keep up. Mollie, the Amsterdam-based online payment provider, sees an enormous spike in the usage of their platform. “Our business is constantly growing, but this is exceptional”, says Ken Serdons, CCO of Mollie. “We have seen some big shifts in e-commerce spend over the last two weeks as consumers and businesses are forced to adjust to the situation.”
Mollie raised 25 million last year to realise their international ambitions and the current situation, as dreadful as it is, might give them a push. Serdons: “Last week we processed our largest transaction weekly volume since Black Friday. We are working overtime to try to help as many businesses set up their online account so they can smoothly start selling online. In the last 5 days alone, more than 2,000 businesses signed up for a Mollie account.” Mollie has seen an increase of more than 20 percent in online spend in the last two weeks of March, among customers in The Netherlands, Germany, Belgium and France.
Volatile financial markets
Same goes for Ali Niknam, CEO and founder of challenger bank bunq, which recently expanded its operations to 22 new European countries. The fintech-startup sees increasing activity on their platform. “During these difficult times, a global recession looks inevitable. Even though we’re currently not experiencing any direct setbacks, on the contrary, we see an increase in users joining our bank, we should be dynamic for the times to come.”
The massive shift in consumer spending is not the only thing offering opportunities for fintech startups. Dutch online mobile-only trader Bux notices a lot of people wanting to take advantage of the extreme volatility of the financial markets, as Nick Bortot, CEO and founder, Bux explains: “We see a large influx of people who are trying to either break into the market for the first time and invest with a long term horizon or are in some cases, are going short on the dropping share prices of different companies.” Bux scored €11,4 million in funding last year and is currently expanding its operations to Germany and Austria.
Adapting to the new way of working
Not only their customers are adapting to a new lifestyle. The startups themselves also have to work in a new world, where coming to an office is no longer an option. How are they dealing with these new situations? “One of the main pillars of a safe and secure society is a healthy financial system. The only way to keep the financial system safe is by making it resilient”, says bunq’s Niknam. At Bux, that resilience is built-in, the organisation from the start says Bortot, ” We’re a tech-savvy company and nearly all of our operations are digital, so we have been able to transition to working fully remotely with minimal disruption to our day-to-day business. We’ve tried to translate what we would normally do into a digital environment – and it’s been working rather nicely.”
Mollie’s Serdons agrees that resilience is key for many fintech-businesses to survive: “Fintech is a dynamic industry and many of the startups here in Amsterdam are very agile and used to adapting to the fast changing needs of our customers. It’s heartwarming to see how many businesses are supporting their local communities and showing great solidarity. Web developer agencies are super busy building webshops for retailers who quickly need to move their activities online. At Mollie we have organised a contest for our partners to come up with the most creative and effective ideas to help businesses that need it the most.”
Tough times ahead
Despite the current positive vibes of these three Amsterdam-based startups, the report of Finch Capital claims the fintech-sector might be in for a rough period. Vlaar expects to be in crisis mode until the third quarter of 2020, after which there will be a recovery period of one to one and a half years. During this time, there will be a pull-back of corporate VC-led investments. Startups trying to access funding will encounter higher hurdles, putting pressure on valuations in later-stage rounds. Among the areas under pressure are challenger banks with high valuations, high burn-rates and lower than expected activity after the immediate crisis.
Mollie’s Serdons also acknowledges that there’s going to be tough times ahead. Besides running his business, he is also active in the start-up scene as an investor and mentor to entrepreneurs: “It’s tough to see some great startups see their financing rounds suddenly cancelled and companies now burning through their cash reserves much faster than they normally would. I am convinced that our economy and incredible start up talent will bounce back quickly and will be stronger at the end of this.”