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The pandemic will redefine fintech lending

COVID-19 and the national lockdown will be a trial by fire for most consumer loan startups.

The transfer of money from me to you and you to me is what greases the wheels of the modern economic machine. We earn, we spend, and then, most importantly, we borrow to spend some more right now, betting on earning more later. Salaries and profits fuel deposits and capital, which get routed into credit, which drives consumption, resulting in the vital rotation of money.

Over the past five years or so, India has seen a flurry of startups emerge promising to usher in a new wave of technology- and data-led lending. Venture capital tracking platform Traxcn lists 484 “alternative lending” startups in India, thanks to the easy availability of liquidity and rising consumption across segments. App after app proffered credit at a tap, each targeting a niche of an increasingly internet-connected population; many built large loan books in a short period of time on the back of aggressive segmentation and acquisition strategies.

But in the aftermath of the COVID-19 pandemic and India’s lockdown, producers, makers, sellers and consumers are stuck across the economy. The holy flow of cash and credit is suffering heavily, resulting in one of the deepest economic impacts in the history of nations.

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