FinTechs Collaborate, Respond to the COVID-19 Crisis
The fintech industry originated with a mission-driven focus of open access to financial services globally. FinTech companies have established unique advantages that allow for innovation and value creation in the current environment, such as harnessing and analyzing data, being unbound by legacy systems, a seamless customer experience, and growing partnerships within the financial services industry.
As the global economy suffers in uncertainty from the coronavirus, FinTech has the ability to step up and support governments, businesses, and individuals who are struggling the most with a loss in income and/or employment. FinTech companies of all sizes around the world have started to collaborate, change their business models, give aid, and form new programs to help the most vulnerable in our communities.
FinTech and Government Collaboration
At a basic level, the support from government at this critical time has been through stimulus checks and business loans. The most economically vulnerable consumers in the US don’t have a bank account to deposit this check. Since its inception over 10 years ago, FinTech has targeted these groups to offer standard banking services free of transaction limitations or monthly fees and minimums. There are an estimated 12M unbanked individuals in the US making less than $30K annually (based on data from US FHP).
For the unbanked or underbanked, cashing the stimulus check would be the only option, typically done in-person at a check cashing store or supermarket for a fee. There’s a critical misalignment here in check-cashing services gaining revenue income from the loss of personal income.
Additionally, these individuals may not be able to wait for weeks for this check to come in the mail. Those who earned less than $12,200 annually are not required to file taxes, and won’t be receiving a check — students, homeless, and unemployed lack financial support from the stimulus. Undocumented workers would also not receive benefits.
Collaboration between FinTech and government would help bridge gaps in allocating aid quickly:
Funds distribution: Mailed checks are a poor option in these times of emergency; government should be able to fund a universal account for each individual that can be opened online or on mobile devices within minutes. FinTech companies can advise on best practices, system architecture, and user flows to ensure proper protection of data and efficiency;
Partnerships with local organizations: In order to identify the most economically at-risk, fintechs can connect with local welfare, non-profit groups, and schools to confirm all homeless, students, and undocumented workers are receiving proper aid as soon as possible through online, mobile, or card channels.
There has been a government proposal made for the creation of “FedAccount” wallets online to allow for the deposit and transfer of funds. This measure has yet to be approved but is a positive step in the right direction towards a long-term solution. In a similar manner, the government has recently started to recommend neobanks and opening accounts online as a resource for the millions of unbanked individuals in the US.
FinTech Agility in Times of Crisis
In unprecedented times such as these, FinTech is rapidly mobilizing its ability to innovate for helping those most struggling with income and other resources. Firms of all sizes around the world are actively stepping in for consumers and businesses in need:
GiveDirectly & Propel - The New York-based non-profit, GiveDirectly, is raising funds for families in urban areas hit hardest by the downturn and has partnered with Propel (Brooklyn-based fintech with the Fresh EBT app) to identify and support these groups. GiveDirectly has already supported over 140K families in need;
Even - an Oakland-based fintech that provides individuals early wage access (once per paycycle) through partnerships with employers, is delivering faster and daily access to pre-payday income. The company is currently targeting employers in high-demand industries such as grocery stores and hospitals to offer no-cost, no contract programs of advances;
SaverLife - a San Francisco non-profit (formerly EARN) that offers members savings incentives and bonuses has teamed up with Wells Fargo and Neighborhood Trust (a financial coaching service) to distribute $500 checks and provide coaching to 1,000 small businesses;
Chime - the largest US neobank (based in San Francisco) has committed to advance $1,200 to 1,000 individuals waiting for their stimulus check to arrive;
Kabbage, Lendio, Finix, and Fundera - launched a platform that allows consumers to buy gift certificates in support of local businesses during the crisis, as a way to inject much-needed revenue during this downturn — over $50K has been purchased so far;
PayPal - waived fees on instant transfers from PayPal business accounts to external business checking accounts, and extended seller protection on certain purchases;
Lending Club - well-known, San Francisco-based fintech lender offers new hardship plans, waives late fees, and allows some borrowers interest-only payments or skipping up to two months;
Stripe - the fintech payments unicorn from San Francisco is providing escalated support for telemedicine platforms;
Nomo - a freelancer platform (based in Spain) that manages accounting, taxes, and invoices, is providing free access for new customers;
7 Chord - the AI-based platform (from Brooklyn) for bond traders is also offering its services free of charge temporarily;
Revolut - the UK challenger bank that recently expanded to the US added a charitable-giving feature in their app to allow for donations to those affected by COVID-19;
Trade Ledger, Wiserfunding, Nimbla, and NorthRow - created a business-lending taskforce in the UK that launched an origination and underwriting platform for banks, alternative, and private debt lenders to disburse funds virtually to businesses impacted by the outbreak;
Credit Kudos, Fronted, 11:FS - formed the “Covid Credit” program to support UK freelancers in obtaining government aid through self-certifying lost income;
ODX - a subsidiary of OnDeck (small business fintech lender from New York) has a new product specifically for banks to deliver the CARES Act.
As the fintech companies all over the world continue to adapt and find new ways to meet the needs of consumers and businesses, look for this list to continue to grow in length and depth of programs and products offered.
opportunities for FinTech in a post-COVID economy
As the world starts to flatten the curve and decrease the spread of the coronavirus, businesses look ahead towards what life may be like in the “new normal” of the post-COVID economy. Delivering financial services was already on a path towards digital channels — does this mean bankers, financial advisors, and banking support functions will all become remote-based? Here are 4 themes that will play a critical role in opportunities for fintech companies:
Mobile-first - social distancing is becoming a way of life and is expected to expedite the use of online and mobile channels channels for banking and finances. FinTech has an existing core competency in being app-based, and delivering a robust user experience (onboarding, data visualization, and transactions). This strength will become even more relevant as individuals flock to mobile over in-person channels;
Increasing partnerships - FinTechs have experience in building and maintaining partnerships with banks from the last 12 years. Bank customers will come to demand enhanced features from their trusted financial institution at a faster pace— banks and credit unions will respond by aggressively targeting fintechs for quality digital solutions. Anticipate the pursuit of these partnerships to originate more from banks than fintech over the next year;
Expanding financial inclusion - Government, non-profits, welfare groups, merchants, and fintech companies will have multiple opportunities to continue to support those struggling. Similar to the examples above, consortia targeting specific groups will need to be created and maintained. Initiatives for small businesses, retail and food service employees, undocumented workers, and gig employees will become readily available and cast a wider net of sustainable benefits. Once these consumers and businesses are able to get back on their feet, expect these programs to evolve into savings and credit building platforms to help prepare for future economic downturns or emergencies;
Empowering gig workers - The fintech industry has had a focus on the underserved segment of freelancers, gig, and contract workers for a decade. Disruption in the gig economy has only magnified how fragile income can be to workers, who need to self-manage all financial, insurance, and tax obligations as contractors. Add-on services such as pay advances and job placement currently exist with some firms on a small scale. Expect companies in separate verticals to come together on a wide scope and provide an all-inclusive platform and benefits program for this group — with products that will develop and help stabilize their finances.
Regardless of fintech, bank, or tech giant, the world is in need of support now and in the foreseeable future. COVID-19 has permanently disrupted how the economy functions, and all companies and organizations should band together to tackle and address the long-term concerns. FinTech as an industry has a history of thriving in times of disruption and bringing about positive change quickly and efficiently. The time is now for leaders in FinTech to step up and support communities who are struggling to survive and help the world get back on its feet.
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