From stock market swings and billions wiped off of the airlines, hotels, transportation revenues to drug, soap or iPhone replacement shortages – the coronavirus outbreak is taking its toll on many business aspects of life.
But what about fintech? It’s not immune to the virus either. As the side effects of Covid-19 will be unfolding in the weeks to come, we’ll see some fintech or finance companies taking hits. But other companies or solutions will be gaining traction.
Let’s take a closer look at the impact of coronavirus.
First Mastercard and later Visa cut its predictions for the revenue growth in Q1 2020 and lowered sales expectations for Q2. As of now, they are estimating a drop by 2 to 3.5 percentage points.
The reason behind the cut? Cross-border payments and fear. When an American Airlines flight from JFK to Milan is cancelled, it means that its 300+ passengers won’t be using their credit cards on travel and travel-related spending.
Now, multiply this single incident by the number of flights cancelled, industry events closed or rescheduled, and add quarantine to the equation. You’ll get some handsome losses.
“The most significant impact has been on travel to and from Asia. This has resulted in a sharp slowdown of our cross-border business, in particular travel related spending” Visa said in a regulatory filing.
What about other players in the payment sector? PayPal has already confirmed that international e-commerce activity has been affected by the coronavirus, which, in turn, brings its revenue expectations down.
“We currently estimate the negative impact from COVID-19 to be an approximate one percentage point reduction, on both a spot and foreign currency-neutral basis, to PayPal’s year-over-year revenue growth for the first quarter, as compared to the revenue guidance provided on January 29, 2020,” the company said in a press release.
“Forbes” speculates that if the virus starts spreading, consumers will dine out less. In effect, this may hit companies like Square or Stripe, that have a chunk of payment-related revenues. Fewer transactions mean fewer fees.
As of now, Square executives don’t see any material impact on the results, nor do they expect one in Q1.
“We have sellers in a variety of industries on our platform, and we're actually under-indexed to tourism. Although, of course, we'll continue to monitor any impact to the overall consumer spending numbers that we see.”
due to the prolonged outbreak, and travel or commercial restrictions, Square may experience disruptions in its supply chain and shortages of hardware products, which could affect its ability to grow and acquire new sellers and materially and adversely impact our financial results;
Square’s product development might be delayed, as they work with manufacturers in China to develop new hardware products.
What about the stock market?
There are also speculations that robo-advisers fintech startups will also be dragged down. For instance apps like Betterment or Wealthfront may be hit, as their profits rely on customers selling and buying stocks.
Does the recent volatility of the market affect them?
Wealthfront says that new investment account signups were “through the roof high”, and Betterment saw more “inflows than outflows” (more here).