India’s inclusive fintech startups have a once-in-a-generation opportunity to use their unique advantages to grow and help underserved individuals and small businesses during COVID-19. I joined The Economic Times Digital Lending Summit to share my views and explain why Venture Lab is continuing to invest during the pandemic. I discussed:
- A dramatic disruption: The COVID-19 pandemic is the most dramatic disruption to business that many fintech startups have ever experienced. Facing average revenue drops of more than 50 percent in the aftermath of initial lockdowns, founders quickly moved their teams to remote work and cut costs significantly. Many made major changes to their companies to ensure runway and leaned on their investors for support, which Accion Venture Lab has provided. Companies are proving their resilience and finding ways to cut down and refocus costs for the long haul.
- A time for innovation: Lenders are facing unique challenges as consumers and micro, small, and medium enterprise (MSME) borrowers continue to struggle and the effects of moratorium wear off. But some lenders also see an opportunity to truly innovate and even thrive. We have seen companies activate their digital capabilities to continue serving their customers. Some are onboarding customers and sourcing loans entirely by WhatsApp, and others have turned to digital marketing to reach customers. Many lenders have shifted from operating as a physical business with tech components to operating as tech businesses with minimal physical components.
- Emphasis on digital: This pandemic has been very difficult for nearly everyone but is particularly so for the financially vulnerable. Still, we believe there is still reason to be optimistic. While the crisis has led to the worst economic downturn of our lifetimes, it has also unveiled a new urgency to accelerate digital solutions, especially digital solutions that help MSMEs move their businesses online. Digital transformation is no longer something that is ‘nice to have.’ It is imperative, and that has massive implications for data and distribution for fintech solutions
- Alternative platforms: The increasing need for digital tools opens opportunities for digital lending startups to engage investors and grow their businesses. At Accion Venture Lab, we are excited about what we call “platfins”: platform fintechs that solve difficult problems for MSMEs, like delivery and distribution, and add digital financial services to their offering over time. This is particularly true in sectors like agriculture and education. We are on the lookout for startups that can leverage this proprietary data and distribution to serve SMEs, or business that enable non-financial platforms to expand their offering to financial services.
As the inequalities in our systems are exposed, it has become abundantly clear that financial inclusion is more important than ever. The innovators in fintech and inclusion — who were already using new data, artificial intelligence, and innovative engagement strategies to reach customers — have quickly become more relevant and more needed than ever.
This is the moment for inclusive fintech startups to become the next leaders in financial inclusion.
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