What the fintech sector can learn from the pandemic

One of the most important lessons 2020 taught the financial technology sector, as well as most of us, is resilience — not just of the human spirit, but also in the way people overcome adversities.

When a nationwide lockdown in March last year forced consumers to turn to online resources, businesses and industries overnight digitised as much as they could to maintain some semblance of momentum, instead of completely shutting down.

Financial technology was obviously an integral part of their effort to digitise —  and that sudden spike in more people using online financial services helped the sector see some of its strongest growth in history.

“The pandemic digitised large institutions much faster than they otherwise would have,” Nadia Sood, Global CEO and Co-founder of CreditEnable, said on the sidelines of the Resurgence TiEcon Delhi-NCR event. One of the many things, she said, the pandemic taught her was the need to focus on creating more innovative digital journeys and interactions for users, instead of just taking improperly functioning offline models and turning them digital.

Sarbvir Singh, CEO of PolicyBazaar.com, said the lesson he learned was that there is not just one truth.

“Earlier, we believed that things had to be done a certain way — for example, we believed that we had to come to office and sit to do more work — but COVID-19 challenged those assumptions,” Sarbvir said at the same event during a session on what fintechs learned from the pandemic.

Similarly, pre-COVID-19, people did not think they needed an insurance policy, or they kept procrastinating buying one if they knew they needed it, he said. “But the pandemic was a wake-up call that helped people realise the importance of a good insurance policy.”

Here are some other lessons the panelists spoke about during their session at the event:

Debt is not bad

Nadia said one of the important changes in perception she noticed as a result of the pandemic was that it forced people to stop thinking of debt as a bad thing. That change in perception has accelerated the adoption of debt in India.

“People are realising that debt isn’t bad — it just needs to be managed properly,” she said.

CreditEnable witnessed several people and businesses trying to take out loans for the first time in their lives, especially when they realised there might be an opportunity to grow even during the pandemic, she added.

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Positive regulatory changes 

Financial regulators rolled out several policy changes across the board to smoothen processes during the pandemic. One such move was accepting insurance claims in the form of a soft copy, as opposed to the hard copy-only directive earlier.

Regulators also heightened their oversight of online financial platforms and have been able to weed out those who do not comply as well as rule-breakers, thereby quickly clamping down on online financial fraud attempts. 

Such regulatory changes that take cues from where consumers are headed —  in this case, online —  are encouraging for the broader financial sector, said Mukesh Kalra, CEO of ETMoney.

Banks view fintechs as partners, not ‘cannibalisers’

As fintechs take on an increasingly larger share of total loans given out in the country, banks are coming to an important realisation that fintechs can help open up new segments and new product lines for them, said Mukesh.

“We’re starting to see a strong uptick in loan disbursements again, which is definitely a net positive,” he added.

But despite banks in India being more generally open to fintechs, startups have to ask themselves what value they bring to the table and if their offering aligns with the banks’ strategic priorities.

“If you develop something very cool and very fast, but if it only incrementally increases the banks’ profit and if it takes them a lot more effort to add you to their system versus what’s already there —  which is the case with big banks and legacy businesses —  they’re never going to take you on,” Nadia said. 

“However, if you open a new segment to them, touch customers they’ve never been able to before, and help them manage the risk around that, or you can help them become vastly more efficient and give them greater RoI (return on investment), they’ll be keener to work with fintechs,” she added.

With fintechs looking at another high-growth year in 2021, it will be interesting to see how the sector implements the lessons it learned last year, and what innovations stem from those observations.