Impact of covid on future of virtual finance

The need drives the urgency which drives innovation. Convention changed by an unprecedented situation.

Virtual financing or virtual finance function(VFF) is a process of providing financial services on the
internet by a third party, which carries out traditional financial services like bookkeeping, accounting,
and ledger formation online.

Companies that use the internet, cloud computing, or software technology to use financial services are
known as fintech companies.
Virtual financing stores financial data remotely so you can access it anytime and anywhere and make
important financial decisions.
In fintech companies rather than a CFO, they have a VFO(virtual financial Officer).
Fintech companies operate by transferring their offline financial functioning to online by using either their
inbuilt software infrastructure or outsourcing this storage using cloud computing.
The finance cloud or using financial services through the cloud has many advantages like increased
agility, efficiency, minimum CAPEX investment, and analysis done over the cloud; which all lead to
enhanced planning and strategy formulation.
Many companies like amazon and google provide cloud facilities.
By adhering to international financial regulations like PCI-DSS, cloud computing also aids in the
prevention of fraudulent financial practices. It also maintains a data log, offers data classification for
simple decision-making, and gives us access to a backup that can protect us in the event of a disaster by
allowing us to transfer all of our data to a different location.
During Covid
The fundamentals of finance were changed due to Covid, earlier even though virtual financing was
growing at a fast pace through e-wallets, e-KYC, and crypto but customer willingness to adopt and firm
intention to invest in virtual financing was still low compared to the traditional medium of managing
finance.
Post covid changed the market outlook on virtual financing with increased confidence and even with the
fear of a global economic slowdown looming across all industries, the eCommerce industry grew by
27.6%.
Digitalization of finance took a new speed breaking old conventions and beliefs; online banking
transactions jumped from 25% to 75% during covid.
The reason for the change in the atmosphere regarding financing was:
Limited mobility which called for the forced adoption of online and mobile banking and a gradual shift to
a digitalized economy with years of technology and innovation condensed into just a few weeks.

Work from home became a norm leading to an increased usage of AIs and software, and Cloud computing
became increasingly popular.
Companies began uploading their work, data and accounts online through the cloud or companies' virtual
private networks(VPN).

Restriction on mobility because of lockdowns led to an increased usage of e-transactions as a result,

issuance of Visa and MasterCard increased by a whopping 40% during the 2021 financial year.

Consumer spending will lag due to a rise in inflation and a decrease in treasury yield leading to an
economic slowdown.
This recessionary period will be most damaging to small enterprises and to recover from an inevitable
business cycle choosing financial institutions is an absolute.

Post covid future of VFF(virtual financing function)

The covid situation has brought forth our weakest link, our inefficiency in connectivity, and infrastructural
inadequacy.
While covid has damaged a lot of industries, it has boosted AI and IT industries by removing the
previous roadblock of distrust.The impact of covid on the future of virtual financing is optimistic.virtual
finance has softened the blow of covid 19, and in return, the pandemic has accelerated its growth.
As Alex Mason of standard chartered put, “ covid is a chief transformation mechanism always needed.”
Turning crisis into opportunities.
Even though prerequisites for virtual financing were already met by many nations, the digitalization of
financial institutions was still challenging and covid helped move past these hurdles.The time crunch and
need for hours brought financial institutions and fintech companies together.
Implications and new challenges will emerge because of this rapid digitalization. Covid will have a
lasting effect on the future of the digitalization of finance.
To overcome them, financial institutions must adopt and adapt.
The future of virtual financing calls for:
Differentiation through personalization and diversification.
With the expansion of the virtual financing domain owing to the covid, financial institutions must find a
way to differentiate themselves from their competitors.
The Future of virtual financing will lead to its emergence as table skates, providing additional facilities in
response to market competition and increasing user experience will be a need to survive.Increasing UX
will be possible through data mining and analyzing, delivering the right products at the right time.
Full-scale optimization to cut down cost
In view of the ‘long run production curve’, we are still in the early stage of production and upgrading to a
larger scale will help by lowering expenses through bringing down average costs. According to the ECB,
digital-only banks have a cost-to-income ratio of 47%, significantly lower than traditional banks.
Artificial intelligence innovation
The future of virtual financing calls for more AI assistants and machine learning to cut down costs and
increase efficiency.The AI model will make our portfolio more risk averse by providing us with a
‘forward-looking rating’ of different credits.
Security to the user of virtual finance and complying with cyber risk
With the boom of VFF, its security will also be questioned, as along with an increase in the use of digital
financing chances of fraud, scams, and data leaks are also increased.
In the coming years, virtual finance will be highly regulated and protected.
With the rising number of people on online platforms, impediments like cybercrime, and hacking data
leaks will also increase, and in that time VFF should show resilience and find effective ways to curb these
activities.

Evolution of VFF and increased competition

With banking and financial institutions gaining a decade's worth of innovation in a couple of years, the
line between NBFC and bank will be indistinguishable.
According to Jaco Grobler, a chief risk officer at first rand bank limited “In the future with better
connectivity and standardization of these financial service providers, the one which is most effective,
efficient, and comfortable for users will be the winner”.
It is clear from data and cases that the future of finance is virtual. Digital transformation will not only
accelerate businesses but also the companies that fail to adapt to the evolving and digital economy will be
left behind.
Covid helped VFF by providing it with a much-needed Kickstarter, but now it depends on the institutions
whether they will be able to retain the trust and confidence of their users.