The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

The biggest silver lining in periods of economic turmoil—such that we are in right now, despite what the stock market may tell you—is that they often lead to significant innovation. 

This is true for most major economic depressions and recessions in U.S. history. General Motors (NYSE:GM) was founded less than a year after the Panic of 1907, a crisis so severe it led to the creation of the Federal Reserve. The first Publix grocery store was opened in 1930, less than a year into The Great Depression. 

More recently, the dotcom bubble burst gave way to Web 2.0 companies like Skype, Facebook Inc (NASDAQ:FB), and YouTube, three companies that would all grow to be worth over $1 billion. 

In each of these cases, entrepreneurs either identified a shift in consumer behavior that was already beginning to take shape (automobiles in the 1910s and supermarkets in the 1930s) or harnessed emerging technology for new purposes (video chatting, streaming, and social media in the 2000s).

In this regard, financial services are no different than how every other industry is in flux right now. Everything about financial services is changing before our eyes—from how we bank, to how we invest and spend money. Just like the last financial crisis in 2008, fintech is going to pull it all forward. 

The Great Recession And The Birth Of Modern Fintech

While the technological disruption of financial services was well underway by the time The Great Recession destroyed a decade’s worth of wealth, the economic and regulatory upheaval of that period gave way to a fintech boom that is still being felt today. 

Meanwhile, distaste over how traditional banks and Wall Street firms had played a role in the financial crisis led to a host of new financial services providers that focused on democratizing access to the market. Among those was Robinhood, which ushered in the commission-free trading business model that has since been replicated by the major retail brokerage firms and low-fee banks like Chime, NuBank, and Aspiration. 

The JOBS Act, passed in 2012, and Regulation A, passed in 2015, also enabled smaller private companies to raise money from public investors, giving birth to the entirely new industry of equity crowdfunding and companies like WeFunder and StartEngine. 

And then there are the poster children of fintech—payments apps Venmo and Square Inc (NYSE:SQ)—which enabled payments in the early days of smartphones and have since exploded into multi-billion dollar financial services.

Fintech In A Post-COVID World

If the modern fintech industry was essentially born out of the last major economic recession, the obvious next question is what kind of impact will the COVID-19 pandemic have on the industry? Here are some ideas for the types of companies that could thrive in a post-pandemic world.

Digital payments and e-commerce are not new. But there’s a chance we’ll look back and realize 2020 was the year that threw gasoline on the fire. 

The pandemic has not only forced every type of financial institution—from the largest commercial lenders to the smallest community banks—to shift its operations and interactions with clients to online and mobile, it’s forced consumers to make that very same adjustment. 

Though some consumers will always prefer in-person interactions with their bank or lender, these types of monumental shifts can spur long-term change. 

Regulatory and public scrutiny of Big Tech has steadily increased in recent years, and the rising trend of digitization that has resulted from the global pandemic has only further raised the stakes. The enactment of GDPR in Europe in 2018 and the California Consumer Privacy Act in 2019 set the stage for what will likely be the most scrutinized decade yet when it comes to data protection.

1. Companies That Enable Digital Payments And Spending
2. Companies That Put An Emphasis On Data Privacy
3. Companies That Find New Markets Online

Crises can breed innovation, but that innovation can also expose gaps and opportunities unseen in the existing business models. New technologies create the need for other new technologies, and new services need to find ways to reach consumers who may not know to look for them. 

Companies that can fill these gaps can position themselves as key cogs in the marketplace. 

Square, for example, started as a company that facilitated cashless and mobile payments. But that created a need for new services as more and more merchants built up e-commerce operations. Now, the company provides small businesses with everything from marketing and payroll solutions to loans with the caveat that everything is done as frictionless as possible. This ease of integrations has made Square an often critical partner to businesses during the pandemic.

Other firms have taken it upon themselves to fill in the gaps by connecting financial services around the globe. JP Morgan Chase & Co.’s (NYSE:JPM) Interbank Information Network is a good example. Since its launch in 2017, the initiative has connected more than 415 institutions across 78 countries to facilitate cross-border payments. 

Even Financial is another example. According to its founder, the company was created due to the rise of application programming interfaces. APIs, interfaces that allow multiple pieces of software to communicate, created a new opportunity in financial services to deliver a better user experience.

Our “new normal” from the pandemic has created a unique opportunity for financial services to define what the “new normal” is within banking and finance. The economic shockwave from COVID-19 created a situation where there are suddenly many more people in need of services like credit and loans, while at the same time shifting the way firms interact with their clients. The innovation from fintech can help us navigate this changing environment.