Covid-19 Pandemic and the Fintech Industry - Key Takeaways
This is the first part of our 3 part blog series. In this blog, we discuss the strategies adopted by fintech companies to onboard and engage with customers during the Covid-19 pandemic.
Our introductory blog provides a quick overview of this study.
The Covid-19 pandemic had a strong and loud impact on the fintech industry in India. The pandemic witnessed a significant change in consumer behaviour and attitude towards rapid adoption of digital channels, particularly in the payments space. Within a few months into the pandemic, users from tier 2/3 and beyond warmed up to the idea of using a mobile app and QR codes to make payments for low to high-value products.
We interviewed representatives from fintech companies involved in B2B and B2C money movement solutions and asked about the impact of covid on their business. In this blog, we will discuss the changes fintech companies faced specifically in onboarding and engaging with their customers.
The onset of the pandemic witnessed small to medium businesses gravitating towards digital payments and at such a speed that it felt like sitting in a time capsule. The encouraging sign was that many of these businesses were first-time entrants to the digital platforms and the digital payments ecosystem. But this could also turn into a challenge if the onboarding process wasn’t smooth. There was an urgent need to build innovative products and processes to onboard SME businesses onto the journey of using fintech products.
Interventions to increase access and adoption of fintech services during the pandemic
The pandemic pushed B2C enterprises in tier 2, 3 cities, and beyond to adopt digital fintech solutions to keep their business afloat. To capture and engage with this market, fintech companies tested and introduced innovative strategies to connect and engage with the growing customer base.
Vernacular campaigns, partnerships with enterprises that know the pulse of the local SME economy, and simplified or easy-to-use products were some of the strategies introduced by fintech companies during the pandemic. A B2B fintech company shared that they introduced #NoCode products like a payment page, payment link, and payment button that entrepreneurs could start using within a few minutes and does not require any knowledge of coding.
Interestingly, fintech companies observed that before the pandemic hit, businesses prioritized having a digital presence on social media more than offering digital payments as a growth strategy. However, during the pandemic, the majority of businesses across the country wanted to start offering digital payment options in less than a week.
Onboarding businesses wasn’t the easiest process for fintech companies. During the pandemic, conducting a physical visit and for diligence was near impossible but the businesses had to be vetted quickly and efficiently. To address this, fintech categorized businesses in white, grey, and black lists. The safer whitelisted businesses were those that had – low fraud to sale ratios, low refund rates, have valid and authentic KYC documents. Upon checking all the necessary boxes, fintech companies also ensured that the onboarding and go-live process was seamless and quick.
To understand the impact of Covid-19 on fintech serving in remote rural areas, we also spoke to companies that provide digital banking services like money transfer and micro ATM services ( i.e. cash-in cash-out points) in rural areas through the Aadhar-enabled payment systems (AEPS). During the pandemic, the country witnessed large-scale reverse migration where people moved away from cities back to their towns and villages. Reverse migration also brought along a plunge in remittance transfers by migrant workers back to their hometowns. However, during the same period, government transfers and bank account disbursal of loan products were at an all-time high. To capture this silver lining, fintech companies increased the availability of AEPS and Micro-ATM services at local Kirana stores and post offices, which provided much-needed relief to the last-mile customer. The surge in transactions at these cash-in cash-out points was reflected in the 20-30% increase in AEPS transaction volumes for B2C fintech companies.
Q. Why did people avail Aadhar enabled payment services during the pandemic?
AEPS transactions were done through stores at odd hours or in and out of vehicles. For example, during the pandemic and Pujo, they set up the shop in one of the villages in West Bengal. They will move localities/ villages and set up shops for AEPS payments. This made is easy for people to access these benifits even with lockdown restrictions in place.
- Digital banking platform company
However, last-mile fintech companies faced the serious challenge of authenticating and onboarding new customers. In many cases, there was a disparity of personal details on different KYC documents. There was also a lag in pushing people to do e-KYC either because they were unaware of the process, or because they did not know how to do it.
Customer engagement strategies during the pandemic
Fintech companies that were now serving a large customer base had a stronger need to connect and empathize with customers. To make the process less onerous, fintech companies ensured that they used more empathetic language in their sales playbooks, improved the quality of their chatbots, and automated a majority of their communication related to products that were cross-sold.
Q. Has there been any change in your strategy to engage with your customers post COVID-19?
In all of our communication used in our support marketing sales communications etc, we make sure that we wish them and ask about the health of their family and loved ones, and co-workers before getting down to business. This is included in the sales playbook.
- Digital payment services company
These trends were also observed across the economy. As per research, in the later stages of the pandemic fintech platforms heavily used only self-serving digital onboarding models through simple mobile applications. Chatbots and automated query-based solutions were used heavily to engage with the customers.
In addition to payment platforms, digital lending companies have also adopted remote and form-less onboarding process, which is based on video, voice, and images along with video-based KYC.
Despite designing interventions to cope with the pandemic and offer digital solutions for everyone, some challenges prevailed. For instance, the process of onboarding customers to open their current accounts still requires physical verification where someone bank officials have to manually collect and scan relevant documents. Fintechs are concerned that the doorstep onboarding process may not be scalable and they should be permitted to use video-based e-KYC to onboard these customers.
Opportunity in adversity
During the pandemic, fintech companies outperformed the growth of products per customer, and the majority of these products were built on a self-serve model. Self-serve products also meant that there is no human interface of involvement and it is an end-to-end digital user journey. This has been reflected in their 5x to 10x increase in the rate of acquiring new customers and volume of transactions. Some of the growth can also be attributed to the higher adoption of smartphones and the general proclivity towards becoming a mobile-first app-first type of customer base.
Fintechs believe that the pandemic has made it necessary to democratize access to digital solutions for the non-digitally native, non-tech savvy, small-town micro longtail SMEs. The ideal path to serve this customer base is to create self-serve products that are simple enough to use even for a person who doesn’t speak English or has any knowledge of coding but has a rich understanding of their business.
In part 2 of the blog series, we will be discussing the changes that covid brought about the product offerings and the scale of businesses in the fintech space. Do keep an eye out for it!
 More on no-code and low-code products -
All illustrations are designed by Prajna Nayak.
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