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The UK fintech sector steps up in the battle against COVID-19

UK peer-to-peer lending giant Zopa was conceived in 2005, but it’s fair to say that the bulk of the fintech wave appeared from 2010 onwards – after the financial crisis.

As such, detractors have often predicted that fintech’s true test would be its response to a severe economic downturn. That test has arrived in spectacular fashion, with the COVID-19 pandemic hitting the economy hard. The Office for Budget Responsibility (OBR) has warned that the outbreak could see the UK economy shrink by a record 35% by June 2020.

The initial signs are that the fintechs are stepping up to the plate impressively. It’s been announced, for example, that Funding Circle and ThinCats have received accreditation from the British Business Bank to take part in the government’s coronavirus business interruption loan scheme (CBILS). They are the first alternative lenders to receive the green light to line up with the banks to lend to SME customers via the emergency scheme. I’d expect more to follow.

Fuelled by open banking

The key to unlocking fintech’s full potential amidst these difficult times is open banking, which was implemented in the UK in early 2018. The growing movement has created a particularly fertile ground for innovation and collaboration.

One of the most significant, and well-publicised, fintech contributions to the battle against COVID-19 is Covid Credit. This new platform, brought to life over a single weekend by professionals from Fronted, 11:FS and Credit Kudos, will help self-employed workers to prove a loss of income needed to claim new government benefits.

The thinking behind this initiative is that if the UK government could be persuaded to provide financial support to the self-employed during the coronavirus crisis, then open banking technology could be used to self-certify lost income, and overcome one of the main hurdles of providing compensation.

The Open Up 2020 Challenge is another strong example of the intersection of fintech and open banking. Run by Nesta Challenges, in partnership with Open Banking Limited (OBL), the Challenge has selected fifteen fintech finalists, which have secured funding to develop innovative solutions that use open banking to transform how people across the UK manage their finances.

All the solutions use open banking data to help users better manage their financial lives, whether it’s gig economy workers trying to manage the peaks and troughs in their finances, millennials and Gen Zs trying to get on the property ladder or save money, or others who may simply wish to pool charitable donations in one place. Each finalist has been awarded £50,000 to develop their innovation over the coming months – with Kalgera, Toucan and Wagestream receiving £100,000 because of their focus on financial inclusion.

In the past few weeks, some of this year’s finalists have adapted rapidly to bring their innovation to bear on the new issues introduced by COVID-19.

Wagestream has released a number of updates to ease financial difficulties during the pandemic. This includes immediate overtime payments for under-pressure healthcare workers. Any shift that has been logged as COVID-19 is eligible for enhanced payment limits, and staff who complete these types of shifts can now access 80% of wages earned immediately upon completion of work.

Cleo, an artificial intelligence (AI) assistant with a sense of humour, offers tips and tricks on social media to help younger people to budget, save and track their spending. It also now provides them with welcome guidance on how to appropriately speak to their landlords about a rent holiday, if needed.

Digital debt adviser Tully, meanwhile, has highlighted that with pay cuts, reduced hours, furloughing and redundancies, around 17 million people have found it much harder to meet their bills and payments overnight. The Nottingham-based fintech has just announced the launch of its COVID-19 Relief and Wellbeing Network to help people financially impacted by the crisis get access to payment relief online.

The advantage that these agile fintechs have is that they are well-positioned to adapt and grow in line with the evolving needs of their users. Fintech will be a useful weapon on the frontline

James Tall
James Tall
James is a freelance writer and communications consultant with over 10 years experience in financial services and fintech. He has worked in Hong Kong, New York and London, and currently writes for a number of industry titles.

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