According to the latest UK FinTech State of the Nation published in April 2019, the positive impact of technology on the financial services sector in the UK is unprecedented globally. During the Covid-19 pandemic, a number of FinTech solutions, such as P2P property lending, were able to show their worth by continuing to lend to SME property developers at a time when many lenders pulled out their loan offers. For example, at Blend Network we saw our two strongest ever months in June and July 2020 by agreeing lending facilities totalling £5.2 million. As we start to emerge out of the Covid-19 pandemic, the UK faces an unprecedented opportunity to tap into its FinTech capabilities to leapfrog out of the crisis by increasing transparency and efficiency, by reducing cost, and by giving the most vulnerable access to financial services. Being a FinTech centre of excellence and having consolidated its position in this field over the past decade enables the UK to utilise technology to create solutions for the new challenges ahead. Let’s look at three FinTech solutions that hold the key to Britain’s ‘level up’ recovery.
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First, FinTech solutions, such as P2P lending, that connect private lenders who have cash to invest with pre-vetted borrowers who require funding for their projects, offer funding solutions to SMEs in need of funding and investment solutions to investors looking for yield. For borrowers, P2P lending platforms offer extra flexibility and faster access to loan-based funding from multiple lenders. For lenders, P2P lending platforms offer generally better returns that the interest rates offered in traditional debt or equity markets. Furthermore, P2P lending platforms generally take on the task of vetting and pre-approving the borrowers, thereby offering lenders an easy way to find the right borrower for them. A sub-sector of P2P lending platforms are P2P property lending marketplaces, such as us at Blend Network, that connect lenders with SME property developers looking to build more affordable homes across the UK. At a time when large-scale public borrowing will see an unprecedented deterioration in public finances, P2P lending marketplaces appear as a robust solution to help SMEs get the funding they need.
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Second, FinTech solutions such as digital banking that offer no-frill financial service with an end-to-end digital infrastructure have proved to be much better positioned to face the challenges of remote working and lockdown in times of the pandemic. Indeed, it would be fair to say that many small businesses have so far been able to weather the crisis thanks to always-on digital banking services. Consumers, meanwhile, have benefitted from lower fees passed on to them by banks not having to invest in manpower, real estate and ancillary services. As a result, as we emerge from the crisis it is the time for the banking sector to fully embrace digital banking. The UK, home to several digital banking giants, appears to have a competitive advantage to grow its market share and get ahead in open banking and the use of artificial intelligence applied to the open banking and digital banking sectors.
Third, FinTech solutions such as payment gateways that have supported the upsurge in e-commerce and the need to have secure payment systems has never been more relevant than in times of Covid-19. The rapid adoption of contactless payment solutions over the past few years saw an unprecedented acceleration during the Covid-19 pandemic, and is likely to boost market growth for FinTech platforms offering payment gateway solutions. Indeed, according to Edge Retail Insight, the rise in online shopping caused by Covid-19 is expected to add £5.3bn to UK e-commerce sales in 2020 alone.
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In summary, FinTech platforms holds the key to Britain’s ‘level up’ recovery, as technology has the power to increase transparency and efficiency, reduce cost, and give the most vulnerable access to financial services. Users and businesses both stand to gain from these changes, as incumbents are challenged by the new wave of digital innovation.