The world of digital transactions is in the middle of a meteoric rise, spurred by major lifestyle changes in the face of Covid-19. Ecommerce has developed more in the past three months than in the ten years prior, and that growth still hasn’t plateaued. How do FinTechs take advantage of that growth and adjust for the future?
That was the theme of Plug and Play Ventures’ Summer Summit, an annual conference that – on the theme of digital growth – also grew its audience this year in a remote broadcast format.
“Covid and this quarantine have been the most seminal events of our lifetimes,” said Uzma Makkdumi, head of New Business Development at Google Pay, in her keynote address. “Given that, we’re seeing a lot of new trends evolving in the FinTech space and in payments. How can we embrace those trends as a FinTech industry?”
It’s a complicated question for organizations, as there’s no one-size-fits all solution—especially not in the global marketplace, where there’s a wide gap in progress between levels of digital transformation. It’s made even more complicated by the fact that those long-term plans, from real-time payment rails to cashless transactions or digital wallets are suddenly very urgently needed.
“Banks are struggling to adjust,” Makkdumi said. “The digital transformation was always part of the agenda, but it was not expected to come so soon. We’ve seen a reduction in physical spending and an increase in online, and these impacts are expected to last even after the economy starts to open up – and even after, hopefully, a vaccine.”
Consumer behaviors have transformed in a massive way since the start of quarantines: online transactions have increased massively, with a further shift in consumer priorities to essentials and entertainment spending. And that shift towards the online marketplace has caught many merchants off-guard; while services like Doordash and Amazon can help with continuation of sales in the new market, they also represent another cut into profits that many businesses were not prepared for.
And on the back end, financial institutions are accelerating their digital transformation efforts, with particular emphasis placed on branchless banking and credit management. It’s a major opportunity to disrupt existing business models.
“In India, we worked extensively with the banks to launch Google Pay,” Makkmudi said. “Most transactions in India were being done in cash, there was not much acceptance of digital payments. To digitize cash, you have to incentivize merchants to accept these payments: you have to reduce the processing costs to be close to cash, or basically zero. We have to move from transaction-based revenue to upselling and cross-selling. This is the time to think about what you give up in the short-term to build longer-term gains.”
Digital transformation efforts can also help to solve old problems along with the new ones; identifying pain points for consumers and underserved markets. Easier access to the digital marketplace will be critical moving forward for the unbanked, and digital platforms will be needed to accommodate that shift. Those organizations which will be successful will be those which can embrace change quickly.
“We’ve already seen two years’ worth of development here in the past two months, and there’s only more to come,” Makkmudi said.