The pandemic has created a strong push towards automation and technological innovations is the way to proceed
Fintech players are focusing on creating plug-and-play solutions that are highly integrable with other products
Lending fintechs will be the biggest game-changer in reviving the SMEs and provide the much-needed trickle-down of credit that both the Government and RBI has been focussing on
The year 2021 started with businesses geared up and raring to go with high hopes as the first wave subsided. Small businesses were looking at stocking fresh orders for the festival season of Lohri, Holi, Baisakhi and others. Very few experts were predicting the second wave to be strong, while the common man was trying to adjust and arrive back at the pre-pandemic phase. The reality could not have been farther, with the second wave hitting hard, leaving the country unprepared to handle COVID impacted patients in such volumes requiring intensive medical assistance.
It has taken us 1.5 months of lockdown to bring the situation under control, and the government is being extremely cautious in opening up the business and curfew, ensuring the third wave is under control in case it hits the cities.
Now once the lockdown is starting to open up, industry is placing its hopes on the second quarter of the financial year to resume base operations and business and ramp up significantly in the third quarter taking advantage of the festival season. Economists believe that the economy is going to bounce back very strongly from the second wave with projection of 11% real GDP growth in FY22. There are ~6.3 Crore MSMEs in India and the registration of these businesses grew 18% y-o-y to 2.5 million and yet a long way to go to achieve the objectives of strengthening the backbone of the economy.
The pandemic, both the first and second wave, has created a strong push towards changing the age-old method of doing business, and small businesses that had ignored or procrastinated to modify their modus operandi for sustainable and technology-oriented operations in the first wave have realized by now that to be in the run for the long haul, automation and technological innovations is the way to proceed.
Fintechs need to lead the way in this time of crisis and change. The time has never been more critical for Fintechs to make a lasting contribution to the economy as businesses and customers need support at every stage of their operations to automate and leverage the technology interventions to spearhead their recovery plan. Small businesses need a new approach to their expense management, bookkeeping, hiring requirements, payment solutions, transaction monitoring, inventory management, purchasing, communications, employee payroll and engagement tools, working capital requirements, financial products available etc. They need to spend their time focusing on generating and increasing their business without having to think of spending time on operational, administrative and compliance overheads.
Fintech players across the segments are leaving no stone unturned to ramp up their offering, spreading awareness by media, vernacular reach outs, offering the customized product as per business needs and at very affordable prices, especially in these times when the business volumes have shrunk. All fintech players together are enabling a significant reduction in effort and time in processes that are not the core competencies and are recurrent mundane tasks like invoicing, return filing etc. With the manual effort in adhering to these hygiene practices being phased out, the business will be able to focus on their core competencies of building and scaling up their businesses
Fintech players are focusing on creating plug-and-play solutions that are highly integrable with other products, which they are identifying by relooking at the complete business operations from a new eye and vision to identify the tiniest of cracks. Agility and extreme proactiveness are the demand of today’s time. It is amazing to bear witness to how the emergence of such hyper customized modules is being offered to support the recovery of the industry. It is one of the reasons that FinTechs have been able to raise funding from investors in the middle of pandemic and will prove to be real value multipliers for them
All of this though cannot be possible without having the required capital and liquidity for it, which has been a forever problem of the MSMEs in our country. It is here that the lending FinTechs are leading the charge and delivering where the traditional finance sector has failed. Lending fintechs have reached the nooks and corners of the country with their digital origination and delivery systems, and this will be a key to providing access to credit across the country. Lending fintechs will be the biggest game-changer in reviving the SMEs and provide the much-needed trickle-down of credit that both the Government and RBI has been focussing on. They will be at the frontline to provide the end-stage deliverability of services and capital.
To enable this, lending fintechs will also need to reinvent themselves, especially to be able to evaluate the creditworthiness of the business, as the cash flows and revenues have been severely affected in the lockdown along with slow opening up of the geographies to control the virus spread. There will need to be a focus on revamped collection strategies to minimize the NPAs and provide flexible repayment options to the customer. Additionally, they will need to innovate to create new sources of debt funding for themselves from multiple arenas across the lending community of public, private sector banks and financial institutions, especially creating seamless colending solutions.
FinTechs have utilized this phase to take their offering up a few notches and provide real value addition to small businesses. Though unorganized, these businesses form the backbone of Indian economy, though unorganized, are ready to take a step towards financial inclusion and get back on their feet very quickly as soon as the second wave impact fizzles down. FinTechs will definitely be the big key differentiator in us bouncing back in the least amount of time and creating the most sustainable ecosystem for our small businesses and the Bharat customers.