In a matter of weeks, COVID-19 altered the world, bringing the historic Post-Great Recession bull market to a grinding halt. Consumers are losing confidence in the economy and unemployment has shot up. However, amongst the outpouring of grim news, there are good news stories that deserve to be highlighted. Stories of neighborhood cafes donating food to NHS staff and companies stepping up and adapting to help their customers affected by the COVID-19 outbreak. The Government now has a unique opportunity, and challenge, to ease the COVID-19 induced financial strain felt by SMES and consumers, who will no doubt be at the center of any economic recovery.
Customer-centricity, agility and innovation have long been the watchwords of Fintech. Since COVID-19, we have seen many startups use these strengths to solve unprecedented and unique problems. Pento, a payroll automation provider, built a furlough claim calculator, allowing SMEs to quickly and simply calculate the impact on their payroll. Fronted, 11:FS and Credit Kudos came together to build a platform leveraging Open Banking to help those impacted by COVID-19 report their income loss to HMRC.
In addition, the UK Government has announced two historic support packages: Coronavirus Business Interruption Loan Scheme (“CBILS”) to support SMEs and the Self-employed Income Support Scheme (“SISS”), which provides up to £2,500 per month to the self-employed. There is no doubt that these schemes will go on to support countless employees and help SMEs across the UK to thrive in a post COVID-19 environment.
However, whilst we recognise the Government’s historic allocation of these funds, distributing them is another matter. The British Business Bank (BBB) is now responsible for overseeing CBILS, and must ensure that the Government’s promise of support quickly translates into cash in the hands of SMEs. Therefore, the BBB needs to pick agile partners who can innovate and solve novel problems – in other words, Fintech startups.
Traditional financial institutions are symbols of stability and continuity, and are trusted government partners. It is logical for these institutions to be part of the CBILS rollout. Over the years though, UK fintech has expanded, and consumers will find a fintech solution at every financial touch point possible. This includes markets typically underserved by traditional institutions – such as those for SMEs. As small businesses are the ones most likely to be affected by COVID-19, we applaud the BBB’s inclusion of Fintechs specialising in this market (Starling Bank and OakNorth) as CBILS distribution partners.
Similarly, as the Treasury and the HRMC prepares its roll out of SISS, we hope to see the UK’s Fintech scene included. At Portify, we can already see the impact of COVID-19 on the self-employed. Our own analysis showed income for the self-employed decreased by 30% in just two weeks in April due to COVID-19. Whilst we recognize the Government’s multi-billion pound SISS program, we need to ensure the self-employed do not have to wait longer than necessary to receive financial support. Which is why we believe the inclusion of fintechs in the rollout of SISS is key.
For example London has startups like Coconut, who specialise in accounting and taxes for the self-employed or Wollit, who have brought forward the launch of their product ‘Income Promise’, designed to top-up the pay packets of freelancers by months to help those hit by Coronavirus. Another example is fintech Wagestream which allows employees to access a portion of their wages as soon as they have earned them, rather than waiting for payday. The startup recently waived all fees for care workers. Here at Portify, we have allocated funds from our own balance sheet to advance SISS grants to select users. We are raising funds with external partners to advance even more.
Fintech has and will be the shining star of the UK’s startup community. There are over 1,600 fintech firms in the UK and this figure is expected to more than double by 2030. In addition, these startups have the knowledge and capabilities to simplify and hasten the SISS distribution process, and help ease the financial difficulties faced by the self-employed. It is time that the UK government take advantage of this shining star and call upon us to assist with SISS.