Fintechs and government have teamed up for COVID: will it last?
The first round of $ 1,200 stimulus checks began rolling out in April 2020, but as of August, around 35 million Americans had yet to receive theirs. This included 12 million people who did not file tax returns or receive government benefits, as well as 14 million unbanked people who, once they received paper checks, found it difficult to cash them. .
The fintechs have stepped up to the plate.
Give Americans Faster Access to No-Fee Stimulus Checks
PayPal, in particular, has worked to get people’s stimulus money into their hands faster. “During the first wave of government stimulus payments in April and May, we saw an incredible number of customers turn to PayPal as a way to receive their stimulus payment quickly and securely. PayPal’s senior vice president of brand experiences, John Kunze, explained.
“With the next round of personal payments to come, customers who receive a government-issued paper stimulus check in the next few weeks will be able to cash their check without going to a physical collection location, simply by taking a photo. check in the app to receive funds quickly and easily.
PayPal has also waived the usual fees associated with instant access to funds for all government stimulus checks processed with its cash-a-check feature or Venmo’s direct deposit. Individuals could access every dollar of their stimulus payments almost immediately.
Meanwhile, the Neobank Current claimed the credit for the fastest direct deposit processing for the first and second stimulus checks:
“We are proud to once again be the first fintech in the country to credit stimulus funds, especially at a time when many Americans need cash more than ever. We will immediately make all funds available to all members. “
Hopefully there won’t be a continued need for stimulus checks as more people receive COVID-19 vaccines and economies start to reopen. This payment agility, however, raises questions for other forms of government-issued financial support. Could social protection programs, for example, potentially be made more effective with the help of fintech?
Fintech-powered business loans reduce unemployment
U.S. unemployment reached historically high levels in 2020 and remains higher than ever before the COVID-19 pandemic. As companies scramble to keep their employees, neobanks and digital banking have mushroomed, allowing loans in less than a day in some cases.
Fintech companies like PayPal, Womply, Kabbage, and Fundera all provide applications for the Paycheck Prevention Program, or PPP, provided by the federal government to keep small businesses afloat and people employed. Ultimately, the federal government is already relying on fintech to provide loans and distribute desperately needed funds. There is no reason why this practice cannot continue in the future.
Some banks, like Cross River Bank, have decided to seize the opportunity that presents itself. In partnership with Eastern Union Funding, Cross River provides a simple online PPP application for clients. If approved, clients receive funds in ten days or less, keeping businesses afloat and workers employed.
Rohit Arora, CEO of PPP provider Biz2Credit, explains how this demonstrates the versatility of digital platforms:
“The increased access to capital we provide to the hardest hit and underserved small businesses is a clear testament to the importance of digital lending. The fact that we got almost twice as many approvals as the country’s two largest banks indicates that a digital platform is the best strategy to serve the widest range of small business clients, especially for such a program. urgent than PPP.
Could public loan and social protection programs finally be on the brink of digital transformation?
Post-COVID digital innovation
Some fintech companies such as Avant have made COVID relief their primary mission. Avant connects people to health information, financial assistance, and resources to meet basic needs in the aftermath of COVID-19. The site also shares information on employment services and offers financial advice, aimed at helping users save up to $ 250 per month through trusted support sources.
But COVID relief isn’t the only place fintech is relevant when it comes to caring for citizens. “There is no doubt that innovation brings enormous potential for well-being and well-being for society”, insists a report from the Bank for International Settlements.
“Suffice it to mention the positive transformation that new finance technologies have brought in access to credit, speed and reliability of trade finance and insurance coverage. Indeed, technology represents a tremendous opportunity for innovation and financial inclusion by providing access to financial services at a lower cost.
The report then lists the many areas where fintech has already improved accessibility and inclusion in finance:
Payments. Mobile payment options and neobanks are making financial management more accessible to unbanked and underbanked Americans. In addition, fintech solutions have reduced the cost of cross-border payments, making international transactions and related activities more affordable.
Credit. Fintech innovations such as Buy Now, Pay Later, and data-driven lending are leaving traditional credit scoring behind. Thanks to these products, customers who are underbanked and have poor credit access the necessary financing.
Savings. With apps like Robinhood democratizing saving and investing, consumers now have more access to products that help ensure future financial stability. Previously inaccessible investment areas are becoming available through user-friendly applications and new approaches, such as crowdfunding in commercial real estate.
Assurance. Fintech companies allow insurance companies to harness vast amounts of user-generated data to inform their policies. Pay-as-you-go insurance policies are a popular example, and IoT trackers used to track usage can also encourage safer driving, healthier habits, and more.
Obviously, government entities stand to benefit from these developments.
Can governments digitally transform lending and welfare?
While the potential of fintech to streamline government funding processes is clear, a major hurdle remains. The sheer size and complexity of municipal governments is often prohibitive when it comes to rapid change, let alone federal programs.
However, complex organizations such as banks and financial institutions have already adopted fintech in various ways with great success. With stimulus payments and P3 loans as forays, the federal government may soon follow suit.
Tarun Bhasin is the CEO of Kunai, a consulting firm that helps the financial services industry create high-quality digital products.