Life Online: How will COVID-19 Affect Digital Lending?

I have news for you: the epidemic of the COVID-19 will pass. Like other global shocks and disasters, it has its expiration date. But, like all significant events, it will change our life. You can argue for a long time about the degree of its danger, the need for certain measures, but one thing is obvious: it has already influenced our everyday life, current business models, made us overestimate the importance of science and individual areas of medicine.

Augmented Reality

What will our world become after the end of the epidemic? We must ask ourselves this question today. COVID-19 dared the barriers to translating our communications on the Internet. 

Often, the introduction of truly useful online tools has been slowed down by cautious bureaucrats and a reluctance to relearn. For example, telemedicine gained rapid development. Many private clinics in the world have introduced or increased the number of online consultations. 

Some educational institutions conduct distance learning, although traditionally homeschooling was not held in high esteem. I am not saying that the overwhelming majority of personnel in companies have been transferred to remote work.

Can we put this Gene back in the bottle when it's over? Will students want to pay for expensive housing or prefer to study remotely? Will companies start spending money on office rental when telecommuting is already in place? Will employees spend time and money travelling to the office for traffic jams or will they replace their jackets and ties with comfortable home clothes? 

Of course, everything will not change dramatically in one day, but many will ask themselves these questions. We will see the effectiveness of some changes and the problems that were usually discussed at the meeting will be solved by simple correspondence in the messenger. It’s not for nothing that the Zoom video Communications Inc. video conferencing platform shares on March 23 jumped 40% in price.

Online Only

All these processes have been going on for several years, but it was this situation that showed their relevance. One of the main areas of work of our investment group is the development of fintech projects in online lending, e-commerce and IT. 

The ideas of a “state in a smartphone” also appeared before quarantine, but how much easier it would be for people today if digitalization processes started earlier.

Today we are talking not much about rapid growth, but about the effectiveness of the online business model, not only in peacetime but also in unprecedented quarantine measures. This model will not lose its relevance even after the “corona crisis”, digital technologies will help to deal with its consequences.

So, in the USA, innovative lenders are coming together for participation in the state plan to stimulate enterprises suffering from recession after coronavirus. The industry group Financial Innovation Now (Square, PayPal, Intuit, Stripe and other non-banking financial companies) sent a letter to Congress asking them to be included in the development of anti-crisis financial measures.

Fintech companies are confident that their technology-oriented underwriting approach can transfer funds to small businesses faster than commercial banks. Time is key to this segment. 

According to a survey of small enterprises conducted by JP Morgan Chase Institute, half of them have a cash buffer of less than one month. The speed of financial processes plays a decisive role here and this will become an incentive for the development of fintech.

What will alm my Heart?

Small and medium-sized businesses have found themselves in an extremely difficult situation and will need fast money. No less difficult times will come for the tourism, restaurant and other industries affected by forced restrictions. 

In turn, this will have significant implications for the financial services industry. Companies and banks involved in mortgage lending, car loans, student loans and credit cards should be ready to help borrowers who are already late with payments or expect this to happen.

 In addition, it is important to provide people with the opportunity to resolve their financial issues remotely, without having to go to the department.

The epidemic and the ensuing crisis will be a serious test for the financial services market. The companies that deal with microloans are most at risk, as unemployment is growing, and any benefits from the state will only partially mitigate the situation for borrowers.

It remains to believe that an outbreak of coronavirus is an event that will not happen again soon. As an industry, we are likely to be able to learn many lessons.

Looking back, we will probably see that we have made remote work available to a larger number of employees, online loans are even more efficient and convenient for customers, and we also used our resources to solve other unforeseen problems.

A negative experience will also teach us a lot. However, now it is important that your customers and employees know that we have plans to solve problems and provide services with a minimum break in work.