NextWave was fortunate to interview Swaroop Shah, CEO of Validus Vietnam, an SME Financing platform, to discuss the trends for FINTechs in 2020 and the future. He helped grow the Validus team in Singapore before moving to Vietnam to build on the business there.
With over 20 years of experience in financial markets and an MBA, Swaroop was able to give impactful insight not only into Validus' future but also that of their customers.' He was able to shine a positive light on the opportunities that FINTech has moving forward by adopting a digital, customer-centric, and data-driven approach.
How have the current market conditions affected Validus and the FINTech Industry?
Swaroop: The current situation has reframed the way we work, the way we communicate, both with our internal and external customers, and the interaction thereof. For Validus, we follow a certain BCP (Business Continuity Plan) and we have adapted very quickly to the new normal. As a Cloud-based FINTech, we are fully operational with minimal disruption even in this kind of lockdown. The reason being, we work on Cloud-based platforms giving us the ability to work from remote locations and not necessarily be stuck in the office. FINTech companies in general comprise digital natives, so the industry is better placed to adapt easily to the digital processes and remote working capabilities.
What has been the impact on the customers or users of FINTech digital platforms?
Swaroop: At Validus, we have 2 sets of customers. We have SME customers who are looking for alternative cash flow solutions. Then we have the investors who invest in our platform who are looking to diversify their portfolio with a new asset class.
We have seen a lot of increase and interest from the SMEs who are coming to platforms like Validus and looking for alternate financing. Our focus has always been to work with SMEs who are working with government-linked entities or bigger corporates where we have a better understanding of how the business is getting operated because we have partnership with these corporates. Validus will continue to adopt a prudent approach in ensuring that we support viable and established SMEs, in sustaining their operations on the road to recovery and growth.
You also have certain investors who would want to spread their risk by investing via platforms like Validus. We have seen an economic downturn and this could see lenders risk appetite declining, hence there might be fewer funds available for the SMEs. But as a team what we have done is offer direct lending with attractive risk-adjusted returns.
Why might an investor go to a FINTech like Validus at this time?
Swaroop: What we do as a business is that, given our experience, we monitor our portfolio very, very closely. It’s not because of the current situation—we have been doing this since day one! We monitor our portfolio, do some kind of stress testing of our portfolio, and try to take pro-active measures to ensure that the debt management is taken care of so we have repayments coming on time. We keep our investors informed of what we’re doing in terms of how good/bad is our portfolio as compared to how the market has moved, which gives them that additional comfort as well.
Do you think there are opportunities or challenges in this current market and what would they be?
Swaroop: Quoting Albert Einstein, “In the midst of every crisis lies great opportunity”. While we are seeing increased activity in the market as things settle down, it is evident in areas where companies are requesting for bridge financing, sale, and leaseback, so there is a significant opportunity to make market plus returns from attractive SME lending investments.
For SMEs new opportunities exist for those who are able to pivot or re-tool their businesses to adapt to the changing environment, services, or make their products in response to fulfill the requirements of the market because of the current situation.
How might the FINTech industry as a whole adapt to the current market?
Swaroop: Many in the industry are already rising to the challenge and making sure they are adjusting their product and services to the needs of the customer who are struggling through the current pandemic themselves.
FINTechs have started enhancing their capabilities of online registration, online application instead of a face-to-face meeting with your clients in addressing any credit risk-related issues via video conferencing. That has given rise to a new way to continue with their business.
FINTechs have the agility and innovation needed to rapidly create and deliver new solutions. They’re in a position to not only survive the situation but contribute to the industry and the society in meaningful ways once the crisis is behind us.
What do you think the future holds for digitalization and FINTechs? In the short term (2020) and the long term (post-2020).
Swaroop: There is a major shift from competing to collaborating. FINTechs have core expertise in certain areas so it makes a lot more sense to work together and provide a solution that is required in the market.
As we are on Cloud-based platforms, it has given us a lot more opportunity and flexibility to test how fast we can grow. These capabilities will likely become even more relevant and important as an even greater number of transactions are conducted through digital channels.
On a long term basis, the digital-only becomes a new norm for the industry. Especially for financial services now. In the next 5 years, you’ll see a whole lot of changes that were not expected but because of the current situation every company, every bank, every financial services worker is going to start looking at digitalisation.
The continued acceleration of partnership with financial institutions has offered the benefits of often sought after digital solutions. The next big thing is tech-enabled contact-less payments, without handling cash or other potentially impacted services in today's time. There are huge opportunities for FINTechs to collaborate and partner in different areas and I think technology firms are going to be a great enabler for these kinds of partnerships.
So it seems that the future looks quite bright for technology and digitalization!
Swaroop: Yes! You will see that a lot more of the financial services and companies are moving in that direction. There is always a resistance to change but whoever has accepted the changes inviting the future that is coming, will always be successful. So embrace changes, embrace technology, use technology as your enabler with whatever work you’re getting into and you'll build a strong partnership with technology for the future.