It’s a notorious fact that markets hate uncertainty. Right now, the main source of uncertainty is the novel coronavirus (alias Covid-19), which has infected an estimated 122,000 people worldwide and resulted in the deaths of about 4,300 — for a mortality rate of around 3.4%, according to the World Health Organization.
That’s sobering news, and it has engendered some newfound habits, among them:
- Avoiding public transportation in big cities
- Keeping hands clean, and, where handkerchiefs are absent
- Coughing into the crook of one’s arm rather than a bare hand
The outbreak has also triggered a run on hand sanitizer. In some places, staples like pasta, canned vegetables, and long-shelf-life milk are in short supply. The US Surgeon General has even asked people to stop buying up surgical masks so they’re readily available to healthcare professionals who actually need them.
Technologies That Promote Efficiency Are Often Low-Touch
Meanwhile, sports seasons and cultural events have been put on hold, travel plans have been scrapped, and in some places, workers and students have either been encouraged or ordered to work from home.
Some call these reactions prudent; for others they’re hysterical. Whatever your view on the matter, it’s undeniable Covid-19 is taking a toll, on lives, on energy, and on our finances.
But if it’s possible to discern a silver lining, Covid-19 has already had the virtue of forcing us to think about the power of technology to limit person-to-person contact as we continue to conduct business. In an effort to reduce exposure, Sam’s Club, a members-only retailer owned by Walmart, is urging customers to scan and pay for purchases using a smartphone app instead of clustering together at checkout counters.
We’ll come back to this point as it relates to the financial-service industry.
SARS, Another Coronavirus, Took a Similar Toll on Markets
Another immediate financial impact of Covid-19 is evident in stock markets around the world. The S&P 500, a broad gauge for large-cap US listings, has seen an 19% decline since hitting all-time highs in mid February 2020, slipping to levels it last saw in March 2019.
But it’s worth remembering we’ve seen similar reactions to epidemics before.
Covid-19 is just the newest strain of coronavirus, a family of viruses that can be passed from animals to people (and from person to person). Other coronaviruses cause a range of illnesses from the common cold to SARS, which in 2003 claimed 774 lives in 8,098 cases (for a mortality rate of 9.6%), according to the US Center for Disease Control.
The SARS outbreak weighed on US stocks when prices had yet to recover from 9/11. But within months of SARS dominating the headlines, the Rolling Stones were performing a free concert in Toronto to celebrate the demise of the pandemic, and the US stock market had already rebounded by 19%.
Of course stock markets aren’t economies, and Covid-19’s impact on the world’s economy is tough to call at this stage. Still, some important players are making educated guesses.
Central Banks, Analysts, and Trade Associations Snap into Action
On March 5, the US Federal Reserve signaled a hunch the widening epidemic could dent the US economy. It trimmed the fed funds target rate by 50 basis points to a range between 1.00% and 1.25%. The Bank of England also cut rates, and central banks in Japan and the European Union are expected to take some sort of action, even if rate cuts are off the table.
Then, prompted in part by the Fed’s reaction to the health crisis, Wells Fargo cut its outlook for the securities brokerage business. The bank says firms should expect to see per-share earnings shrink by 12% for 2020, and an average share-price decline for brokerages in the neighborhood of 22%.
Meanwhile banking associations are rushing to provide members with information to help them cope with the outbreak.
UK Finance, a British trade group, recognizes the strain put on small and midsize businesses by Covid-19 and urges these enterprises “to contact their finance providers early to discuss how they can help support their companies through the coming weeks.” The American Banking Association promises two upcoming webinars. One is on “coronavirus preparedness,” and the other will “give institutions an opportunity to practice and adapt their technology and cybersecurity resiliency plans for large-scale, work-from-home scenarios in the event they are quickly needed.”
Digital-Based Fintech Means Never Having to Say “Gesundheit”
While governments, NGOs and business groups scramble to calm citizens, entrepreneurs and customers, another possible effect of the Covid-19 is a function not of its virulence, nor of its severity, but of its endurance.
In this view, the health crisis could pose significant challenges to client-centric businesses, including lenders, and show these enterprises whether their technology is up to scratch. After all, a significant benefit of digital lending technology is in its ability to equip businesses to continue running in an emergency.
Just as fintech can equip customers to engage with financial-service providers remotely — so that, for instance, a retailer can apply for a loan, secure approvals, sign documents, and make repayments entirely online — so could a bank’s lending-department personnel work remotely to keep the bank itself, and the credit-worthy enterprises that rely on it, running smoothly in a setting where it doesn’t matter if someone sneezes.
And if problems crop up that can’t be solved on the phone, via text, instant messaging or email? Well, there’s always Skype or a dozen other conferencing apps for real-time, face-to-face interaction.
TurnKey Lender Can and Will Help You in This Health Crisis
Here’s the big point.
A lot of public- and private-sector effort is being expended right now to cushion the impact of Covid-19, a virulent and sometimes deadly disease. But no matter what anyone else does, your clients’ are still going to be feeling depressed and fearful in a period of financial uncertainty — largely because the crisis is, now at least, of equally uncertain length.
Just imagine how much you could do to calm those fears simply by maintaining your accessibility and keeping your communication channels wide open.
We’re here for you at TurnKey Lender. Reach out, and we’ll make sure you can continue extending credit in the small to midsize business segment, where it’s needed most to keep our economies afloat.