Mille Lees Mille Lees, Friday 17th April 2020, 11:20 AM CEST
Fintech Firms

It has been several weeks since the United States Government informed their citizens of the COVID-19 Stimulus Plan, which will deliver cheques to millions throughout America. This Senate-approved agreement enables protection for small business, ensuring the safety for America’s backdown. The challenge with this stimulus plan is financial institutions cannot keep with the required demand from Federal Government officials. This will slow the distribution of funds, with small businesses and individual Americans always encountering chaos when inquiring a loan. Numerous questions are imposed onto these applications, which has delayed the essential participation of Wall Street institutions.

The Chief Executive Officer for the Consumers Bankers Association does not believe that these institutions are to blame. Richard Hunt notes that guidance outlines from the Federal Government demand $350 Billion, which takes a prolonged period to acquire and distribute amongst these institutions. The CBA Executive pointed out that patience is vital for the millions of men, women and children needing these funds. It should be noted that these statements were expressed two weeks ago, with banking institutions still unable to process these loan applications. It is forcing millions of Americans to go without the required funds to sustain themselves throughout this pandemic.
The challenges imposed onto these financial institutions prompted the United States Government to find solutions within the Fintech Market. Their solution allows for Square, Intuit and Paypal to engage with the United States Small Business Administration. Their involvement in this COVID-19 Stimulus Plan will include working with the Paycheck Protection Program. It will allow for companies like Paypal to provide small businesses specialized loans, which could keep employees paid for several to ten weeks. Loans have begun being issued through the Small Business Administration.

Additional Fintech Firms throughout the North American or European Union landscape could be implemented into the United States standard financial markets after the specialized approval. Politicians will find benefits in acquiring subsidized assistance from companies like Paypal or Square, creating a potential endless wave of new opportunities in the Fintech market. There are numerous individuals in the Fintech industry that believe this is possible, including Michael Sury from the University of Texas in Austin. He is positioned as the Director for Financial Analysts and Transformative Technologies at UOTA.

Coronavirus Impact Fintech

Michael remarked: “Given the challenges that traditional banks have had in implementing the various liquidity provisions of the stimulus package, a window of opportunity has opened for FinTech firms to differentiate themselves and serve as an additional channel. It’s clear that the banks are overwhelmed with trying to process record loan and credit facility volumes, but this is where FinTech firms can shine. In many cases, their core competence is precisely in managing and processing information—which is critical to getting funds to where they are desperately needed.”

Lobbying

Investigative research from TechCrunch revealed that Paypal, Square and Intuit all lobbied with politicians from February to March. This enables these financial institutions to acquire access to the COVID-19 Stimulus-Response. It is known that by assisting the American government during their shortcomings, added benefits will follow. It should be mentioned that payment interests are included in these small business loans, meaning Paypal and Square will earn minor profits.

It is because of these benefits that financial analysts are considering this the breakout moment for Fintech Firms. It will provide them with new opportunities when building critical relationships with government representatives. Senior Analysts with the Harvard Business School have publicly remarked that Fintech could save the day for Americans, making them more vital and influential than Wall Street Institutions.

Karen Mills continued her remarks by stating: “The next two weeks are critical for America’s small business owners–as you know, they have been struggling; they only have about three or four weeks of cash on hand, and they’ve been closed for that period. You saw it in the unemployment numbers…these are half of America’s jobs. So, we did have one week of the plan so far, and as you said, it was bumpy banks not known for moving quickly, and this is $349 billion worth of stimulus cash.”

Finishing her sentiments, Karen noted: “People are applying to the SBA, and they’ve got about $200 billion approved–but only about 1% seems to be flowing into the hands of small businesses. So, the question is, what are we going to do to get the money out there?”

Square, Paypal & Intuit

Executives within the Fintech Industry have begun expressing their confidence behind this financial product. Technology makes trading more efficient and effective, with financial institutions often adopting these new features. This makes Fintech firms more capable of processing millions of applications over Wall Street Institutions. It is where companies like Paypal, Intuit and Square come into effect. They’ve already distributed thousands in loans without a 48 hour period, which is considerably faster than the American Finance Firms.

The United States Small Businesses Association does not have the technologies required for these extensive processing capabilities, prompting their substantial declines. Without the assistance of companies like Paypal and Square, American citizens would not be receiving any compensation to sustain themselves during COVID-19. This extends towards the small businesses as well. After the pandemic has concluded itself with a vaccine, Fintech firms can anticipate higher usage across America.

The Managing Director of Customer Acquisition with Bottomline Technologies spoke on the Fintech’s conditional factors by engaging with the stimulus package. Comments noted on the distributions of stimulus funds, which is creating an economic situation never-before-seen. Brain Drozdowicz remarked: “Since the PPP program is so new and unique, most lenders did not have a purpose-built solution in place and standing up a new digital experience can take months to enable. This an opportunity for their fintech partners can come in to help.”

Brain continued his sentiments by mentioning: “This is all consistent with a major emphasis on digital access and enablement. There is a sense of urgency around small business account opening and onboarding, especially as many SMBs begin to see loans come through. We are beginning to see the impact of branch closures”–that while the facilitation of stimulus distribution is a considerable challenge in and of itself, small businesses that generally depend on in-branch banking services may have been high and dry.

Drozdowicz finished his statements by noting: “Since many small businesses have been dependent on physical branches for service and access to credit, this digital capability is even more essential in the current environment due to temporary branch closures and social distancing guidelines.”

The Gaps to Fill

Fintech Firms operational in the United States of America can gap together branches of the economy. The task, for now, is accounting for millions needing stimulus funds for basic survival. However, business analysts with Paypal and Square are surely looking into new opportunities. These companies will want to provide American citizens with financial assistance that is more effective and efficient than the banking institution. Filling this gap would enable Fintech firms like Paypal to become influential as JPMorgan.

fintech small businesses

Michael Sury spoke on the viable solutions required and the process involved. The University Finance Director noted: “FinTech can offer other solutions as well. They can increase the number of options available and streamline the process for raising capital beyond just traditional bank loans. They can automate and integrate finance and accounting functions, which are essential to the success of any small business, including managing invoices and receipts, HR, cash flows, and taxes. “Other FinTech firms can also help develop and manage insurance and retirement solutions.”

Brain Drozdowics conducted that cash management and liquidity is most beneficial for digital solutions. His full remarks state: “There is also a real need for liquidity and cash management controls, more robust cash flow reporting, payroll and invoicing, digital payments and potentially real-time payments, all of which require digital solutions that can be done remotely and paperless. Technology providers can have a major impact in all of these areas with their bank partners, offering and interconnecting many of the features required in rapid response situations—where time-to-market matters.”

Brain continued his statements by speaking on the side effects of Fintech assistance. Those official remarks note: “Reduce fraud by including integrated risk and compliance capabilities that help streamline and secure the process for lenders and borrowers. Providing our digital account opening solution along with the loan application platform, which allows lenders to choose open new deposit accounts as well. This is an important problem that needs solving.”

Michael Sury closed out his public remarks by saying: “The next week is indeed a critical time window because many small businesses already run on low liquidity. If the logjam of funds that have already been earmarked for small businesses does not clear up, we may see a record number of business closures. As it is, Congress will likely need to approve additional funds to keep these businesses in operation. Given the generally accepted maxim that ‘small businesses are the backbone of America,’ this is a significant problem that needs solving. And FinTech solutions can address it.”

Mille Lees

Author: Mille Lees

Millie has been with whichbroker.com since the start. She has a passion writing financial news after an internship at Bloomberg London. Millie's background in journalism and politics means she has an eye for a good story. Millie graduated from LSE and has a masters from Durham University England. Mille Lees can be contacted at [email protected], View all posts by Mille Lees

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