Michal Smida, Founder & CEO, Twisto gave us beautiful tips to manage the trends of 2021 and answered few questions of to how to tackle the crisis and manage the risks.
He said that the Q2 was mainly characterized by a conservative approach and a protected reaction to manage the credit risk and that is one of the key trends that we are seeing in lending. “There was substantial tightening in approval rates for onboarding new clients – this in part is due to the uncertainty of the potential impact of unemployment, as well as the increased challenge of gaining access to capital markets. We saw as much as 50% reductions in approval rates across the industry.” Meanwhile, there was also a much larger focus on managing the risks in the existing portfolios which included frequent communication with the clients. “Q3 has seen an easing of the above measures as prime client portfolios in the EU have recorded positive non-performing loan (NPL) performance. In some cases, customer payment behavior has improved vs. pre-COVID, with some lenders recording their best performance to date.”
When asked about, if the Corona Pandemic would also act as a catalyst for the innovation as the 2008 crisis did and what might be the future’s looks, he shared that there was already a digital transformation on going theme since 2008 which had given rise to many great fintechs and at the same time pushed the banks to digitalize very quickly. He added, “What the current crisis has brought is increased customer adoption of what has already been in the market for some time. So we don’t see the change in the product offerings of financial institutions, but rather a change in customer behavior and their willingness to use digital channels, which are not only much more convenient, but also safer and quicker to use in comparison to traditional offline processes.”
The biggest challenges for lenders in the coming 12 months would be maintaining and managing the further risk performances and Q4 might be in the critical situation to prove its resilience of the customer base. He also added, “As governments have stepped in to support businesses and the wider economy, the possible impact on unemployment has been delayed. This in turn can lead to credit deterioration once the support stops. Venture capital and debt markets effectively shut down in Q2, with reopening noted in Q3. As many lenders require additional capital to sustain growth momentum, the key challenge will be attracting capital from investors who became even more selective and cautious,” when asked about the risk and challenges which might be seen in the coming year.
Creating a payment card would be the logic step he said when asked about the transitions to lending 3.0 and what was the intention behind it. “We started with simple deferred payments “Buy now. Pay later” for e-commerce. This was demonstrated in our recent launch of the Twisto app and card offering in Poland, which has been well received by customers, with over 70,000 sign ups and over 20,000 cards ordered in the first 30 days from launch.”
Mr.Smida shared the Twisto’s vision for the card program and how they are facing the challenges and yet delivering a better customer experience. “At Twisto we believe that having a plastic card in your wallet is already outdated. Because of this, we’ve committed to our goal to stop issuing plastic cards by 2025. We believe that the future is paying with mobile phones. Thanks to Marqeta and our Digital First certification from MasterCard, we’re one of the first companies in Europe, or even the world, who doesn’t have to issue physical cards.”