While COVID-19 is having a devastating effect on the global economy and consumers, the use of financial technology services – better known as fintech – is increasing. Consumers, through computers and smartphones, rely on fintech to improve the delivery and use of financial services. In unprecedented times like these, fintech provides a lifeline for some, and convenience for others, says Ron Oertell, Chief Financial Officer at LendingUSA, LLC. “Further embracing by the public and private sector of products and services offered byfintech can help lessen the effect of the downturn in the economy, now and in the future,” Oertell says. “Fintech allows for faster, smarter, and less expensive products and services.” Oertell provides examples of how the fintech industry is responding to COVID-driven consumer needs:
- Quicker access to money. The Paycheck Protection Program loans are an example of fintech’s ability to get money directly to people quickly, Oertell says. Fintech company Kabbage became the third-largest lender by volume of the PPP, following two traditional banks – Bank of America and JPMorgan Chase. “In prior downturns when the federal government has given money to banks, it’s been a little bit of a bottleneck as lenders tightened lending requirements – notwithstanding the government’s intention with the additional liquidity,” Oertell says. “It was harder to actually get money out to individuals and companies. By leveraging the fintech networks and infrastructure, the government was able to send money directly to companies and, in turn, individuals, which helped save more than 35 million jobs.”
- More knowledge leading to better financial decisions. The pandemic has also caused individuals to use personal finance/budget apps for the first time as the need to watch spending has increased. Fintech tools are more nimble, provide more information and deliver such information better than traditional methods. “They provide immediate feedback on loan applications and how taking such a loan would impact a person’s credit score. Shopping apps that instantly find the lowest price for goods have proven especially critical in these times. Fintech companies process massive amounts of data and allow people to access financial help in real-time. It’s been instrumental in the boom in point-of-sale financing, when the merchant offers customers a financial solution to assist them in buying the product or service.”
- Lower fees. Fintech platforms and the increase of consumers using them have spurred lower user fees. Because of that, retail stock trading is one area where the cost of products and services has been significantly reduced, and to zero in many cases. By hyper-focusing on the products their consumers demand, removing barriers to broad adoption by a large number of consumers, and improving the user experience, the cost to the consumer can be slashed.
- Alternative investment opportunities. The pandemic has caused more interest in alternative assets – those not categorized as stocks, bonds, or certificates. Fintech platforms remove barriers and enable users to access these opportunities. In a global recession, investors are looking for safe-haven assets, which has spurred more involvement in cryptocurrencies. “With fintech solutions growing, companies like Bitcoin IRA have enabled individuals to easily invest in alternative assets. In turn, assets such as Bitcoin are at their highest points in several years.”
- Contactless payments. Social distancing measures due to the coronavirus have conditioned many people to limit face-to-face interactions. With fintech, people can access their money or make payments without leaving home or exchanging cash. The pandemic has created a need for robust contactless solutions. There is fear with paper money changing hands over and over, and the same goes for pin pad systems. More people prefer not to touch anything outside their homes, and the World Health Organization is encouraging the use of contactless payments.
Rapid, immense changes bring problems for which some forms of technology bring solutions. Fintech is well-positioned to help people who are looking for immediate help and long-term solutions as well.