Looking At the Role of Fintechs in Building a Post COVID-19 Economy
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After the COVID-19 pandemic is taken care of, we will inherit a different world. This world will be guided by a new routine, modified in sync with the essential health and healthcare-centric requirements for sustaining life in the post-lockdown, post-pandemic world. The decisions that people, organizations, and governments take today will determine how the world will function tomorrow. The influence of our decisions will not just be limited to our healthcare systems but will also affect the political, economic, and cultural landscape of the future.
Against this backdrop, global industries will adapt in tandem with the various socioeconomic developments. Startups and established players alike will need to embrace innovations to bridge the emerging need-gaps and those who will rise to the occasion will become market leaders in the post-COVID-19 economy. The fintech startup ecosystem is no exception. In fact, fintech are already coming to the rescue of quarantined people and enterprises amid the strangulated mobility landscape due to the mandated nationwide lockdown.
In the wake of the lockdown, people are unable to physically access financial services even though the banking sector is doing business as usual. Further, the exchange of cash has also ground to a halt as people are actively reducing their contact environment with foreign objects and other people to curb the spread of the infection. This is where the presence-less, hassle-free, and trustworthy fintech services step into the picture.
The fintech ecosystem of the future
New-age, digital-first fintech platforms—including NBFCs, account aggregators, e-wallets, escrow service providers, etc—are enabling Indians to meet their financial obligations without violating the social distancing protocols. Amid the lockdown, customers are purchasing essential goods and online services, pay EMIs, drive rental transactions and wealth management, etc., by leveraging digital currencies and secure payment modes such as UPI. Consequently, many digital payments companies have registered a transactional surge in online payment volumes since the announcement of the lockdown.
In the future, the norm that social distancing has become will persist, until at least, the development of a vaccine for the novel coronavirus. Until then—and perhaps beyond that as well—every individual will prioritize sanitization and hygiene, and so society will adapt. In this scenario, fintechs will play a key role in making payment services contact-less and more accessible so that the chance of coming into contact with a contagion similar to COVID-19 can be minimized.
Besides minimizing the physical contact between user and the fintech services, the financial landscape of the future will facilitate robust efficiency, superior accessibility, and, above all, firm trust. And escrow-based fintech services comprise one such financial solution that embodies all these values and will boost the drive of expanding financial inclusion across the country.
Escrow accounts and the road ahead
Escrow account services involve an arrangement where a third party plays the part of a trust-enabler in a transaction between two or more transacting parties. The third-party holds the transactional asset, releasing it only when all the terms of the contract are satisfactorily met. Traditionally, escrows have been associated with big-ticket transactions between corporates. However, new-age fintechs are democratizing escrows by developing a digital overlay with the banks serving as the backbone of the entire framework. Leveraging user-friendly front-end to facilitate a seamless user journey, such players are committed to enabling average users to conduct contingent-based transactions instantaneously over the digital platform.
Besides stakeholders of sectors such as real estate, players of the ‘gig economy’ can also glean immense value from escrow accounts. Freelancers and hustlers, for instance, can ensure that upon the delivery of a service from their end, they are paid in time and in full. Similarly, buyers can rest assured that they will not be defrauded by the service provider. Other key use-cases of escrow accounts that will become highly relevant post-COVID include procurement, supply chain, buying and selling of second-hand vehicles, purchase of luxury goods, and other high-value goods, among other things.
With transactions becoming faceless and contact-less, trust has emerged as a valuable commodity. Hence, fintech will be responsible for bridging the trust-deficit through their new-age innovations, and services such as escrow will gain critical relevance in the aftermath of COVID-19. Naturally, fintech will comprise one of the barycenters of the investor interest, making the establishment of a trust-based, tremendously-accessible financial ecosystem not a matter of possibility but merely that of time.