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    Growth of Fintech Amidst the Coronavirus Pandemic

    Founder and Chairman, Zaggle
    Jan 27, 2021 5:41 PM 4 min read

    COVID-19 has changed the way we live. In a contactless world that has been thrust upon us, people are adapting to the changes, rising to the challenges and overcoming the crisis. As businesses grapple with the economic downturn, they are pivoting more and more towards technology to ensure lesser disruption. A highly conscious consumer force and an uncertain economic future, has led to Fintech play a major role in putting businesses back on track. The Fintech sector has registered a good accelerated growth, as it has been in high demand for innovative products and services that businesses are seeking to address their pain points of dealing in the post-pandemic world. Today, digital transformation has emerged as a critical mechanism to ensure the continuity of business, during and after the COVID-19 crisis.

    Organisations are reshaping their strategies by inherently changing their business models and ways of operations. They have been quick in realising that those adopting technology and joining the digital path will most likely emerge as winners in a post-pandemic world. Today, organisations are looking towards technology in the financial world keenly and seriously as they offer solutions to the unprecedented challenges that COVID-19 has brought in.

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    The use of technology has been high globally. Even in the Indian context it has helped organisations respond quickly to disruptions caused by the pandemic and allowed them to improve their business situation.

    Digital payments, open banking, mobile banking/internet banking and peer-to-peer lending are some of the major trends that COVID-19 has accelerated in the Fintech sector. Enhancing customer satisfaction, maintaining social distancing norms, lowering costs and creating alternative product options to avoid the aspect of physical touch, based on customer’s needs and wants, have been major drivers behind the digital transformation.

     

    Lines are Blurring Between Banks and Tech

    Fintech is reshaping the whole banking sector. Amidst the crisis, banks have started taking advantage of technological innovations. The rise of Fintech has modified each facet of monetary services and banking. Transaction-processing is one of the most important functions for any business and that is where technology has come to support the banking sector right from the beginning. Simple matters such as a 24-hour real-time settlement system goes a long way in improving the efficiency of businesses.

     

    SMEs Need Digital Transformation

    SMEs, which are very important constituents of the Indian economy, have been adopting technology and more particularly technology in finance to improve their overall efficiency. It is necessary to ensure smoother transaction processing.  Organisations have been forced to move away from traditional business patterns to ensure continuity of business according to the demands of the time. And Fintech has and will continue to play an important role in the sustainability journey of SMEs and MSMEs.

     

    Digital Payments Have Become a Necessity

    Social distancing facilitated the surge in Fintech with increasing demand for digital payments over traditional hard cash or card payments. As buying from physical stores became unpreferable, e-shopping and virtual options were high in demand. Thus, consumers leaned more towards the digital payment routes. The Reserve Bank of India (RBI) data has revealed that digital payments across India increased at a compound annual growth rate (CAGR) of 55.1% over the past five years, i.e., between the financial years (FY) 2015-16 and 2019-20. Their value has grown from ₹920.38LCr ($12.6trn) to ₹1,623.05LCr ($22.2trn), clipping at an annual compounded rate of 15.2%.

     

    Rise in Digital Lending

    Digital lending as a substitution has a significant and a quicker turnaround time than the traditional loans procedure. It helps one overcome the traditional pain point of extensive, time-consuming, complicated manual process. With Digitisation, the lending processes have become paperless and faster. Today, P2P lending companies have come to the forefront, offering all the financial facilities which have led to the widening of the customer base for P2P lending platforms during the COVID-19 crisis.

     

    Surge in Fintech Investments

    Investments in India’s Fintech firms have continued to grow even as the COVID-19 outbreak caused a massive destruction in the economy. As per the MEDICI India Fintech Report (2020 edition) between January and June this year, Fintech investments touched $1.47bn, a 60% increase over the corresponding period in 2019.

    Even though the pandemic has made us switch to a more efficient and smarter way of functioning, COVID-19 has accelerated digitisation which has given different innovative perspectives and has broadened our horizons. It is progressive and the sooner people adapt to it, the better. The COVID-19 pandemic has compressed the cycle for digital transformation and the innovators in the Fintech space have evolved with innovative engagement strategies to reach customers, hence, quickly becoming more relevant and more necessary than ever.

    The author of this article is Mr. Raj. N, Founder and Chairman of Zaggle.

    FIN.

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