Disruptive fintech is our best bet to economic recovery post COVID-19
It’s time for financial services to update their approach.
Change is needed
A traditional approach to lending will not get cash to SMEs quickly, when many are just weeks or even days away from drastic losses or potential closure. In Nigeria for example, it can take up to six weeks for businesses to get an answer from a bank on a loan application,which may still come back as a ‘maybe’ or an outright ‘no’.
This is where fintech lenders are stepping in and using smart machine-learning algorithms to provide convenient access to credit in as little as 24 hours. In the midst of a pandemic, these fast alternative borrowing options are a lifeline for SMEs.
Traditional lenders often reject SME loan applicationsdue to greater perceived risk, a lack of collateral and smaller sized loans that yield lower returns. This may become even more difficult as the world goes into recession and some lenders look to minimize risk even further.
However, online lenders like ours are able to streamline and optimize lending processes, using big data to assess risk, and offer financial support to SMEs even during the most difficult times. Since beginning operations in the Czech Republic in March and Poland in April — at the height of COVID-19’s hold in Europe — Lidya has so far had an almost 0% default rate — and a 100% repeat business rate.
Fintechs can provide solutions that are not only more comprehensive and convenient, but also safer. Perhaps one of the most important qualities about fintech solutions today is that customers can remotely access financial services without the need to physically visit a bank, or handle physical cash. People, and cash, are potential transmitters of the virus. But with online lenders, digital channels are the new branches. SMEs who adopt fintech solutions are reducing the need for unnecessary human contact and protecting people’s health.
The outbreak of COVID-19 has driven society online more than ever and reflected the importance of digital transformation strategies in financial services and other industries. It has shown that it is possible to do everything digitally and remotely, and that digitizing client-facing services and internal operations can drive efficiency.
Fintechs, that have been digital from day one, now need to step up and assume a responsibility to support SMEs, so that they can emerge from the global economic crisis and fast-track business growth. It is an opportunity for fintechs to build their reputations: legacies will be defined by how lenders acted during this pandemic, and customers will remember those who looked after them through these difficult times.
This article was co-written by Tunde Kehinde and Ercin Eskin, co-founders ofLidya
Story byTunde Kehinde
Tunde Kehinde is the Co-Founder of Lidya, the future of finance for small businesses in fast growing economies. Tunde is a seasoned emerging(show all)Tunde Kehinde is the Co-Founder of Lidya, the future of finance for small businesses in fast growing economies. Tunde is a seasoned emerging markets entrepreneur who co-founded Jumia Nigeria, the leading eCommerce platform in Africa and Africa Courier Express, the leading last-mile eCommerce delivery company in Nigeria. Tunde holds a degree in Finance with honors from Howard University and an MBA from Harvard Business School.
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