How COVID-19 vitalised the need for digital solutions platforms?

Rupesh Kumar Mishra

Digital financial solutions, in and of themselves, are a revolutionary transformation that introduces technological breakthroughs. The COVID-19 period was a wake-up call for all organizations and their consumers who were hesitant to adopt digital and newer technological advancements. Since then, every company has scaled up digital to not only retain but also grow its consumer base and keep the employees satisfied while staying competitive in the sector.

According to a McKinsey survey of global consumer sentiment conducted in April 2021, customers are increasing their preferences towards digital platforms such as GPay, PayTM, and TapCard for their everyday transactions. Prior to COVID-19, these adoptions were observed to be concentrated in and around bigger cities. Also, Covid-19 accelerated the rise of newer financial (digital payment) solutions which have further increased the pace of digital transformation, shortening the time it takes for digital technologies to be widely adopted by several years.

As India’s start-up culture evolves, one industry has witnessed tremendous growth: FinTech start-ups. These start-ups proliferated as the internet spread from major cities to small towns, supported by the government’s initiative to drive financial inclusion for all citizens. Over 2100 Fintech companies have been established in India, with more than 67 percent of them having been established in the previous five years. In the year 2021, India’s Fintech market will have seen exponential growth in terms of investments totalling more than US$8 billion.

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The value of Fintech transactions is expected to rise from US$66 billion in 2019 to US$138 billion in 2023, at a compound annual growth rate (CAGR) of 20%. In terms of digital payments, India has seen remarkable development, with a monthly volume (total digital transactions) of over 5.7 billion transactions totalling around US$2 trillion in 2021.

FinTech’s contribution across medium, and small industries: 

Though the economy is still recovering from the global pandemic crisis, the sudden shift towards technology has helped consumers to move towards using less cash and adaptto digital payment options, especially in Tier II, III, and IV markets. This transition is here to stay across medium, and small industries and will close the barriers between banks, FinTech, and technology players.

The Micro, Small, and Medium Enterprise sector has proven to be an important component of India’s expanding economy, accounting for 31% of India’s GDP and 45% of exports in the country. To present, the total number of MSMEs registered is around 55.8 million firms in various industries, employing over 124 million people, with approximately 59.5 percent of companies located in rural regions.

Given that the MSMEs sector is burgeoning, there is a need for a robust financial solution to continue to fuel their expanding demand. Prior to COVID-19, MSMEs businesses were especially disorganized, with little information available about their company health or capacity to provide manybenefits to employees. Since the COVID-19 engulfed the whole world, every MSMEs have tried to become strong and efficient so as to step up and recover while focusing on their expansion.

Financial services have always relied on information technology and have focussed on resolving their problems of developing technological innovations in improving financial literacy, improving retail banking coverage, improving insurance and portfolio management, and so on.

Apart from the above challenges of fin-tech. MSMEs also have new problems of working capital management, employee benefits handling, and new business development in the digital market while competing with other players in the industry.

Because of the lack of digital connect, MSME employees were not part of the mainstream financial ecosystem and hence the established solutions of the large financial services cannot be deployed directly into MSME problems.

Hence, these rising FinTech start-ups developed new technologies for MSMEs to help run their companies more efficiently. Since then, businesses have used digital to their advantage in streamlining operations, automating procedures, focusing on revenue-generating activities, maintaining online work schedules, and offering financial help to their staff.

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Additionally, technology is also helping MSMEs in employee management through maintaining attendance records, calculating overtime/holidays/leaves, and processing salaries. Certain FinTech start-ups have gone ahead to create a neobank concept that can act as a financial institution for debit and credit card transactions.

Additionally, SMEs must become more (digitally) efficientand have a pool of funds to expand up their enterprises so as to stay relevant and counter the e-commerce giants of Amazon, Flipkart.

The Road Ahead

FinTechs have had to learn to lead, negotiate, and disrupt the financial services industry amidst a period of significant upheaval since the outbreak.

Views expressed in this article are the personal opinion of Rupesh Kumar Mishra, Co-Founder, PagarBook.

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