Fintechs Help Speed SME Relief

Social distancing and lockdowns are propelling some fintech companies' fortunes.

The Covid-19 pandemic has been a bonanza for some of the most established fintech companies around the world. Locked down in homes and communities, record numbers of consumers and business owners have downloaded smartphone apps and opened online accounts for peer-to-peer transfers, paying bills and—perhaps more importantly—applying for loans. The fintech revolution arrived earlier than expected, and traditional banks and credit unions took notice.

In the US, PayPal and Square—subsequently joined by a half-dozen other companies—became the first non-banks to gain approval to provide loans through the US Small Business Administration’s Paycheck Protection Program.

In China, through that nation’s similar Merchant Relief Programs, Alibaba Group leveraged its digital capabilities to provide instant support to consumers and vendors with low-interest and interest-free loans.

In the UK, British Business Bank—the state-owned institution administering the government’s support to smaller businesses—recruited three challenger banks into the program in order to speed the delivery of funds.

In Africa, Nigerian startup Lidya saw a surge in working-capital demand by small and medium-size enterprises (SMEs) in all five countries where it operates.

In Latin America, Brazilian giant Nubank created a $4 million fund dedicated to helping customers through the crisis. Many other digital banks across the globe, meanwhile, gave clients a break on their mortgages.

With their technologies facilitating an unprecedented volume of requests and loan applications, fintechs can issue credit quickly and remotely to those who don’t have longstanding relationships with a traditional bank. However, it hasn’t been all smooth sailing for fintech firms, as some early-stage startups suffered from the same liquidity crunch experienced by the businesses they aim to serve. Only profitable enterprises will outlive the pandemic, but even for them, concerns about the future availability of funding will linger.