Covid-19: A boon or bane for the fintech lenders?
The outbreak of fatal Coronavirus infection has emerged as a formidable challenge for businesses and governmentsglobally. Fintech firms too, especially the new-age digital llending platforms, are feeling the heat amidst the transforming dynamics.
In the US market, many fintech companies have been affected due to the drop in overall lending as unemployment grew. Digital platform that focus on offering loans to individuals with low to medium credit scores have been particularly at risk, reports highlight.
While many of these fintechs have been effectively filling the credit gap that was left unaddressed by the traditional banks, COVID-19 has given rise to unprecedented situation globally.
Fear, anxiety and quarantining reduced consumer expenses. This implies FinTech firms in the payments sector like Square, Stripe, or Chime will collect irregularly lower payments. Both Visa and MasterCard have alerted shareholders regarding a sharp downswing in cross-border plus travel-related spending, chopping their expected deals by 2% to 4%.
Although the pandemic may result in increased adoption of new virtual mechanisms, there is also a risk of an investment freeze in case of early-stage startups. The Financial Brand argues that some early-stage fintech enterprises may get shut down, as the coronavirus outbreak could affect venture capitalists financing for young firms, as well as existing ones.
Fintech lenders might seem to stop investing in their newbies and prioritise their business.
Fortunately, there is a brigher side.
Amidst the bleak scenario, Fintech enterprises are prepared with digital channels to cater to the needs of people globally. César Cuevas who co-founded Linxe, a Colombian lending fintech elucidates that the consequence of the coronavirus on the fintech industry should not be daunting. He believes that the COVID-19 situation is leading to a greater adoption of digital banking services across the globe.
Rather than visiting banks physically, people are most likely to use fintech and digital channels in the upcoming days.
Experts also point out that the coronavirus will act as a wake up call for legacy banks that do not have a primary digital focus and will increasingly adopt digital channels as the preferred medium for customer transactions.
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