Calling On Fintechs To Support SMB Lending During COVID-19

small business loans

Hundreds of millions of small businesses require immediate financial relief through government funding in order to stay afloat—and keep economies functioning. But traditional financial institutions and current infrastructure cannot support the sheer volume, scale, security, and timeline of the necessary loans. That is why Canadian and U.S. governments should look to innovative fintech companies to deploy emergency funds quicker.

After President Trump signed the $2 trillion CARES Act, the Small Business Administration (SBA) Administrator Carranza and Treasury Secretary Mnuchin announced a mobilization effort of banks and lenders to supply U.S. small businesses with capital. Canada also announced official funding plans for SMBs on March 27, 2020. 

“Small businesses are the backbone of our economy and an important source of good jobs across this country,” Canadian Prime Minister Justin Trudeau said in his statement. “They are facing economic hardship and uncertainty during the COVID-19 pandemic, and that is why we are taking action now to help them get the financial help they need to protect their workers and pay their bills.”

However, there is a snag in the COVID-19 financial response plans for small businesses in both countries. The scale and timeline of the demand for assistance to keep SMEs afloat are greater and more serious, according to Finance Canada’s top concerns, than that which traditional financial services can currently meet. 

Meeting the scale and timeline of SMEs relief loans

In an open letter to the Government of Canada, the Canadian Lenders Association (CLA) asked to extend the proposed economic stimulus package for small businesses to include financial technology (fintech) lending options. While the fintech community, of which VoPay is a proud member, stands prepared to offer digital lending services, a few steps must also be considered.

In the FDATA COVID-19 letter to Finance Canada and the Minister of Innovation, Science and Industry, they state the need to formally recognize the essential role that fintech companies can play to deliver financial services. The association explained that tens of thousands of truly small businesses (MSMBs) in Canada, such as restaurants, auto repair, and retail shops, may not be adequately served for three reasons:

  1. These businesses don’t meet traditional financial institutions’ credit requirements
  2. Loan amounts by these businesses are relatively small, making them lower priority
  3. The volume of time-sensitive credit requests may overwhelm traditional financial services

How fintechs can support COVID-19 SMB relief funding

In a recent FDATA statement, Fintech Lending to Small Businesses During COVID-19 Response, the association aimed to encourage Canada’s financial institutions to enable their customers to gain access and control over their own financial data. Unfortunately, as we discussed in our post, Healthy Competition Among The Einsteins And Edisons Of Fintech, some financial institutions have taken actions to limit access to essential data that powers digital tools. 

If consumers (and business owners alike) had access to their own financial data, they could continue to use third-party fintech tools to help them manage their money and financial wellness remotely. The choice would be in the hands of small business owners and consumers over who gets access to their data—and what they use it for.   

Learn more about the benefits of Open Banking wherein consumers would have control over who uses their financial data and for what purposes. 

The same goes for accessing capital in this time of need. Current financial infrastructure does not have the bandwidth or capacity, according to FDATA, to adequately service the financial needs of small businesses in this crisis. It is time to turn to fintech lending for additional support. Many of these institutions have already turned to innovative, secure fintech companies for mutually-beneficial partnerships.  
Scale, timeline, and security have thus become unnecessary blockers for moving forward. Innovative fintech companies, VoPay included as a secure payment solution built for lenders, have long since overcome those challenges. VoPay offers real-time funding through bulk e-transfers and reduces withdrawal NSFs and returns through next-generation, tokenized EFT/ACH.

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5 Companies Disrupting The World of Money

VoPay World of Money

For every disrupted industry and category, hundreds of innovative startups seem to appear overnight. Some are better at others on capitalizing on the disruption. On revolutionizing old and dated systems. They aim to make the world a better place than how they found it. Customers (and fellow fintech companies like VoPay) take notice. 

Today we’re highlighting 5 companies in particular that are making the financial lives of customers—be they entrepreneurs, business owners, investors, or average consumers—better. 

5 disruptive companies making the financial world better

1. Qwil: Granting cash flow access to SMBs and freelancers

Cash flow can make or break a business. This is especially the case for small, medium and gig-based freelance businesses that rely on payments to make their business run from month-to-month. Many companies are popping up to fill this need, offering user-friendly and accessibly priced fintech services, along with access to capital. 

Qwil startup is doing just that, supplying on-demand capital and automated global payments to SMBs and freelancers. The company has raised over $160 million from financial companies and fintech investors to help improve the financial wellness of entrepreneurs around the globe. Qwil provides Liquidity as a Service (LaaS) and contingent workforce, giving its SMB users control over their invoicing and payments, and granting access to liquidity. More than 500 companies use their services for digital media financing, freelance marketplaces, and invoicing and payment automation.  

2. Currencycloud: Making global money transfers affordable and accessible  

Sending money between countries is worth some $700 million annually—and many innovative businesses are capitalizing on the globalization of remittances. Currencycloud is one of them. This London-based startup specializes in international payments and collections. 

Currecycloud has over 85 remittance APIs in 180 countries, allowing financial businesses to easily integrate its cloud-based platform and payment infrastructure into existing systems. This helps clients get paid, exchange currencies, and manage everything from digital wallet services to inbound and outgoing payments. Currencycloud recently raised $80 million to help take on the world’s Western Unions—and make international money transfers easier, more efficient, accessible, and affordable. 

3. FrontFundr: Democratizing Canada’s private markets 

Although private markets are growing faster and having higher returns than public markets, the average retail investor hasn’t been able to participate. FrontFundr aims to change that, leading the charge for the democratization of private markets in Canada. FrontFundr is Canada’s leading equity crowdfunding platform and exempt market dealer. 

Since its launch in 2015, the fintech’s community has over 15,000 investors and has raised over $20 million in its platform. The company anticipates raising nearly $15 million in 2020 alone through its investment crowdfunding platform. As of December 2019, FrontFundr has become an official participating dealer on DealSquare, which is Canada’s first-ever centralized dealer platform for private placements. 

4. Finhaven: Tokenizing and disrupting traditional capital markets 

Finhaven is set to revolutionize and disrupt the traditional capital markets, seeing their challenges as opportunities. This Vancouver-based fintech company is building a tokenized global investment banking and securities exchange platform for issuing, investing, and trading. It’s high-capacity cryptographic ledger and platform provide solutions for identified blockchain limitations. For them, the future of capital markets is in security tokens

Finhaven is focused on increasing capacity, liquidity, immutability, audibility, and, of course, security. Their technology will help customers (global issuers and investors alike) raise capital and trade faster and more cost-efficiently than ever before. They help companies access capital through digital currencies while enabling tokenized security and governance for any blockchain transactions. 

Learn more about tokenization and digital security in our recent post

5. Unimoni: Empowering customers with universal money

Financial services today are transcending boundaries, borders, currencies and channels. They aim to allow consumers to move money wherever it needs to be as quickly and affordably as possible. Unimoni is one company that’s leading the charge. 

Unimoni, part of Finablr, is a global provider of money transfers, foreign exchanges, payments and credit solutions worldwide. This company has in-store services, online and self-serve kiosks in countries across the globe—supplying a one-stop financial solution for its customers. It’s parent company, Finablr, spans over 170 countries, processed over 150 million transactions in 2018 and managed nearly US$115 billion for customers. 

Interested in learning about more innovative fintech companies? Read our 15 fintechs to look out for in 2020 blog.

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