Jun 12, 2021 ●12 min read
Covid and Its Impact on Consumer Lending?
COVID-19 Pandemic has affected us in all spheres of life. Every sector is bearing the brunt of the same. Banking and Non Banking Financial Companies also have not remained untouched. Effects of the pandemic can be seen in the fintech industry too as it has changed the complete scenario. It is quite evident that consumer behavior has been impacted all over the world by the Pandemic.
Work from home culture due to the pandemic has urged the companies to go digital. The digitally equipped fintech companies are seen improving themselves further and promptly changing by the passing years. Innovations and flourishing technologies have always been inseparable parts of fintech companies and they were delivering their products and services digitally even before the pandemic broke out. Change in consumer behavior during Pandemic can also be seen through the swelling use of UPI-based payments, mobile based lending, etc.
Consumer’s shift in priorities and spending is directly related to consumer lending. The pandemic has forced consumers to hold back the expenses as lockdowns have impacted its earnings drastically. Job losses and pay-cuts have shattered the lives of consumers. Second wave of the COVID-19 Pandemic has devastated lives further as medical expenses have skyrocketed.
Demand for home loans, car loans and two-wheeler loans has dropped considerably. Rise in the demand of Consumer loans and Instant Personal loan has been seen. Rise in demand has forced fintech companies to opt for automation, cloud based processes and other latest technologies to meet the rising demand and make the whole process quick, contactless and hassle free.
Online studying and teaching, work from home culture in companies after the first lockdown compelled the consumer to buy smartphones, laptops, etc. on EMIs. At the same time, people were holding back on cash due to the uncertainty the Pandemic had brought. With the passage of time, situations improved a little and demand for different things increased gradually.
People diverted themselves towards online shopping and started using digital services. Online purchase of grocery and daily essentials, entertainment through OTT platforms, online courses and skill upgradation, e-libraries, housekeeping services through digital platforms have become a new normal.
Consumer demand patterns have also changed after the onset of Pandemic. Once a luxury has now become a necessity. Keypad phone users are shifting towards smartphones, laptops have become an essential for many people, digital banking and online payments have risen substantially. Internet users have increased in small towns and villages too. Online subsidy transfer, PM Jan Dhan Yojana, PM Kisan Nidhi, etc. have also encouraged the consumer in small towns and villages to use digital banking and they have also started doing online transactions. This has opened a new arena for digital banking companies and they are exploring the options to attract consumers from rural bases by designing their products keeping them in mind.
This changing scenario is demanding for new innovations and new business strategies in Banking and Non-Banking Financial Companies and companies are responding to it positively. No doubt the Pandemic has become a game changer for the fintech companies. New emerging technologies have become the answer to the new challenges coming towards the fintech companies. As demand for unsecured loans is rising, digital databases have become the savior for the companies as credit score and credit history of the consumer has become handy for them.
Changing consumer behavior has become decisive for these companies. Devastation caused by the second wave of Pandemic has resulted in the rise of demand in the field of medicine and personal loans to meet the medical and other expenses. Losses in business due to lockdown has also increased the demand for business loans. Need to build a compact solution and to provide a long term benefit is more than ever before.
The present situation has helped the companies in the realization of the use of innovative methods to provide customer service. Services like e-KYC, video customer service, chatbots, etc. have helped to provide a satisfactory experience to the customer which in result increased the trust in customer and strengthened the relationship between the lender and the borrower. Adoption of technology has helped in the increased consumer awareness.
In the new era of the pandemic, consumers are becoming more value conscious. He is spending very cautiously as resources are drying up for him. Safety and skill upgradation is becoming the major concern. Struggle to upgrade the lifestyle is increasing. Keeping all this in view, companies are reimagining their product portfolios so that they can cater to the needs of their newly emerging customers. New technology is helping the companies to achieve this goal. Fintech are aiming to become operational fully via digital platforms.