COVID-19 has put forward a never-seen before situation to the world. Businesses across sectors – including fintechs – faced uncertainty overnight and have been under stress to sustain. However, one could also think of this as a catalyst for rapid and much-needed innovation. As the broader economy shifts from a sentiment of Respond to Recover, COVID-19 has created new opportunities for the fintech sector.
With social distancing being a new norm worldwide, there has been tremendous growth in the use of digital payment platforms, leading to fintechs showcasing new-age solutions for merchants as well as secure and seamless experiences for customers. In the last few years, we have seen excellent use of disruptive technologies to create customer-focused solutions. Let’s look at some solutions that highlight how essential fintechs are in expanding the potential of merchants.
Easing credit access for SMEs
Around the world, small businesses have been hit hard by the impact of the pandemic. Accounting for almost one-third of India’s GDP , MSMEs are particularly vulnerable as they find themselves facing reduced demand and lack of finance. Traditional lending, with its requirements of a credit history and scores, has not solved the problem of access to credit for SMEs. Of the 6.33 crore MSMEs in India, only 10 per cent have access to formal credit .
That said, in recent years, a growing crop of fintech lenders for SMEs is offering a new model of alternative lending that is faster, easier, more cost-effective and more transparent. SMEs can share some of their spending patterns and data in order to get formal access to credit. By using advanced analytics platforms and AI to assess transactional and alternative data, fintech lenders can establish their creditworthiness, evaluate risk and issue loans faster.
Digitizing B2B payments
The B2B payment ecosystem in India is faced with two big challenges – dependency on cash and expensive, inflexible enterprise management systems. By digitising payment processes, partnerships between larger financial institutions and fintechs are not only helping address the immediate challenges posed by the pandemic but have also made payments easier for smaller businesses.
Fintechs are enabling businesses accept remote or digital payments, grow their customer base and even expand operations to include international markets at relatively lower costs. Business owners can now make real-time payments and receive them in a timely manner as well. To help micro-preneurs focus on their business rather than spend valuable resources tracking unsettled bills, new-age solutions from fintechs enable secure and automated e-billing solutions to regulate billing process.
Simplifying contactless payments
Owing to the fear of getting infected, societies across the world have witnessed fundamental shifts in the way people pay and get paid. Digital payments have played an important role in responding to the crisis and online purchases. Making contactless payments in-stores is no longer just a convenience but a necessity, also seen by the fact that the RBI (Reserve Bank of India) increased the permissible limits for tap to pay transactions. In a recent study which surveyed small business owners and consumers in eight countries, nearly half of global consumers said they wouldn’t shop at a store that offers only payment methods that require contact.
Consequently, an increasing number of merchants are now migrating to contactless payment solutions to attract and retain customers with more ways to pay remotely. Fintech players are looking to leverage low cost, asset-light infrastructure to roll out innovative services that target last mile penetration – such as Bharat QR or contactless tap to phone technology to ensure simple, secure and convenient ways to pay.
Enhancing safety of digital payments as online commerce gains traction
The pandemic has caused digital payments to propel as consumers showed a strong inclination towards transacting using least possible contact. However, fraudsters aren’t far behind in trying to attack the system and users. To give a perspective, the number of spoofed websites used for phishing rose by 350% since January to more than 500,000 globally .
Artificial intelligence and machine learning are increasingly being adopted for fraud prevention in digital payments. Fintechs have utilized these technologies to leverage signals like behavioural analysis and location profiling to identify and curb fraudulent activities. AI provides enhanced monitoring of online payments and responds in real-time to possible fraud cases. Fraud scoring is now possible, thanks to multiple data points and channels that predict fraud patterns and provide related insights.
As the whole world shifts towards a new reality, there will be an abundance of opportunities for fintechs. With the pandemic accelerating the adoption of digital solutions among consumers and businesses alike, it’s going to be exciting to observe this phase of new emerging technologies and what consumers adopt. There will be new niches and exciting ideas, as people realise that the digital tools they have relied upon during this disruptive time are in fact integral to their day to day operations, irrespective of whether the pandemic occurred or not.
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