Fintech Trives During COVID-19 Pandemic

Digital payments expanded during the COVID-19 quarantine as demand for payment processing continued to drive integration. Access to banking operations became an issue in the US initially as thousands of small businesses quickly applied for assistance. The initial demand for small business loans from the “CARE ACT” passed by the US Congress, overwhelmed traditional banks, which brought to light the need for fintech processing.

How Did Fintech Assist

It seems cliché to say that fintech thrives on providing access to banking and payment processing by providing a user-friendly interface and secure apps. What has occurred in the banking space is that fintech has created innovative access to an old industry during a crisis-level period.

A perfect example of this situation occurred as thousands of small and medium-sized businesses attempted to get access to the US Federal Governments Paycheck Protection Program. This was a loan program that was passed by the US congress that allowed small businesses to tap loans to use for payroll, rent, and utilities, which would turn into a grant if several criteria where met. The initial criteria were that the business needed to use 75% of the funds to pay employees, while the balance could be used for rent and utilities.

The plan was lauded as an initial success but it was very difficult for small business to get their hands on the money. At first, banks did not know what they should do. Many banks were reluctant to give loans to businesses that were not already customers. Square, which is a fintech that focuses on the payment process, was one of the fintech companies that received approval from the US federal government to process the Paycheck Protection Program (PPP) applications for small and medium-sized businesses.

For many business access to Square’s existing tech infrastructure, the company was able to disburse emergency relief funds for 60,000 applications much faster than any bank because Square invests in its customers. Several banks generate long queues where they did not even get back to their customers about the PPP loans. Fintech companies like Kabbage, Square, Intuit, and Paypal who were authorized by the US Federal Government to become lenders in the PPP program in many cases allowed businesses to survive.

These fintech businesses have the added advantage of technologies to help streamline the application processes. These companies are the payment processors of millions of small business owners. These companies are sophisticated and use artificial intelligence to process loans and use concierge-like services to help small businesses. Fintech and incumbent banks are competing in terms of innovation, but customer experience will be the tie-breaker in this space.

Regulators Try to Facilitate This Process

To help this process accelerate, the financial regulator in New York and its national counterpart in France have signed an agreement to help fintech companies to penetrate their markets more quickly. The counterparts have signed a memorandum of understanding which allows the two regulators to refer companies to each other for potential market entry and to exchange information on regulatory and political issues.

Mastercard is Helping to Accelerate Access

Mastercard has brought its Fintech Express program to Europe, providing easy access and digital-first services to help startups add payments to their suite of products. The goal of Fintech Express is to shorten the time taken for fintech to launch new payment services. The scheme is part of Mastercard Accelerate, a bundle of startup and growth programs.

The bottom line is that the pandemic around the globe has brought to light the demand for fintech in the loan and payment space. Banks were overwhelmed in the US when the PPP program was introduced to help small businesses. Without the assistance of fintech, several small businesses might have gone out of business.