Balancing Risk Management in the Dynamic Fintech Landscape

The COVID-19 pandemic has ushered in a period of accelerated growth for fintech companies worldwide, and India stands at the forefront of this transformation. As the financial services and fintech sectors continue to evolve, risk management becomes a crucial aspect of maintaining stability and safeguarding consumer interests. In a recent interview hosted by Sourav Majumdar, Editor of Business Today, two industry experts, Kuntal Sur, Partner - Risk Consulting and Leader - Financial Services & Treasury Risk Management at PwC India and Vivek Veda, Co-Founder & CFO at Kreditbee, discussed the intricate art of balancing foresight, vigilance, and agility in risk management. They shed light on how organizations can strategically leverage risk management to gain a competitive edge in this dynamic landscape.
 
Pre-COVID and Post-COVID Challenges for Fintechs

The conversation began with a discussion on the challenges faced by fintechs, particularly in light of the COVID-19 pandemic. Vivek Veda noted that fintechs, which primarily deal with small-ticket, short-tenure loans, encountered significant risks during the pandemic due to the sudden lockdowns and potential defaults. To navigate this crisis, fintechs adopted innovative collection practices, focusing efforts on regions less affected by lockdowns. The pandemic compelled fintech companies to evolve their risk models and adjust their risk appetite to build a more robust system.
 
Geopolitical Risks and Regulatory Challenges

Sourav Majumdar pointed out that geopolitical events, such as the Russia-Ukraine conflict, have added another layer of complexity for fintech companies. Vivek Veda acknowledged the impact of geopolitical risks on the industry and emphasized the importance of ensuring long-term sustainability and profitability during funding winters. He also highlighted the role of regulatory bodies in mitigating unauthorized players in the market.
 
 

The Role of Risk Management in Financial Services

Kuntal Sur, from PwC India, shared valuable insights on risk management in financial services. He emphasized the importance of governance models, early adoption of regulatory compliance, analytics, and credit bureaus in managing risks effectively. By analyzing homogeneous customer pools and sharing risks through partnerships, fintechs are optimizing their risk management strategies.
 
Concentrated Verticals and Partnerships

The conversation then turned to the trend of fintechs focusing on concentrated verticals, such as MSME lending. Vivek Veda explained that concentrating on niche areas is a strategic approach to address the underserved credit market in India. It allows fintechs to leverage their innovation and digital capabilities, filling gaps left by traditional banks. Additionally, partnerships between fintechs and banks have emerged as a successful model, combining the strengths of each entity to provide a wider range of financial services.
 
The Future of Fintech and Risk Management

The discussion concluded with an outlook on the future of fintech and risk management. Kuntal Sur expressed optimism, highlighting India's strong economic growth potential and the continued demand for fintech services. He emphasized the importance of vigilant portfolio management and adherence to regulatory guidelines. Despite challenges like funding winters, global investors are expected to continue supporting Indian fintechs as they grow and mature.
 
Conclusion

The discussion provided valuable insights into the evolving landscape of fintech and risk management in India. The sector's ability to adapt to challenges, embrace partnerships, and leverage technology-driven solutions to usher future growth and resilience in an ever-changing environment.