How Fintech handles Consumer Finance during Inflation?


How Fintech handles Consumer Finance during Inflation?

When Inflation rises globally, consumers are the worst affected in terms of financial challenges. With Fintech firms being major players in the current financial ecosystem, it is important to understand their role during hard times. It has been witnessed that financial service providers ease the burden of consumers by making them financially stable in times of financial crisis.

In this article, we will learn about the opinions of industry experts about the changing finance ecosystem and how Fintech companies are striving to protect their customers from the financial crunch.

Inflation and its Impact on Customers

Pew Research gives a detailed explanation of a survey conducted by the Bureau of Labor Statistics in May 2022. It reveals that the yearly inflation rate in May 2022 was at its highest peak since 1981 with 8.6% as measured by the Consumer Price Index. The rate has further risen since then thereby having a crippling effect on both consumers and companies.

Joanne RobinsonDirector of Lenders at Zuto, says, “In response to the growing cost of living challenges that our customers are facing and to keep up with changing customer demand, we are working with our lenders to scale our product offering significantly.”

Fintech firms can expand their options to offer a wide range of choices for customers with different circumstances.

The question is whether or not Fintech can curb the potential threats posed by inflation and the economic depression that may occur.

Neil Kadagathur, co-founder and CEO of Credit Spring, a UK-based Fintech lender shares his views stating, “The financial services sector has to protect customers, especially in the current financial landscape. Lenders, for example, have long had a poor reputation amongst borrowers – four in ten (43%) people believe lenders encourage them to take out more money than they can afford and fewer than one in five (17%) see lenders as responsible businesses that care about their financial wellbeing.”

In his viewpoint, business models that are ethical and responsible are emerging to meet customer demands and keep them protected. He also believes that financial service providers are adopting Fintech to ensure enhanced customer experience and to treat vulnerable customers fairly.

BNPL, Repayment and Credit Crisis during Inflation

The BNPL (Buy Now Pay Later) came as big relief for customers during the pandemic times 2020-2021. It helped customers easily buy essentials using BNPL services and boosted finance facilitating retailers’ growth. Unfortunately, the BNPL success couldn’t last longer than the pandemic for retailers due to the rising inflation rate.

The consumers were unable to repay the debt installments due to higher interest rates and economic strain post-pandemic.

Ken Serdons of Mollie says, “Whether direct debit, debit card or credit card payments, consumers are not always in a position to pay for goods upfront and in full – particularly as we face a prospective recession and economic strain following the pandemic.”

In Serdons viewpoint, BNPL is growing in usage among the tech-savvy younger generation. It is so because customers look for flexible payment methods that allow them to utilize financial freedom on their terms.

Nevertheless, this growing popularity has led to increased scrutiny for better customer experience as some critics consider BNPL as another avenue for debt.

How Fintech drives the Industry despite Downturn?

No matter the negative impact inflation has on consumers’ financial ability to spend, the Fintech space keeps on growing. Fintech in the past two years has embarked customers on a digital finance and spending journey and the number keeps on growing.

  • Firstly, technology has enabled consumers to make better choices online so that they can shop for the best deals.
  • Secondly, since the inception of Fintech, online transactions and payments are constantly evolving ensuring smooth financial flow.

Fintech innovation is driving positive growth in the finance industry thereby transforming the global economy for the better.