How Fintechs Are Game Changers During And After The COVID-19 Crisis

How can fintechs stay disruptive when they themselves have been disrupted by COVID-19?

How can SMEs flourish in a disruptive fintech world?

As a rule, financial technology companies aka fintechs are seen as mighty disruptors to the financial and banking industries. But what happens when the disruptor also gets disrupted? This is the question our webinar How Fintechs Are Game Changers During And After COVID-19 Crisis sought to answer. This was also an issue worth considering by Kamau Kunyiha, Regional Manager, East & Southern Africa, Creditinfo Group, a credit risk management firm.

What, he ponders, do we see as disruptors during this pandemic period, and how can those disruptors be converted from negative to positive drivers for survival and momentum? The pandemic brings across diverse challenges creating quite a bit of frustration for a number of people that will see a lot of businesses closing down based on reduction of business. Loan defaulting, predicts, is to be expected. It is during difficult times that a business such as a credit bureau needs to ask itself, are businesses sensitive to the change of behaviour, people confronted with confined spaces and little movement, or are they thinking of their profits? Perhaps they are altruistic and considering ways through which they can support the communities around them by bringing sensitivity to the table.

With the disruptive COVID-19, it is clear more businesses are since trying to invest in the tech that meets the needs and engage customers. Elements such as customer experience and user experience has become paramount for a business to survive. Mainly because when you can no longer rely on face to face interactions, technology needs to move to the next phase to see what the new age of fintechs will be like.

Harvard Business Review says only about 11 per cent of available data is used to make most decisions on and about customers. It indicates an entire 89 per cent of data is not being used, which is insufficient, so a lot of guesswork, previous intuition or performance is going into a decision. That, or only the use of a certain cohort of people’s behaviour informs decision-making. Fintechs, therefore, find themselves in a position where they need additional data to bridge the gap. So how can one use fintech data during times like these?

Take the case of 11 per cent as static/traditional data, and the rest as live data, whatever is being created here and now. As opposed to the stagnant/stored/pooled and therefore, old data, live data is that which is created by fintechs and also created by the user in forms such as; application data, psychometric data and user behaviour. This is all used to understand consumer profiles and day to day lives, thus allowing fintechs to cater to this individual or that SME. All this is because fintechs create an ecosystem that facilitates live data necessary to survive the pandemic, make key decisions and tailored solutions for both SMEs and individuals.

“It has historically been seen, especially in the SME sector, the tax implications of disclosure. But I think moving forward, evidence is higher that we need to share more data to make more specific decisions to target the right people to ensure minimum loss and increase profit. And, just pay a bit more tax because you are now in a better position. These are the benefits of sharing that data through a platform through a fintech provider that would be available in the market.”

Munyi Nthigah, CEO of Codesign Africa, says, “Globally, from where we sit, we are now beginning to move from response to recovery.  We are seeing fintechs grapple with idea of increasing or releasing capacity, maintain an operational structure that sustains the growth in volumes brought about by people move into the digital space. We are in a transition space right now where critical decisions have to be made.” He, like his peer Kamau, sees this as a further opportunity where fintech companies can unite to create solutions for the new norm in light of behavioural changes especially for businesses relying on contact.

He observes that there has been a downward trend when it comes to lending money globally. “You will find that the more established fintechs will continue to get funding. But when you look at the smaller start-ups that are essentially trying to scale challenges mentioned so far, it will be hard for them to come by enough funding to scale the business. It creates a dual challenge of scale and operations.”

WHO made a statement about minimising use of cash, raising the following questions to Stephen Mwaura, former Head of National Payments, CBK –  is cash a transmitter of COVID-19 and what does this mean to financial services? How have governments reacted? We remember all this lead to the strong encouragement of mobile money transactions. “COVID-19 crisis”, he points out, “is first and foremost a public health crisis threatening many people’s financial security. While the bulk of the effort has been towards the health sector/system, there has been a spirited effort to cushion the financial services sector not just in Kenya but globally.”

It is a most exciting time to be in fintech in Africa, and East Africa in particular to Firas Ahmad, Group CEO and Co-Founder of AzamPay and Sarafu. “This is the 1999 of the internet back then when there was no Google or Facebook or any of the companies dominating the space right now. I think there is a tremendous amount of innovation that could potentially happen in this region. I wouldn’t be surprised if some of these innovations find their way back to Europe and America eventually.”

His passion being e-commerce, Firas has noticed it has not been a runaway success in this part of the world. Instead, it is something of a mixed bag when it touches on situations like COVID-19. Ïf you look at countries like Tanzania or East Africa, the vast amount of transactions tend to be in cash which has been the case for more than 10 years. People use digital payment for transactions that don’t happen in person for example airtime or PayTV. It is actually inconvenient for you to go pay for those transactions at the office than it is to pay for them on the phone. As compared to other transactions that are predominantly cash made at the point of sale. Save for pockets of well-off people pushing for deliveries thorough e-commerce, most people are  transacting through cash.”

Firas then concludes, “Human beings tend not to change their behaviour immediately unless there is something that’s affecting them. Is COVID going to prevent people from using cash? I don’t know.”

For a more in-depth look at this discussion visit our Big Marker page.

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