Fintech firms register growth in activity during pandemic

Fintech firms have seen a significant spike in activity during the Covid-19 pandemic, a panel of experts revealed during a roundtable discussion recently.

While start-ups and venture capital funds saw a drop-off in activity at the onset of the pandemic, activity amongst fintech firms has ramped up since then, both in terms of investment and product-to-market speed.

“After a four to five week lull, between mid-March and end of April, there has been a massive acceleration,” Sam Hodges, chief executive of Vouch Insurance, explained during the virtual session, co-hosted by Bahrain’s Al Waha Fund of Funds and UAE-based VentureSouq.

“The technology sector remains a bright spot in the global economy. There has been a massive increase in digitisation across many sectors, driven by the Covid-19 pandemic and lockdowns.”

The fintech subsector also saw firms moving much faster to get their products to market especially if these were products that would be in immediate demand during the pandemic.

One of Bahrain’s e-wallet providers BenefitPay announced a 1,257 per cent increase in the number of remittances, through their Fawri+ service at the onset of the pandemic.

Venture capital funds and private investors responded by becoming more binary in their choices, electing to invest heavily in companies with immediate and acute market demand, as opposed to those whose products were more speculative and would take longer to develop.

“It can be easy to forget that certain technology is at an advantage during critical moments like this,” added Peter Ackerson, partner at FinVC.

“I would compare it to the difference between somebody who is rowing in a crew boat versus a kayak. When you enter the rapids, those in the kayak are much more nimble and adaptive.

“And that’s what investors have been asking – will the product provide a solution now? And start-ups find themselves at an equal footing with veterans as they can quickly pivot their product to respond to immediate needs.”

According to Mr Hodges, investors continue to have an appetite for investment and higher returns amidst a low-interest investment environment.

Even fintech firms like Robinhood, which faced a public backlash after it barred users from buying shares of GameStop during a short squeeze on the stock initiated by a social media group, has benefited.

Its secondary market share trading now values the company at $40 billion (BD15bn), double its valuation in December and three-and-a-half times its market capitalisation during its last round of funding in September.

Meanwhile, in the Middle East, a number of private firms have been looking at lucrative market exits and re-investment within their geographical locations with the influx of new users they have seen during the pandemic.

“While the last decade has been geopolitically complicated, I think we are moving into a period of growing foreign direct investment as well as very significant reinvestment within economies, as opposed to money leaving the region,” Mr Ackerson added.

“With innovation centres being created across the region as well as strong ecosystems, there are tremendous tail winds that will play out over the next five to 10 years.”




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