How fintech became a critical part of the economy

‘Fintech was born in the last crisis and it is primed to help in the current crisis’


Charlotte Crosswell, CEO, Innovate Finance
By Charlotte Crosswell, CEO, Innovate Finance

Fintech was born in the wake of the last economic crisis. It is ready to help in the present crisis and to power lasting growth.

The global economic crisis caused by coronavirus is already drawing comparisons with the 2008 recession. Though the causes are very different, we can foresee the same fallout: credit drying up, small and medium-sized enterprises (SMEs) struggling and the most vulnerable in society put in a precarious position.

Happily, we have made progress in our ability to handle these issues. The advent of fintech is a particular highlight. The fintech sector, which finds its roots in the 2008 Great Recession, has grown with a stated aim of tackling those very problems which headlined that crisis. Since then, fintech has flourished and is now delivering innovation across the full spectrum of financial services.

Current accounts, savings, investments, insurance, foreign exchange and payments have all been disrupted by fintech providers. So too have the core infrastructure of banks and banking systems, helping to improve efficiency across the sectors players, old and new. There is a strong base on which the sector can build. Fintech was born in the last crisis and it is primed to help in the current crisis.

An area in which fintech has seen particularly strong growth, and one where it stands to make a big impact in the recovery, is SME financing. Protecting the future of SMEs has been front of mind for government and business alike. Fintech lenders have certainly played their part in disbursing the lifelines of CBILS (Coronavirus Business Interruption Loan Scheme) and BBLS (Bounce Back Loan Scheme) to small businesses.

They have an equally important role in providing the capital to keep SMEs, the very backbone of the UK economy, growing and succeeding. SME financing has been an issue for many years. A lack of access to credit for small businesses is endemic in the UK and it has held back the ambitions of entrepreneurs.

Recognising this, a cadre of innovators have built new digital-first businesses designed to meet the financing needs of SMEs. Challenger banks and alternative lenders, such as Starling, iwoca, Funding Circle, OakNorth, Tide, Capital on Tap and Atom Bank, have all started since 2010 with the aim of disrupting the SME lending market.

This new breed of lenders are smaller and more flexible than bigger banks, which means they can cater to SMEs more readily and are armed with new technology to allow speedier decision-making. Their use of new data analysis technology combined with machine-learning and artificial intelligence means they can process large volumes of requests from SMEs much faster than traditional players.

Fintech lenders already have relationships with more than 500,000 SMEs in the UK and it’s clear they have a huge role in supporting small-business financing. The speed and flexibility of these innovative lenders is what sets them apart. The way they can support SMEs in need now, and power those who are looking to take advantage of growth or starting a business in the wake of COVID, will be absolutely vital for the long-term strength of the economy.

The speed of our recovery will in a large part be determined by the fortunes of SMEs. The more tools and the more options they have at their disposal to support their financial situation and to achieve their goals, the better.

We have seen the potential for fintech to power growth for a number of years. Now is the time for it to really make its mark and to show it is a critical part of our economy.


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