The Role of FinTech Lenders in the Recovery from COVID-19 Crisis
Blog: NASSCOM Official Blog
The coronavirus outbreak has left businesses and governments around the world in disarray. The ever-changing landscape has also impacted fintech firms, particularly the emerging digital lending platforms. Due to the rise in employment, fintech companies are seeing a drop in overall lending. Further, as lockdowns and curfews were imposed across the nation, the economic activities except essential services came to a halt. In particular, the online platforms offering loans to individuals with low to medium credit scores are at high risk.
The credit gap left unaddressed by the traditional banks was filled by the fintech providers. However, the fear and anxiety caused by COVID-19 have led to a decrease in consumer expenses and given rise to an unusual situation globally. This also means that FinTech firms involved in processing payments, such as Square, Stripe, and others, are collecting lower payments on an irregular basis. Both Visa and MasterCard shared that there’s a sharp decline in cross-border and travel-related expenses, cutting their expected deals by 2% to 4%.
Although there will be an increase in the adoption of new virtual payment systems to maintain social distancing due to the pandemic, the decline in investment in early-stage startups poses yet another risk. There is also a chance of a complete shutdown for some early-stage fintech companies because of the lack of funding from venture capitalists for young firms. This could fintech lenders to stop investing in acquiring new customers and prioritize existing userbase with a good credit score.
Most businesses and individuals consider fintech lenders to meet their credit needs, meaning the current situation can leave them financial imbalance. There is also the inability of paying back loans in these unprecedented times when many individuals are laid off and businesses are finding themselves disrupted.
A silver lining for fintech lenders
Although the current situation looks miserable, fintech companies are equipped with the right technologies to meet the demands of the people around the world. Some even believ