You’re probably working from home right now and it’s likely been that way for a couple of weeks or so depending on where you are. It’s the new normal, maybe you’re shopping once a week, going out for exercise once a day and probably getting a few more takeaway meals than usual.
One thing you’re unlikely to be doing, despite all these purchases, is spending cash. The same is true for your customers. In the name of social-distancing and self-isolation, handling cash has become an action to avoid. In Vietnam, the banks are literally washing money, if infection rates continue to climb it’s possible that other nations will follow suit where possible.
Cash is dirty, but so are cards, although it’s much easier to clean a debit card than a banknote. The WHO has suggested contactless payments as an effective solution for interacting with cash and to comply with social distancing. And thanks to mobile wallets like Google Pay and Apple Pay, customers don’t even need to take out their card. It’s a commonly seen use of fintech, even in non-pandemic times, but it raises interesting questions around how technology can be useful today.
It’s not just payments where the coronavirus and fintech are having an impact. Banking is moving online as customers are trying to adhere to social distancing measures and avoiding branches. Remittances, purchases and general money movement is still vital for individuals and businesses to operate – thanks to digital transformation efforts this is able to work seamlessly in many ways today.
Lack of access to physical banking has forced customers to go online to do their banking. However, even with online banking, branch banking serves a real and useful purpose to customers by providing bespoke insights. Digital transformation has already been adopted by some to handle this, TSB has added live agent functionality to its website. But other banks and financial institutions (FIs) have simply closed down branches.
Financial institutions are having their hands forced by the pandemic to finally take digital transformation seriously. The coronavirus crisis is an opportunity for banks to rehabilitate their image, for the first time the developed world is experiencing elements of what it’s like to be unbanked – approaching this financial inclusion issue in the right way will give FIs a chance to prove that they can support customers when needed.
However, many FIs are struggling. New economic-rescue schemes such as PPP loans and CBILS mean that lenders are accessing a colossal amount of government funding and portioning it out to applicants. However, the current climate has also meant that thousands more applications are being made compared to FIs capacity. Those FIs need to adapt fast and onboard customers at speed, something that is simply not possible without automated solutions that free compliance officers from administrative work.
More than that, FIs need digital technology solutions and APIs that can integrate with their existing tech stack and adapt to new projects that are being built. This is where fintechs can have a significant impact. Providing a disintermediation layer of services is where fintechs have thrived. But now, in light of the coronavirus, fintechs have the opportunity to highlight how that layer can work for FIs and partner together to deliver service needs that help customers.
Coronavirus Fintech Fallout
For the fintechs that focus on providing an alternative to the FIs rather than a solution to FI problems, the landscape looks a little different. Chime is piloting a program to obtain the $1200 stimulus checks directly in the US. But there are concerns that the US fintechs lack the compliance structure and strength to be relied on for the government’s relief loan program.
Similarly, in the UK neobanks were unable to tap into the opportunities provided by the CBILS program until recently. OakNorth and Starling Bank have both become accredited lenders and can now distribute the government-sourced funding.
But that doesn’t mean that they’ve been left untouched by the crisis. Fintech all-stars Monzo and Starling Bank have had to furlough staff and Monzo CEO, Tom Blomfield has opted to forego his salary for the next 12 months to help the company. Gravity Payments CEO, Dan Price, who made headlines by cutting his pay to $70K, has also cut his pay to $0 in a bid to not fire any of his staff.
These are all difficult situations but it will be a good test for fintechs to see how they weather a hostile economic environment after years of a growth economy. Stress tests are done for exactly this reason. However, for non-bank fintechs, there’s an opportunity to work closely with FIs, highlight the gaps that are proving to be a blocker for smooth customer engagement and prove value.
Regulators, the world over, including the FCA in the UK, FINTRAC in Canada and FinCEN in the US, have stated that regulatory obligations are changing slightly. Depending on the region, supervisions are suspended, reporting requirements are lowered or regulatory demands are being relaxed to some degree during the pandemic.
FIs will never have another opportunity like this to push forward with modernizing their tech stack and making digital transformation a core part of their service to customers. Fintechs should take this moment to approach financial institutions and demonstrate how their technology-led solutions will encourage a stronger relationship between FIs and customers.