Every business had its resiliency tested when the coronavirus pandemic hit. Some did everything they could to survive while others chose to suspend operations. Some even closed completely, regardless of their industry or business line. As we all know, many people and businesses kept finding solutions to remain in the market. One option was to seek financial institutions’ help to endure this unprecedented time. As we are all aware, financial technology (fintech) grew remarkably during the pandemic. How do fintech companies continue to operate and serve the needs of their market without encountering too much defaults in the long run while the economy remains unstable?
Without a doubt, small and medium businesses have been heavily affected. Almost all traditional businesses have shifted their platform to online. And even if fintech firms are ahead of the game and supporting people and businesses without any physical interaction, there is still part of the process they need to adjust and change swiftly during the pandemic to step up without losing their game and continue working around the clock!
One of the things fintech companies need to strengthen is their risk assessment. It is critical for the business, especially in the lending industry, to support clients while striving to collect repayments. Lending and collecting are an unending process, and risk assessment has a big role in this. As economies remain unstable, the people behind these companies, especially those in risk operations and management, must proactively come up with a risk strategy action plan to continue its purpose: formulate solutions despite current economic problems with sufficient and updated knowledge and data from old and new customers.
Monitoring risks should be undertaken continuously on a formal and informal basis. But how does it differ during trying times? Here are a few ways on how to tweak risk assessment, a policy without hurting the customer’s experience.
First, identify if the company needs to collect additional financial documents from the client to help them repay on time and avoid a default. It could also serve the organization to collect relevant data that would be a good basis to build new credit limits, new pricing or even new interest rates based on customers’ current demand and needs. These may be just examples, but they still depend on how the organization wants to use them. Surely, the initial phase of collecting additional requirements or documents might be quite tough for customers and for companies themselves, as they are concerned with the customer experience. But they can still modify it, especially if some customers with a good payment history cannot immediately submit those requirements; they won’t be eliminated upfront.
Instead, companies must adjust to them and ensure that their partnerships remain intact.
For example, giving customers a grace period for the needed documents without delaying their current needs.
After identifying the needed additional financial documents or other requirements, changing the policies must come next. Ensure that policies are directly reflected in the organization’s strategic plans and changes are well-documented. Stakeholders must understand that revising policies from time to time, depending on economic conditions, will not always be designed to mitigate the risk alone; it’s also designed to benefit customers.
And last is alignment with stakeholders and strategizing on how to communicate the changes to the customers effectively. This is critical, because not all customers can easily adapt to the changes. Not all are flexible enough to gather the needed documents, especially during the lockdowns and natural calamities. Nevertheless, communication and proper execution to help customers adjust are an integral part of the business. All involved in the organization must exert extra effort to make sure not a single good customer will fall through the cracks.
These are just some of the things that can help financial institutions make small and fine adjustments without hurting customers and organizations too much. It’s also one of the smarter ways to modify and intensify requirements when the company is so flexible that it can make policy changes as soon as possible.
Angelie-Mel Salvatus is a senior risk operations analyst and credit bureau authorizing officer at First Circle Growth Finance Corp. She handles an end-to-end process in operations, from KYC verification to credit limit setting, ensuring to mitigate risk while serving customers’ needs with speed and quality.