BENGALURU: Fin-tech startups are expecting a volume recovery in three to six months time following the pandemic hitting hard various businesses like payments, lending and neobanks, according to a report by venture capital firm Matrix Partners and consulting major McKinsey & Company.
The report is based on a survey of 70 fin-tech startup founders and chief executives including PhonePe co-founder and CEO–Sameer Nigam and Razorpay co-founder and CEO–Harshil Mathur. It was conducted in August and the report was released earlier this week.
The report showed how ledning startups were hit the hardest by the outbreak of Covid-19 and neo-bank have had to delay new product launches even though smaller businesses continued their digital adoption. For example, lending startups saw 85% drop in disbursal due to Covid-19 compared to the period before the virus outbreak in India. However, there was a 20% increase in efficiency collection in June, compared to April. 40% of lending startups shut at least one line of business due to the pandemic while the same is 15% for payments firms. There is a 35% decrease in average spending in marketing by neo banks.
For digital payments, firms said they reached 82% of pre-Covid-19 volumes in June with average transaction size growing over 1.1 times compared to before Covid-19 in India. “30% of respondents had achieved pre-Covid-19 volumes by July and 60% expect to reach those by September,” the report added.
According to the report, Covid-19 has it has delayed product launch plans for 50% of neo bank players and 70-90% respondents in the survey said the pandemic would have a positive or neutral impact on their gross margins, customer acquisition cost and commissions.
“90% of respondents feel that banks are much more open to neobank partnerships. Neo banks will focus on large and underserved segments or niches (e.g. SMBs, millennials) and have similar revenue lines as traditional banks. While virtual/digital bank licenses are still a few years away, clarity on bank-fintech partnerships will be a welcome step and reduce confusion amongst all stakeholders,” it added.