Fintechs and the Government Teamed Up for COVID: Will It Last?

Fintech companies assisted millions of people accessing COVID relief stimulus payments and PPP funds. Will the government leverage them when the pandemic is over?


The first round of $1200 stimulus checks began rolling out in April of 2020, but by August, roughly 35 million Americans had yet to receive theirs. This included 12 million people who didn’t file tax returns or receive government benefits, as well as 14 million unbanked people who, once they received paper checks, struggled to cash them.

Fintechs stepped up to the plate.

 

Giving Americans Faster Access to Stimulus Checks Without Fees

PayPal, notably, worked to put people’s stimulus money in their hands faster. “In the first wave of the government’s stimulus payments in April and May, we saw an incredible number of customers look to PayPal as a way to receive their stimulus payment quickly and securely,” PayPal’s Senior Vice President of Branded Experiences John Kunze explained.

“With the next round of payments to individuals coming soon, customers receiving a government-issued paper stimulus check over the coming weeks will be able to cash their check without visiting a physical check-cashing location, simply by taking a picture of the check within the app to receive the funds quickly and easily.”

PayPal also waived the usual fees associated with instant funds access for all government stimulus checks processed with its cash-a-check feature or Venmo’s Direct Deposit. Individuals could almost immediately access every dollar of their stimulus payments.

Meanwhile, neobank Current claimed credit for the fastest direct deposit processing for both the first and second stimulus checks:

“We’re proud to once again be the first fintech in the country to credit the stimulus funds, especially at a time when many Americans are hurting for cash more than ever. We will be making all funds fully available to all members immediately.”

Hopefully, there won’t be a continual need for stimulus checks as more people get COVID-19 vaccines and economies begin to reopen. This payment agility, however, raises questions for other forms of government-issued financial support. Could welfare programs, for example, potentially be made more efficient with the help of fintech?

Fintech-Powered Business Loans Reduce Unemployment


American unemployment reached historically high levels in 2020, and remains higher than ever before the COVID-19 pandemic. As businesses scramble to keep people employed, neobanks and digital banking services have risen to the moment, enabling loans in less than a day in some cases.

Fintech companies like PayPal, Womply, Kabbage, and Fundera all provide applications for the Paycheck Prevention Program, or PPP, provided by the federal government to keep small businesses afloat and people employed. Ultimately, the federal government is already relying on fintech to grant loans and distribute desperately needed funds. There’s no reason why this practice can’t continue into the future.

Some banks, such as Cross River Bank, have decided to seize the opportunity presented. In a partnership with Eastern Union Funding, Cross River provides an easy online PPP application for customers. If approved, customers receive funds in ten days or less, keeping businesses afloat and workers employed.

PPP provider Biz2Credit CEO Rohit Arora explains how this demonstrates the versatility digital platforms provide:

“The increased access to capital that we are providing for the hardest-hit and underserved small businesses is a clear testament to the importance of digital lending. The fact that we have secured almost twice as many approvals versus the nation’s two largest banks indicates that a digital platform is the best strategy for serving the broadest range of small business clients, especially for a program as urgently needed as the PPP.”

Could government lending and social welfare programs finally be on the brink of digital transformation?

Digital Innovation Post-COVID

Some fintech companies such as Avant have made COVID relief their core mission. Avant connects people to health information, financial assistance, and resources to meet basic needs in the wake of COVID-19. The site also shares information about employment services and offers financial counseling, aiming to help users save up to $250 a month thanks to trusted sources of support.

But COVID relief isn’t the only place where fintech is relevant when it comes to taking care of citizens. “There is no doubt that innovation brings enormous potential for societal good and welfare,” a report from the Bank for International Settlements insists.

“It suffices to mention the positive transformation that new technology in finance has brought access to credit, rapidity and reliability in trade financing and insurance coverage. Indeed, technology represents a great opportunity for innovation and financial inclusion by providing access to financial services at lower cost.”

The report goes on to list the many areas in which fintech has already improved accessibility and inclusion in finance:

  • Payments. Mobile payment options and neobanks make finance management more accessible to unbanked and underbanked Americans. Additionally, fintech solutions have reduced the cost of cross-border payments, making international transactions and related business more affordable to conduct.
  • Credit. Fintech innovations like Buy Now, Pay Later and data-informed lending are leaving traditional credit scoring behind. Through these products, underbanked and low-credit customers access needed funding.
  • Savings. With apps like Robinhood democratizing saving and investing, consumers now have more access to products that help ensure future financial stability. Previously inaccessible investing areas become available thanks to user-friendly apps and new approaches, such as crowdfunding in commercial real estate.
  • Insurance. Fintech companies enable insurance companies to leverage vast amounts of user-generated data to inform their policies. Pay-per-use insurance policies are one popular example, and the IoT tracking devices used to track usage also may encourage safer driving, healthier habits, and more.

Clearly, government entities stand to benefit from these developments.

Can Governments Digitally Transform Lending and Welfare?

While fintech’s potential to streamline government funding processes is clear, a major obstacle remains. The size and complexity of even city governments is often prohibitive when it comes to rapid change, let alone federal programs.

However, complex organizations such as banks and financial institutions have already adopted fintech in various ways with much success. With stimulus payments and PPP loans as inroads, the federal government may soon follow suit.

Tom

Sandeep

Sandeep: Tell me a bit about the early part of your career.

Tom: I spent a decade helping to build start-ups focused on application and database software. This was where I learned how to sell and do business development. I was fortunate to be part of one company going public and another being sold to IBM.

Sandeep: What is something you learned during this time that helped you with consulting?

Tom: I began to appreciate how different customers achieved varying levels of success with the same foundational technology. This made me understand just how critical getting your team and process right can be.

Sandeep: This is something I only came to appreciate years into consulting, especially after the sale of my first consultancy to Capital One.I saw teams in different parts of the company trying to solve challenges like real-time messaging. Same corporate culture, same technology, same internal support mechanisms. Night and day outcomes.

Tom: We saw a lot of the same thing after selling our practice to EMC (sold to Dell in 2015). This is probably the thing I'm most proud of when it comes to the teams I've helped to build: the ability to perform well in a variety of contexts, sometimes in ways that inspires the client team to up their game as well.

Sandeep: Yes. It's particularly cool to see your team succeed in individual ways after an acquisition...consulting skills definitely translate into the corporate environment.

Tom: Totally. We have people who've stayed on at Dell and risen up the ranks, while others took the opportunity to become successful executives at other Fortune 100 companies....or to start their own agencies and startups.

Sandeep: We've both been around a while. My first consulting project was a Y2K thing for Cisco back in 1998. You've been around a little longer than that :). How do you think consulting has changed most during the past five years?

Tom: I think because there is so much infrastructure available now, consulting has become more delivery and outcome-oriented. A better blend of strategic and tactical. Public Cloud has also enabled velocity to increase at a pace unfathomable 5 years ago.

Sandeep: What has stayed the same?

Tom: It's still mostly about people. People who thrive on change and are focused on their personal and professional development. I love that this has not and will not change...it's what I love about consulting.

Sandeep: I know you're adjusting your work style to COVID. You're still a dude who clearly prefers to drive an hour for a socially-distanced hike or outdoor meeting over Zoom any day of the week :) But personal styles aside, what is specifically compelling about a remote agency during the era of COVID?

Tom: Kunai has been remote for years, which gives them an inherent advantage. There is something about the communication and management styles that just works in a way that other organizations are still figuring out.

Sandeep: Yeah, I think what a lot of people fail to realize is that remote work isn't just office work over Zoom. it's an entirely new paradigm. There needs to be an understanding for asynchronous efficiency...and this just takes time and effort to develop. How do you approach remote work and family? What are you learning about separating work and personal time?

Tom: No matter what the form of interaction, Focus. Be present. Quality over quantity. The best weeks are the weeks where I proactively schedule work and personal time. Neil (Kunai's Head of Delivery) shared a great quote with me "With discipline comes freedom." When I am proactively addressing the majority of my professional and personal commitments, I find I earn a little flexibility. A little freedom.

Sandeep: Tell us about a business hero of yours that I may not have heard of before.

Tom: Paul O'Neill is someone you may not know. His work in both the public and the private sector created a profound impact

Sandeep: We are both over forty years old :). How have you learned how to work smarter during the past decade or so? What do you wish you knew about consulting when you were 25 that you know now?

Tom: Consultants want to make lasting change. Lasting change is often not the act of a single person. Today I work much harder bringing others along on the journey.

Sandeep: Last question. What are you doing here? :) Why join a small consulting company this late in your career when you could have a cushy job somewhere else?

Tom: I love a good challenge personally and professionally. When I turned 40, I decided I would run a 10K every Thanksgiving weekend and try to have my finishing time be less than my age. With the exception of one year where I did not run due to a health issue, I have met the goal. I also recently completed the Leadville 100 Mountain Bike race. So, I guess I'm here because I'm a glutton for punishment :) Jokes aside, our customers have a job to do and I intend to put Kunai in a position to execute flawlessly on their behalf. I love committing jointly to audacious goals for our customers and our business.

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