FinTech Blue Chips Accelerate Right Through Covid Era

Despite an uncertain economy, FinTechs that specialize on payment processing and lending are actually seeing a boost in business. 

FinTechs that are helping people live and work remotely are currently thriving, with consumers purchasing goods and paying bills online now more than ever. In the beginning of lockdown, there was a 72 percent surge in the use of financial apps in Europe within just one week. 

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And a new report by venture firm Finch Capital says that the pandemic will ultimately drive adoption for FinTechs, with the biggest winners expected to be consumer and SME lending platforms, as well as mortgage and life insurance digitalization.

"Fintechs have been trying to advocate for the world to move to digital [alternatives] and away from the expensive, costly and slow incumbent, and that is being accelerated," said Radboud Vlaar, managing partner at Finch. "It will be a bumpy ride, but those with cash will be able to grow faster." 

With that in mind, Stripe just revealed that it had raised an additional $600 million in capital, bringing it to a $36 billion valuation, while Robinhood is nearing a deal to raise $250 million from investors at a valuation of $8 billion. In acquisition news, SoFi announced earlier this month that it had signed a definitive agreement to buy Galileo Financial Technologies for $1.2 billion.

In addition, the United States government has given eligible FinTechs the ability to disburse loans through the Paycheck Protection Program. The bill that was signed last week allocated another $310 billion to the program, and $60 billion of that has been earmarked for smaller banks and lenders. FinTechs were also given the green light by the Internal Revenue Service to allow eligible recipients to receive their stimulus payments electronically. In response, challenger bank Chime offered advances on stimulus checks, and Plaid is building an app to make it easier to apply for Small Business Administration loans.

That means that these platforms may be attracting many new customers. And as Lisa Ellis, a senior analyst at the research firm MoffettNathanson, pointed out: “New user acquisition is like the holy grail of FinTechs.”