Fintech companies’ involvement in the delivery of Covid-19-related relief has to date been ‘limited’, despite significant willingness by firms, according to a report.
More than one third of fintech companies surveyed for the ‘Global Covid-19 Fintech Market Rapid Assessment’ report cited a willingness to participate in the delivery of one or more Covid-related relief measures or schemes. While the report’s authors say that this demonstrates strong interest, the participation rates of fintech firms in relief schemes ranged between seven per cent for NGO-led measures to 13 per cent for government job-retention measures.
Fintech firms were most likely to indicate interest to participate in the delivery of industry-led relief measures (32 per cent of firms), government match-funding schemes (32 per cent), and government-bases stimulus funding to micro-, small and medium-sized enterprises MSMEs (30 per cent).
The 125-page report was co-produced by the World Bank, Cambridge Centre for Alternative Finance (CCAF) and World Economic Forum (WEF). It examined more than 1,300 firms in 169 countries to explore how fintech companies have been affected by, and reacted to, the pandemic.
Examples of fintechs’ involvement
The report cites various examples from across the globe of fintechs’ participation in Covid-19 relief measures.
Within Europe these include: an Austrian fintech speeding up relief measures by supporting the vetting process for government loans, helping avoidance of fraud (‘regtech’ – the application of technology to improve regulatory compliance); and, in Spain, as part of a Covid-19 relief measure for shops, a fintech’s customers received credits to their pension account when shopping at local retailers.
In the US, examples cited include a digital lending firm partnering a state-wide Covid-19 relief recovery fund to disburse loans to small- and medium-sized businesses; in Hong Kong, the report says a digital bank launched an initiative to get government stimulus payments to citizens earlier in form of fee-free and interest-free loans; meanwhile, the governments of Colombia and Paraguay both partnered digital wallets to distribute Covid-19 related payments.
‘Fintechs have proven resilient and adaptable’
The World Bank and Cambridge Centre for Alternative Finance also recently published their ‘Global Covid-19 FinTech Regulatory Rapid Assessment Study’, which examined how 118 central banks and other financial regulatory authorities have responded to the pandemic. It found that identified the top five ‘use cases’ of support by fintechs to Covid-19 relief efforts as being: digital disbursement of payments and remittances; delivery of governmental relief and stimulus funding; healthcare applications for contact tracing; ensuring business continuity; and support for SMEs.
The new report focuses more on the private sector and fintech economics. Despite the magnitude of the impact of the pandemic on the global economy, this study finds that, overall, 12 out of 13 surveyed fintech ‘verticals’ (specific fintech areas) reported growth on average during Q1-Q2 2020, compared with the same period in 2019, although the growth was very uneven across geographies. There was noticeably higher growth in countries with stricter lockdown measures.
Despite this growth, the report notes that many fintech firms are in a deteriorating financial position, with more than half of survey respondents reporting that the pandemic had negatively impacted their capital reserves.
‘Fintech [companies] were nimble and innovative in adapting to market conditions by both tweaking existing products and services and launching new ones. However, they still face significant headwinds in operations and fundraising, and seem to be in need of further government and regulatory support,’ the report says.
“Despite the challenging backdrop, fintechs have proven resilient and adaptable: contributing to pandemic relief efforts, adjusting operations and offerings to serve vulnerable market segments, such as micro, small and medium-sized businesses, while posting year-over-year growth across most regions,” said WEF head of financial and monetary systems Matthew Blake.
“Fintech has shown its potential to close gaps in the delivery of financial services to households and firms in emerging markets and developing economies,” said World Bank global director for finance, competitiveness and innovation Caroline Freund.