Experts Share Their Views on How Fintechs Can Navigate the COVID-19 Crisis

Experts Share Their Views on How Fintechs Can Navigate the COVID-19 Crisis

by March 27, 2020

The COVID-19 pandemic has proven to be a strain, not just on our healthcare systems, but also on the global economy as well. Besides being concerned about the wellbeing of fellow humans, businesses are also growing increasingly concerned about surviving these extremely challenging times.

In light of this, the Fintech News Malaysia team, together with the Malaysia Digital Economy Corporation (MDEC), came together to organiser a webinar to discuss and explore how fintech startups can navigate these troubled waters. We were joined by Dato’ Wan Peng, COO, MDEC; Wong Wai Ken, Country Manager, Stashaway; Siew Yuen Tuck, Co-Founder of Jirnexu; and Wong Kah Meng, CEO, Funding Societies Malaysia,

One point that we tried to drive home during the webinar was that although things seem bleak and downright scary, we need to remember it was the 2008-2009 Global Financial Crisis that was the spark that set off the fintech revolution around the world. Some of the most valuable fintechs you see today like Venmo and Square, existed precisely because of market conditions created by the crisis.

Similarly, if we are strategic, we will not only survive these dark hours but we can emerge stronger and better than before.

Managing Remote Workers during the Movement Control Order

For businesses who are accustomed to the environment of physical offices, being thrown into the deep end of managing the entire team remotely can obviously prove to be difficult for many.

However, the panelists, most of them concurred that managing employees remotely isn’t a huge challenge for them. Wai Ken, for example, shared that in Stashaway, they have been digital from day one, critical systems like receiving and withdrawing money have been digital from the get-go,. Therefore, the transition went smoothly.

For MDEC, who has a large workforce, Dato’ Wan Peng shared that they’ve been prepared for this scenario. Judging from what other governments around the world were doing, they anticipated some form of social distancing to take place in Malaysia. In doing so, they have created Team A and Team B to limit physical contact and ensure the wellness and safety of MDEC’s employees. As an agency that is tasked with catalysing Malaysia’s digital transformation, Dato’ Wan Peng shared that they have always had the digital tools to manage remote workers. The challenge, however, lies with external stakeholders who aren’t necessarily that ready to work in a digital environment.

Kah Meng, echoes Dato’ Wan Peng’s views, and shared that as a regional company that operates in Singapore, Indonesia, and Malaysia, Funding Societies had already implemented rotating teams a month ago.

They’ve split critical functions and leadership roles across two teams, their Singapore experience helped them prepare for this scenario in Malaysia in which they have started implementing two to three weeks prior to the Movement Control Order in Malaysia.

Similarly, Kah Meng shared that the biggest challenge lies externally, where many of the SMEs who raise notes on their platform find a lot of comfort in meeting in persona and that they have to find creative workarounds for site visits for due diligence processes, by using video conferencing tools. However, with investors on their platform, there wasn’t much to transition since nearly all of these customers interact with Funding Societies digitally.

On Jirnexu’s front, Yuen Tuck shared that they have started preparing two to three weeks prior to the Movement Restriction Order from the Malaysian government. Even prior to that, he shared how roughly 80% of Jirnerxu’s team can already effectively work from home if needed but the challenge lies in working with banks and insurance companies where some processes are still manual, which has slowed down things operationally in their value chain.

There Will be Winner and Losers

New realities demand new solutions and there will also be verticals that would benefit and others that will not perform that well. Dato’ Wan Peng opines that e-wallet players are in an advantageous position as they reduce the usage of cash, which, according to WHO, could potentially carry a transmission risk.

She further adds that digital payment players that service e-commerce platforms also have a strong position in this scenario given the surge of online purchase brought about by millions of Malaysians staying at home. She thinks that ultimately the fintechs who are able to tweak their solutions to solve today’s problems will emerge strong after the crisis.

Echoing her views, Kah Meng shared that there are always defensive and counter-cyclical industries in every crisis and Funding Societies had reassessed the credit risks of each industry and how it would perform during this crisis. SMEs that have an e-commerce presence and the medical industry is something he believes will do well, and as demands go up, so too will the need for financing – whether through traditional banks or peer-to-peer (P2P) lending platforms like Funding Societies.

For Kah Meng, he feels companies like his need to be extremely careful when balancing the need of protecting the investments of their retail investors and SMEs’ need for financing. While they need to protect investors’ capital, they must also not turn off the taps for SMEs when they need it the most.

Managing Worst Case Scenarios

There’s a very real possibility that the situation will not improve soon, with some predicting massive job losses across sectors and geographies. Therefore, it would be prudent for startups to consider how to survive in this scenario.

Yuen Tuck, shared that when it comes to tech companies, the biggest cost base is always people. So in a scenario where revenues and funding are not coming in the biggest lever to pull would be human resource costs. He says that if possible maintaining employment should be the key goal and startups should first consider options like salary cuts, reduced working hours and unpaid leaves.

When it comes to raising funds, he emphasised that many companies were founded during bad times and that while the situation is far from rosy, Vcs still have money and they need to deploy it, they are just placing more importance on solutions that address the current situation. Ultimately fintechs need to think about what problems they can solve and pivot their solutions accordingly.

Wai Ken on the other hand shares that it is a lot easier to manage this scenario if startups were conscious of designing their business to withstand cycles in the first place. With a business model like Stashaway’s robo advisor, who operates on a very thin margin, Wai Ken said that they are always thinking about unit economics.

He feels that fintech startups that have modeled their business right from day 1, are now in a position to push their messaging and marketing as their competitors scale back. Sharing an anecdote of how dinosaurs were the ones that were wiped out by asteroids and not smaller mammals, he alluded to the importance of being agile and nimble.

Kah Meng paints a different picture. He is of the view that now is not the best time for companies to pursue growth and its better for startups to take a defensive position as they don’t necessarily have deep pockets like many larger corporations do and chancing it on the situation improving is a risky play.

He also emphasized for business owners to clearly communicate with shareholders and layout plans and options on how they are going to respond to this crisis.

While it’s important for us to think about surviving this crisis, those of us who are a little bit more well-positioned should consider how we can give back to the nation. Solidarity in this dark hour is crucial to Malaysia as a nation, if you wish to give or contribute your digital services to the cause, MDEC is currently coordinating efforts nationwide, to take part please fill up this link.

 

If you’re interested in further insights, the full video for the webinar can be found here. We hope to host more sessions like this in the future so do let us know in the comments below if you’d like to work with us in organising a webinar or if you have any topic suggestions.

 

 

 

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