While the fintech industry is still evolving, the evidence so far indicates that it has a key role to play in financial inclusion, according to Ana Fiorella Carvajal, lead financial sector expert at World Bank. This role comprises not just the provision of basic services, such as payments mechanisms, but more recently also the provision of financing to consumers and SMEs.
“There are some fintech firms that act as online lenders and lend on their balance sheet, but there are also other types of fintech firms that basically work as intermediaries, putting the SMEs together with investors that are willing to invest in these SMEs,” Ana Fiorella Carvajal explores.
She continues to say that what is materialising is that these fintech firms “not only exist in advanced jurisdictions, but also in emerging markets and they are starting to have an important role in providing financing to them.” Providing an example, Ana Fiorella Carvajal states that in Chile, 50% of loans were channelled to those who were unbanked and underbanked in 2017.
She also reiterates the importance of retaining and maintaining levels of financing for SMEs during and post-pandemic, for SMEs are “a key engine of growth and employment in countries.”
She adds: “In emerging markets, formal SMEs constitute for about 45% of employment and 33% of GDP, so they are really key for the economies of our countries to go on and the pandemic is hitting them very hard.” However, while many countries are establishing programmes and support packages for SMEs during these unprecedented times, it is uncertain whether these will remain indefinitely.
Therefore, Ana Fiorella Carvajal highlights the need for authorities to ensure that alternative mechanisms of finance remain available to both consumers and SMEs and to be cognisant of the fact that “the universe of fintech is not monolithic.”
A key point here is to precisely understand this dynamic, and this is where the Cambridge Centre For Alternative Finance’s (CCAF) Global Covid-19 Fintech Market Rapid Assessment survey comes into play as it will yield the granularity of data required to appreciate the nuances of the influence Covid-19 has had on fintech.
The Rapid Assessment Survey consists of 15 questions and seeks to capture, analyse and understand the following:
1. Changes in Fintech Market Performance - How Covid-19 has impacted market performance of fintech firms in areas such as transaction volumes, customer acquisition rates, loan default rates, premium lapses and the participation of retail and institutional investors in the provision of funding across various verticals.
2. Specific Covid-19 Responses by Fintech Firms - How fintech firms have adapted or plan to adapt their product and services in response to Covid-19, e.g. the launch of new products and services, payment holidays, inclusion of pandemic risk cover, a pivot to facilitating Covid-19 related fundraising activities, reducing or waiving of fees.
3. Regulatory Support or Policy Assistance - Assistance or support fintechs have received or will require from governments and regulators. This might include changes to or fast tracking of regulations, the provision of interim permissions, fiscal subsidies and tax reliefs, as well as opportunities to participate in government-run SME emergency loan, employee job retention or cash disbursement schemes as service providers.
4. Operational Challenges - How Covid-19 has impacted the daily operations of fintechs, including challenges related to client onboarding, human resources, cyber security, fundraising and access to platform-held or third-party data.
The CCAF invites participants in key vertical FinTech and Digital Financial Services sectors (digital lending, digital capital raising, digital payments, digital savings, InsurTech, WealthTech, digital custody, cryptoasset and consensus services, digital banks and market provisioning) to complete the survey. There are two versions available:
For FinTech and digital financial services firms that have not participated in previous CCAF benchmarking studies:
Complete the survey
For Digital Lending and Digital Capital Raising firms that have previously participated in the CCAF's long-running Alternative Finance Industry Benchmarking Studies (to allow our longitudinal data collection).
Complete the survey