Many fintechs have adjusted their strategies during the pandemic to meet the requirements of populations under lockdown. Which providers will thrive and which will struggle in the new normal?


Someone asked me what the coronavirus pandemic means for the future of fintech. I guess they were of the mind that not much is happening and therefore many firms will shutter and close.

However, while you might imagine that, with businesses closed and the public locked in at home, nothing is going on, but there is actually a lot of activity in the fintech community. Critically, this involves firms pivoting and switching strategies to deal with the new world.

Fast acting

Some are acting quickly to respond to customer needs during the crisis – such as US online-only bank Chime, which offered to get government benefits direct to citizen via an app; or UK challenger bank Railsbank, which created LightningAid for the same purpose.

Major deals have also been struck, such as US payment firm Stripe’s new $600m funding round, which values the firm at $36bn, up $1bn on the last valuation in September 2019.

US fintech Robinhood just raised another $200m, valuing the firm at $8bn; UK fintech Revolut completed a funding round just before lockdown that valued it at $5.5bn, making it Europe’s most valuable fintech unicorn; and Australian neobank 86400 landed another $34m in April.

New ways

Then there are challenger banks that prepared for the crisis by simulating a pandemic and work at home rule, for example Monzo, whose operations have transitioned pretty smoothly from office-based to home-based, unlike many large and traditional banks.

Other challenger banks are coming up with new ideas: Starling Bank moved rapidly to issue companion cards for people who are unable to leave home, due to existing health issues or other vulnerability. The card enables them to give a family member or friend a prepaid card to do their shopping for them, with top-ups direct from the Starling account.

So, things are not that quiet. Business is still being done, start-ups are still launching and things are moving on.

However, some have taken a hit, and I wonder what will happen to the fintech start-ups that were in the middle of planning a funding round. What will they do with their staff or their customers? If they were running out of money, what will they do? How can they do a funding round when they can only reach investors via Zoom? This will be challenging.

We have already seen some companies switch strategies as a result. Moven, the US challenger bank launched in 2011, has sold off its consumer-facing business to Varo Money, for instance; and it is predicted the crisis will result in the closure of four out of five blockchain start-ups, according to a Swiss Blockchain Federation survey.

Who will survive?

This is unsurprising when you see the numbers. According to research firm CB Insights, the first quarter of 2020 has seen venture capital-backed fintech funding drop to $6.1bn, across 404 deals worldwide. That is the worst first quarter since 2016 for fintech deals and the worst first quarter for funding since 2017.

My own feeling is that the coronavirus crisis will force any cash-strapped firm to fold. Cash is king in a crisis like this. Not physical cash notes, but liquidity. Equally, debt and costs are a critical factor. Any firm that has new hires, offices, physical infrastructure and more will struggle: cash out but no cash in is the issue.

This was brought home when I read how Silicon Valley start-up Bird sacked a third of its staff in a two-minute Zoom call delivered by the CEO’s personal assistant. Equally, WeWork and other leading unicorns that were clearly struggling before the crisis hit will most certainly be worse off today.

What’s the answer?

Companies that shine in this crisis, that are doing the right thing for customers and society, innovating and generating ideas, will exceed expectations post-pandemic. Companies that act like monsters during the crisis, treating their customers and staff badly, will fail.

Chris Skinner is an independent financial commentator and chairman of the London-based Financial Services Club.


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