Impact of Covid-19 on FinTech in India

Impact of COVID-19 on Indian Urban Mobility by Sam Ghosh 19th July 2020

Impact of COVID-19 on FinTech in India by Sam Ghosh 26th July 2020
FinTech in India Indian Economy amid COVID19 Forces at Play Post-COVID FinTech
Policy & Industry
Response
Executive Summary
● As the pandemic gripped the economy, the FinTech companies are now at a product launch spree from
health insurance to affordable loans for consumers and MSMEs.
● Increase digital adoption is causing rapid growth for the sector. For example, as offline channels for financial
services got restricted by the lockdowns and fear of infection, InsurTech and Online Brokerages are
becoming the primary channel for the distribution of financial products.
● But, all is not hunky-dory. The looming recession is expected to take a toll on some of the sub-sectors. For
example, Alternative Lending companies involved in Retail Lending may face a tough test for their business
models and algorithms.

Pre-COVID FinTech in India
Policy & Industry
Response

FinTech Landscape: Major Segments in India
Policy & Industry
Response
FinTech
Alternative
Lending
Digital Payments InsurTech WeathTech
Marketplace lending
and alternative
underwriting platforms.
These companies use
alternative data to
evaluate the
creditworthiness of
individuals and
businesses without
enough credit history.
1. Retail Lending
2. MSME Lending.
Digital payment is a
way of payment that is
made through digital
modes. In digital
payments, payer and
payee both use digital
modes to send and
receive money. It is
also called electronic
payment.
Companies selling
insurance digitally or
providing data
analytics and software
for (re)insurers
WealthTech is
categorised as
products and services
offerings ranging from
financial services
software, investment
platforms, online
investing tools and
robo-advisors to digital
brokerages.
EnablingTech
Businesses that
provide technology
-based solutions to
both FinTechs and
traditional FIs to aid
the creation,
enablement and
delivery of innovative
financial products and
services.

FinTech Landscape: 67 FinTech unicorns globally valued at $252.6B
Policy & Industry
Response
Source: CBInsights

FinTech Landscape In India: Alternative Lending: Retail Lending
● Retail Alternative Lending uses AI/ML to create credit profiles for new to credit (lacking enough credit history
for credit from banks) borrowers. Thus the loan book of such retail lenders may contain considerable
sub-prime loans.
● ICICI/CRISIL: Retail Loan was expected to grow from Rs. 48 trillion (US$640 billion @ 1 USD = Rs.74.65) to
Rs. 96 trillion (US$1.29 trillion) by FY24 and digital lending is expected to increase to 16% (from 6% in
FY19) of whole retail credit market i.e. US$206 billion.
● Use Cases (PwC):
○ Checkout Financing/ POS Lending: Providing low cost/ no-cost EMI options at online or offline checkout points.
○ Lending to Gig Workers through aggregators.
○ Digital Lending Marketplaces.
○ Direct small-ticket lending through mobile apps.
Policy & Industry
Response
Read more about Digital Lending in India.

FinTech Landscape In India: Alternative Lending: MSME Lending
● IFC: The addressable credit gap in the MSME sector is estimated to be INR 25.8 trillion (USD 397 billion) as
of 2018.
○ Tech-driven acquisition and underwriting.
○ Providing credit as a value added service with non-financial services such as an wholesaler providing credit as
financing option.
○ Providing Invoice Financing based on data from Trade Electronic Receivables Discounting System (TReDS) to the
GST Network (GSTN).
○ PoS based lending to MSMEs.
Policy & Industry
Response
Read more about Digital Lending in India.

FinTech Landscape In India: Digital
Payments
● RBI: The cash propensity is
considerably high in India compared
to other countries.
● Digital payments in India grew at
CAGR 19% in value and 61% in
volume between FY 2014-15 and
FY 2018-19.
○ Retail electronic payments
comprising credit transfers and
direct debits are growing at a
CAGR of 42% and 65% in terms of
value and volume.
○ Debit and credit card-based
payments registered a CAGR of
44% and 40% in terms of volume
and value.
Policy & Industry
Response
Read more about Digital Payments in India.
Different types of Digital Payments.
Source: BCG & Google

FinTech Landscape In India: Digital Payments..
● Assocham-PWC: Digital payments’ transaction value was estimated to grow at a CAGR of 20.2% from
approximately USD 64.8 billion in 2019 to USD 135.2 billion in 2023.
○ Providing payment technologies such as mobile point of sale (mPoS) or quick response (QR) code to enable offline
merchants to accept digital payments.
○ Offering a full suite of cash management services and other banking services along with Payment Gateways.
○ As a value-added service along with non-financial services.
○ Leveraging new innovative payment technologies such as sound waves to provide contactless payment services.
Policy & Industry
Response
Read more about Digital Payments in India.

FinTech Landscape In India: InsurTech
● IBEF: The insurance industry in India was expected to reach US$ 280 billion by 2020.
● At 3.69%, India ranked 41st in 2017 in terms of insurance penetration, with life insurance penetration at
2.76% and non-life insurance penetration at 0.93%.
● In terms of insurance density, India ranked 73rd in 2017 with an overall density of US$73.
○ Using technology to support not only the digital purchase of insurance policies but also claims initiation and
settlements.
○ Targeting new customer segments by offering niche insurance products such as insurance for non-critical health
conditions, protection for devices, and cyber insurance.
○ Employing technology to provide customers with a wide range of best-suited options through marketplaces and
simplifying digital purchases.
Policy & Industry
Response

FinTech Landscape In India: WealthTech
● Most underpenetrated segment in FinTech in India.
● Other FinTech players are trying to penetrate this segment with their existing customer base.
● PwC: The total market size for robo-advisory in India was predicted to be worth US$145 million by 2023.
○ Digital discount brokers: Tech- first, low-cost brokerage offerings to empower retail investors and traders with the
right tools for investing.
○ Digital wealth management platforms: Providing clients with a 360-degree view of their investment portfolios and
assisting them with tools and personalised inputs to optimise and invest towards their goals.
○ Robo advisory: Offering financial advice for achieving goals with moderate to minimal human interaction.
○ Thematic investing: Enabling retail investors with sophisticated tools that allow them to create tailored baskets of
stocks reflecting their strategy and views on the market.
○ FS wrapped around non-FS business offering: Offering non-FS services and bundling WealthTech offerings such
as intuitive tax filing services, along with inputs on optimising investments for tax saving.
Policy & Industry
Response

FinTech Landscape In India: EnablingTech
○ Helping the distribution of financial products and services to targeted prospects.
○ Advanced solutions for digital onboarding with KYC related services, securing transactions, and mitigating fraud and
anti-money laundering (AML)/combating the financing of terrorism (CFT) risks.
○ Extraction, aggregation, and analysis of information from multiple accounts, such as loan/credit accounts, savings and
current accounts, credit cards and investment accounts, Government repositories such as public provident fund
(PPF), and income tax return data.
Policy & Industry
Response

Indian Economy amid COVID19
Policy & Industry
Response

Economic Activity: Index of Industrial Production (IIP)
● The pandemic induced lockdowns have caused havoc for the Indian economy as we can see in the below graphs.
Year on Year growth of all major sector remained negative from March to May.
Policy & Industry
Response
Data: RBI
Industrial Production Transactions Capital Markets Insurance Policy Rates Credit Growth Prices

Economic Activity: Transactions
● The lockdowns also affected the payment transactions in the economy.
Policy & Industry
Response
Data: RBI

Economic Activity: Transactions Variation from February Levels
● UPI payments recovered quickly in May, higher than the March levels.
Policy & Industry
Response
Data: RBI

Economic Activity: Transactions: Growth
● The month to month growth of transactions for most modes was negative in April but positive in May.
Policy & Industry
Response
Data: RBI

Economic Activity: Capital Markets: Market Indices
● The capital markets are experiencing increased volatility from March. NIFTY 50 dropped by 23% in March, grew
15% in April, lost 3% in May, before growing by 7.5% in June. Overall, NIFTY50 is down 8% in June end from
February end level.
Policy & Industry
Response
Data: NSE

Economic Activity: Capital Markets: Market Indices
Policy & Industry
Response
Data: NSE

Economic Activity: Capital Markets : Market Indices
Policy & Industry
Response
Data: NSE

Economic Activity: Capital Markets: Market Indices: Transaction Volume
● Capital market transactions increased rapidly in March for NIFTY50 then stabilised. For Midcaps, transactions are
increasing exponentially from March.
Policy & Industry
Response
Data: NSE

Economic Activity: Capital Markets: Market Indices: Transaction Value
● Similar trends are visible in turnover. This shows that uncertainty has gripped the market. Also, attracted speculators
for short term profit.
Policy & Industry
Response
Data: NSE

Economic Activity: Capital Markets: Mutual Funds
● Mutual Fund Asset Under Management (AUM) decreased by 18% in March, before increasing by 7.5% in April and
2.6% in May.
Policy & Industry
Response
Data: AMFI

Economic Activity: Capital Markets: Mutual Funds
● Mutual Funds experienced outflows in February and March but inflows after that.
Policy & Industry
Response
Data: AMFI

Economic Activity: Insurance
● As the lockdowns affected the offline channels, the growth of the insurance sector affected negatively. Insurance
Premium till the end of June shrunk by 19% for Life Insurance and 4% for Non-Life Insurance from a year before.
Policy & Industry
Response
Data: IRDA1 and IRDA2

Economic Activity: Policy Rates
● To encourage investment and growth, RBI continued and deepened an accommodating stance. Repo rate was
decreased by 1.15%, Reverse Repo by 1.55%, Cash Reserve Ratio by 1% from the beginning of the year till May
end.
Policy & Industry
Response
Data: RBI

Economic Activity: Credit Growth
● The credit market was already dealing with slow growth.
Policy & Industry
Response
Data: RBI

Economic Activity: Credit Growth
● For the period March - May, credit growth was not bad for sectors except for Personal Loans. The growth of
Personal Loans trend has reversed due to uncertainty.
Policy & Industry
Response
Data: RBI

Economic Activity: Prices: Consumer Prices
● Given lowering interest rates and supply-side transportation problems due to lockdowns, consumer prices increased
in April before stabilising.
Policy & Industry
Response
Data: RBI

Economic Activity: Prices: Consumer Prices
Policy & Industry
Response
Data: RBI

Economic Activity: Prices: Wholesale Prices
● Wholesale prices affected negatively signifying slow industrial activity. Year on Year growth for most sectors was
negative after March, especially for Fuel (low Crude oil prices in the international markets added to the low prices).
Only Food prices saw slight positive growth probably because of the transportation issues for agricultural produce.
Policy & Industry
Response
Data: RBI

Policy & Industry
Response
Policy & Industry Response

Policy & Industry
Response
Relevant Policy Response: Foreign Direct Investment
● DIPP 17th April 2020 - Review of Foreign Direct Investment (FDI) policy for curbing opportunistic
takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic.
○ Restriction placed on “entity of a country, which shares land border with India or where the beneficial
owner of an investment into India is situated in or is a citizen of any such country”. FDI from such
countries can only happen with government authorisation.

Policy & Industry
Response
Relevant Policy Response: GOI, RBI and SEBI
● GOI on 24th March 2020: MHA guidelines state that banks, insurance offices, ATMs including IT vendors for banking
operations, Banking Correspondent and ATM operation, and cash management agencies are exempted from the
lockdowns.
● SEBI on 24th March 2020: SEBI exempts Stock exchanges, Clearing Corporations, Depositories, and other
regulated entities from the lockdowns.
● GOI on 25th March 2020: MHA guidelines exempt pay and accounts offices, financial advisers, RBI, RBI regulated
financial markets such as NPCI, CCIL, payment system operators, etc from the lockdowns with conditions.
● GOI on 14th May 2020: Extended Partial Credit Guarantee Scheme offered to Public Sector Banks (PSBS) to:
○ Purchase of pooled assets of rating BBB+ or above from sound NBFCs and HFCs.
○ Portfolio guarantee for purchase by PSBs of Bonds of Commercial Papers (CPs) with a rating of AA or below
issued by NBFCs/ HFCs and MFIs.
● RBI 27th March - Moratorium on Term Loans - All commercial banks (including regional rural banks, small finance
banks, and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing
finance companies and micro-finance institutions) were permitted to allow a moratorium of three months on payment
of installments in respect of all term loans outstanding as on March 1, 2020. On 23rd May 2020, the moratorium has
been extended till 31st August 2020.

Policy & Industry
Response
● RBI 27th March - Deferment of Interest on Working Capital Facilities - For working capital facilities sanctioned in the
form of cash credit/overdraft, lending institutions are being permitted to allow a deferment of three months on
payment of interest in respect of all such facilities outstanding as on March 1st, 2020. Relevant provisions have been
made in the asset classification norms. On 23rd May 2020, this also been extended till 31st August 2020.
● RBI 23rd May - Easing of Working Capital Financing - In respect of working capital facilities sanctioned in the form of
CC/OD to borrowers facing stress on account of the economic fallout of the pandemic, lending institutions may, as a
one-time measure,
○ recalculate the ‘drawing power’ by reducing the margins till August 31, 2020. However, in all such cases where such a temporary enhancement
in drawing power is considered, the margins shall be restored to the original levels by March 31, 2021; and/or,
○ review the working capital sanctioned limits upto March 31, 2021, based on a reassessment of the working capital cycle.
● RBI on 27th March 2020 - Reduction of the policy repo rate under the liquidity adjustment facility (LAF) by 75 basis
points to 4.40% from 5.15%. The Marginal standing facility (MSF) rate and the Bank Rate war reduced to 4.65%
from 5.4%. On 22nd May 2020, the policy repo rate under the liquidity adjustment facility (LAF) got further reduced
by 40 bps to 4.0% from 4.40%. Accordingly, the marginal standing facility (MSF) rate and the Bank Rate stood
reduced to 4.25% from 4.65%. The reverse repo rate under the LAF stood reduced to 3.35% from 3.75%.
● RBI on 28th March 2020 - Reduction of the cash reserve ratio (CRR) of all banks by 100 basis points to 3.0% of net
demand and time liabilities (NDTL) with effect from the reporting fortnight beginning March 28, 2020.

Policy & Industry
Response
● RBI 27th March 2020 - Targeted Long Term Repo Operations (TLTRO) - auctions of targeted term repos of
up to 3 years tenor of different sizes for a total amount of up to Rs. 1,00,000 crore at a floating rate linked to
the policy repo rate. A second TLTRO was announced on 17th April 2020.
● RBI 27th March 2020 - Increase in the borrowing limits in the marginal standing facility (MSF) to 3% from
2% of the Statutory Liquidity Ratio (SLR). This is intended to provide comfort to the banking system by
allowing it to avail an additional ₹ 1,37,000 crore of liquidity under the LAF window
● RBI 27th March 2020 - Widening of the Monetary Policy Rate Corridor from 50 bps to 65 bps - Under the
new corridor, the reverse repo rate under the liquidity adjustment facility (LAF) is set to be 40 bps lower than
the policy repo rate.
● RBI 27th March 2020 - Deferment of Implementation of Net Stable Funding Ratio (NSFR) from April 1st,
2020 to October 1st, 2020.
● RBI 27th March 2020 - Deferment of Last Tranche of Capital Conservation Buffer from March 31, 2020 to
September 30, 2020.

Policy & Industry
Response
● RBI 27th March 2020 - reduction of the interest rate on fixed-rate reverse repo under the Liquidity
Adjustment Facility (LAF) by 25 basis points from 4.00% to 3.75%.
● RBI 17th April 2020 - Reduction in the Liquidity Coverage Ratio requirement.
● RBI 17th April 2020 - Refinancing Facilities for All India Financial Institutions (AIFIs).
● RBI 17th April 2020 - Extension of Resolution Timelines under the Prudential Framework on Resolution of
Stressed Assets.
● RBI 24th June 2020 - Guidelines for increased transparency related to loans sourced by Banks and NBFCs
over Digital Lending Platforms
● RBI 1st July 2020- Special liquidity scheme for NBFCs/HFCs through a Special Purpose Vehicle (SPV) to
avoid any potential systemic risks to the financial sector.

Policy & Industry
Response
Relevant Policy Response: IRDA
● IRDA 4th March 2020 - COVID 19 related guidelines to health insurers
○ Expeditious handling of claims.
○ Advisory to design products covering the costs of treatment for Coronavirus.
● IRDA 23rd March 2020 - COVID 19 related guidelines to life insurers.
○ Grace periods for premiums
○ Quicker settlement for claims
○ Periodic reports
● IRDA 30th March 2020 - Guidelines to life insurers
○ Additional grace period.
○ Additional settlement options.
● IRDA 30th March 2020 - COVID 19 related guidelines
○ Communication guidelines related to COVID linked claims.
○ Monitoring the situation with Business Continuity Plan (BCP), Crisis Management Committee, etc.
○ Encouragement to devise appropriate insurance products that would protection from risks arising out of COVID 19.
○ Enable digital payment of premiums.
○ Simplification of claim processing.

Policy & Industry
Response
● IRDA 1st April 2020 - Arogya Sanjeevani Policy
● IRDA 2nd April 2020 - Allowance for the delay in payment of health insurance premiums. Extension on 16th
April. Further guidelines on 21st April 2020.
● IRDA 4th April 2020 - Guidelines to life insurers
○ Additional grace period.
○ Additional settlement options
● IRDA 16th April 2020 - Providing mandatory medical insurance coverage to workers as part of the National
Directives of MHA, GOI.
● IRDA 9th May 2020 - Extension of grace period for life insurance premiums.
● IRDA 18th April 2020 - Norms on settlement of health insurance claims.
● IRDA 18th April 2020 - Norms on settlement of health insurance claims.

Policy & Industry
Response
● IRDA 26th June 2020 - Guidelines on Covid Standard Health Policy.
● IRDA 26th June 2020 - Guidelines on Covid Standard Health Policy. Further details.
● IRDA 14th July 2020 - Provision of cashless facility to the policyholders.
● IRDA 21st July 2020 - Filing of “Corona Kavach Policy” as a group health insurance product.
All IRDA Guidelines related to COVID 19.

Policy & Industry
Response
Relevant Industry Response
Sub-Sector Company Initiative
Payments Paytm Enters insurance business with COVID-19 Insurance in collaboration with Reliance
General Insurance.
Payments Razorpay Launches UPI Autopay partnering with NPCI, payout links, and partnered with Rentlite,
a division of Featherlite to with corporate offers to enable people to rent office furniture
for working from home.
Payments Instamojo Launches InstaCash through which merchants can avail loans up to Rs 1 lakh for a
period of seven to 14 days, and an initiative to help MSMEs set up their store online in
less than five minutes.
Payments PhonePe Launches Corona Care, an affordable Corona hospitalisation insurance policy, in
partnership with Bajaj Allianz General Insurance. Also, launches Grocery Home
Delivery.
Payments CRED Launches RentPay, which allows its members to pay rent on credit and CRED Stash,
a flexible, low-cost, and instant credit line.
Lending (P2P) Faircent Launches Anti Lockdown Loan, which offers three months of EMI free period.

Policy & Industry
Response
Relevant Industry Response
Sub-Sector Company Initiative
EnablingTech Veri5Digital Launches Video KYC an ID Verification system.
E-Commerce/
Payments
Amazon Launches checkout financing as a zero cost EMI of 3,6,9 and 12 months.
InsureTech Riskcovry Ties up with NPCI to offer health insurance to RuPay card users.

Policy & Industry
Response
Forces at Play

Policy & Industry
Response
Indian
FinTech
Industry
Rapid Digital
Adoption
Lower
Purchasing
Power
Fear of Infection
Fear of Financial
Distress
Policy Changes
Lower Asset
Values
Low Interest
Rate
Environment
Hampered
Cash-Cycles

Policy & Industry
Response
Forces at Play: Fear of Infection
● At the onset of COVID-19 people started fearing that infection can spread through currency notes.
● All kinds of payment modes took a hit in April 2020, UPI based payments accelerated rapidly in May
compared to other modes.
● Digital payments surpassed cash withdrawals
For the first time on the back of UPI growth.
● Contactless payments are getting popular.
● As people are learning to avoid physical
meetings and use digital channels instead,
the fear of infection will be favourable for
all kinds of FinTech from InsurTech to Lending.
**ATM withdrawal data for June 2020 is for NFC and AePS
Data: RBI and RBI Analysis by Author.

Policy & Industry
Response
Forces at Play: Rapid Digital Adoption
● Capgemini Consumer Survey finds:
○ COVID-19 has accelerated the shift from cash to digital payments and this trend will persist in the future.
○ Digital channel adoption will increase, but physical touchpoints will continue to play a role post-COVID.
○ Over a third (36%) of consumers have found a new provider during this crisis and they will stick with this
provider in the future. Digital disruptors are the destination for many of these consumers.
● This is beneficial for the whole FinTech ecosystem from lending to enablers.

Policy & Industry
Response
Forces at Play: Lower Purchasing Power
● IMF projects the global economy to shrink by 4.9% in 2020 as of June 2020.
● Job loss is the most severe immediate impact of the COVID-19 crisis according to a survey by the Indian
Society of Labour Economics (ISLE).
● A study shows that 80% of Indians lost Income due to COVID-19.
● Covid-19 crisis may lead to a decline of 5.4% in the per capita income (PCI) of Indians in FY21 to Rs 1.43
lakh.
● People are likely to postpone non-essential and high-value purchases.
● The financial behaviour likely to become conservative.

Policy & Industry
Response
Forces at Play: Fear of Financial Distress
● Apart from job losses, job types are changing and gig economy/ freelance jobs are on the rise.
● The change in employment type may have various effects on the consumers such as an increased
preference for saving than spending, delaying high-value purchases, repaying loans, etc.
● This conservativeness is reflected by mix of insurance purchases, as people are stressing on limiting losses
than growth.
● This has implications for the financial products as it likely that people will avoid risky investments (capital
markets) and focus on risk management (insurance).

Policy & Industry
Response
Forces at Play: Policy Changes
● RBI has adopted an expansionary regime with low-interest rates and increasing liquidity in the system.
● RBI is also pushing for digital payments.
● GOI has adopted a new FDI policy to restrict opportunistic takeovers from entities neighboring countries
(read China).
● As significant of funding to Indian startups come from Chinese entities, this has implications on the growth of
the sector.
● RBI 24th June 2020 - Guidelines for increased transparency related to loans sourced by Banks and NBFCs
over Digital Lending Platforms.

Policy & Industry
Response
Forces at Play: Lower Asset Values
● The pandemic induced economic crisis likely to severely affect the real estate prices.
● As corporates experience earning losses*, the medium-term prospect of the capital markets cannot be very
optimistic even at record low-interest rates.
● Lower asset values likely to result in a negative
wealth effect causing further lower consumption.
● Negative wealth effect may also lower affect the
demand for consumer credit as people may be
unsure about repayment ability. Also, Alternative
Credit is often offered as a financing option for
high value items (checkout financing). Lowering
consumption of high-value items means lowering
credit growth.
● In fact, personal loan growth was negative
between March end and May end.
● Negative wealth effect also likely to make people conservative and make them opt for insurance.
*Covid-19 impact: Two of every 5 firms log 20% drop in profits
Data: RBI

Policy & Industry
Response
Forces at Play: Low-Interest Rate Environment
● The interest rates are at a record lows. As this is expected to be a prolonged economic distress, the interest
rates are expected to be kept low by RBI.
● This has implications for Alternative Lending and WealthTech companies.
● Lost interest rates enable lenders to offer low-cost credit if they have access to low-cost capital as Banks
and larger NBFCs may turn conservative and transmission of policy rates become slower.

Policy & Industry
Response
Forces at Play: Hampered Cash-Cycles
● Business cash-cycles are seriously getting hampered by the unpredictable lockdowns.
● MSMEs, who lack cash reserves, are facing a serious cash crunch.
● This brings opportunities for lending FinTechs.

Policy & Industry
Response
Post-COVID FinTech

Policy & Industry
Response
Fear of
Infection
Rapid Digital
Adoption
Lower
Purchasing
Power
Fear of
Financial
Distress
Policy Changes Lower
Asset
Values
Low Interest Rate
Environment
Hampeed
Csh-Cycles
Alternative
Lending - Retail
Alternative
Lending - MSME
Digital Payments
InsurTech
WealthTech
EnablingTech
Very
Unfavourable
Unfavourable Neutral / Mixed Favourable Very Favourable
Impact Map Recommendations

Policy & Industry
Response
Analysis and Recommendations: Alternative Lending
● The impact on retail lending and MSME lending are expected to be very different.
● As households turn conservative about their finances, the growth of retail credit is expected to be slow with
lower discretionary spending.
● Also, exposure to sub-prime retail customers makes many alternative lenders with weak balance sheets
vulnerable to financial shocks. A slow recovery will be a tough test for many alternative lending business
models.
● Retail lenders are recommended to differentiate between the financing of essentials and non-essentials.
● MSME lenders, on the other hand, are given an opportunity for rapid growth as MSMEs struggle to fund
working capital from conventional sources.
● Although, it is recommended that MSME lenders should be careful about exposures to vulnerable value
chains (Travel, Hospitality, etc.)

Policy & Industry
Response
Analysis and Recommendations: Digital Payments
● The pandemic brought enormous opportunities for digital payments in India on the back of UPI growth.
● Although there can be some short-middle term pain due to economic distress, overall the pandemic has
accelerated the growth of digital payments.
● The payment companies need to address the increasing conservatism in the consumers who are learning to
differentiate needs from aspirations.

Policy & Industry
Response
Analysis and Recommendations: InsurTech
● As expected, the COVID-19 has caused a surge for health insurance.
● Many new players (ex.Paytm, PhonePe) entered the insurance distribution business.
● But, we need to understand that InsurTech is no only about health insurance. IRDA data shows a sharp drop
in new business premiums for life insurance. This is because of the restrictions on offline channels due to
lockdown.
● Insurance companies are trying to boost their online sales channels creating opportunities for the
InsurTech companies.
Data: IRDA1 and IRDA2

Policy & Industry
Response
Analysis and Recommendations: WealthTech
● Fear of infection caused the digital adoption of investment channels as experienced by online brokerages.
● Although, at the same time economic uncertainty is keeping the investors from making any new investment.
● AMFI data shows that February and March both months witnessed net outflow from the mutual funds.
Although, net inflow returned in April, it was far
less than the January levels.
● While many WealthTech businesses may face
short term pain due to outflows and shrinking
AUM increased digitization as experienced
by online brokerages will be favourable for the
players.
Data: AMFI

Policy & Industry
Response
Analysis and Recommendations: EnablingTech
● EnablingTech companies are expected to see favourable outcomes due to the pandemic.
● As FinTech players try to react quickly to the changing circumstances, demand for services of the
EnablingTech companies is expected to see rapid growth.
● Increased digital adoption overall is also favorable for these companies.

Thank You

Impact of Covid-19 on FinTech in India

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