Innovation Opportunity for Fintech Startups Amid COVID-19As with all stakeholders in the economy, fintechs too are feeling the heat of the COVID-19 pandemic

COVID-19流行has had a significant impact across sectors in India and disrupted business operations. The fintech sector is no exception and various segments within this sector have been impacted, although the extent of the impact varies. While companies are working round the clock to adjust to the new normal and meet the challenges, there are many opportunities for fintechs in the current scenario, given the strong need for digital and contactless delivery of financial services.

The fintech sector finds itself at an inflection point as the world continues to tackle the socioeconomic fallout of the COVID-19 crisis. Despite sincere and strong efforts announced by governments and international bodies to stem the spread of the disease, there has been a considerable impact on global health and safety, and India is no exception. The contagious nature of the virus has fundamentally altered human interaction and collaboration, leading to a swift and significant reduction in consumer demand, affecting economies worldwide. At this crucial juncture, fintech models have an opportunity to create a significant socioeconomic impact and redefine the mechanics of doing business once again.

Fintech sector's strings pulled by COVID-19

In India, fintech is in early stages of evolution due to a large proportion of the population having limited or no access to banking. In November 2016, demonetization gave this industry a shot in the arm as the event became a catalyst for moving from traditional to digital payments. With a country having the world's second-largest unbanked population, fintech has a crucial role to play in enhancing awareness, addressing the credit gap in MSME (micro, small and medium enterprises) segment and bringing a larger population to be part of formal financial system.

While on one side there is the challenge of limited or no access to banking, on the other side, the industry since mid-2019 has also been facing challenges due to scarcity of funds and economic slowdown in the country. To top it up, we now have COVID-19 which has been merciless in its impact on all countries and sectors. With vast geographical dispersion, non-availability of access to Internet and smartphones/ computers to a large population, and limited government interventions for the MSME sector, the challenges become unique for India.

A large section of India still is a cash economy. However, even in organized sectors, where the money is distributed digitally, most recipients still withdraw cash for spending. This is often because mobile money agents are local shopkeepers who prefer taking cash as opposed to processing digital payments that eat into profits. Fintech Industry is also facing a tough task of meeting the expectations from consumers, who are looking for solutions to fill the credit gap and round the clock service. "What COVID-19 has done is to act as a catalyst in pointing out the importance of contactless digitization in fintech," says Deena Jacob, co-founder, CFO and head (revenue and growth) of Open Financial Technologies Pvt. Ltd.

A concerted response by fintech ecosystem

许多fintechs卡伦牌tly working on innovative, interactive and user-friendly technology solutions to help their customers tide over the current crisis. In the payments space, some startups are going beyond their core payment gateway business by offering a full suite of cash management services and other banking services to help their small and medium enterprise (SME) customers. Likewise, other fintechs are leveraging new innovative payment technologies, such as sound waves, to provide contactless payments targeted at customers with feature phones or those in areas with slow/no internet coverage.

In the digital lending space, many fintechs are acquiring customers digitally and using sophisticated underwriting models to disburse loans with significantly low costs of acquisition. Some fintechs are setting up payments infrastructure to facilitate easy payments and sales for SMEs and micro merchants, as well as provide them with loans based on payments data.

"In the next 3-6 months, probably the requirement for credit is going to be the highest." validates CEO of Lendingkart Finance, Mithun Sundar. "The right thing to happen should be the government to make sure that the banks and financial institutions we borrow from, also pass the same moratorium and on the same level of clarity on how we should treat the loans during these periods of time," adds Sundar.

In the post-COVID world, there is an immediate need to move towards completely digital, paperless and presence-less end-to-end processes. The need to conduct in-person customer due diligence for all regulated entities should be progressively done away with while ensuring the authenticity of the process. As soon as this process is implemented, we will move towards better customer experience and a greater degree of financial inclusion in the country.

The virus has brought about a powerful shift in reality; in addition to the effects that the virus has had on our personal lives, companies in every industry are being forced to find new ways of operating on every level. All things considered, the paradigm shift is creating opportunities for the fintech that allow them to better position the innovative proposition to contactless transactions, supporting clients, building connections, credit and finance, and making arrangements for the future. It cannot replace all aspects of human interactions, but with its agility, use of technology to reduce human intervention and anytime-anyplace service is best placed in creating solutions in the new normal.

All signs point to fintech being a standout sector during the coronavirus pandemic and beyond. COVID-19 has accelerated secular trends already underway—pushing larger swathes of the population online, large digital payment platforms have flourished, and the most effective businesses are pivoting towards fintech use-cases in highest demand—and the sector is well-positioned for the new global reality that is starting to emerge.