The COVID-19 crisis is devastating for the world from a human and also an economic perspective. There is no doubt in that, writes Rahul Jain, co-founder of South African fintech startup Peach Payments.
For me, the past few weeks have been an emotional roller coaster. From being worried about my family – currently spread across three continents – to daily highs and lows in business, it’s been the most stressful time since I co-founded our business eight years ago.
As an entrepreneur, I’m wired to look for silver linings. This is what keeps me going. They say necessity is the mother of invention – read innovation – and there is never a time when this was truer than today. So I thought about what are some big opportunities that will come out of this crisis, and what that means for us as entrepreneurs.
Here are four key megatrends I am following and the opportunities they represent for us:
- Accelerated adoption of digital commerce
Digital commerce is the buying or selling, development, marketing, and servicing of any product or service via a digital channel such as a website, app, phone, email, SMS etc. The adoption of digital commerce is being accelerated at a massive pace. What billions of dollars of marketing and promotional budgets could not do, social distancing and lockdowns have helped achieve.
People who previously had inhibitions about buying online are suddenly forced to do so. This inspires them to see the benefits of digital commerce and the convenience this brings to their lives. These are the new converts, the so-called “late majority” and “laggards” from the technology adoption curve (see this link). This massive shift in consumer confidence and comfort with digital commerce is a game changer in many ways. It potentially means the death of certain industries and segments whereas it represents an once-in-a-lifetime opportunity for many startups.
Business mindset is changing at an incredible pace as well. Businesses that previously were only considering e-commerce are suddenly going online in a matter of days. At Peach Payments, we saw record numbers of new accounts in March and again in April . Across market segments – from retail, digital learning, fitness, and even traditional financial services – we’ve onboarded new clients in almost every vertical in the past two months. This is a reflection of the needs to make digital commerce and digital transformation a priority, rather than a great soundbite.
While companies across the globe are cutting jobs, digital commerce businesses are seeing a record jump in demand. Amazon is hiring 100,000 workers, Microsoft Teams, Slack and Zoom are adding millions of users a week, and here in South Africa as well, we are seeing businesses like OneCart, Bottles, Quench, UCOOK, and Sixty60 from Checkers seeing phenomenal adoption and growth.
Another massive area of growth for businesses will be in consumption of services in-home.
Fitness is a big example of this. We’re seeing gyms and trainers offering digital classes to their members via apps like Zoom while everyone is locked in their houses. Once again this is breaking mental barriers for these consumers. Consumers are learning that these activities can be done at home and can be effective.
I am excited about this acceleration of digital commerce. At Peach Payments, we’re helping these entrepreneurs succeed by removing friction in the payment experience. A lot of these businesses I mentioned above already use Peach Payments and we are collaborating on new services to smooth out the rough spots from such rapid growth. I’m grateful to be in the right place at the right time, and I never take that for granted.
- Decentralisation
The second big megatrend emerging from this pandemic is the decentralization of work and government.
Businesses now understand that work from home is not that bad for productivity. In fact, a lot of businesses are seeing increased engagement and commitment from their employees. The biggest surprise for me – and potential for radical change – is the adoption of decentralisation by governments across the globe.
Whether it is for continuity of services during such crises or on a more permanent basis, the mere fact that businesses and governments are being forced to open their minds to these possibilities is intriguing and exciting. Business leaders who were once sceptics are turning into believers. TCS, India’s biggest IT services company, has announced that it expects 75 per cent of it’s 450,000 strong global workforce to work outside an office by 2025.
While decentralisation of work won’t work for every business or sector, it can be a boon for many.
- Businesses will more confidently build global teams. Living in close proximity to the company office will no longer be a requirement.
- Cost savings will emerge as businesses can cut down on the amount of real estate they rent.
- Better work-life balance may lead to happier and more engaged teams.
Rise of digital learning
The impact of COVID-19 on education has been felt globally and has been quite severe. Almost 1.38 billion learners around the world are impacted by the crisis. At this point it’s hard to say when and how students will return to schools and university campuses. A lot of this is also going to differ across countries, and we’re already starting to see some of these differences in national strategies.
Denmark is opening up schools for kids up to the age of 11, while in India, South Africa and South Korea schools continue to remain shut. The Chinese government instructed 250 million students to resume learning using online platforms. As a result, on February 10, 730,000 out of the total 900,000 primary and secondary students in Wuhan used Tencent’s online platform for learning. New Zealand and Cambodia have launched a TV channel dedicated to learning with different time slots for different grades. In South Africa, DStv is piloting a learning channel as well.
It’s not just children who are getting comfortable with digital and distance-based education. Adults are learning new languages using apps, and new skills using platforms such as Udemy, Coursera and even Zoom.
Digital and distance learning represents a massive opportunity for startups. In December 2019, a research study estimated that the online education market would hit US$350 billion by 2025. This was before COVID-19 hit.
There is no doubt that digital learning is and will continue to gain prominence in the aftermath of this pandemic. However there are serious questions that still remain:
- Digital learning or distance learning is also amplifying the economic divide between the affluent and marginalised communities. The risk we are seeing is that kids from marginalized communities may be deprived of an education during and beyond this crisis. They are the ones who don’t have access to a laptop, tablet or smartphone to really do digital and distance learning.
- You have kids in the same school with access to different resources – so how does a school ensure equal opportunity and equal access to education for these kids?
- It’s not just about book knowledge – schools also inculcate social habits in children. How are these restrictions and closures going to impact the psyche of children without physical social contact with their peers, friends, and teachers?
- How do we balance our reliance on technology for education and socialisation with the risk of addiction and abuse?
It’s relatively easier to build a digital learning platform that, at a minimum, needs a smartphone and good internet connectivity to access. However these things are not easily accessible in many countries in Africa – including in South Africa – where data costs remain one of the highest in the world.
I believe that the startups that will solve for some of the questions listed above and for the constraints of developing economies like those in Africa will truly hit mass appeal and can be the next unicorns. This is the real opportunity in online education.
- Change in outlook and mindset of regulators around the world
Regulation is a double edged sword – it plays a critical role in maintaining standards that protect people. Regulation done right can be a powerful tool for a country to develop its economy. On the flip side, regulation can also stifle innovation and adoption of new technologies if it’s not designed and implemented correctly.
This crisis is doing two things for regulation globally: first, it is forcing regulators around the world to “fast-track” innovations that can help solve for the crisis. Second and more importantly, the forced lockdowns and quarantines are compelling regulators to open and deregulate sectors which would have otherwise taken years – if not decades – to open.
As an entrepreneur, I believe this new open mindset of the regulators can be the boon we need.
Fintech is a great example. There is now a massive push for economies to reduce the use of cash. Why now? It’s simple. Cash can spread the disease.
China has already launched its own digital currency. McDonalds, Starbucks and many other local businesses are already testing the digital Yuan in four different cities in China.
In Africa, we should expect more growth in mobile money acceptance, tap and pay, QR code based payments, and many other forms of cashless transactions. We will see regulators be more open to paving the way for startups to play a greater role across segments like digital banking, digital identity, cross-border transactions, and blockchain based applications, which previously has been notoriously hard to do. From a Peach Payments perspective, I think about how we can innovate to further enable, accelerate, and facilitate these digital transactions for consumers and businesses.
Healthcare is another obvious sector that will benefit. Examples here include that of the US FDA approving manufacturing facilities in record 10 days or fast tracking approvals for drug trials and therapies such as blood plasma based treatment regimes. Telehealth and Telemedicine are huge opportunities where regulatory hurdles had previously prevented large scale deployments and adoption. In the past few months, we have seen this take-off in many countries where regulators are relaxing the norms.
Africa could see a renewed focus in developing core health infrastructure to help cope with the growing risks of global pandemics. This time it’s ventilators. Next time it could be something else. The lack of core infrastructure is a critical aspect that many developing countries need to address urgently. Here again we could see more openness from regulators to relax some norms and allow startups to participate more.
Irrespective of how some of these trends play out or new ones emerge in the next weeks and months, one thing is clear – the world as we knew it in 2019 doesn’t exist in 2020. It will probably never return. Our ability to adapt and thrive in this new world, with all the uncertainty it will bring, will determine which entrepreneurs and ventures thrive and which become irrelevant.
