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It was the Great Recession that gave rise to the fintech boom, or so the origin story goes. Armed with righteous anger against big banks and validation from the Dodd-Frank Act mandating banks to make consumers’ data available to them “in an electronic form,” companies like Robinhood, SoFi, and Venmo (now owned by PayPal) became near ubiquitous.
Now as fintech faces its first global downturn, could its players become even more entrenched than before? Company leaders certainly see it as an opportunity to prove their mettle.
Not only is usage up within apps such as Venmo, but in a historic first, fintechs are being called upon to help disburse parts of the U.S.’s massive $2 trillion stimulus package—which includes forgivable small business loans and $1,200 payments to consumers—aimed at cushioning the economic blow of the coronavirus.
The Internal Revenue Service, for instance, has allowed eligible recipients to elect to receive their stimulus payments electronically—through Square’s Cash App or Venmo—rather than by paper check. The Small Business Administration meanwhile has approved PayPal, Square, and Intuit to distribute the forgivable Paycheck Protection Program (PPP) loans.
Fintech proponents argue the industry will be faster and more efficient than their older banking competitors. And in this high-pressure moment, when consumers and small businesses are desperate for monetary relief immediately, speed is everything.
My colleague Jen Wieczner has the full story:
The crisis has become a proof-of-concept for fintech, one likely to change the way people bank and move their money even after they can visit a teller in person again. Says Zach Perret, CEO of Plaid, a startup whose software powers virtually all the major U.S. fintech apps (and which was recently acquired by Visa): “This shutdown time, I’ll suspect we’ll look back and say this was one in which digitalization really accelerated.”
The chosen ones
Late Tuesday, President Donald Trump revealed a list featuring some of the most prominent names in commerce as part of his “Economic Revival Industry Groups”—business leaders that Trump says will be advising him on when and how to reopen the economy. Colloquially, Trump has described it as his “Opening the Country” council.
Included in the list: Amazon CEO Jeff Bezos, Facebook CEO Mark Zuckerberg, Blackstone CEO Stephen Schwarzman, Mark Cuban, and one prominent venture capitalist, Doug Leone of Sequoia.
Interestingly absent: longtime Trump supporter Peter Thiel.
