Fintech firms could emerge strongly from the coronavirus pandemic due to the level and speed of support they are able to provide borrowers compared with mainstream banks, Moody’s claims.
The ratings agency said social distancing measures and lockdown restrictions have meant everyone has had to get used to working remotely and digitally, something that fintechs are more geared to than traditional lenders.
This, it said, has been highlighted in way mainstream banks have been criticised for their speed in providing financial support, creating an opportunity for fintech firms.
“US fintech firms are working with governments to get crisis support payments and loans to those unable or unwilling to obtain traditional bank accounts and are accepting loan applications for the Paycheck Protection Program (PPP),” Moody’s said.
“In contrast, traditional incumbents have received criticism in their handling of the PPP approval and disbursement process.
“In the UK, fintech firms are providing government guaranteed loans to small businesses, while incumbents received criticism for moving too slowly to channel funds to small and mid-size businesses until the government guarantee was increased to 100 per cent.
“Though the barriers to entry in financial services are high, a number of financial services challengers could emerge strongly from this crisis.”
Peer-to-peer lenders are slowly getting more involved in facilitating government support measures.
Funding Circle has been approved to provide PPP in the US and bounce back loans and coronavirus business interruption loans (CBIL) in the UK.
Assetz Capital has also been approved to provide CBIL loans but there have been concerns that more alternative lenders are not being accredited quickly enough.