8 Steps for fintech startups: Planning a strategic response to COVID-19

Authored by: Maelis Carraro
March 31, 2020 - 8 mins read
Inclusive fintech startups COVID-19 emerging markets

As the COVID-19 pandemic unfolds around us, reported cases across most emerging markets are still relatively low. As of March 30, Nigeria had 111 confirmed cases, Kenya reported 50, India and Mexico reported around 1000, and South Africa around 1300.

However, growth curves indicate we are likely to see an explosion of cases over the next few weeks. Governments will be forced to take hard measures, causing disruptions in supply chains, logistics, and customers’ ability to make purchases, as well as a global slowdown in private investments.

Inclusive fintech startups will face difficult challenges and also opportunities to offer solutions as individuals and small businesses figure out how to transact digitally, purchase health insurance, buy goods and services online, and adjust to remote work.

Here are eight things that fintech startup CEOs in emerging markets must do right now to prepare for the months to come (see here for specific advice for PAYGo providers):

1. Analyze the situation in your market and define your crisis management plan

CEOs should start by asking themselves a number of questions:

Startup founders should start by identifying the key risk areas for their business, assessing the probability of each risk factor, quantifying the risk over a specific period of time, and developing mitigation strategies.

Given the situation evolves daily, it is important to create scenarios for how risk levels might change within each mitigation strategy. These scenarios (high, medium, and low risk) will help founders identify the actions that need to be implemented under various possible eventualities. The scenarios should include an impact assessment across all levels of the organization and stakeholders, including staff, suppliers, investors, customers, distribution partners, financing partners, etc.

With this analysis, founders can adjust their sales forecasts and operating expenses forecasts to have a realistic picture of their funding and operational needs during the months to come. It can also help them prioritize where to focus in order to keep the business running. In these situations, it’s better to plan for the worst and hope for the best.

In some cases, for instance, fintech firms looking at mitigating the risk of a major dropoff in customer growth are offering free access to certain elements of their products in an effort to keep customers engaged and continue attracting new ones, while helping them through the crisis.

2. Switch to cash-conservation mode 

Maintaining as much cash in the bank as possible should become every CEO’s number one priority to extend the runway and ensure the business can continue to operate without making difficult decisions. It is valuable to delay tough moves like laying off staff and selling key assets. CEOs should first account for all cash reserves and then consider ways to keep the burn rate as low as possible. This might include renegotiating payment terms with suppliers, asking customers to pay early or to continue paying if they can afford it during this time, keeping inventory levels at a minimum, delaying non-critical hires, taking a salary cut if necessary, and overall minimizing expenses. The typical rule of thumb to keep the equivalent of at least 18 months of operating expenses in cash in the bank is even more important in these circumstances.

Digital lending startups will also need to focus on how to provision for rising NPLs if customers stop repaying. As Accion Venture Lab puts it, it’s important to consider customers as allies during this period. If fintech startups consider extending repayment timelines upfront, waiving fees, and other solutions to help individuals and small businesses manage the cash flow hit, they might ultimately build long-term customer loyalty and drive lifetime value.

Founders need to pay particular attention to their financials in this period of crisis. Keeping track of the numbers via dashboards has helped several of our companies stay focused on the most important metrics to make real-time, data-driven decisions even while investors might not be looking at the metrics very closely.

3. Adjust business models to become more digital 

Many fintech companies rely on tech-and-touch models such as field agents, third-party agent networks or call centers to reach, communicate with and distribute products to customers. The crisis is going to severely limit the ability of startups to operate through physical touchpoints, so it is critical that companies quickly shift to digital models.

Fintech startups can double down on digital acquisition channels, and digital ways to collect payments, disburse funds, and deliver their core service. If possible, startups should minimize all offline customer touchpoints and switch to digital means for all client-facing activities. Many fintech companies are already well-positioned to do so relative to brick and mortar businesses and traditional financial service providers, so they should capitalize on this strength.

If you had product features on the back burner that could now help mitigate the crisis and support the business as a new revenue line, prioritize them.  However, these growth opportunities need to be carefully assessed based on how strategically aligned they are with the core business and how much effort they will take to develop. Startup founders should not fall into the temptation of announcing an immediate pivot at the first signs of slowing demand. We are operating in a time of extreme uncertainty, and today’s pivot might not be the best strategic move for the business tomorrow. While a pivot might be necessary in some cases, in others a re-tooling to become more digital or a focus on a different product line might make more sense in the long run.

For instance, in Tunisia, bike-hailing startup IntiGo has pivoted toward food delivery services in the wake of the crisis, as demand for ride-hailing has disappeared, while the need for the infrastructure they already have in place is higher than ever. Meanwhile, South Africa-based payments technology company Yoco has sped up the development of its remote payment product that would enable transfers on its client network via a weblink, in order to promote the adoption of contactless technology. They’ve also adjusted communication across its digital channels to address the ongoing crisis.

Furthermore, as many companies start to move to working remotely, founders need to also equip their teams with the right tools to be able to work from home. The transition is not easy, but most fintech companies we spoke with are already operating with digital and remote global teams, so they may be well suited to make this transition.

4. Try to keep your team, which is your most valuable resource

If the crisis continues for long, at some point companies will have to face the difficult decision of letting team members go. This is painful on many levels and might also result in long-term gaps and added search costs when the crisis ends and startups need to find new team members to meet increased demand.

If possible, founders should explore other ways of cutting fixed costs – for example putting key staff on part-time engagements, switching them from permanent to variable employment contracts, or considering furloughs for the most loyal workforce that cannot be utilized immediately but that will be essential when the hard times are over. These measures will allow startups to keep their most valuable resources and establish loyalty with employees.

For instance, firms like lending startup Kabbage have had to make difficult decisions to temporarily furlough staff, close its Bangalore office, and reduce the salaries of senior members in order to avoid the risk of shutting down altogether.

5. Fundraising will be tougher for a while, so focus on surviving 

The funding environment is likely to dry up in these times. Most investors are going to first focus on helping their existing portfolio companies prepare for the crisis, deploy resources to help some stay afloat, and only after, look at building a pipeline of deals for when the crisis ends. Many institutional investors are freezing their processes and hunkering down, so investments are likely to slow on the whole. Capital may also be fleeing faster from emerging markets, where the economic repercussions will be acutely felt by businesses and the population alike.

So if you are already talking to investors or have tearsheets on the table, try to close the deals as fast as you can. If you have an urgent need to raise capital, expand the number of investors to talk to in order to maximize the chances of landing an investment – even those that were on the B-list. You might also need to be more flexible on terms, explore bridge rounds, convertible notes and other instruments that will give you the runway you need.

Finally, several governments have come up with debt relief funds, such as the South Africa small business debt relief fund, and a number of impact investors and DFIs are also putting forward alternative debt facilities for companies that need them, such as the Equalife debt fund for African entrepreneurs.  These will potentially become lifelines as startups consider re-financing options and/or other funding alternatives.

6. Communicate clearly, transparently and very, very often  

Startup founders need to have a clear plan to double down on their communication during this period – both internally and externally – to communicate clearly, transparently and often with investors, staff, suppliers and customers alike. Investors in the cap table will want to know how founders are planning to respond to the situation. Customers will need to know how this affects them and the service you provide to them. Staff members will want to know they are safe and how they should re-orient their focus to help face the crisis.

Communicating consistently and clearly with all stakeholders will build trust and confidence in turbulent times. Keeping a broader network up to date in these times could also help when raising money later on or to gain support from the community.

Email newsletters, social media updates, team calls, personal messages to your customers, and even a press release outlining your approach toward COVID-19 can all go a long way in getting the message out and demonstrating you are working to manage the situation. Here are some tips on how best to prepare.

7. Keep up the team morale and show empathy

During this time, your team might be feeling particularly scared and worried about their own health, their families,  and their jobs. They might not be used to working from home, have to deal with homeschooling and face growing concerns about the overall slowdown of the economy.

As a leader, you will have to go the extra mile to boost morale and ensure people feel cared for. Communicate as frequently as possible, share updates and data about the situation, be upfront about the state of the business and the impact of the crisis, and think about tricks to keep everyone focused and engaged. Companies are organizing virtual daily check-ins with their teams where people can hop in to just chat and release the stress. They are also lightening the mood by sharing WFH tips, playlists, recipes, and other things that can distract oneself from the news. Finally, it will be important for the leaders in your company to show a little extra empathy towards all employees.

Leaders from global tech companies including SAP, Microsoft and more have demonstrated empathy, transparency, tolerance and humanity in communications with their teams in the face of the crisis. Slack’s CEO has urged his staff not to worry about work.

8. Don’t forget your impact mission 

Inclusive fintech customers belong to the most vulnerable segments of the population, whether they are gig workers, micro-entrepreneurs, informal traders, food sellers, or low-income salaried workers.  They will often have to make difficult trade-offs between potentially falling sick from coronavirus or letting their families go hungry. Unfortunately, across emerging markets, from South Asia to Africa to Latin America, the pandemic is creating a public health emergency, as well as an economic crisis, each exacerbating the other, and the dangers are amplified for the most vulnerable communities who struggle to maintain regular cash flows under normal circumstances.

As Tahira Dosani of Accion Venture Lab puts it: “Consumer protection during this time will be incredibly, incredibly important. Consider what you can do to minimize the negative impact on lives and livelihoods of your customers. Would it make sense to eliminate late fees during this period? To be more flexible in reporting to credit bureaus? To allow longer grace periods? While there may be some short-term costs of this, it will set you up well for the long-term.”


A lot will change over the next few months, and we hope this advice will be helpful to fintech startup founders around the world. Below are some resources we aggregated to write this post and for fintech startups to refer to.

Finally, on a more positive note, we believe that crises like this one can present opportunities to be part of the solution. Around the world, fintech startups are stepping up to offer their services when traditional financial service providers have their hands tied. Our next blog in the series of fintech in the time of COVID-19 will highlight some of the solutions fintech companies in our portfolio specifically are deploying to protect the most vulnerable. Stay tuned for more.

Resources for CEOs:

COVID-19 Resources and Toolkits

Emergency Funding Sources:

Related Publications
Leave a Reply