As the institutional response to the viral outbreak endangers millions of jobs, businesses and livelihoods, fintech companies are quick to adapt to the new normal by providing novel solutions. Fintech infrastructure in the UK is especially developed, if not the most developed in the world. The question remains, how exactly can it help restore the blood circulation of any nation – the economy?
Rigid Institutions Are No Match for FinTech Ingenuity
As we all feel the anxiety and uncertainty of the unprecedented shutdown of economies around the world, it bears remembering that digital money, powered by blockchain, emerged as a response to a crisis. The crisis of sluggishness, centralization, waste, and inefficiency.
After a decade’s worth of development, the same entrepreneurial, problem-solving spirit shines against the primordial forces of nature. Although it is yet dubious if the COVID-19 virus strain will cause more deaths than previous flu seasons, and if lockdown measures serve their purpose given the example of Sweden, it is certain that deep economic ripples will be felt for years to come.
In such an environment, fintech companies in the UK are leading the charge when it comes to solving real problems facing regular people. Speaking to Yahoo Finance UK, Gabriel Sabato, chief executive of WiserFunding explained that established companies have trouble adapting due to their entrenched ways. On the other hand, fintech can lead the charge in getting people the money they need faster, through a number of ways:
- Online lending and insurance
- Client onboarding
- Wage advances
Covid Credit Is a Sign of Things To Come
One of the best examples of how fintech can dampen the current crisis is Covid Credit, coming out of Credit Kudos under the guidance of chief executive Freddy Kelly. Covid Credit is a simple online tool that serves a very powerful and much-needed function: it facilitates the self-employed with the ability to certify their past income by sharing banking data.
Freddy Kelly explained to Yahoo Finance UK that Covid Credit can create a type of IOU covered by government underwriting. With such insurance, one can then approach fintech lenders as proof that they can get a loan at a reasonable rate. Freddy also pointed out that the government relies on historic tax data that is often outdated. This creates space for people to be left without support, which the Covid Credit is trying to remedy.
So far, Credit Kudos had a positive response from the UK’s governmental bodies such as HMRC, FCA, and the Treasury. Alongside Credit Kudos, other fintech entrepreneurs are coming up with solutions to ease the tremendous load of loan applications, mainly from small businesses that don’t have deep pockets. Unlike the international corporations that can easily be bailed out by governments at a moment’s notice.
Interweaving Governments, Banks, and FinTech
On a larger scale, the UK is determined to salvage the economy with the CBIL program – Coronavirus Business Interruption Loan. It aims to back $406bn worth of loans to businesses in order for them to stay afloat. Moreover, the UK government has stated they are willing to cover up to 80% of losses.
Although the program is run by national British Business Bank that is linking the CBIL program to 40 traditional banks and credit institutions, there are some fintech beneficiaries: Iwoca, OakNorth, Funding Circle, and Market Finance. Still, the emphasis of the CBIL program is lopsided, favoring traditional banks. As a result, it suffers constant delays and criticism. If there is any time for fintech to gain the upper hand, at least in the mediatic space, that time is now.
Do you think the UK’s emergency loan response will suffice to prevent the mass bankruptcies of small businesses? Should they increase their integration of fintech companies? We want to know what you think in the comments section below.
Image courtesy of Cyworld Wealth.